Author: Site Staff

As many executives are taking extra measures to protect their companies during the economic downturn, employment attorneys are seeing an increase in litigation around trade secrets. Specifically, employers are being more aggressive about suing former employees regarding noncompete agreements, attorneys say.

“In these economic times, companies are taking precautions to protect their business,” said Marguerite Walsh, a shareholder at employment law firm Littler Mendelson. “These lawsuits serve two purposes: One is to salvage a situation, but also it’s to send a message to people at the company.”

In the past, the majority of litigation around noncompetes seen by Walsh has involved key executives or salespeople at the firms. But now, Walsh is seeing more litigation involving junior and midlevel employees. Even in these tough economic times, top-performing employees can be offered positions elsewhere, and companies want to be prepared for that, she said.

“Solid performers may be in a situation where their companies aren’t doing well, but they can go across the street to a more stable company,” Walsh said.

And with mass layoffs in financial services and other sectors, attorneys expect noncompete litigation to continue rising. Noncompete agreements can cover terminated employees.

“It’s going to be very interesting to see what happens to these agreements in the financial services industry over the next couple of months,” said David Landau, who is a partner at WolfBlock and has seen an uptick in trade-secret litigation in the past few months. “These people can’t be prevented from making a living.”

Don Schroeder, a partner in the labor and employment practice of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, said he is seeing a 15 to 20 percent jump in trade secret litigation around noncompete agreements. Specifically, he is seeing a lot of activity in the staffing industry.

He partially attributes the increase to rising temporary hiring activity since many employers are reluctant to bring on permanent workers in the current economy.

“With temporary hires, employers can still be nimble and respond to the fluctuating economy,” he said.

Because the industry is still growing, staffing companies are becoming more protective of their customer lists, he said.

“The well-established players want to protect their turf in this down economy,” he said.

Employers can save themselves a lot of time and money if they are careful about how they structure their noncompete agreements, attorneys say.

“I am not a fan of cookie-cutter noncompete agreements,” Walsh said. “Every situation is a little different, and so everyone shouldn’t have the same agreement.”

Companies also have to give more thought to making sure employees don’t leave their employment with trade secrets. “It’s not just about collecting former employees’ laptops,” Landau said. “Today, you need to get their cell phone, their PDA and anything that might have company information on it.”

—Jessica Marquez

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The shifting cost of labor in European emerging markets.

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Workforce Management, November 17, 2008, p. 29 — Subscribe Now!

This year, the Grinch may not have stolen Christmas, but he definitely took the Christmas party.

Across the nation, companies are canceling annual end-of-the-year holiday bashes to cut costs, or in some cases just to blend in with the rest of a world that’s too worried about money to feel like a party. The trend is having a ripple effect on caterers and event coordinators who say that calls canceling parties have spiked in the past few weeks.

Two annual holiday-party surveys back up anecdotal evidence that a record number of companies have dropped holiday parties this year—more even than in 2001 after the September 11 terrorist bombings—while others are scaling back how much they spend, what they serve or how many people they invite.

In its survey of 100 companies, outplacement consultant Challenger, Gray & Christmas Inc. found that 23 percent of companies elected not to host a holiday party this year, compared with only 10 percent in 2007. New York executive search firm Battalia Winston Amrop found in its survey of 108 firms that 19 percent will forgo a party this year, the highest percentage in the poll’s 20-year history.

And in a separate study of more than 1,200 executives by Towers Perrin, 58 percent of all organizations polled acknowledge they are somewhat or very likely to scale back this year’s holiday party and other employee events to save money.

“People are scared,” Battalia CEO Dale Winston said. “We do this survey because it’s a way of calibrating the mood of the country, and we’re just not in a celebratory mood.”

Investment banks and financial institutions rocked by the mortgage industry crisis were some of the first to cancel celebrations, including Barclays and Morgan Stanley.

Barclays will sponsor parties for employees’ children at several locations internationally, but it canceled other celebrations. Company executives issued a memo to employees stating that given the upheaval in the financial industry and in light of its Lehman Brothers acquisition, “it is not appropriate for us to do anything that might be seen as inappropriate by any of our stakeholders.”

Publishing, news and entertainment companies dealing with tanking revenues and earnings have put the kibosh on once-lavish celebrations, including Viacom, ABC News and Hearst.

Holiday parties at Viacom were the stuff of legend, but this year, the media conglomerate that owns cable TV networks MTV, VH1, BET and CMT canceled all year-end festivities. Instead, employees will get two extra paid vacation days between December 22 and January 1. Kelly McAndrew, a Viacom corporate communications vice president, wouldn’t discuss whether trading parties for time off will save the company money. McAndrew said only, “This is what we think is right for our company at this time.”

The celebratory downsizing doesn’t end with finance and media companies. Enterprise Rent-A-Car, hit with a triple whammy of credit, energy and auto industry woes, put the brakes on the year-end party it normally hosts for 2,000 St. Louis corporate headquarters employees and their spouses on a weekend night at a downtown hotel. After 200 corporate staff members were laid off in late October, having a party just didn’t seem right, said Ned Maniscalco, an Enterprise spokesman.

Adidas Group also canceled annual holiday parties at multiple locations internationally as part of broader cost-cutting measures that include a hiring freeze and less business travel. The Germany-based global sportswear giant did its partying earlier in the year, with a picnic for 1,000 employees and their families June 7 to kick off the Euro 2008 soccer championship and a two-day, all- expense-paid trip to the Summer Olympics in Beijing for 1,000 Chinese employees, said Anne Putz, a corporate spokeswoman.

As companies rein in party spending, it’s affecting caterers, hotels and event planners at what is typically the biggest party season of the year. At Tavern on the Green, the historic restaurant and banquet facility in New York’s Central Park, clients are postponing, cutting out luxuries such as seafood displays, or canceling altogether, including one longtime client that canceled a party for 1,000. In years past, the facility would have been booked solid for December. This year, “We have some holes we’d love to fill,” said spokeswoman Shelley Clark.

Even companies that aren’t in bad shape are forgoing extravagant affairs. Nobody wants to be the next American International Group, which was excoriated for sending executives to an opulent spa retreat days after receiving a federal bailout.

“If the company is laying off people, celebrating in some over-the-top way would be insane,” said John Challenger, CEO at Challenger, Gray & Christmas. It’s appropriate, however, to bring employees together in some fashion to thank them for their hard work and long hours, he said.

—Michelle V. Rafter

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The Pension Rights Center wants Congress to change federal pension laws to protect participants in single-employer defined-benefit plans in response to asset declines caused by the financial crisis.

“As Congress considers new actions to address the economic crisis—by rescuing financial institutions, bailing out the auto industry, and aiding homeowners who face foreclosure—we urge you to also address the equally important issue of erosion in retirement financial security,” said a letter sent to congressional leaders.

The organization urged Congress to block funding relief to plans that have frozen benefits and to make relief contingent on an employer’s promise to not freeze plans for five years after the period of funding relief.

The letter also called for extending the amortization period for funding unfunded liabilities to 10 years from seven and reinstating a pre-Pension Protection Act rule for companies facing bankruptcy to make the effective date the day the company terminates the plan, not the date the employer files for bankruptcy protection. The current system allows bankrupt plan providers to “retroactively strip employees of benefits” when the bankruptcy filing date precedes the termination of the plan by several years. 

The center also wants to ensure that deferred compensation for management and high-paid employees be frozen along with any DB plan freezes.

Filed by Timothy Inklebarger of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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Efforts to use weight-loss surgery to fight diabetes suffered a setback Monday, November 17, when Medicare officials said the government-run health care program no longer intends to cover bariatric surgery for people with diabetes who are not severely obese.

As the largest single payer of health care in the country, Medicare’s proposal to no longer cover a medical procedure strongly influences what procedures employers and health insurers will cover.

Medicare already covers bariatric weight-loss surgery for individuals considered morbidly obese, a decision that has led to the growth in popularity of the surgery and a willingness among employers to cover it.

Until Monday’s announcement, Medicare also covered the surgery for people with Type 2 diabetes. Citing a lack of efficacy, however, the agency said it would no longer pay for the surgery for Type 2 diabetics whose body mass index was below the threshold of 35, indicating severe obesity. Body mass index above 40 is considered morbidly obese.

“We have said definitely Type 2 diabetes is a cause for the surgery, but we’re limiting it to patients with BMI over 35,” said Medicare spokesman Don McLeod.

Research published this year in the Journal of the American Medical Association that showed significant health improvements for obese diabetics who underwent the surgery gained wide attention and sparked interest among employers who believed the high cost of the surgery—between $15,000 and $30,000—could be justified if it reduced health care costs associated with diabetes. The 60 people in the trial had a body mass index between 30 and 40.

But Medicare, in justifying its proposal, said generally that studies examining the efficacy of the surgery for diabetics did not sample a wide enough group to conclusively show the same kind of benefit for diabetics who were not morbidly obese.

“While recent medical reports claimed that bariatric surgery may be helpful for these patients, Medicare did not find convincing medical evidence that bariatric surgery improved health outcomes for non-morbidly obese individuals,” the agency said in a statement.

Medicare’s decision will be open to public comment for 30 days.

—Jeremy Smerd

Final Labor Department regulations issued Friday, November 14, resolve numerous questions employers have raised about legislation enacted this year that expands the Family and Medical Leave Act for employees whose family members are in the military.

That new law expands the FMLA in two ways for military families. Under the first expansion, spouses, children, parents or nearest blood relatives can take up to 26 weeks of leave under the FMLA to care for a service member who is injured or becomes ill while on active duty. The illness or injury must be severe enough that the service member is unable to perform his or her duties.

Under the second expansion, employees are allowed to take up to 12 weeks of leave when a spouse, child or parent is on active duty in the armed forces or is called up for active duty. Leave is allowed for any “qualifying exigency.”

The final regulations make clear that an employee is entitled to a maximum of 26 weeks of leave during a 12-month period. For example, if a working parent took 26 weeks of leave to care for an injured child, the parent could not take another 26 weeks of leave during the same 12-month period if a second child were injured.

In addition, the 26-week leave limit is a per-injury limitation. For example, if an individual injured an arm and a working parent used 26 weeks of leave to care for the child, the parent could not take additional leave in a subsequent period to provide care for the same injury.

However, the employee could use up to 26 weeks of leave to care for a child’s injury and then take another 26 weeks of leave in a subsequent 12-month period if the child incurred a second injury during a later period.

The regulations also provide numerous examples of “qualifying exigencies,” including rest and recuperation, post-deployment activities and additional activities where the employer and employee agree to the leave.

The final regulations also provide guidance on nonmilitary-related parts of the FMLA. For example, the regulations make clear that employees working on “light duty” cannot have that time count against their 12-week FMLA entitlement.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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Lawmakers and the Department of Treasury were urged to provide relief to sponsors of defined-benefit plans during this time of extreme volatility without weakening funding improvements that have been achieved through the Pension Protection Act of 2006, in a letter and report sent by Mercer to Treasury Secretary Henry M. Paulson.

In the letter, Brian Duperreault, president and CEO of Marsh & McLennan Cos., Mercer’s parent company, made three recommendations to Paulson.

First, funding rules should limit the annual increase or decrease in the company’s contributions to a specified percentage of the total plan liabilities. The Treasury could do this with its existing authority by granting funding waivers to companies whose contributions would increase beyond this threshold, Duperreault wrote. Second, the Treasury should support legislation to delay for one year the requirement for plans less than 60 percent funded to be frozen. Third, the Treasury should propose legislation that would relax lump-sum benefit restrictions.

Company executives are concerned about the increases in contribution requirements for defined-benefit pension plans, Duperreault wrote.

These increases are the result of recent market declines and “will impose significant unanticipated cash demands on businesses when capital is limited, credit markets are unusually tight, and the overall business climate challenging,” Duperreault wrote. “Increased pension contributions compete with other needs for cash and, in the current situation, could result in limiting plan sponsors’ growth strategies, let alone managing through the current situation.”

Filed by Jennifer Byrd of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce com.

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The U.S. Department of Labor’s Office of Disability Employment Policy details some of the myths that some employers may believe about the 18-year-old federal law that helps protect the rights of people with disabilities. Contrary to what some might believe, the ADA does not force employers to hire unqualified workers with disabilities. And the law doesn’t mean that those with disabilities can’t be fired. They can be, under certain conditions. (For more details about the scope of the law, other government agencies that have ADA responsibilities, and more, visit www.ada.gov.)

Four years ago, officials at the Metropolitan Development Association of Syracuse and Central New York were thrilled to learn that New York City-based AXA Financial was considering moving its service operations from Secaucus, New Jersey, to their area.

The association, which is made up of 200 local employers, had been struggling to create job growth in the region. So they were justifiably excited when they first heard of AXA’s new office in Syracuse and the 300 jobs that came along with it.

When AXA officials asked for data that would demonstrate the region has a pool of talent to facilitate the new office, Frank Caliva, the association’s director of talent initiatives, knew he had to act fast.

“They needed to know that we had a pipeline of marketing people, accountants and lawyers,” he says. “We got the data together, but it took a full seven business days.”

While AXA ultimately opened its office in Syracuse, Caliva and his team started looking at ways they could more quickly provide talent-pipeline data to prospective employers.

Now it seems they have found it. The association is implementing a new Web-based tool that will enable it to provide companies with real-time data on what talent the region has and what talent needs to be developed, Caliva says.
 
The tool, developed by Kingston, Tennessee-based Worldwide Interactive Network, enables users to tap 70 databases, including government and university databases, to provide a real-time snapshot of a region’s workforce and workforce needs.

“Frankly, we were getting outmaneuvered by other states that could get this data faster,” Caliva says. “But this software will help us be more competitive.”

The software, which is two years old, isn’t yet available to private employers. But it has been implemented by regional entities in Alabama and Tennessee and by the Department of Commerce in South Carolina, says Teresa Chasteen, president of Worldwide Interactive Network.

The WIN Strategic Compass is designed to help public entities, such as states and universities, not only understand what skills they have, but what talents need to be developed, Chasteen says.

“Our goal is to connect economic development and education through a workforce delivery system,” Chasteen says. She notes that many universities have told her the software would help cut research time by 60 percent.

Employers want this kind of information before they relocate or expand into an area, but getting it on a real-time basis is unheard of, says Jamie Hale, director of workforce planning at Watson Wyatt Worldwide.

“We get a lot of requests from clients asking about what the demand versus supply is of certain skill sets in areas they are looking to enter,” she says.

—Jessica Marquez

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Goldman Sachs said Sunday, November 16, that CEO Lloyd Blankfein and CFO David Viniar—along with five other top officers—will not get bonuses for 2008. According to Financial Week’s list of the highest-paid CFOs, Viniar received a nearly $23 million bonus in 2007.

Blankfein and Viniar, along with presidents and co-chief operating officers Jon Winkelried and Gary Cohn and vice chairmen J. Michael Evans, Michael Sherwood and John Weinberg, asked the board’s compensation committee Sunday morning that they not receive a bonus, spokesman Lucas van Praag said.

The compensation committee met and agreed, van Praag said.

The executives will only be eligible for a base salary of $600,000 each, The Wall Street Journal reported.

Last year, Blankfein made $68.5 million; Winkelried and Cohn received $67.5 million.

Viniar’s bonus for 2007 pushed the CFO’s total compensation to $57.5 million for the year. That made him by far the highest-paid finance chief in the U.S., according to Financial Week.

The second CFO on the list, Occidental Petroleum’s Stephen I. Chazen, earned just under $30 million last year.

New York Attorney General Andrew Cuomo said Goldman had taken “an important step in the right direction.”

Last month, Cuomo warned Goldman and eight other banks getting U.S. government money in the first round of capital injections under the $700 billion Troubled Asset Relief Program that using the funds for bonuses might break state law.

“This gesture by Goldman Sachs is appropriate and prudent and hopefully will help bring Wall Street to its senses,” Cuomo said in a statement Sunday. “We strongly encourage other banks to follow Goldman Sachs’ step.”

On September 16, Goldman posted a 70 percent drop in quarterly profit, its biggest earnings decline since going public in 1999, as the worst market slump in decades led to weaker-than-expected revenue.

Several analysts expect the company to post a fourth-quarter loss, which would be its first ever as a public company.

Its shares are down 69 percent so far this year.

Filed by Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.