Author: Site Staff

Next month’s executive changes at HR software firm Spectrum Human Resource Systems are less revolution than evolution. In fact, Spectrum’s top post isn’t even leaving the family.

The Denver-based vendor, which focuses on selling human resource management systems to midsize companies, recently announced that founder, chief executive officer and chairman Jim Spoor is stepping aside as CEO effective September 1. In addition, his wife, Nancy, is retiring from her post as executive vice president and COO.

Their daughter, Sybll Romley, is taking over as CEO. Matt Keitlen, who is not a member of the Spoor family, will become executive vice president and COO.

The change should be a positive one for Spectrum clients, says Nov Omana, an industry consultant and chairman of the International Association for Human Resource Information Management professional group. Omana says Jim Spoor has established a reputation as a solid businessman and mentor in the field, and Sybll seems likely to extend the family legacy.

“From everything I’ve seen, she is her father’s daughter,” he says.

Founded in 1984, Spectrum concentrates on selling HR management applications to companies with 500 to 5,000 employees. It offers to install software on a customer’s own computers or host products remotely, allowing clients access to the application via the Internet.

Spectrum employs about 110 people, primarily in Denver. It has been profitable for all but one of its years. And business is healthy at the moment. Revenue rose 11 percent last year and is on pace to grow another 20 percent in 2006, the company says.

Jim Spoor prides himself on having been a leader through various eras of HR software, including the shift to Web-based applications. Earlier this year, IHRIM gave Spoor its Summit Award for long-term contributions to the HR technology field. But Spoor, who only will admit to being over 55, says he is ready to ease back on the day-to-day demands of running the business.

“I’m looking forward to getting some more fly-fishing in,” he says.

Jim and Nancy Spoor remain majority owners of Spectrum. Other family members and employees also have ownership stakes. All three of the Spoors’ daughters work at Spectrum, as do two sons-in-law.

Keeping control of a business within a family risks charges of nepotism and leadership that’s been bestowed rather than earned with hard work. But Sybll Romley, who has worked at Spectrum for about two decades, says it’s obvious that family favoritism isn’t a factor at the firm.

“Family members at Spectrum work twice as hard to prove that they truly earned the position,” she says.

Romley has more work ahead. Paul Hamerman, an analyst at Forrester Research, says Spectrum faces competition from big software vendors SAP and Oracle, who are looking to serve smaller customers, and companies that already focus on midsize and smaller firms, such as Sage Software and Employease. “They’re kind of in a cauldron,” he says.

—Ed Frauenheim

In a frank admission of the limits of high-deductible health plans, a national medical director for Aetna said the plans would not by themselves reduce health care costs for employers.

“I don’t think high-deductible health plans are the cure-all for bringing down health care costs,” said Charles Cutler, Aetna national medical director for quality and clinical integration, during a July 25 Kaiser Family Foundation webcast on the subject of transparency in health care cost and quality.

Advocates of high-deductible health plans have long argued that individuals forced to spend their own money before health insurance kicked in would be more sensitive to price and, with a financial stake, become more cost-conscious.

This in part has led to the widespread belief among employers interested in offering high-deductible health plans that doing so would cut costs. In a survey released two days after the webcast, Buck Consultants reported that 84 percent of employers surveyed said reducing costs was their primary reason for offering a high-deductible health plan with a health savings or health reimbursement account.

Savings depend on the health of employees. Unhealthy employees who quickly burn through their deductibles are no longer sensitive to price, says Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health.

“He was, in a sense, being honest,” Anderson, a webcast co-panelist, said of Cutler. “What you recognize is that most of the spending occurs after the deductible is reached. Once that happens, you don’t care how much things cost. Any hospitalization puts you above the deductible.”

Though growth of the plans among companies remains strong, it has slowed in recent months, according to a midyear survey of health plans conducted by industry newsletter Inside Consumer-Directed Care. The data correspond to sentiments at a recent conference sponsored by the Midwest Business Group on Health in Chicago.

“Our membership is not embracing that as much as the consultants would lead you to believe,” says Cheryl Larson, the group’s director of membership and education. “Five years ago, CDHPs were being pushed and pushed and employers were scratching their heads. And the reality is that penetration is still pretty low.”

Instead, Larson has seen a renewed interest in companies wanting to take a hard look at managing employees’ health by offering incentives—discounts on premiums—to those who take blood tests that can determine health risks. The employer then can use the information to manage employee health. Opinion varies on whether such a hands-on approach represents a philosophical difference from the consumerism model of health care.

In April, Watson Wyatt released a survey showing that people who would benefit from a high-deductible health plan would by and large be healthy employees—about 75 percent of the population—who incur 11 percent of health care costs.

To demonstrate their support for high-deductible health plans, insurance companies have moved a lot of their own employees into them, says Paul Fronstin, director of health research and education at the Employee Benefit Research Institute. (Aetna sits on the institute’s board.)

“But they have been doing a lot of other things all along as well,” such as wellness programs and lower co-pays for drugs that manage chronic diseases, he says. “There is no silver bullet, and you have to address cost increases among many fronts.”

—Jeremy Smerd

Jared Bernstein
Economist, Economic Policy Institute

   Jared Bernstein’s new book combines a sober critique of economic policies with a clever set of acronyms. Bernstein labels the Bush administration’s approach to the economy as “YOYO” thinking—that is, a “you’re on your own” philosophy. The better alternative, Bernstein argues in All Together Now: Common Sense for a Fair Economy, is the “WITT” stance. Some “we’re in this together” policies include an end to the Bush tax cuts and some flavor of national health care, Bernstein says. He recently spoke to Workforce Management staff writer Ed Frauenheim.

    Workforce Management: It seems this idea of “we’re in this together” is mostly a call for government action. How does it apply to employers?

    Jared Bernstein: Employers benefit when they operate within an environment where rational and efficient economic policy prevails, as opposed to policies that generate greater insecurity—insecurity among working families, but also insecurity regarding some fundamentals of the macro economy, including indebtedness. The YOYO agenda, where policies are crafted to basically shift risk from government and firms onto people, leads to greater economic insecurity, and it leads to much higher levels of government indebtedness.

    WM: How so?

    Bernstein: One of the main strategies of YOYO economics is to “starve the beast”—that is, to cut tax revenues by regressive tax cuts. They’re much less willing to cut spending. So what you end up with is big budget deficits. Many in the business community worry about the impact of budget deficits on the economic environment, both in terms of crowding out private investments but also in terms of simply hobbling the government’s ability to meet basic functions. That comes anywhere from providing America’s employers with a trained and educated workforce to protecting us from Force 5 hurricanes.

    WM: Employers might be interested in your argument for just the health care reason.

    Bernstein: This notion of a universal, single-payer approach to health care, or something that takes it out of the employer-based system, is something that’s no longer viewed as a radical, left-wing idea. It’s viewed under the heading of competitiveness. It’s difficult to compete in world markets if you’ve got this albatross around your neck.

    WM: The counter-trend that many employers are moving toward is consumer-directed health care.

    Bernstein: I think that that’s a big mistake. Every other country has solved this riddle by taking health care out of the market, because market solutions are incompatible with health care—which in an advanced economy like ours is correctly viewed as a right. If you need heart surgery, you’re not going to go shopping for it.

    WM: A counter-argument to what you’re saying is that people are most creative when their backs are against the wall.

    Bernstein: You don’t want to create disincentives to be creative and to work and to get ahead. But, paradoxically, individuals cannot realize their economic potential if there are no safety nets in place. If those safety nets become too cloying, then sure, you’ve got a different problem. But that’s never been our case.

Workforce Management, August 14, 2006, p. 7 — Subscribe Now!

Although provisions of a landmark pension bill approved by Congress don’t take effect until 2008, companies may start increasing payments into their plans immediately to achieve better terms for completely shoring up underfunding in the future.

The bill, which was approved by large margins in the House and Senate and has been sent to President Bush, requires that companies fund 100 percent of their pension promises over seven years. But the healthier a plan is by September 2007, the more time it will receive to make the transition—perhaps a total of 10 or more years.

“There will be a real incentive to fund these plans over the next 12 months,” says Kevin Wagner, retirement practice director in the Atlanta office of Watson Wyatt.

Generous transition means the Pension Benefit Guaranty Corp. probably won’t eliminate its $23 billion deficit anytime soon, according to Bradley Belt, former PBGC executive director.

Belt, who helped formulate Bush’s stringent pension proposal, gave the congressional reform a mixed review.

“It’s a partial long-term solution,” he says. “In certain key areas, it’s an improvement over current law. It’s clearly not a panacea. It won’t ensure that taxpayers won’t bail out (the PBGC) over the long haul.”

After years of effort, Congress finally reached agreement on the complex bill in late July. Legislative activity has been fostered by several recent large pension defaults and estimated total underfunding of more than $300 billion in defined-benefit plans that cover 44 million employees.

The pension bill prohibits the use of credit balances in plans that are less than 80 percent funded. It subtracts the balances to determine the funding level. It forces companies to pay higher “at risk” premiums if plans are below 80 percent and slip to less than 70 percent, assuming that workers eligible to retire in the next 10 years do so as early as possible. It reduces interest-rate smoothing to 24 months. And it proscribes increasing benefits if a plan is below 80 percent funding.

In a concession to airlines, carriers will receive between 10 and 17 years to reach 100 percent funding, depending on whether they have frozen their pension plans. Despite the break, Delta terminated its pilot pension plan on August 4, a move that it foreshadowed even as it appealed to Congress for extra time to save pensions covering other employees.

“You still have a hodgepodge of rules,” Belt says. “It’s a reflection of the sausage-making process.”

Analysts agree that the new sausage will be spicy—in the form of higher payments, either to meet the 100 percent funding mandate or to avoid costly “at risk” status.

“Plan sponsors are much more focused on staying above these trigger points,” says Jon Waite, chief actuary of SEI Global Institutional Group. The new rules “are going to drive a lot more money into pension plans.”

Waite estimates that a $100 million plan funded at 90 percent, the requirement of current law, would pay an extra $2 million annually, or a 30 percent to 40 percent increase, to meet new funding targets.

Despite the rise in costs, companies are relieved to have certainty after years of limbo.

“This bill in and of itself doesn’t make plans onerous,” Wagner says. “This should stop some of the momentum (to dump defined-benefit plans) because we know what the rules are.”

—Mark Schoeff Jr.

Sun Microsystems may be emerging from its darkest days, as the computer maker trims its headcount and continues to announce new products.

Sun’s decision in May to cut 4,000 to 5,000 jobs—or 11 percent to 13 percent of its workforce—received a warm welcome from a number of analysts. But the firm erred by not trimming more jobs sooner, says Jonathan Eunice, an analyst at technology advisory firm Illuminata.

“There aren’t many examples of especially advantageous products that Sun has now that it needed thousands of additional folks to develop,” he says. “It wasn’t any masterpiece of talent management to keep those folks on over the past five years, only to cut them now.”

Sun spokeswoman Stephanie Hess counters that the firm’s investment in research and development in recent years has helped with its current product set. She also says new chief executive Jona­than Schwartz is “not going to hack his way to a higher stock price.”

Sun, which took the dot-com bust on the chin, reported net losses for its fiscal years 2002 to 2006. Thanks partly to restructuring charges, Sun posted a net loss of $301 million for the quarter ended June 30. Revenue for the quarter rose 29 percent year-over-year to $3.8 billion.

Sun has been an innovative maverick in the computer world. Founded in 1982, the company came to dominate a class of powerful computers called workstations. And Sun machines helped power the rise of the Internet in the late 1990s. But its culture of engineering excellence didn’t sync well with the ensuing era of belt-tightening, says Clay Ryder, president of technology consulting firm the Sageza Group.

As the economy contracted around 2001, companies began turning to lower-cost or free computing products such as the Linux operating system, he says. “Think of Sun as being a gourmet chef when most people are willing to eat at Togo’s or McDonald’s,” Ryder says.

Schwartz, who had been Sun’s chief operating officer, took over as CEO in April from Scott McNealy, one of the company’s co-founders. McNealy had a reputation, not wholly deserved, for holding on to employees despite financial losses. Sun’s headcount dropped by 12,000 from 2001 and 2005 because of attrition and job cuts.

The recent layoffs, part of a plan to return to steady profits, were less than Wall Street had expected. “We had projected a slightly higher 15 percent reduction in headcount,” Merrill Lynch stock analyst Richard Farmer wrote in a research note last month. But, he wrote, “we still see this action as a meaningful proof point of new management’s commitment to profitability.”

Layoffs have come under increased scrutiny recently. Louis Uchitelle, author of The Disposable American, says companies underestimate the damage layoffs do to morale among remaining workers.

Eunice, however, says Sun’s morale suffered as employees saw the company floundering in red ink.

On the other hand, he gives Sun credit for turning things around beginning early this year. That’s partly due to new chips for high-end computer servers—machines used for tasks such as logging bank transactions. Sun is “looking better these days,” he says.

In July, Sun unveiled a new product in the category of thin “blade” servers, designed to save space and energy.

Not everyone thinks the clouds have cleared for Sun. Hugh Mai, a stock analyst with First Albany Capital, said in a recent report that Sun’s long-term goal of 10 percent operating profit margins may require additional cost-cutting.

Ryder says Sun could manage a recovery similar to IBM’s. Big Blue sagged in the early 1990s but reshaped itself as a services-oriented company.

Key for Sun and its leaner workforce will be creating a new identity, Ryder says, just as the firm did during the Internet boom. “They really need another way to reinvent themselves.”

—Ed Frauenheim

After five years as head of the Equal Employment Opportunity Commission, Cari Dominguez leaves behind an agency that employment lawyers call more activist and effective.

An EEOC union leader, however, says that reforms instituted during Dominguez’s tenure have reduced agency resources and undermined service to discrimination victims.

Dominguez will step down as EEOC chair August 31, the end of her five-year term. Under her leadership, the agency has upgraded its technology infrastructure, improved relationships with business and labor constituencies, expanded outreach and education programs and expedited cases, says one attorney.

“She’s leaving very big shoes to fill,” says Gerald Maatman Jr., a lawyer with Seyfarth Shaw in Chicago. “The agency has become much more visible, much more approachable and much more responsive.”

For instance, cases that used to languish for years are now handled much more quickly. In the process, Dominguez has changed the agency’s disposition into that of an activist enforcing Title VII anti-discrimination laws, according to Maatman.

“You have the EEOC out there in the fray much more than it was before,” he says.

The agency has also chosen its battles carefully in an attempt to send signals to entire industries. For instance, it settled a $54 million sexual discrimination lawsuit against Wall Street investment firm Morgan Stanley two years ago. It also is putting an increased emphasis on systemic discrimination.

“It seems that they’re focusing more on impact cases than run-of-the-mill discrimination cases,” says Jonathan Greenbaum, a partner at Nixon Peabody.

But that philosophy doesn’t mean that the EEOC is turning to the courtroom first.

“They’ve made a concerted effort to moderate claims before the parties get entrenched in their positions,” Greenbaum says.

In the announcement of her departure, the agency said that Dominguez has put in place a five-point plan that emphasizes prevention, resolution, mediation, “strategic enforcement and litigation” and organizational excellence.

But Gabrielle Martin, president of the National Council of EEOC Locals No. 216, argues that the agency is wobbling as Dominguez departs.

“The things we have seen her do in the name of reform have set the agency back,” Martin says.

Dominguez introduced inefficient and costly call centers and ushered in a severe staffing shortage, says Martin, who asserts that “the rank-and-file (staff) is angry” about working conditions.

Having a new chair take over the commission “gives us an opportunity to focus on these issues and rectify them,” Martin says.

In a statement, the EEOC said that Dominguez’s overhaul of the agency’s field structure increased frontline staff and expanded its presence in high-growth areas. It also touted a “historically low inventory of pending charges due to prompt and proficient resolution” and “an increase of merit findings with record benefits.”

—Mark Schoeff Jr.

 

Now that HR technology firm Kronos has signaled it will enter the recruiting arena by buying software firm Unicru, how far will it go in talent management?

That’s a key question for the company, argues Jason Averbook, chief executive of HR technology consulting firm Knowledge Infusion. Apart from the recruiting and candidate-assessment capabilities of Unicru, organizations are keen for applications that help them measure and manage employee performance, develop workers and plan succession strategies, Averbook says.

“Is Kronos ready to step up to the plate?” he asks. “In the past, people have seen them as a company that makes time clocks and the software that goes with them.”

Stuart Itkin, chief marketing officer for Kronos, which is based in Chelmsford, Massachusetts, says the company has already moved well beyond its roots as a maker of time-and-attendance technology systems and is determined to go further. “The acquisition of Unicru is one step in a journey to broaden our offerings in the domain of talent management and human capital management,” he says.

This month, Kronos announced plans to buy Beaverton, Oregon-based Unicru for $150 million in cash. Unicru specializes in software used to assess and hire hourly workers. Its customers tend to be large employers, such as Best Buy, Toys “R” Us and Marriott.

Kronos sells a variety of workforce management applications including scheduling, payroll and human resources management system software. It said the combination of companies will let customers integrate employee selection strategy with actual labor performance and connect labor planning to hiring.

Jim Holincheck, research vice president at market analysis firm Gartner, said the deal should allow Kronos to pitch additional services to its many customers with significant hourly workforces. Unicru, he says, is known for sophisticated analysis of candidate and worker data.

“The scientists that Unicru has on board are very smart,” he says. “That’s part of the value for Kronos.”

Unicru is slated to operate as Kronos’ talent management division, headquartered in Beaverton. Unicru chief executive Chris Marsh will join Kronos as president of the division. The acquisition is expected to close this year.

“Kronos views this strategic acquisition as fundamentally changing the landscape of workforce management,” Kronos CEO Aron Ain said in a statement. “Importantly, this acquisition moves us significantly closer to our goal of becoming the first $1 billion software company focused exclusively on meeting the human capital management needs of both large enterprises and small- and medium-size organizations on a worldwide basis.”

Founded in 1977, Kronos posted revenue of $519 million in its last fiscal year. Unicru, which was founded in 1987, is on pace to report revenue of $46 million for 2006, says Brad McMahon, Unicru vice president of corporate development. Unicru’s revenue has been growing at a rate of 25 percent to 35 percent annually in the past several years, McMahon says.

The move is part of a broader consolidation trend in the area of recruiting technology. Holincheck says that given Unicru’s focus on hourly hiring, particularly in industries such as retail, the company was a more desirable acquisition target for Kronos than were other recruiting software firms such as Vurv Technology.

He also says Unicru customers should have little fear that their products will be neglected once the company is gobbled up, which is a common concern when tech firms merge. Holincheck says Kronos is “not going to abandon the retail sector.”

—Ed Frauenheim

Paying $3.47 for a cup of coffee is commonplace in Warsaw, but it is tantamount to highway robbery in Buenos Aires, where Argentineans generally plunk down $1.47 for their brew of choice. The price difference may not seem like that big a deal when it comes to a cup of java, but it can add up for big-ticket items and have quite an effect on the quality of life for expatriate workers.

One way that companies can ensure workers have comparable living standards—whether they’re in New York or New Delhi—is through careful management of cost-of-living allowances, says Rebecca Powers, a principal consultant for Mercer Human Resource Consulting. “Rapid currency fluctuations and sudden changes in the rental of real estate make it pressing for companies to be proactive in this area,” she notes.

Mercer recently released the Worldwide Cost of Living Survey for 2006, which could help employers calculate fair allowances for expatriate workers. The study covers 144 cities and compares the cost of 200 items, such as food, housing and entertainment.

Several myths about the cost of living are busted by the report. Tokyo is not the world’s most expensive city to live in; that distinction belongs to Moscow. And no, deploying workers from an industrialized market to a developing nation does not always save money. The cost of living in Cleveland, Pittsburgh and Detroit is cheaper than that of Guatemala City.

According to the survey, four of the world’s 10 most expensive cities are in Asia. Seoul, South Korea, ranks No. 2, followed by Tokyo at No. 3, Hong Kong at No. 4, and Osaka, Japan, at No. 6.

London, which places No. 5 in the survey, is the most expensive European city. Swiss cities Geneva and Zurich; Copenhagen, Denmark; and Oslo, Norway, round out the top 10.

The Brazilian cities of Sao Paulo and Rio de Janeiro—the most expensive cities in Latin America—jumped dramatically, climbing from 119 and 124 to 34 and 40, respectively. The move, which happened during 2005, is largely attributed to an appreciation in Brazil’s currency, the real, relative to the U.S. dollar. Powers says that kind of ascension illustrates how important it is for companies to frequently conduct cost-of-living allowance reviews.

Infrequent assessments have put workers stationed in Europe in a tough spot, since there have been sharp fluctuations in the U.S. dollar against the euro.

“Purchasing power was changing very rapidly,” Powers says. “Their standard of living varied with the currency exchange.”

Though that situation has stabilized recently, companies had to initiate policies to extend expatriates better protection against currency fluctuations. Powers says that 40 percent of companies in North America now conduct allowance reviews on a case-by-case basis, which enables them to be more responsive to the needs of workers overseas.

One place where companies likely won’t sweat changes is in Asuncion, Paraguay, which ranked last on the list at No. 144 for a second year. Powers says that Mercer’s list is not meant to help companies determine where to station workers. Instead, it should be used to help organizations establish fair compensation practices.

“Companies are going to send workers to where the business opportunities are found, regardless of cost,” Powers says. “To maximize their chances (of succeeding), they are going to have to hold on to talent. And one way of achieving this is by compensating them adequately.”

—Gina Ruiz

Google’s newly announced facility in Michigan shows once again that the American heartland can win over tech employers.

The Internet giant’s decision to locate a 1,000-job sales and operations center in the Ann Arbor area comes in the wake of several other tech firms making significant investments in places both outside the traditional U.S. tech hubs and far from offshore centers such as India and China.

Cities including Ann Arbor, Oklahoma City and Twin Falls, Idaho, offer a supply of local college graduates as well as a lower cost of living compared with the Silicon Valley region of California, as well as the tech hubs in Seattle and Boston. Wages in Middle America communities may be higher than in Bangalore or Shenzhen, China. But employers benefit from workers familiar with U.S. cultural norms and avoid the tribulations of collaborating at a distance.

Tax breaks also can play a role. Michigan officials, for example, approved a tax credit valued at more than $38 million over 20 years to woo Google. In addition, the company should benefit from close access to the highly regarded University of Michigan, whose main campus is in Ann Arbor. Michigan Gov. Jennifer Granholm said on her Web site that Google chose Michigan over several other potential locations “because of our highly skilled workforce.”

Google spokeswoman Courtney Hohne confirmed that Michigan’s talent pool was a major factor in the decision to put down roots in the Ann Arbor area. It also didn’t hurt that Google co-founder Larry Page graduated from a Michigan high school and from the University of Michigan.

“We’re delighted to open a new office in the Ann Arbor area,” Page said in a statement. “We hope to establish as wonderful a home in Michigan for Google as I enjoyed while growing up.”

Google’s new facility will be part of its AdWords online advertising program, which is used by organizations to promote products and services on the Web. AdWords ads are displayed along with search results on Google, as well as on other sites.

Hohne says the 1,000 jobs Google expects to create in Michigan over the next five years will include account management and customer support positions. She also says the company could decide to bring on engineering talent at the site. “We’re not going to rule anything out at this point,” she says.

Given its current size, Google is making a substantial commitment to the Ann Arbor region. The company had 6,790 full-time employees as of March 31. Google’s headquarters is in Mountain View, California, in the heart of Silicon Valley. The company also has operations in the Seattle area, India, China and Japan.

It is not the first technology firm to bet on a smaller American community. Computer maker Dell put a manufacturing plant in Lebanon, Tennessee, a technical support facility in Twin Falls and a customer contact facility focused on sales to smaller businesses in Oklahoma City.

Oklahoma City also attracted the attention of computer services company Ciber. Last year, Greenwood Village, Colorado-based Ciber opened a software development center there. Ciber has operations in other U.S. cities not considered tech powerhouses, such as Tampa, Florida, and Edison, New Jersey.

Tech services firm Rural Sourcing employs a similar strategy. It operates in places including Jonesboro, Arkansas.

John Laird, professor in the electrical engineering and computer sciences department of the University of Michigan, is hopeful that Google’s move will help reverse a “brain drain” from Michigan.

“A lot of our students go out to California to get jobs with Microsoft, Google or Intel,” he says. “This has a significant chance of keeping them in the area.”

—Ed Frauenheim

Participating in salary surveys helps many employers stay on top of compensation trends in their industries. Such surveys often act as the bread and butter for companies’ recruiting and retention efforts.

But a recent spate of lawsuits may put this kind of information sharing under a microscope.

Four class-action lawsuits filed simultaneously in June against separately owned hospitals in Chicago; Albany, New York; Memphis, Tennessee; and San Antonio allege that they conspired to keep nurses’ wages down.

The lawsuits, which were filed in federal court in the four cities, allege that the hospitals exchanged compensation information through telephone conversations, meetings and written surveys and that “the exchange of this information itself has suppressed competition” among the hospitals in how they compensate their nurses and thus kept wages low in violation of antitrust laws. The suits have raised the eyebrows of labor lawyers, who note that evidence for the cases was uncovered by the Service Employees International Union.

It’s part of a greater corporate campaign by the SEIU, says Connie Ber­tram, a partner in the Washington, D.C., office of Winston & Strawn.

“These kinds of tactics help unions to prove that they are working in the interest of employees while putting pressure on employers,” she says.

If the suits are successful, it could mean that all employers have to take extra steps to make sure the salary surveys they participate in do not violate antitrust laws, says Russell Miller, a senior client partner in the executive compensation group of Korn/Ferry International.

Under current rules, employers are allowed to share salary information as long as it’s through an independent third party and the information is not specific. “It’s possible that this suit may mean that companies have to go through higher hurdles when working with third parties,” Miller says.

Companies may want to make sure they have an antitrust lawyer review all materials before submitting them, he says. Employers also may want to include even less-specific information in these surveys, Miller says.

Experts warn that executives may have to be more careful when having casual conversations about compensation, which often occurs at trade shows or industry events.

“This may be how some companies get their best information (on compensation trends), but it might be the most dangerous,” says Gerald Hathaway, a partner in the New York office of Littler Mendelson.

“If the unions get the scent that a company may not be in compliance with antitrust rules, they are going to use that information,” he says.

But Dan Smith, a partner at Cohen, Milstein, Hauseld & Toll, one of the law firms that filed the suits, says there is no reason for employers to become paranoid.

“The practices that we are challenging are not a gray area. The hospitals were clearly flouting the antitrust rules,” he says. “In these cases there are some legitimate surveys that have occurred, and they are not the ones that we are challenging.”

—Jessica Marquez