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Workforce Management, February 2010, p. 14 — Subscribe Now!
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Legislation that would restrict video surveillance of employees who have filed a workers’ compensation claim by insurers and self-insured employers has been approved by a Colorado House committee.
Colorado’s House Judiciary Committee approved H.B. 10-1012, sponsored by Democratic state Rep. Sal Pace, on a 6-4 vote last week. The bill would prohibit insurers or employers from conducting surveillance of workers’ comp claimants unless they have “a reasonable basis to suspect that the employee has committed fraud or made a material misstatement concerning the claim.”
Claimants would be allowed to ask for an expedited hearing to learn why they are being investigated and individuals conducting the surveillance would be required to respond fully to questions.
The legislation, which now goes to the Colorado House Appropriations Committee, also sets up a $1,000-a-day penalty for violations. A similar bill is pending in the Colorado Senate.
Separately, Denver-based Pinnacol Assurance, a state-created workers’ comp insurer, said in a statement Tuesday, February 16, that it is prepared to give the state $200 million to remove it from state control and become a policyholder-owned workers’ comp insurer.
Filed by Roberto Ceniceros of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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A laid-off sales executive sued by Motorola Inc. for taking a job with rival Ericsson says he had permission from his boss and from co-CEO Gregory Brown to take the new position.
Daniel Aderhold, who spent 31 years at Motorola before being laid off in May as a vice president of sales in its wireless network unit, says he took a similar job at Ericsson after Motorola lost out in its bid to supply next-generation gear to Verizon Wireless.
Motorola sued Aderhold last month to prevent him from overseeing the Verizon account for Ericsson, claiming he violated a noncompete clause in his separation package and that he couldn’t take the new position without revealing trade secrets such as product strategy, violating a confidentiality agreement.
Aderhold’s attorney claims the suit is the result of Motorola’s effort to boost perceptions of its network business, which it has been rumored to be trying to sell as part of its larger plans to split up the company.
“This is part of Motorola’s marketing strategy, to put lipstick on a corpse, which is their networks business, and to keep other employees from abandoning the sinking ship,” said Oak Brook, Illinois-based attorney Peter Lubin.
A Motorola spokeswoman said, “Aderhold signed a noncompete with Motorola, and we stand behind the allegations made in the complaint.”
A year ago, Motorola lost out to Ericsson and Alcatel Lucent on a bid to become a supplier of fourth-generation network equipment, known as LTE or long-term evolution, to Verizon. The loss was a serious blow to the viability and value of Motorola’s network equipment business, Aderhold states in an affidavit describing a conversation he had with Brown a few weeks before his departure.
“Brown told me he lacked confidence that Motorola’s network divisions could compete in the global marketplace with its LTE technology, as the company had recently competed for and lost the major [LTE] technology bid for Verizon Wireless,” the affidavit states.
“Brown thanked me for my many years of employment … and indicated he could ‘see no good reason why I should remain at Motorola.’ Further, Brown stated that he had ‘no angst’ with what company I might work for in the future and that he did not care if, for instance, I went to work at [competitor] ‘Huawei.’ ”
Aderhold says that before taking a job with Ericsson in mid-June, he cleared it with Fred Wright, senior vice president of Motorola’s network business. “Wright congratulated me on finding a new position, plainly indicated he saw no problem with my employment at Ericsson, as I would not be competing with Motorola since it had recently lost the bid to be an approved LTE vendor to Verizon Wireless,” Aderhold’s affidavit states.
Filed by John Pletz of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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New federal legislation aimed at getting tough on independent contractor misclassification was introduced September 15 in Congress.
The Fair Playing Field Act of 2010 was introduced by Sen. John Kerry, D-Massachusetts, and Rep. Jim McDermott, D-Washington.
It aims to:
• End the moratorium on Internal Revenue Service guidance addressing worker classification.
• Requires the secretary of the Treasury to issue prospective guidance clarifying the employment status of workers for federal employment tax purposes.
• Requires those who use independent contractors to provide them with a written statement on their federal tax obligations, the labor and employment law protections that do not apply to them and their right to seek a determination from the IRS on their status.
• Raises penalties for misclassification.
“The legislation is timely, as misclassification is an increasing problem, one that puts employers who properly classify their workers at a disadvantage in the marketplace and costs the government billions of dollars in unpaid taxes,” Vice President Joe Biden said in a written statement.
A similar piece of legislation, the Employee Misclassification Prevention Act, was introduced in June.
Filed by Staffing Industry Analysts, a sister company of Workforce Management. To comment, e-mail editors@workforce.com.
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Senate Majority Leader Harry Reid, D-Nevada, on Thursday, February 11, scrapped a bipartisan jobs bill that included provisions to extend and expand federal COBRA premium subsidies to laid-off employees, as well as temporarily ease pension plan funding rules, in favor of a narrower measure that he intends to bring to the Senate floor soon.
Benefits experts say there is overwhelming congressional support to extend COBRA premium subsidies and that the COBRA provisions in the scrapped bill are likely to be attached to any one of several other bills that Congress will consider in the coming weeks.
The COBRA provisions remain uncontroversial, and instead of going out on this train, they may go out on the next train. Employers should expect the subsidy to be extended,” said Frank McArdle, a consultant with Hewitt Associates in Washington.
Under current law, employees involuntarily terminated from September 1, 2008, through February 28, 2010, are eligible for a 15-month premium subsidy.
In addition, the draft bill would allow employees who lost group health insurance due to a reduction in the number of hours they work and were involuntarily terminated later to receive the COBRA premium subsidy, assuming certain conditions were met
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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U.S. companies’ budgets for salary increases in 2010 fell to their lowest level in more than two decades, The Conference Board reported Tuesday, February 9.
The 2010 median forecast of salary budgets for increases is 2.8 percent for all employee groups, the lowest level in the 25-year history of The Conference Board’s annual survey on salary-increase budgets.
In addition, changes to salary structures (changes to minimum, midpoints and maximums of pay scales) to account for changes in cost of living and other factors aren’t expected to top 2 percent, according to the survey. That’s below The Conference Board’s forecast of a 2.6 percent inflation rate.
A recovery in compensation is likely a few years away, Gad Levanon, associate director of macroeconomic research at The Conference Board, said in a statement. “In the previous three recessions, compensation began accelerating only several years after employment bottomed,” Levanon said.
In the statement released with highlights of the research, “Salary Increase Budgets for 2010—Winter Update,” Linda Barrington, the organization’s managing director for human capital, said: “U.S. workers will continue to face downward pressure on their salaries and wages. Without the purse strings loosening on financial rewards, employers are going to have to rely on other ways of engaging employees, especially top performers, in order to keep their companies competitive.”
The survey included 285 U.S. organizations.
Filed by Staffing Industry Analysts, a sister company of Workforce Management. To comment, e-mail editors@workforce.com.
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Kathleen Sebelius, secretary of the U.S. Health and Human Services Department, has called on Anthem Blue Cross of California to release financial data to justify its 39 percent increase in premium costs for California customers with individual policies. President Barack Obama cited the increase to bolster his case for health care reform. The rate increase does not apply to employer-provided plans.
In a letter dated February 8 and sent to Anthem Blue Cross president Leslie Margolin, Sebelius said she was “disturbed” to learn about the increase, which she said is 15 times greater than the rate of inflation and could make insurance unaffordable for hundreds of thousands of Californians.
“Your company’s strong financial position makes these rate increases even more difficult to understand,” the secretary stated, adding that WellPoint, Anthem’s parent company, posted $2.7 billion in profits during the fourth quarter of 2009.
Sebelius also called on the company to make public its medical-loss ratio data, or the amount of premiums that is used for medical care versus the percentage used for administrative costs.
California law requires that insurers spend at least 70 cents of every premium dollar on medical care.
Last week, California Insurance Commissioner Steve Poizner instructed his department to hire an outside actuary to examine Anthem’s rates, adding that if the ratio is found to be excessive, “I will use the full power of my office to bring these rates down.”
An Anthem spokeswoman said that the company had been alerted to Sebelius’ letter through media accounts, but has yet to review it.
In a statement on its rate increase, Anthem said that the rising cost of care has forced the company to raise its premiums.
“It is important to note that premiums are expensive because the underlying healthcare costs are expensive,” the letter states.
Filed by Matthew DoBias of Modern Health Care, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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Experts say employers should brace for another extension of the federal subsidy of COBRA health insurance premiums for involuntarily terminated employees, with President Barack Obama and top Senate Democrats adding their support to the plan.
The Obama administration included the extension in its proposed fiscal 2011 budget, which it sent to lawmakers February 1.
In Congress, key lawmakers also are backing an extension. Senate Majority Leader Harry Reid, D-Nevada, and Finance Committee Chairman Max Baucus, D-Montana, and several other top Senate Democrats have distributed a description of a soon-to-be-introduced jobs bill that would include extending the COBRA subsidy, but provided no specific details. One proposal under discussion, sources say, would extend the subsidy an additional three months so employees laid off in March, April and May would be eligible.
Under the extension proposed by the administration, employees laid off from March 1 through December 31, 2010, would be eligible for the 65 percent subsidy for up to 12 months.
Previous subsidies affected employees laid off from September 1, 2008, through February 28, 2010. Those individuals, who are eligible for 15 months of premium subsidies, would not be affected by the extension proposed by the White House.
Driven by administration and congressional support, along with the nation’s continuing high unemployment rate, another COBRA subsidy extension is almost certain, Washington observers say.
“All signals say to me that employers should prepare for another extension,” said Frank McArdle, a consultant in the Washington office of Hewitt Associates Inc.
“There is huge public pressure on legislators” to pass another extension, said Kathryn Wilber, senior counsel-health policy with the American Benefits Council in Washington.
Congress included COBRA premium subsidies as part of a broad economic stimulus package it approved and Obama signed into law in February 2009. The American Recovery and Reinvestment Act of 2009 included a 65 percent COBRA subsidy up to nine months for employees laid off from September 1, 2008, through December 31, 2009.
Congressional researchers estimated the subsidy would benefit about 7 million former employees and their families and cost about $25 billion.
Then in December, Congress approved and Obama signed into law a Defense Department spending bill with a provision extending the subsidy to a total of 15 months for employees laid off from September 1, 2008, through February 28, 2010.
The 65 percent subsidy has been a boon for millions of laid-off employees and their families who, in many cases, would have been hard-pressed to pay the entire monthly premium, which typically is about $400 for individual coverage and $1,200 for family coverage.
The availability of the subsidy has sent COBRA opt-in rates soaring. In a survey of 200 large employers, Hewitt found that the percentage of laid-off employees opting for COBRA more than doubled to 39 percent from March 1, 2009, when the subsidy generally first became available, through November 30, 2009. In contrast, from September 1, 2008, through February 28, 2009, an average of 19 percent of involuntarily terminated employees opted for COBRA.
The original COBRA subsidy law, which went into effect almost immediately after passage, put enormous pressure on employers to locate and inform former employees who initially declined COBRA of their new right to obtain subsidized coverage.
“Initially, there was huge turmoil,” recalled Gretchen Young, vice president of health policy with the ERISA Industry Committee in Washington.
Over time, though, administrative and other problems eased as employers and their consultants put systems in place and as federal regulators provided guidance that resolved many questions, not the least of which was defining situations that qualified laid-off employees for the subsidy.
“Within about six weeks to two months, problems eased,” said Scott Keyes, a senior consultant with Towers Watson in Stamford, Connecticut.
In December, when the initial nine-month subsidy started to run out, employers and administrators had another period of uncertainty, not knowing whether Congress would extend the assistance. Many employers, uncertain of whether the subsidy would be extended, charged the full premium for beneficiaries whose nine-month subsidy eligibility had run out.
In mid-December, Congress extended the subsidy, requiring employers to again notify beneficiaries of the change. For those who were overbilled because they paid the entire premium for December, beneficiaries typically received a credit applied to the next COBRA premium payments along with an explanation of the adjustment, said Jennifer Henrickson, a legal consultant with Hewitt in Lincolnshire, Illinois.
Depending on when and how Congress extends the subsidy, employers and administrators could again face some of those same issues.
Aside from administrative issues, experts say the subsidies have boosted employers’ costs, though definitive statistics are not yet available.
That is because those opting for COBRA typically are above-average users of medical services. While the risk pool has almost certainly improved because of the subsidy, premiums certainly are not covering the cost of claims, says the ERISA Industry Committee’s Gretchen Young.
The cost can be significant, especially for employers who have laid off large numbers of employees, Young said.
Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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Defined-benefit pension plans are consistently earning higher rates of return than 401(k) plans, according to an analysis by consulting firm Towers Watson.
The median annual rate of return from 1995 through 2007 for defined-benefit plans was 10.13 percent, compared with 9.06 percent for 401(k) plans, Towers Watson found.
Towers Watson consultants say it isn’t surprising that rates of return in defined-benefit plans have topped those of 401(k) plans.
Participants in 401(k) plans “often do not optimize their investment strategies. Even with investment education and better default investment options for 401(k) plan participants, DC plans do not replicate all the advantages of DB plans and are unlikely to outperform DB plans, which generally have extended investment horizons and economies of scale,” said Mark Warshawsky, director of retirement research at Towers Watson.
The analysis, which is based on pension plan reports employers file with the federal government, looks at individual years. In 2007, the most recent year included in the analysis, it found that the median rate of return for defined-benefit plans was 7.71 percent, compared with 6.78 percent for 401(k) plans.
The biggest difference during the 13-year period was in 2000, when the median rate of return for defined-benefit plans was -0.01 percent, compared with a 401(k) plan loss of 2.76 percent.
The highest rate of return for defined-benefit plans during the 13 years was in 2003, with a median rate of return of 21.35 percent. During the same period, 401(k) plans registered a 19.68 percent median rate of return.
The top year for 401(k) plans was 1997, when the median rate of return was 19.73 percent, compared with 18.82 percent for defined-benefit plans.
In all, median rates of return for defined-benefit plans were higher than 401(k) plans in nine of the 13 years analyzed by Towers Watson.
Still, despite generating higher investment returns, the number of defined-benefit plans open to new employees continues to fall. As of May 2009, 45 percent of Fortune 100 companies offered a defined-benefit plan to new salaried employees, down from 90 percent in 1998, according to an analysis last year by Watson Wyatt Worldwide prior to its merger with Towers Perrin. By contrast, 55 percent of Fortune 100 companies offered only a defined-contribution plan to new salaried employees last year, compared with 10 percent in 1998.
Employers cite many reasons for moving away from defined-benefit plans. One is the unpredictability of the amount of required contributions, due to the swings of investment results and interest rates. Another is their concern about future costs as plan participants live longer.
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Although a Senate committee approved Harold Craig Becker for a seat on the National Labor Relations Board on Thursday, February 4, the 13-10 party-line vote signals that Republicans may block his controversial nomination with a filibuster this week.
The Republicans’ ability to halt Becker, who has caused concern in the business community with his pro-union stances, is enhanced now that Sen. Scott Brown, R-Massachusetts, has been sworn into office.
The ceremony was advanced to late Thursday afternoon, hours after Brown’s election was certified by Massachusetts officials. He gives the GOP 41 senators, enough to sustain a filibuster.
Originally scheduled for February 11, Brown’s seating was moved up a week to allow him to vote on Becker and other administration nominees opposed by Republicans. A source with a business group in Washington expects Brown to join a filibuster against Becker, who is associate general counsel for the Service Employees International Union.
In a Capitol Hill press conference minutes after he was sworn in, Brown did not take a position on the Becker nomination. He said he was studying the qualifications of pending nominees and was not being pressured by Senate GOP leadership.
“I have not been asked to do anything either way,” Brown said.
The Senate will vote on whether to end debate—or stop a filibuster—on the Becker nomination at 5 p.m. ET on Tuesday, February 9.
Another Democratic nominee who drew Republican objections, Patricia Smith, tapped by the Obama administration to be solicitor of the Department of Labor, gained Senate approval, 60-37, hours before Brown was sworn in. The solicitor is the top legal official at the Labor Department.
Republicans asserted that Smith had misled the Senate about the details of a program that she implemented as New York labor commissioner designed to enlist unions and community groups in seeking out pay violations by local companies.
Becker, meanwhile, stokes passionate corporate opposition because of papers he has written in which he asserts that management should have no role in union elections and that the National Labor Relations Board can implement labor-law changes independent of Congress.
In a hearing last week, Becker distanced himself from his articles, saying that he wrote them as a scholar who was attempting to foment debate. Becker has served as a professor at Georgetown University; the University of Chicago; and the University of California, Los Angeles. He said that as an NLRB adjudicator, he would respect the will of Congress and adhere to current labor law.
His opponents fear that once he has joined the five-member board, he and his Democratic colleagues will try to implement aspects of the Employee Free Choice Act by administrative fiat. The bill, which makes it easier for employees to form unions, is stalled in the Senate as backers look for 60 votes to overcome a filibuster.
The NLRB would have a 3-2 Democratic majority if Becker and two other nominees—Democrat Mark Pearce and Republican Brian Hayes—gain Senate confirmation.
The board, which oversees collective bargaining in the private sector and whose majority reflects the presidential administration, has had only two members since January 2008. The Supreme Court will consider this spring whether decisions that have been made by the two-member board are valid.
The three NLRB nominees will be considered by the full Senate as a bloc. Pearce and Hayes have not generated controversy but cannot move forward without Becker.
The Senate labor committee voted in favor of Becker in October, with two Republicans joining the panel’s Democrats. They changed their votes to “no” Thursday, demonstrating Republican unity.
Sen. John McCain, R-Arizona, placed a hold on the nomination last fall, preventing action on the floor and forcing the Obama administration to re-nominate Becker in January. It’s not clear whether McCain will put another hold on Becker.
Sen. Tom Harkin, D-Iowa and chairman of the Senate labor committee, expressed frustration with Republicans trying to block Becker.
“This government cannot function if we, as senators, abuse our power to advise and consent to presidential nominees by using extraordinary procedural tactics to block the nomination of qualified people,” Harkin said.
Sen. Mike Enzi, R-Wyoming, defended the Republican moves. He said Becker’s answers to some 280 written questions from the committee were “vague” and leave open the possibility that Becker would “tilt the playing field unfairly in the direction of labor union leaders.”
Harkin, the chief sponsor of the Employee Free Choice Act, dismissed concerns that the NLRB can bring the bill’s provisions into effect. Among other things, the Employee Free Choice Act as originally envisioned would allow workers to form a union by signing cards rather than through a secret-ballot election.
“I don’t have any illusions that those important changes can somehow be accomplished administratively, and neither does Craig Becker,” Harkin said. “It would take a change in the law.”
Harkin acknowledged that Senate prospects for the Employee Free Choice Act remain cloudy but promised a vote this year.
“It’s not dead,” Harkin told reporters Thursday. “We’re still hoping we can bring something out that can garner 60 votes.”
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