Category: Compliance

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Hostess Brands to Terminate Pension Plan as Part of Liquidation

Hostess Brands Inc., Irving, Texas, will terminate its defined benefit plan, and the Pension Benefit Guaranty Corp. will assume its liabilities, said Lance Ignon, Hostess spokesman.

The news follows Hostess’ announcement on Nov. 16 that it will close its business and sell off all its assets.

Hostess suspended payments to the 42 multiemployer pension plans to which it contributes in August 2011. “For active employees, the circumstances differ for each MEPP, so (participants) should contact the administrator of the MEPP” in which they participate, Ignon said in an email, citing an employee Q&A document. He could not provide further information by press time.

The company’s IBC Defined Benefit Plan had about $56 million in assets and $111 million in liabilities as of April 30, according to the PBGC.

“PBGC exists to safeguard retirement security in uncertain times, and that’s what we’ll do for the 2,300 men and women in Hostess’ single-employer plan if the company liquidates. The plan is underfunded by about $55 million,” said J. Jioni Palmer, PBGC spokesman, in an emailed statement.

“Hostess belongs to 42 multiemployer plans, but its liquidation wouldn’t cause those plans to immediately become insolvent. PBGC doesn’t take responsibility for multiemployer plans, but instead gives financial assistance to the plans that can’t pay benefits,” Palmer said.

Kevin Olsen writes for Pensions & Investments, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Medical Employers Are Enticing Workers With Cash to Repay Student Loans

With many students graduating from college with unprecedented levels of debt, some employers are helping to pay employees’ student loans, easing the burden for new hires while making it easier for those organizations to recruit and retain workers.

“It’s another competitive advantage for us to attract the brightest and the best,” says Angie Metcalf, assistant vice president, human resources, at Martin Health System in Stuart, Florida.

Martin Health System, which operates two hospitals and a variety of other medical facilities, began offering student loan repayment to nurses about a decade ago and then expanded it to include pharmacists.

“Nobody will come here just because of this,” Metcalf says. “But if they have two competing offers, it can push them over the edge” in deciding where to go to work.

Martin Health System is far from alone with the practice. Online job boards carry numerous ads from medical facilities offering student loan repayment programs to recruits in various health care positions.

And the 2010 Physician Retention Survey by Cejka Search and the American Medical Group Association found that 35 percent of the medical organizations that responded to the survey offered student loan repayment assistance for physicians.

More than 60 organizations employing more than 17,000 physicians responded.

Last year, Martin Health System provided funds to help pay the student loans for 19 of its 3,100 employees. A nurse or pharmacist has to be with the health care system a year before that person can apply for the loan assistance and if they get it, then they can reapply two more times. “It has an aspect of retention to it,” Metcalf says.

Health system nurses are eligible to receive up to $2,000 a year in student loan assistance, with a total cap of $6,000. Pharmacists can receive up to twice that amount. The money is paid directly to the institution from which the employee graduated.

A recent study by the Federal Reserve Bank of New York found that in 2011, the average outstanding student loan balance per borrower exceeded $23,000. Total student loan debt in the first quarter of 2012 reached $904 billion. That’s up $30 billion from the previous quarter, and an increase of $663 billion from 2003, the bank found.

Metcalf acknowledges that the amount Martin Health System pays out doesn’t put a huge dent in the student loan balances of its employees, but it does serve to foster employee loyalty. While the program costs Martin Health System $35,000 to $40,000 a year, by retaining employees the organization saves on recruiting costs.

The practice of using student loan repayment to recruit and retain workers also is common in the federal government. In July, the U.S. Office of Personnel Management reported that it had paid more than $85 million in student loans in 2010 to more than 11,000 employees—primarily in the departments of Defense, Justice and State.

Finding and retaining quality employees—especially for specialty positions—can be a major challenge for organizations in remote locations.

Montana is assisting school districts by helping to pay the student loans of teachers who go back to college and get certified in hard-to-find specialties, says Eric Feaver, president of MEA-MFT, the union that was formed when the Montana Education Association and the Montana Federation of Teachers merged.

It’s difficult enough to recruit employees to a rural area, and Montana faces particular shortages in certain areas, such as special education and music, Feaver says.

Montana is dotted with 430 school districts, and many are tiny. With shifting student populations, one district may develop a surplus of English teachers but need a special education teacher.

Starting in 2008, the state began offering teachers up to $3,000 per year in loan assistance for four years to get certified to teach particular subjects, such as special education, Feaver says. About 500 of the state’s 11,000 teachers have gone back to school and are now receiving student loan assistance from the state.

“We’re very proud of the fact we can help teachers stay in the community,” Feaver says.

Susan Ladika is a writer based in Tampa, Florida. Comment below or email editors@workforce.com.

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No Call, No Show, No FMLA

Just because an employee makes a request for FMLA leave does not excuse an employee from complying with an employer’s attendance policies. According to section 825.302(d) the FMLA’s regulations:

An employer may require an employee to comply with the employer’s usual and customary notice and procedural requirements for requesting leave, absent unusual circumstances. For example, an employer may require that written notice set forth the reasons for the requested leave, the anticipated duration of the leave, and the anticipated start of the leave. An employee also may be required by an employer’s policy to contact a specific individual…. Where an employee does not comply with the employer’s usual notice and procedural requirements, and no unusual circumstances justify the failure to comply, FMLA-protected leave may be delayed or denied.

This means that if you have a policy requiring employees to call-in if they are going to be late or absent, you can enforce that policy to the detriment of a non-compliant employee taking FLMA leave.

For example, in Ritenour v. Tenn. Dep’t of Human Servs. (6th Cir. 8/29/12), the employee, who mistakenly believed she had been approved for intermittent FMLA to care for her mentally ill son, did not comply with employer’s job abandonment or absenteeism policies, which required the employee to provide appropriate notice to avoid the accrual of unexcused absences. Because the employer terminated Ritenour because of her violation of the policy, her FMLA claims failed:

Even assuming that Ritenour was entitled to take FMLA leave and that TDHS interfered with Ritenour’s FMLA rights, TDHS has provided a legitimate reason for Ritenour’s dismissal that is not related to her request for FMLA leave—because Ritenour did not call in, in violation of the job abandonment policy….

Ritenour knew that the absenteeism policy required that absent employees call-in their absences in order to give their supervisor appropriate notice to make alternative work assignment arrangements. TDHS’s job abandonment policy applies to all employees who are absent from duty without approval. The enforcement of that policy against Ritenour was not related to Ritenour’s request for FMLA leave because the policy applies to employees who are absent from work without approval for any reason.

While it sometimes seems as if employees hold all the high cards in the FMLA poker game, as Ritenour makes clear, employers are within their rights to enforce neutral attendance policies against employees who fail to follow their rules. Now, go check your policies to make sure they contain these types of notice and call-in rules.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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Does a ‘Good Faith Belief’ About an Illegal Pay Practice Support an FLSA Retaliation Claim?

April Hurd worked as a nurse’s aide for Blossom 24 Hour We Care Center. The company fired her 10 days after she complained about unpaid overtime. Easy case for the employee? If you think this is an open-and-shut case of retaliation under the FLSA, you are mistaken.

In Hurd v. Blossom 24 Hour We Care Center, Inc. (Ohio Ct. App. 8/2/12) [pdf], the court quickly disposed of Hurd’s retaliation claim:

There is no evidence that Hurd engaged in protected activity by requesting overtime. The U.S. Supreme Court has held that home health care workers are not entitled to overtime compensation because they constitute FLSA-exempt “domestic service” employees. Thus, because Hurd is exempt, her request for overtime did not constitute a protected activity.
Should this case have been this simple? In Title VII retaliation cases, there is a long-standing rule that an employee engages in protect activity by opposing an alleged unlawful employment practice with a reasonable a good-faith belief that the employer has violated Title VII. Some courts have extended this rule to retaliation cases brought under the FLSA.
 
If an exempt employee has a good-faith belief that he or she is not exempt and complains about missing overtime pay, shouldn’t that employee receive the same benefit as an employee complaining about an alleged unlawful employment practice under Title VII? Shouldn’t the employee’s good faith belief in the perceived illegality be put to the test?
 
What is the lesson for employers? Despite the ruling in Hurd, if an employee you have classified as exempt complains about overtime pay, do not assume it is safe to retaliate. The court deciding that employee’s case might not be as generous as the court was in Hurd.

Written by Jon Hyman, a partner in the Labor & Employment group of Kohrman Jackson & Krantz. For more information, contact Jon at (216) 736-7226 or jth@kjk.com.

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Should We Require Employees Who Leave to Repay Tuition?

Dear Feeling Cheated:

 

It’s important to remember that you don’t have complete control over this situation, in that employees will adjust to your decision in ways you might not like. If you get too cheap—paying only part of the tuition costs, requiring a very long payback period—employees won’t use it. Those with resources will pay for it themselves and then leave immediately after.

Most companies now require that tuition-reimbursement costs be paid back when the employee leaves. At least at the Master of Business Administration level, the requirement has been about two years of subsequent service.

It’s useful to ask what problem you are trying to solve by imposing these restrictions. Employees who attend school while also working full time tend to be highly motivated, so the best workers are likely to be the ones using the benefit. They tend to take courses or degrees that improve their performance, which is exactly what you want, and they are making the bigger investment by doing all the work on their own time. We know that they also tend to stay with employers longer than those who don’t use the programs. It’s a great win for the employer. So do you really want to make it more difficult for your employees to use tuition reimbursement?

If the concern is losing investments in people who leave after getting an education, remember: It was only partially on your dime. Second, the overwhelming reason people leave is they have acquired new skills—but often leave because their employer won’t give them jobs or even tasks that use those skills. That is an aspect firmly within your control.

Contracts that require payback don’t keep people from leaving. But if the employee leaves, thus breaking the contract, his new employer pays off the debt.

SOURCE: Peter Cappelli, Center for Human Resources, Wharton School, University of Pennsylvania, Philadelphia

LEARN MORE: Tuition assistance benefits typically have not been assessed for their bottom-line effect. But some see the programs as vital to employee development and retention.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Workers’ Compensation Audit Reviews Can Reveal Costly Errors

With workers’ compensation rates firming, some employers are pressing for reviews of their workers comp audits with an eye to lowering their premiums.

Some of the those reviews are turning up clerical errors and misclassifications that can cost employers as much as hundreds of thousands of dollars in overpaid premiums and adversely affect their financial profile.

By checking industry classifications and experience modification calculations, companies can ensure that their comp premiums are in line with their employment numbers and loss experience, said Lisa D. Costello, senior risk consultant at Willis North America Inc.’s strategic outcome practice in Overland Park, Kansas.

“I think more clients will request this service as the (workers’ comp) rates increase and those increases get traction in the marketplace,” Costello said. “I think the better question is: How many employers or insureds know that there’s even an issue?”

Costello said about one out of five audits that Willis reviews for clients have clerical errors, while about one in three ex-mods includes a mistake. About 10 percent of Willis’ clients that go through the audit review process receive a partial premium refund, she said.

Aside from the total cost of workers’ comp coverage, Costello said such errors can affect a company’s lending profile and even its ability to win contracts.

“This is a significant problem for contractors, because if their (ex-mod) is incorrect because of a clerical error, they’re prevented from bidding jobs and they may not secure the bid because their mod is too high,” she said.

Simon Feuer, president of Apex Services Ltd., said he’s seen more companies requesting workers’ comp premium recovery services as the economy has improved. The Cedarhurst, New York-based company seeks refunds for employers that have overpaid their workers’ comp premiums.

“They see their premiums going up and they’re looking for solutions to get their premium down to what it was,” Feuer said.

Most of Apex’s clients include employers with annual premiums in excess of $100,000. Errors in their policies typically stem from miscalculated ex-mods, Feuer said.

Audit reviews can help companies looking to contain their workers comp costs, he said.

“We go and knock (the premium) down, and they have a better underwriting profile in the marketplace,” Feuer said.

Chicago-based AuditRate Inc., also a premium recovery service, found a classification error that resulted in more than $606,000 in overpaid workers’ comp premiums between 1996 and 2000 for a small Illinois manufacturer.

Howard Alper, chairman and CEO of Alper Services L.L.C., which owns AuditRate, said the error resulted in Byron, Illinois-based Quality Metal Finishing Co. being classified incorrectly as a foundry rather than a plumbing goods manufacturer. While the client has a foundry division, the rest of the business consists of lower-risk operations, Alper said.

The Illinois Department of Insurance ordered the company’s insurer, Liberty Mutual Insurance Co., to repay the excess premiums in 2010. Liberty Mutual is appealing the decision and declined to discuss the case.

Alper said classification errors in workers’ comp policies occur regularly, particularly for industrial firms with various job functions. He said such companies usually need help to correct workers comp premium mistakes.

“The businessperson may have the judgment that it’s wrong, but they don’t have the tools to fix it,” Alper said.

Not all errors result in premium refunds for employers, said Judy Leo, New York-based area senior vice president at Arthur J. Gallagher & Co.’s casualty risk management practice.

The broker reviews workers’ comp audits annually for its clients and finds clerical errors about 10 percent of the time, she said. In some cases, the review showed that companies underpaid their premiums and need to pay the difference, Leo said. Still, she said the process is beneficial because it helps employers catch mistakes before they turn into significant problems.

Willis’ Costello said recovery audits are just a small part of risk management practices that can help employers manage their workers’ comp costs.

“The bigger piece of this is … the claims management or claims prevention,” Costello said.

Sheena Harrison writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Wal-Mart to Pay $4.8M in Back Wages for Fair Labor Standards Act Violations

Wal-Mart Stores Inc. has agreed to pay more than $4.8 million in back wages and damages to more than 4,500 employees nationwide after an investigation by the U.S. Department of Labor’s wage and hour division that found violations of the Fair Labor Standards Act’s overtime provisions, the agency said.

The Bentonville, Arkansas-based retailer also will pay an additional $463,815 in civil penalties, the agency said May 1.

The Labor Department said under terms of the settlement, Wal-Mart has agreed to pay all back wages the department determined are owed for violations in addition to paying liquidated damages to the employees and a penalty to the department.

It said the civil money penalties assessed stem from the violations’ repeat nature. The agency said Wal-Mart corrected its classification practices in 2007, and negotiations over the back pay issue have been ongoing since that time. A third-party administrator will disburse the payments to the affected employees, the DOL said.

Nancy J. Leppink, the wage and hour division’s deputy administrator, said in a statement: “Thanks to this resolution, thousands of employees will see money put back into their pockets that should have been there all along. The damages and penalties assessed in this case should put other employers on notice that they cannot avoid their obligations to their employees by inappropriately classifying their workers as exempt.”

Wal-Mart said in a statement, “When the issues resolved on May 1 were initially raised, we took them seriously and fully cooperated with the Department of Labor to make sure they were corrected in 2007. We adjusted our pay practices at the time and determined that back wages should be paid for the associates involved.”

Judy Greenwald writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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Shareholders Rise Up and Reject City Pay Practices

In a surprising rebuke to Citigroup’s board and management, shareholders effectively said April 17 that the bank is paying its top people too much.

Specifically, a majority of investors voted at Citi’s annual meeting to reject the bank’s compensation plan for top executives. Though the vote is nonbinding—meaning Citi is under no obligation to act—it sends a clear message of how angry investors are over the $15 million pay package awarded to Chief Executive Vikram Pandit last year while Citi’s earnings from continuing operations rose by only 1 percent and its stock price sank by nearly half. Citi’s five most senior executives were collectively awarded $58 million last year, or 80 percent more than in 2010.

Citi is the first big bank to see its pay practices rejected since Cleveland-based KeyCorp in 2010. Under the Dodd-Frank reform law, large companies are required let their shareholders vote on compensation matters in elections known as say-on-pay. Many activist shareholders believe the votes can provide a useful way for investors to register their displeasure and pressure companies into changing the way they compensate their top people.

In a statement, Citi said it would take the message from investors into account.

“Citi’s board of directors takes the shareholder vote seriously, and along with senior management will consult with representative shareholders to understand their concerns,” the bank said. “The personnel and compensation committee of the board will carefully consider their input as we move forward.”

About 25 companies saw their pay practices rejected last year, according to consulting firm Cogent Compensation Partners, including Hewlett-Packard and Beazer Homes USA. The only bank that saw its pay plan nixed in 2011 was Umpqua Holdings, a $12 billion-asset institution based in Oregon that has since taken steps to more closely link executive pay with its stock price.

Citi’s pay practices were subject of an article last month in Crain’s New York Business that examined how the bank increased its top executives’ compensation, in part by subtly moving the goalposts. The bank stopped basing compensation decisions on what fellow struggling global banks like Barclays or UBS paid their senior executives and started looking more closely at pay within much healthier competitors such as American Express and Wells Fargo.

By tweaking its peer group of banks, Citi was able to put itself in the company of more generous companies and justify paying its top people more.

Influential proxy advisory firms ISS and Glass Lewis recommended investors reject Citi’s 2011 executive compensation plan. ISS, according to Bloomberg, said the package awarded Pandit was “substantially discretionary in nature or lack[s] rigorous goals to incentive improvement in shareholder value.”

Aaron Elstein writes for Crain’s New York Business, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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How Much Salary Are Top Graphic Designers Getting These Days?

Dear Budget-Conscious:

The Creative Group recently released its 2012 Salary Guide, which features average starting salary ranges for more than 100 design and production, interactive, advertising and marketing, and public-relations positions. The information is based on a range of sources, including actual placements of creative professionals in 2011 by our staffing teams across North America, and an analysis of current and future hiring trends.

Overall, the numbers paint a fairly promising picture. Average starting salaries for creative professionals in Toronto are projected to increase 4 percent over 2011 levels. In the United States, salaries are expected to rise 3.5 percent. Graphic designers can expect to see even bigger increases this year, our research shows. Those with one to three years of experience can expect to make $45,000 to $58,000, a 4 percent increase over 2011 levels. Graphic designers with three to five years of experience should see a 4 percent starting salary increase as well, to a range of $55,000 to $74,000. And a graphic designer with more than five years of experience can expect to see a starting salary range of $70,000 to $92,500, a 4.8 percent increase.

Keep in mind that these salary ranges do not factor in bonuses, incentives and other forms of compensation, such as benefits and retirement packages, which can be difficult to measure. Also note that designers with interactive skills are faring even better given the strong demand for professionals who can help with online initiatives.

SOURCE: Donna Farrugia, The Creative Group, Menlo Park, California

LEARN MORE: Graphic designers can expect higher raises than most U.S. workers in 2012.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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Desperate Housewife Sentenced in Huge California Workers’ Comp Scam

A woman seeking to appear on the Bravo TV series “The Real Housewives of Orange County” instead will spend 10 years on probation for one of the largest workers’ compensation scams in California history.

Devon Lynn Kile, 46, has already spent two years in jail while her case was pending, according to the Orange County District Attorney’s Office. She recently was sentenced for joining her husband, Michael Vincent Petronella, 52, in committing $30 million in workers comp insurance premium fraud.

The couple gained notoriety in 2010 after fraud investigators raided several properties they owned and found luxury cars including a Bentley, two Ferraris, $500,000 in jewelry and $51,000 in cash. They also found an application for Kile to appear on the television show.

In April, Kile pleaded guilty to 36 felony counts, including misrepresenting facts to the State Compensation Insurance Fund and tax evasion charges. She was sentenced to 10 years probation last week.

Petronella, also known as Michael Constantine, last year was sentenced to 10 years in prison.

The couple co-owned three roofing contractor businesses.Their arrests came after a two-year investigation that began after an employee fell from a roof in 2006 and submitted a payroll stub to SCIF. But SCIF did not insure the company listed on the pay stub and notified authorities.

Investigators found the couple submitted 42 fraudulent claims and underreported tens of millions of dollars in payroll to avoid paying workers’ compensation premiums.

Meanwhile, they charged more than $2.1 million on one credit card and spent thousands of dollars “on jewelry, shoes, clothes and other personal items” at high-end designer stores, prosecutors said.

Kile was also ordered to pay at least $2.8 million in restitution.

Business Insurance is a sister publication of Workforce Management.

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