Category: Compliance

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Injured Worker Denied Comp Can Sue Employer

An injured worker’s lawsuit alleging his employer committed fraud is not barred by the exclusive remedy provision of Oregon’s workers’ compensation law, a state appellate court has ruled.


The ruling Wednesday, March 24, by the Oregon Court of Appeals in Patrick J. Merten v. Portland General Electric Co. stemmed from an April 2003 work accident in which the employee fell from a power pole.


Merten filed a workers’ comp claim, which the employer denied, telling the worker it would open the claim once he submitted medical records documenting his injuries from the fall. However, once Merten’s right to request a hearing on the claims denial expired, Portland General Electric refused to open the claim even though he submitted the medical records, court records state.


The worker sued for fraud, alleging the employer never intended to open his injury claim and told him that it would do so only to prevent him from making a timely request for a hearing on the claims denial.


A trial court granted the employer’s request for summary judgment, agreeing that the workers’ comp exclusive remedy barred the claim.


On appeal, the Oregon appellate court found that the plaintiff’s fraud allegations did not arise from the course of his employment and the alleged fraud could not be compensated by the workers’ comp system.


“There is nothing in plaintiff’s employment that caused his alleged fraud damages,” the court ruled. “Those damages were caused by defendant’s intentional nonwork-related conduct.”


The court also ruled that “a reasonable juror could find that the plaintiff reasonably relied on the defendant’s misrepresentations.”  


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


 


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Overtime Pay Exemption Considered

Lynore Reiseck worked for Universal Communications of Miami Inc. as regional director of advertising sales for the company’s magazine Elite Traveler. Reiseck received a base salary plus commissions but was never paid for overtime. Her job required that she sell advertising space to individual customers. In 2004, after she was fired, Reiseck filed a lawsuit alleging claims including denial of overtime pay.


The district court found that Reiseck was exempt, and not entitled to overtime pay compensation, because she was the “key executive responsible for generating advertising revenue” and exercised discretion and independent judgment with respect to matters of significance. It granted Universal’s summary-judgment motion and dismissed the case.


The New York-based 2nd U.S. Circuit Court of Appeals vacated the district court’s grant of summary judgment on the issue of whether Reiseck was entitled to overtime pay. The court reasoned that “an employee making specific sales to individual customers is a salesperson for the purposes of the [Fair Labor Standards Act], while an employee encouraging an increase in sales generally among all customers is an administrative employee for the purposes of the FLSA.”


The court said Reiseck was “a salesperson responsible for selling specific advertising space, and so seems to fit comfortably on the ‘sales’ side of the administrative/sales divide, and also ‘promoted sales’ in some sense, and thus seems to have performed administrative operations.” Since advertising sales were a critical source of revenue for the free magazine, “one could thus conclude that advertising space is Universal’s ‘product.’ ” Since Reiseck’s primary duty was the sale of that product, she may reasonably be considered a sales employee, rather than an administrative employee and was thus entitled to overtime pay. Reiseck v. Universal Communications of Miami Inc., 2d Cir. No. 09-1632 (1/11/10).


Impact: Careful review of job descriptions, together with review of applicable state and federal overtime exemptions, is necessary to make informed decisions about overtime pay obligations.


Workforce Management, March 2010, p. 8 — Subscribe Now!

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States Digging $1 Trillion Pension Hole, Pew Center Says

Rising liabilities, lagging asset growth rates and inadequate legislative action by many states have produced a $1 trillion gap for public pension, retiree health and other retirement benefits, according to a study issued Thursday, February 18, by the Pew Center on the States.


The Washington-based policy research organization paints a steadily deteriorating portrait among many states whose ability to finance public pension and health programs has fallen well behind the promises made to their citizens.


“What we found was truly troubling,” said Susan K. Urahn, managing director for the Pew Center, in a conference call with reporters. “This is a conservative estimate.”


The states have a combined $2.35 trillion in assets for pensions, health care and non-pension retirement programs for current and retired workers, but they need another $1 trillion to match their liabilities, according to the Pew Center report. Although some states have taken steps to reform public benefits systems, Urahn chided politicians for having “kicked the can down the road” by letting the liability-asset gap widen even when the economy was healthy.


“This problem was not created by the Great Recession,” she said. “[Legislators] need to take action now.” Otherwise, pension and health liabilities will “ultimately crowd out other services” and could force states to raise taxes, she added.


Citing actions by some states, the Pew Center report recommended several reforms:


• Maintain annual funding requirements and make sure investment assumptions aren’t overly optimistic;
• Reduce benefits for new employees by raising the retirement age or altering the pension formula;
• Require employees to make a larger contribution to retirement plans; and
• Improve management and oversight of state pension plans.


 


 


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


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U.S. Salary-Increase Budgets Hit 25-Year Low

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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Almost Half of Wall Streeters to Get Bigger Bonuses This Year

Nearly every Wall Street worker is getting a bonus this year despite public outrage over banker compensation.


A new study conducted eFinancialCareers Ltd. showed that 92 percent of Wall Street workers have been told by their firms that they will get a bonus in the coming weeks for their performance in 2009. This compares with 79 percent who got bonuses last year for their work in 2008.


Of the 92 percent who are getting bonuses this year, 69 percent are getting at least the same amount they got last year.


In fact, nearly half—46 percent to be exact—are pulling in a fatter bonus than they received in 2008. Less than a third of the Wall Street workers will be getting smaller bonuses this year than last.


Employers seem to be supersizing bonuses this year as well. Workers in line for larger bonuses will be receiving, on average, double what they got in 2008.


The highest bonuses are going to employees at investment banks, private-equity firms, hedge funds and those working in trading and fixed-income markets. Wall Streeters working in wealth management, retail banking, real estate and investment marketing will get smaller bonuses.


“This is a very flexible performance-related pay structure,” said John Benson, chief executive of eFinancalCareers. “I think you’re seeing people who are clearly being rewarded for work well done. And firms can trim compensation levels if an individual has done less well.”


Benson said the public often thinks of bonuses as a “four-letter word,” but he pointed out that the bonuses are based on performance.


“I think the word ‘bonus’ is often taken by many people on Main Street to mean something that’s unexpected,” he said. “What we’re talking about here is performance-related pay.”


Survey participants did not disclose the exact breakdown of their bonuses. But 39 percent of financial services professionals indicated that bonuses that are more heavily weighted in stock would not influence their decision to leave their current position.



Filed by Lisa Shidler of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Workers Comp Cost-Containment Method in Jeopardy

The proportion of workers’ compensation medical costs subject to physician fee schedules is declining, threatening the effectiveness of the traditional cost containment measure, a report says.


Several factors are contributing to the trend, including medical providers shifting from charging private practice fees to billing for procedures through hospitals or other facilities that employ them, Boca Raton, Florida-based NCCI Holdings Inc. said in the report released Tuesday, January 19.


Billing by hospitals and the other facilities may not fall under a workers’ comp fee schedule, the rating and research entity said.


The report, “Medicare and Workers’ Compensation Medical Cost Containment,” examined how Medicare reimbursement rates influence prices paid for medical services, including those funded through state workers comp systems.
 
“To maintain the effectiveness of medical fee schedules, workers’ compensation [systems] might consider using Medicare billing approaches for hospital stays and ambulatory services, but in doing so should adapt Medicare models to workers’ compensation priorities,” NCCI said in the report.


The NCCI report is available online at www.ncci.com.



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


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DB Sponsors Under the Gun to Fund Plans

Saint Barnabas Health Care System expected to contribute $41 million to its defined-benefit plan this year, but with a $150 million investment loss in the plan, the company is going to need to invest a lot more, thanks to federal funding rules.


Saint Barnabas recently announced it would be suspending future contributions to the pension plan, but a federal law will force the company to contribute more this year than it did in 2009—even with freezing the plan.


“It’s a staggering amount,” says Sid Seligman, senior vice president of human resources for the health care system, which is based in Orange, New Jersey.


The Pension Protection Act of 2006 requires defined-benefit plans to be fully funded by 2011. Because of the financial crisis, Congress eased the law’s original funding requirements in 2008. But each year, companies still need to meet specific funding levels until plans are 100 percent funded in 2011. That part of the law didn’t change.


The 2008 rule allows companies that miss targets one year to get bumped to the next annual funding level, instead of the original provision, which forced plans to be 100 percent funded the year after they missed the specific goal. For example, companies that missed the 94 percent level in 2009 would need to be 96 percent funded this year but not completely funded.


“When PPA was enacted, we never foresaw the situation we are in today,” says Lynn Dudley, senior vice president for policy at the American Benefits Council in Washington.


And while the 2008 provision improved conditions for companies, they still will need to contribute $89 billion to meet the 96-percent-funded threshold this year, consulting firm Towers Watson estimates. By contrast, the 2009 contribution was expected to be about $32 billion. The number jumps to $146 billion in 2011.


Without relief, the average funded status will be at about 83.8 percent this year and 76.8 percent in 2011, Towers Watson predicts. Congress needs to give employers more time to fund their plans, because tightened credit markets are limiting companies’ ability to borrow for pension funding and a multitude of other needs, Dudley says. If the funding requirement is not relaxed, jobs, salary increases and capital improvements are all in jeopardy, observers agree.


“Companies will have to make very hard decisions now in order to make these obligations,” Dudley says. “Should [employers] lay off people, companies are not going to have the workforce needed when they come out of the recession.”

“When [the Pension Protection Act of 2006] was enacted, we never foresaw the situation we are in today. … Companies will have to make very hard decisions now in order to make these obligations”
—Lynn Dudley, American Benefits Council

Reps. Earl Pomeroy, D-North Dakota, and Patrick Tiberi, R-Ohio, introduced legislation late last year that would give companies more time to meet funding levels. Under the bill, companies would get a choice of either extending the contribution timeline out nine years, with the added benefit of making interest-only payments the first two years, or making payments on a 15-year schedule. If they choose the latter option, employers would need to guarantee retirement benefits and agree to other technical conditions. The bill also stretches the payment schedule for multiemployer plans.


“Most likely, we will see some form of more time early [this] year,” Dudley says.


Workforce Management, January 2010, p. 26 — Subscribe Now!

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Workers Coffee Break Injury Ruled Compensable

Injuries that a foreman plumber suffered while driving for coffee arose in the course of his employment, a New Jersey appellate court has ruled.


The January 13 decision by the Superior Court of New Jersey Appellate Division in Jesse J. Cooper Sr. v. Barnickel Enterprises Inc. upheld a Division of Workers’ Compensation finding that Cooper suffered 100 percent disability as a result of a February 2003 auto accident that caused compound fractures in both legs and his left arm.


Barnickel appealed the division’s judgment, arguing that the accident occurred while Cooper was on a personal errand unrelated to his work, irrespective of company authorization to use one of its vehicles.


The accident occurred shortly after Cooper left a union hall where he had gone to discuss an upcoming company project with a union instructor. But because the instructor was busy teaching a class, Cooper took a coffee break.


The New Jersey Appellate Division ruled that Cooper, who is an “off-site” employee—one who does not report to a single job site—could not be expected to “stand like a statue or remain at the union hall with nothing to do for such a period, particularly when there was no coffee available at the site.”


Accidents occurring during coffee breaks for off-site employees are equivalent to those suffered by on-site workers and “are minor deviations from employment which permit recovery of workers’ compensation benefits,” the court ruled.



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


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Mercer Analysis Pension Plans Improve Funded Status

U.S. pension plans’ funded status improved to 85 percent with a deficit of $225 billion at the end of 2009, compared with a funded status of 75 percent and a deficit of $409 billion at the end of 2008, according to a Mercer analysis released Monday, January 4.


Adrian Hartshorn, a New York-based member of Mercer’s Financial Strategy Group, said in a statement that the improved funding statement status will help pension fund earnings and reduce the need for future cash contributions.


“However, in 2010, some companies may see increased cash contribution requirements or higher [Financial Accounting Standards Board] pension expenses because of smoothing methods, which deferred 2008 losses,” Hartshorn said.


Hartshorn said one reason for the improvement in funding in 2009 is higher corporate bond yields, which has reduced pension plans’ liabilities. A second is the rise in stock market values over the past 12 months.


The Mercer analysis says most plan sponsors continue to have assets invested predominantly in return-seeking assets, mainly equities. As a result, pension plans’ funded status is likely to remain volatile, Mercer said.


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


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Survey Finds Service Requirements for Joining 401(k) Easing


Employers are improving access to their 401(k) plans, according to a survey released Wednesday, November 4.


The Hewitt Associates Inc. survey of 300 midsize to large employers found that 74 percent of 401(k) plans do not have a service requirement, up from 61 percent in a comparable survey Hewitt conducted in 2007.


In addition, looking at plans with employer matching contributions, 56 percent of plans in 2009 did not have any service requirements for participants to receive the match, up from 44 percent in 2007.


On the other hand, 10 percent of employers have suspended their matching contributions during the past two years, the survey found.


“Companies’ bottom lines were significantly impacted by the financial crisis in 2008. As the last resort, some had to reduce or suspend their employer contribution to 401(k) plans to make ends meet,” said Pam Hess, Hewitt’s director of retirement research in Lincolnshire, Illinois, in statement.


Still, many of those freezes either have been lifted or soon will be.


“That trend has slowed. In fact, many employers have already indicated their likelihood to reinstate matching contributions in 2010,” Hess said.


Employers continue to move away from investing matching contributions exclusively in company stock. Just 17 percent of employers do so, down from 23 percent in 2007 and 45 percent in 2001.


That downward trend coincided with the collapse of one-time energy giant Enron Corp.


Enron matched employees’ deferrals exclusively with company stock and barred employees until age 50 from divesting those shares, leaving thousands to watch helplessly as the value of their shares plunged to virtually nothing.


The survey found a big increase in the number of employers offering an automatic enrollment feature.


Such programs are geared to those employees—typically new hires—who don’t indicate whether they want to enroll in their employer’s 401(k) plan. With automatic enrollment, those employees are enrolled unless they specifically object.


In 2009, 58 percent of employers offered automatic enrollment, up from 34 percent in 2007 and 19 percent in 2005. Of those employers using automatic enrollment, 69 percent default employees into a target-date fund, up from 50 percent in 2007.


The funds are so named because the investment mix is adjusted over time, with a more aggressive allocation for funds with retirement target dates further in the future and more conservative asset allocations for retirement dates that are closer.


A summary of the survey, “Trends and Experience in 401(k) Plans,” is available online at www.hewitt.com.



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


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