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Consolidation Nears Zenith With Deloitte’s Xcelicor Deal

Deloitte Consulting’s move to snap up HR tech consulting firm Xcelicor added another deal to a consolidation frenzy in the fast-growing field. But it also may be one of the last such acquisitions for a while.

Most midsize consulting companies specializing in HR software installations have been gobbled up in the past year or so, says Joe Hillesheim, founder and managing partner of Aspire HR, a Dallas-based firm that specializes in helping clients with SAP human resource applications. Acquired firms include PremierHR, which was swallowed by Axon Solutions; Arinso International, which was nabbed by Northgate Information Solutions; and Pecaso, obtained by Accenture.

“Our three main competitors have all been acquired,” Hillesheim says, adding, “We’re one of the last one or two” that remain independent.


In late September, Deloitte Consulting announced an agreement to acquire the assets of Xcelicor, a 98-person Tampa, Florida-based firm that specializes in Oracle HR applications. Terms of the deal were not disclosed. Deloitte Consulting, a unit of Deloitte & Touche USA that provides professional services to large and midsize organizations, said the acquisition should be completed in early October.


All the acquisition activity in the HR tech consulting world comes against a backdrop of many buyouts in the related area of human resources software and increased spending on HR applications. For reasons including more global operations and corporate fears of possible worker shortages, HR software has emerged as the fastest-growing field of business software. AMR Research predicts revenue from human capital management applications will grow 11 percent annually from 2006 to 2011, to a total of $10.6 billion.

All that spending on HR applications translates into growing business for companies that help organizations with HR strategies as well as software implementation.

Xcelicor’s revenue grew 35 percent last year, on top of 41 percent growth in 2005, Xcelicor chief executive Mark Silverstein says. Xcelicor serves both Fortune 500 firms as well as midsize organizations. Most of Xcelicor’s projects are broad installations of Oracle HR software, including core HR applications for tracking basic employee data. Increasingly, Silverstein is being asked to help with key talent management tools such as recruiting and learning management software.


“More and more of our customers are saying, ‘Talent management is really important to us, and we need more guidance on that.’ ”

Clients stand to benefit via increased capabilities to help implement Oracle HCM technology solutions, “particularly as we get ready for the post-Fusion market,” Mike Fucci, national managing director of Deloitte Consulting’s human capital service area, said in a statement. (Next year, Oracle is slated to release the first of its Fusion applications, which are designed to meld the best of its various product lines.)

Aspire HR remains independent—for now. Hillesheim has received multiple takeover inquiries. “If the right opportunity for our employees and clients comes along,” he says, “we’d consider it.”


—Ed Frauenheim

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Lots of Give, Little Take in UAW Contract with Chrysler

The United Auto Workers gave Chrysler L.L.C. similar contract concessions to those given General Motors Corp., but it received less in return.


On Wednesday, October 10, the UAW reached a tentative agreement with Chrysler on a new four-year contract after a six-hour strike. The deal must be ratified by about 45,000 Chrysler workers represented by the UAW.


Unlike GM, Chrysler did not make specific future product commitments plant by plant, say sources familiar with the agreement.


The UAW did not end a two-day strike against GM last month until it received detailed plans for new products launching as far out as 2013.


Most of the rest of the contract was patterned after GM’s. The contract calls for a Chrysler-financed retiree health care trust that would be controlled by the UAW. Provisions would allow Chrysler to permanently unload about $18 billion of retiree health care obligations for about $11 billion. The annual savings — and the financing sources for the fund’s underwriting — have not been disclosed.


GM agreed to an even larger health care trust in a contract that was overwhelmingly ratified by UAW rank-and-file on Wednesday, October 10. To fund a voluntary employee beneficiary association with the UAW, GM will pay about $29.9 billion to hand over future retiree health care liabilities of about $50 billion.


Neither Chrysler nor the UAW is commenting on details of the agreement.


The UAW will begin its final negotiations with Ford Motor Co. in the coming days.


At Chrysler, the UAW also agreed to a new-hire wage and benefit package for nonproduction jobs. Under the terms at both GM and Chrysler, hires would receive about half the $28 an hour wage to replace veteran workers who are expected to receive another incentive package to retire or take a buyout to leave, the sources said.


As with the GM deal, Chrysler workers will receive small annual bonuses during the life of the contract instead of a wage increase. Assuming the agreement follows the GM agreement, workers would get a $3,000 signing bonus the first year plus annual lump sum bonuses of 3 percent, 4 percent and 3 percent during the last three years of the contract.


Analysts say the deals will help GM and Chrysler shrink considerably a $20-$30 an hour labor cost gap with their Japanese competitors in the United States. The new GM contract covers about 73,000 active hourly employees.


—David Barkholz



Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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Federal Judge Halts DHS Regulation on No-Match Letters

A federal judge has indefinitely halted a federal immigration crackdown focused on workplace enforcement.


On Wednesday, October 10, U.S. District Judge Charles Breyer issued a preliminary injunction against a new Department of Homeland Security regulation that would force companies to either resolve within 90 days discrepancies between a worker’s name and Social Security number or fire the employee.


Breyer’s ruling freezes a mailing of so-called “no-match” packets that were to be sent in September to 140,000 employers and would have affected 8 million employees.

In addition to the normal Social Security Administration no-match letter, the mailing was to include guidance from DHS explaining that under the new regulation, a company’s failure to act on a no-match letter could be construed as a violation of immigration law.
On the other hand, if a company follows the no-match rule in good faith, the letter would not be used as evidence in an enforcement action.

Companies currently aren’t compelled to clear up inconsistencies. Mismatches occur in about 4 percent of the 250 million earnings reports submitted annually to the Social Security Administration.
Business and labor groups filed a lawsuit against the DHS rule in late August, which led to a temporary restraining order in early September.

The plaintiffs persuaded Breyer, who serves on the federal district court for Northern California, that the DHS rule would cause significant harm to employers and workers.

They argued that DHS did not calculate the compliance costs that would be foisted on businesses. They also asserted that millions of mistakes in the Social Security database would create havoc in the labor market and lead to discrimination against immigrants—even legal ones.

“As demonstrated by the plaintiffs, the government’s proposal to disseminate no-match letters affecting more than eight million workers will, under the mandated time line, result in the termination of employment to lawfully employed workers,” Breyer wrote in his opinion.

“The new rule presents employers with the Hobson’s choice of complying with DHS’s ‘safe harbor’ procedures or confronting liability for knowingly employing unauthorized workers,” Breyer wrote. “Presented with that choice, it is certain that many employers represented by the organizational plaintiffs will be forced to develop systems for resolving no-match letters within the new 90-day timeframe.”

DHS Secretary Michael Chertoff said that the government would consider appealing the decision and vowed to maintain work-site crackdowns.

“We will continue to aggressively enforce our immigration laws while reviewing all legal options available to us in response to this ruling,” Chertoff said in a statement.

In the meantime, business advocates believe that their case will hold up in court.

“We have a strong chance of success on the merits,” says Laura Foote Reiff, a partner at Greenberg Traurig in Washington and co-chair of the Essential Worker Immigration Coalition.
Her confidence stems from the fact that Breyer agreed with the business community that DHS failed to conduct a proper review of the impact of the no-match regulation.

 “They did not do an economic analysis to see what the burden would be on business,” Reiff says.


DHS asserts it was just providing clearer guidance through the rule on what to do if a company receives a no-match letter. Social Security has been issuing the letters for years.

In addition to forcing companies to absorb big compliance costs, the no-match rule would create a no-win situation when the clock runs out on the 90-day time limit, says Lynda Zengerle, the partner in charge of the immigration group at Steptoe & Johnson in Washington.

“It’s draconian,” she says. “It puts employers in an impossible position. They will be firing U.S. citizens and permanent resident aliens. The burden on the employer is too great.”

But Chertoff said that companies must do their part to combat illegal immigration. “Ultimately, employer diligence will make it more difficult for illegal aliens to use a fraudulent Social Security number to get a job.”

In their proposal to Breyer on Friday, the business groups will ask that the no-match rule be sent through a review process that could take nine months to a year.

“Hopefully, we’ll never see this rule implemented,” Reiff says.
What could happen, though, is a prolonged legal battle that ends up in the Supreme Court.

“Whoever loses at each level will take it to the next level,” Zengerle says. “I don’t see the government backing away and I don’t see unions and business backing away.”


—Mark Schoeff Jr.

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Florida Hospitals Find Wealth of Talent Among People Over 50

The routine hiring and retention of employees over the age of 50 has attracted national attention for two affiliated central Florida hospitals.

Leesburg Regional Medical Center and nearby sister unit the Villages Regional Hospital were recently named as winners of the 2007 MetLife Foundation/Civic Ventures Breakthrough Awards for employing older workers. And for the second year running, the two Florida hospitals, both several miles northwest of Orlando, have been named by AARP as among the country’s best 50 employers of workers over 50.

“We looked to recognize social-purpose employers who were valuing workers 50 and older as part of their labor force,” says Phyllis Segal, a vice president at San Francisco-based think tank Civic Ventures. The organization focuses on plugging in the talents and experience of older adults. Segal directed the Breakthrough Awards program, which cited 10 organizations.

That recognition, adds Segal, includes recruitment and retention of older workers. They’re in the baby boomer generation, and many are interested in an “encore” career that combines meaningful work and helps their communities, she says, while allowing them flexible hours and benefits.

“Leesburg [Regional Medical Center, along with the Villages Regional Hospital] is one of the prime examples of that,” Segal says. “They are at the cutting edge of what will become a future where older adults are contributing in significant ways to the success of employers like Leesburg in serving its community.”

Lori Parham, Florida director of AARP, says Leesburg and the Villages made the list for using a variety of strategies showing the value of older workers, such as offering flexible work schedules and using a senior placement agency to recruit hospital staff.

“The Villages is in a large, growing retirement community in central Florida in a state looking at serious shortages in health care workers,” Parham says.

The hiring of skilled older workers, primarily nurses, she says, makes the two health care facilities “shining examples” of how the shortages can be remedied. “They bring years of experience to the table in a state that has a very big need.”

The 50-and-up crowd, she adds, is a large pool of talent for employers to tap.

“This is the perfect place to look for workers who would be happy to be in a workforce but ask for some flexibility,” she says. Shorter workweeks, seasonal work arrangements and benefits for full- and part-time schedules are conditions older workers typically need, Parham says.

Darlene Stone, vice president of human resources for Leesburg and the Villages, says 38 percent of the 2,600 employees at both facilities are over 50, with the oldest employee nearly 85.

“Florida is predominantly known as a place where everyone wants to come to retire,” Stone says. “And the Villages Hospital is right in the middle of a retirement community.”

With an older population surrounding both hospitals, which are 12 miles apart, “We had to be very creative” in recruiting and retaining older staffers, Stone says.

Older workers aren’t going to go for 12-hour shifts, as is common in the industry. They’re more effective working two six-hour shifts, she says.

“We do not set a mandatory retirement age,” Stone says. “We embrace them as a valuable part of the workforce.”

Among the jobs held by older workers at the two Florida hospitals are nurses, couriers and other staff positions.

“Some are in their second, third or fourth career with us,” she says. “Some have gone back for refresher courses. Some work Monday through Friday. Some work weekends only. Staffing is a puzzle with pieces. We figure out ways to make the pieces fit together.”

Stone says the idea of taking on an older workforce first came up about eight years ago, when planning started for the Villages hospital’s construction. Before it opened six years ago, 450 job openings had to be filled.

“That’s a challenge,” Stone says. Once older workers were recognized as a deep local labor pool, the organization pitched hospital jobs to retirees in the area.

“We’d say, ‘Hey, you can still work. We’ve got awesome benefits. You can work part time. We have excellent health insurance,’ ” Stone says.

Because of all the perks, retention of the older workforce isn’t a problem, she says. While some leave to try work at other hospitals, they often come back after experiencing less accommodating employers.

And older workers are less likely than younger generations to leave an employer that treats them well, Stone says.

“Gen X’ers and Gen Y’s don’t believe in loyalty,” she says. “They’ll leave for 5 cents more and tend to turn over more than mature workers.”

Recruitment of older workers is done very aggressively at both hospitals, she says. When would-be staffers apply for a job, they are typically interviewed that same day, and if they qualify, are often offered a job before they leave. Pay is based on years of experience—the same for applicants of all ages.

“If I let them go,” says Stone, “they’re going to go work for someone else.”

But it’s not like the hospitals take anyone who walks in the door.

“We do thorough background checks,” she says. The difference from other employers, however, is this: “We just do it faster.”

The hardest openings to fill, Stone says, are nursing positions, along with physical, occupational and speech therapists. Radiology lab posts are another staffing challenge.

Combined, the hospitals have managed to keep their average number of openings to less than 5 percent, or under 130.

Performance evaluations of older workers are no different than for any other employees, Stone says.

“If there are performance issues, we look at what’s causing it and we look at how we can help solve the problem,” she says.

If poor eyesight is a hindrance, bigger computer display screens are offered, with text in larger type for easier reading.

But physical frailties aren’t common.

“Our retirees are very, very active,” Stone says. “They play softball, polo and they want to remain active in the employment world.”

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‘Supervisor’ Bill Likely To Face Battle In Senate

In another step toward reversing labor law rulings by judicial bodies, the House is on its way to passing a bill that would limit the number of employees who could be classified as supervisors.

The one-page measure, which passed the House Education and Labor Committee on a party-line vote last month, would strike the words “assign” and “responsibility to direct” from the definition of supervisor in the National Labor Relations Act. It also would insert language that states an employee must be in a supervisory role for at least 50 percent of his or her time at work.

Although it hasn’t come up for a vote in the full House, it is almost certain to be approved. Like other employment law measures, it faces a more perilous path in the Senate, where the Republican minority can more easily block legislation.


The bill is a response by the Democratic congressional majorities to a National Labor Relations Board decision last fall in a collection of cases known as “Kentucky River.” The board said that charge nurses are supervisors because they assign work, direct other employees and exercise independent judgment.

Organized labor rejected the ruling, saying the nurses weren’t part of management because they didn’t have supervisory authority such as hiring, firing or setting pay. They also objected to the NLRB finding that an employee could be designated as a supervisor if he or she spent as little as 10 percent to 15 percent of work time in that capacity.

Labor groups claim that workers such as nurses, construction foremen and team leaders in manufacturing could be denied the right to organize because they’re classified as management under the NLRB approach.

An employment lawyer asserts the effect isn’t that dramatic.
“It was not a decision that brought a tremendous change in the law,” says Andrew Rolfes of Cozen O’Connor in Phila¬delphia. “It just brought some clarity to the definitions that are in the law.”
Republicans say that labor and Democrats are overreacting. The bill “represents a significant departure from 60 years of law,” says Rep. John Kline, R-Minnesota.

The Democratic author of the measure says that it is narrowly drawn to overturn the NLRB decision. “What this bill does is restore the decades-old meaning of those laws,” says Rep. Robert Andrews, D-New Jersey.

He also dismisses Republican charges that Democrats are trying to pay back labor for helping the party take over the House and Senate. “Fairness is good for business and it’s good for labor,” Andrews says.
Senate Republicans may cry foul when employment law battles resume there.

Sen. Edward Kennedy, D-Massachusetts and chairman of the Senate Health, Education, Labor and Pensions Committee, indicated he would like to skip Senate hearings and take the House NLRB bill directly to the floor for a vote—as Democrats did with a measure earlier this year that would make it easier for employees to form a union.

Republicans accuse Democrats of trying to score political points rather than formulate policy by truncating the legislative process.


—Mark Schoeff Jr.

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UAW Strikes Chrysler, Long Strike Could Hurt

The UAW went on strike against Chrysler LLC at 11 a.m. today after contract negotiations failed to reach a deal by the strike deadline. The stoppage affects 49,000 UAW-represented hourly employees at 31 U.S. factories and technical centers. The strike also is expected to shut Chrysler’s Canadian plants within 24 hours as parts run dry.


Five U.S. assembly plants were not included in the strike because they have already been shut down temporarily by the company, according to a source briefed on the situation.


Neither the UAW nor Chrysler has issued a statement about the situation.


The strike would idle 9,000 Canadian Auto Workers at three Chrysler plants including Windsor, Ontario, where Chrysler is launching its critically important redesigned minivan.


A short strike is not expected to hurt Chrysler too badly. High inventories of Dodge Ram pickups and sedans such as the Chrysler Sebring caused Chrysler to temporarily idle five assembly plants and an engine plant.


But a strike lasting longer than a couple of weeks could damage the company, said Gerald Meyers, a University of Michigan business professor who was CEO of American Motors from 1977 to 1982.


He said consumer loyalty doesn’t extend much further than the iconic Jeep brand. Potential Chrysler buyers who go elsewhere may not come back, he said.


Nearly round-the-clock bargaining since Friday, October 5, failed to bring an agreement. The private equity owner of Chrysler, Cerberus Capital Management, wanted concessions at least as good as those won by General Motors. GM’s 73,000 UAW workers are on the verge of ratifying the contract this week.


But the UAW is having a hard time finding the necessary cost savings because Chrysler has far less interest than GM in offloading all its retiree health care liabilities to a UAW-controlled trust, sources say. That health care deal saves GM about $3.3 billion annually beginning in 2010.


Cerberus is said to be balking at the $8 billion to $11 billion cash infusion that would be necessary to fund such a voluntary employee beneficiary association.


The UAW also extracted specific product commitments from GM in exchange for its retiree health care trust and factory work rule changes, including a lower new-hire wage for non-production jobs.


Chrysler has less to offer on the plant investment front.


In fact, Chrysler is re-evaluating a commitment announced this year to build a $700 million axle plant to replace the aging axle plant in Detroit. Automotive News has learned that Chrysler has taken bids from three axle suppliers for the work pledged to the plant.


—David Barkholz


Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Cash-Balance Plans May Make a Comeback

Two years ago, the phrase “cash-balance plan” sent shivers down the spines of benefit managers. In fact, about the only time the term came up was when executives discussed how to get out of the plans.

But now, thanks to the Pension Protection Act and a key court decision favoring cash-balance plans, which are a hybrid of defined-benefit and defined-contribution plans, a number of large organizations are considering them as part of their benefits package.


In the past year, Dow Chemical, MeadWestvaco and SunTrust Banks have announced plans to make cash-balance plans available to employees, while FedEx has expanded its existing cash-balance plan.


Despite the trend, industry observers say most companies are cautiously approaching such plans. Although cash-balance plans were initially viewed as a panacea, particularly for those employers with defined-benefit plans, the past few years of regulatory and judicial scrutiny have taken a toll, experts say.


“Over the past few years, cash-balance plans have been vilified in the press,” says Alison Borland, senior benefits consultant at Hewitt Associates. And that might mean it will take some employers longer to adopt such plans, she says.


Cash-balance plans were initially attractive to employers when they came about in the 1980s because they provided many of the benefits of a traditional pension but allowed companies to share the risks with employees.


These plans set up individual accounts based on a percentage of a worker’s salary and interest credits, similar to a traditional defined-benefit plan. However, like a defined-contribution plan, they allow employees to take the benefits with them if they leave the company, a trait much more popular in today’s world, where employees often don’t spend their entire working lives at one company.


The cash-balance controversy began in 1999, when the Internal Revenue Service announced it would no longer issue determination letters for cash-balance plans. This meant that employers no longer could receive assurance that the agency approved of their cash-balance plans.


“The fact that the IRS said it would not review these plans caused many companies to be concerned about offering them,” Borland says. “Determination letters are not a sure thing, but they do provide some comfort to employers.”


Then in 2003, cash-balance plans got another strike against them when a U.S. district court ruled that IBM’s cash-balance plan violated age discrimination laws. In that decision, the judge sided with employees who claimed the plan’s calculations to pay benefits discriminated against older workers. The case caused a number of companies, including IBM, to freeze their cash-balance plans and offer defined-contribution plans instead.


Despite these events, employers and consultants have remained cautiously optimistic that the courts and Congress would address the issue of cash-balance plans.


“Everyone knew that sooner or later new legislation would have to be passed to recognize the unique nature of hybrid plans,” says Jack Vanderhei, a fellow with the Employee Benefit Research Institute and a professor at Temple University in Philadelphia.


That’s exactly what happened with last year’s Pension Protection Act, which was passed into law in August 2006 and gave employers the green light to offer new cash-balance plans without fear of litigation.


That same month, a three-judge panel of the 7th Circuit Court Appeals in Chicago reversed the decision on the IBM cash-balance plan, saying it did not discriminate against older workers. Then, in December 2006, the IRS ended its moratorium on determination letters for these plans, marking a last bit of good news for cash-balance plans.


Just two months after the Pension Protection Act was passed last year, MeadWestvaco, a Richmond, Virginia-based packaging company, became the first large employer to announce it would offer cash-balance plans to new employees in 2007 and transition existing employees to the plan in 2008.


Executives at MeadWestvaco and Dow Chemical, which in July 2007 also announced plans to offer a cash-balance plan to new employees, say the portability of these plans was a big selling point.


“We know that many of our newer employees compare 401(k) matches [before accepting a job], so we wanted to give a benefit that was transparent and comparable, but also was portable if employees leave,” says Janet VanAlsten, global benefits director at Dow Chemical, which has 21,500 employees in the United States. The average age of a new employee at Dow Chemical is 25.


Dow executives had been discussing the possibility of offering a retirement benefit plan that would be transparent and portable and that could complement its existing 401(k) plan, but the passage of the Pension Protection Act allowed the company to take the idea of a cash-balance plan more seriously, VanAlsten says.


“Before the Pension Protection Act, we were really limited at looking at defined-contribution plans,” she says. “But we felt like we needed to be very thoughtful, so we waited for the Pension Protection Act to pass so that we could really look at cash-balance plans.”


Under Dow’s new plan, which is called the Personal Pension Account, new employees will receive annual credits equal to 5 percent of pay plus interest, and they can take the value of their pension accounts with them when they leave the company. Current employees will still be eligible to remain in the company’s traditional defined-benefit plan and all employees have access to the company’s 401(k) plan.


Dow executives believe that offering such a benefit will help the company be more competitive in recruiting and retaining talent, particularly since so many organizations are moving away from defined benefit plans altogether, VanAlsten says.


“While many companies are getting out of defined-benefit plans completely and passing all of the risk on to employees, we continue to share the risk and rewards,” she says.


And as baby boomers begin to retire, more companies—particularly those with traditional pension plans—are going to switch to cash-balance plans to use as a selling point for recruiting and retaining employees, experts say.


“Companies that were thinking of getting out of the defined-benefit system will now stay in the system with cash-balance plans,” says Ethan Kra, chief actuary with Mercer Human Resource Consulting in New York.


Transitioning to a cash-balance plan could be particularly attractive to companies with over-funded defined-benefit plans, Vanderhei says. Employers have to pay an excise tax on excess assets in their pension plans if they terminate or freeze them. However, if these companies convert to a cash-balance plan, they avoid the tax, Vanderhei says.


Although there are several good reasons for employers to get into the cash-balance game, observers say that it’s unlikely there will be a flood of companies with 401(k) plans switching to cash-balance plans.


“Some companies have moved farther along with their defined-contribution plans, so it’s unlikely they will move back to a cash-balance plan,” Borland says. “The door has reopened to cash-balance plans, but I don’t think we will see the same movement into these plans that we did years ago.”


Kevin Wagner, retirement practice director at Watson Wyatt Worldwide, believes the adoption of cash-balance plans will increase.


“It’s only been a year since the Pension Protection Act and these deliberations take a long time,” he says. “For many of these companies, these investments are worth hundreds of millions of dollars.”


In making this kind of decision, employers need to evaluate their business goals and determine whether having a cash-balance plan will help with those objectives, Wagner says.


Most important, companies should not be fooled into thinking cash-balance plans are going to solve all their problems, as many apparently did several years ago, Wagner says.


“Just as defined-benefit plans are not a panacea for all companies, neither are hybrid plans,” he says. “It’s important for each company to go through a process and find out what’s unique about the business that requires this kind of plan.”

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Employers Legal Obligations to Employees in the Military

Citizen soldiers bring many assets to the workplace: They tend to follow instructions and respect authority; they have leadership skills and work well in organizations. Some have service-acquired skills that translate well in the business community such as computer skills. With these many talents provided to the employer come responsibilities.


This article is intended to bring to the attention of employers the legal obligations they have to employees who have been called to active military duty or who are members of the United States National Guard or Reserves. For example, what obligations, if any, does an employer have to re-employ a veteran in the position they held before being called to active duty? What if doing so displaces another employee or results in hardship for the employer?


While there are benefits in having a citizen soldier as an employee, employers must be prepared to address these difficult questions along with several others that flow from the Uniformed Services Employment and Re-Employment Rights Act of 1994 (USERRA).1Unlike some other federal laws that apply only if the employer has a certain number of employees, USERRA applies to all employers.


If you are wondering if these challenges will present themselves to your business organization, consider what the Pentagon has reported: As of August 2005, more than 141,000 members of the United States National Guard and Reserve military forces have been deployed to Iraq and Afghanistan. Currently, those forces comprise more than 35 percent of all U.S. military forces actively serving in the region.


The magnitude of this issue is clearly reflected in U.S. Department of Labor statistics. There are more than 2.6 million people in the U.S. military.2Since September 11, 2001, more than 390,000 members of the National Guard and Reserve have already been released from active duty. This is the largest deployment of “citizen soldiers” since World War II.3In addition, the U.S. Bureau of Labor Statistics has reported that approximately one in five veterans discharged from active duty between 2002 and 2005 had significant military service-connected disabilities.4


Employers usually try to treat returning veterans fairly but lack clear guidance from state and federal governments regarding USERRA requirements.5This is particularly the case with smaller to midsize business organizations.


This article will discuss the re-employment rights of the returning veteran as well as the concomitant requirements of the employer. The authors will provide an overview of the Department of Labor’s final regulations interpreting USERRA, which can be accessed directly at http://www.dol.gov/vets/regs/fedreg/final. Most important, the authors will offer practical, viable options to the employer in order to maximize the utilization of the citizen soldier and to ensure USERRA compliance.


Leave of absence policies
    In the United States, leaves of absence policies relate to pregnancy disability leave, family medical leave, disability leave, sick leave, jury duty leave, workers’ compensation leave, state disability leave and military leaves of absence. When employees serve in the military during their employment, the company is required to either hold their jobs open or re-employ them in similar positions when they return from their military duties.


The Veterans Benefits Improvement Act, enacted by Congress in 2004, requires all employers to provide a notice of rights under USERRA to all persons entitled to military leave of absence rights and benefits. Virtually anyone who has been absent from work due to “service in the uniformed services” is protected by these laws. Military service includes: initial duty for training (e.g., basic training), inactive duty training (e.g., weekend-type training), active duty training (the typical two-week summer camp training) and actual military service (active duty).


Military leaves of absence may be almost any length, with a maximum cumulative leave of five years. When the employee’s service is over, they must provide notice of intent to return to their employer. Under most circumstances, the employer must re-employ the employee.


Once the veteran has been re-employed in their job, they cannot be fired for one year, except for cause, regardless of the period of their active duty. USERRA requires employers to “promptly re-employ” an eligible returning veteran in an “appropriate position.” In most cases this must occur within two weeks of the veteran reporting back to work.


The definition of “employer” as set forth in USERRA is not the same as in other federal statutes: It includes “individual supervisors and managers” who have been delegated control over employment opportunities. These individuals may in fact be held personally liable as an “employer” under USERRA. However, entities to which an employer has delegated administrative functions—such as for an employee benefits plan—are not included in USERRA’s definition of “employer.”6


Spousal rights
    Interestingly, the state of New York has gone a step further by not only protecting the employment of military personnel but also in granting certain rights to their spouses. On August 16, 2006, the New York State Legislature enacted a statute requiring private and public employers to provide up to 10 days of unpaid leave to employees whose spouses are on leave from the U.S. Armed Forces, National Guard or Reserves, while deployed during a period of war. This law applies both to full-time and part-time employees.7

Seniority, status, pay, promotion and pensions
    Federal law also prohibits taking discriminatory action against any military reservists by requiring them to use their vacation time when deployed or in training for any branch of the U.S. military. It should also be noted that when a veteran is available to return to work, they are entitled to all seniority-based benefits held prior to being ordered to active duty and any other benefits that they would have earned had the employee not served in the military.


Many employers are unaware that USERRA requires that re-employment of returning service members must be in the same seniority, status and pay that the employee would have achieved if they had not been called to active duty and remained continuously employed with their employer. Not only must the employer award the returning veteran any pay increases and promotions they would have received, but these must be applied retroactively—effective as of the date they would have been made had the employee not been required to report to active duty.


Practically speaking, many service personnel are reluctant to make an issue of “return to an appropriate position,” and tend—if they wish to have long-term employment at the business—to not complain. There is a concern that complaining too much may affect long-term relationships with the business for a short-term benefit.


There are also issues regarding whether a promotion was based upon a test. Thus, if a proficiency examination is part of the promotion process, the returning service member may not qualify for the promotion. Without such testing, the theory is that the service member is on an elevator. When he steps off the elevator for military service, the elevator continues. Upon return to the business, the service member is entitled to be at the elevator’s new level.


USERRA also affords protection to re-employed service members relative to pension benefits. Military leave must be treated as service with the employer for pension vesting and benefit accrual purposes; the employer cannot treat them as if they had a break in service.


Veterans returning from war with various types of disabilities
    Some employers are privately reluctant to hire people who have any disabilities. They assume that an applicant with a disability will not be able to fully handle a particular job. With regard to U.S. military veterans returning home from the Iraq and Afghanistan wars, this assumption is not only inaccurate; in most cases it is also illegal. The U.S. federal government and many individual state governments have laws prohibiting discrimination based on disabilities.


In 1990 the U.S. Congress passed the Americans With Disabilities Act (ADA), which is administered by the Equal Employment Opportunity Commission. This federal law prohibits employers of 15 or more employees, in both the private and public sector, from discriminating against qualified individuals with disabilities in hiring and employment decisions. If a person is qualified to do the work, or to do it once reasonable accommodations are made, employers must treat that person the same as all other applicants and employees.8


To have a qualified disability protected by the ADA laws and regulations, a person must have a physical or mental impairment that substantially limits one or more life activities. Under the ADA, “life activities” include: walking, speaking, seeing, hearing, sitting, standing, lifting and performing manual tasks. The idea of a “reasonable accommodation” means that employers have the responsibility to make some changes to help a disabled person do a job.9


For example, if a veteran returns to work with any type of leg injury that affects their ability to walk, employers will be required in a very timely manner to provide accommodations in their workplace. Some examples would include, but not be limited to: ensuring accessibility to existing facilities used by employees such as exits, entrances and restrooms; acquiring new workplace stations that accommodate the disabled veteran; and modifying equipment or other required work-related devices for the veteran’s use.


Other employer requirements may include modifying the work schedule to enable the employee to perform the “core” content of the job for which they are qualified. Employers must keep in mind that these requirements for “reasonable accommodation” also apply to company-sponsored training programs and social events.


Perhaps the most challenging scenario for an employer is when a returning veteran suffers from post-traumatic stress disorder or other psychological disabilities as a result of their military service. In such a scenario, the employer will be required to possibly modify the employee’s work schedule and policies to facilitate appropriate medical treatment and perhaps to provide some degree of accommodation through “job retraining.” The employer must also keep in mind that even though reasonable accommodations must be made to allow the employee the schedule flexibility to see various health care providers, the need for confidentiality in the workplace relative to these matters cannot be overstated. It is imperative that these matters be treated with the highest level of confidentiality.


At every level the returning war veteran employees must be given the same benefits and privileges of employment as those given to all other employees. However, a key point on this subject is that employers will not be required to lower the quality of their work or production standard, but rather to provide accommodations so that the returning veteran—because they have the necessary work knowledge and experience—will again be productive in their work environment


Employers have the right to ask questions such as: Do you need any reasonable accommodations to perform this job? If the answer to this is yes, the employer should then ask: What accommodations do you believe you need to satisfactorily perform the job? Employers will be expected to assist returning veterans in assessing whether they will need any type of accommodation in order to meet job requirements and the expected level of performance.


Employees who supervise other workers are required to receive training related to persons with disabilities. Many employers are not clear about these laws or actively attempt to ignore them.


However, even in cases where employers are in the midst of financial difficulties—or even in the case of layoffs—courts have regarded veterans as a special class of employee to whom special rules apply.


In 2006 a U.S. District Court in Colorado ordered Agilent Technologies to pay Lt. Col. Steve Duarte, a Marine Corps Reservist who was deployed to Iraq, $383,761 for terminating him only a few months after he returned from active duty. Agilent viewed the termination as necessary because it was contending with financial difficulties. However, the presiding judge viewed the situation differently. The judge was of the view that, “Col. Duarte paid a steep price for his military deployment during his employment with the company and he deserved better.”10


Exceptions
    There are essentially only two positions that employers may assert if they wish to be relieved of their obligations under USERRA. First is “impossibility,” which may apply to situations such as reductions in force. It does not apply to situations where an employer would have to reassign current employees to re-employ the veteran.11


Second is the defense of “undue hardship.” Unlike the defense of impossibility, an employer may assert the defense of undue hardship to justify not having to reassign an employee from his or her current job to accommodate the war veteran. To prove undue hardship, an employer must show that the war veteran is unable to perform the job he or she held prior to being called to active duty.12The employer must, however, at least make reasonable good-faith efforts to re-employ the war veteran in a job that is comparable to the former position in both job responsibilities and compensation.13


Advanced planning
    Most military commands will work with the employer to try to avoid a hardship to the business as a consequence of a deployment. There are special offices available at most commands to assist both the soldier and the employer, including the soldier’s individual unit, the superior headquarters judge advocate offices, and the human resources sections.


The employer should work out a plan with the citizen soldier employee in advance regarding notification of when their military duty is expected and for what length of time. If the employee has essential skills needed by the company, the deployment can sometimes be deferred to another date. The military wants its citizen soldiers to have minimal stress resulting from deployment and return to the community.


Conclusion
    Many of our citizen soldiers return to work with excellent technical skills in areas such as computer and information technology, project management and operations efficiency as well as excellent team-building and leadership skills. In terms of personal and professional characteristics, they return with the ability to focus on clearly defined expectations, function well in a results-oriented environment, handle themselves in a complex work environment and function well in high-pressure and high-stress environments.


Amid the wars in Iraq and Afghanistan, it is particularly important to recognize the significance of the military’s role in today’s society and to understand the employer’s responsibilities as well as the implications of providing sources of employment for our military veterans returning from war. A good way to ensure that a citizen soldier will be a successful part of your business is to know the guidelines of employment rights in advance.


Can we ask our soldiers to deploy to train or fight our wars, and then not get their jobs back when they return? We all have a responsibility.


Action steps for employers


  • Carefully review the employee handbook/policy manual to make sure that it is up to date and in compliance with all new state and federal laws.


  • Review the company’s recruiting and hiring practices to ensure that all activities, policies and procedures in this important area of employment meet current legal guidelines for the recruiting and hiring of employees.


  • Establish job descriptions for all positions in the company. It is extremely important for employers to clarify the core requirements and essential skill-set and knowledge needs for each position. Employers should document all essential job functions for important job positions accurately and realistically. Employers must stay current, be flexible, and review job descriptions with current and potential employees.


  • Review all policies related to leaves of absence. These policies should not only be updated and in full compliance with current laws, but employers must make sure that all policies in these areas are applied consistently and equitably within the organization.


  • Familiarize yourself with the current laws and regulations pertaining to military service leaves of absence.


  • Familiarize yourself with the current laws and regulations covered by the Americans With Disabilities Act (ADA).


  • Obtain expert advice regarding the reasonable accommodations to be considered for employees or job applicants with any type of disability. Examples of reasonable accommodations include (but are not limited to): modifying an employee’s work schedule; providing an interpreter; making all physical facilities accessible; and acquiring accessibility equipment. This reasonable accommodation obligation is an ongoing duty and may arise at any time.


  • Familiarize yourself with all employee benefits (including health insurance coverage). Returning veterans will be entitled to their benefits in the areas of health insurance, 401(k) participation, company profit-sharing plans, group term life insurance policies, disability insurance coverage, cafeteria plans and other employee benefits.


  • Understand the obligations and the legal rights and entitlements of employees pertaining to “General Notice of COBRA Healthcare Insurance Continuation” coverage.


  • Review all workplace Safety policies. Ensure compliance with all OSHA (U.S. Occupational Safety and Health Administration) and Cal-OSHA, which requires employers to provide a safe and healthful workplaces for employees. There are severe penalties levied for violation.


Additional References


  • 2007 California Labor Law Digest
  • Veterans’ Employment and Training Service
  •  U.S. Department of LaborUSERRA Advisor

 This article is copyrighted and has been reprinted with permission from Pepperdine University. The Employers’ Legal Obligations to Employees in the Military, Jeffrey Schieberl, JD, MBA, and Charles P. Leo, PhD, MBA, Graziadio Business Report, Volume 10, Issue 3, 2007.  http://gbr.pepperdine.edu/073/veterans.html#_edn5


1 Uniformed Services Employment and Re-Employment Rights Act of 1994, 38 U.S.C. §§ 4301–4334 (2005)


2 Heather DePremio. “Article, Essay & Note: The War Within the War: Notice Issues for Veteran Reemployment,” Naval Law Review, 53, (2006): 31.


3 National Veterans Foundation. “Facts About Veterans: Needs and Solutions”


4 “Veteran says he was forced out of VA job,”Associated Press, May 11, 2006


5 Gil A. Abramson. “Commentary: Employers need guidance when soldiers come back to work,” St. Louis Daily Record/St. Louis Countian, February 5, 2006, Commentary section


6 “DOL Finalizes USERRA Regulations Detailing the Reemployment Rights of Military Service Members,” Mondaq Business Briefing, January 10, 2006


7 Lauren Malanga Casey, Epstein Becker & Green P.C. “Employers’ Obligations Extend to Military Spouses,” New York Employment Law Letter, (New York, M. Lee Smith Publishers: 2006): Sec. 202-i


8 California Chamber of Commerce. “California Chamber of Commerce Employer Guidelines,” California Chamber of Commerce Newsletter, 2007 Business Issues and Legislative Guide, May 14, 2007


9 Equal Employment Opportunity Commission. California Chamber of Commerce Newsletter, 2007 Business Issues and Legislative Guide, February 1, 2007, page 2. California Department of Fair Employment and Housing. California Department of Fair Employment Legislative Guide Journal, Significant Litigation Section, (05/14/2007): 41. 38, U.S.C. § 43 (2007)


10 “Rehire Veterans,” The Washington Times, March 22, 2006, Editorial section, at A16. Marcel Quinn. “COMMENT: Uniformed Services Employment and Reemployment Act (USERRA)—Broad in Protections, Inadequate in Scope,” University of Pennsylvania Journal of Labor & Employment Law, 8, (2007): 237


11 38 U.S.C. § 4312(d) (1994)


12 38 U.S.C. § 4312 (d)(1)(B); 38 U.S.C. § 4312(d)(2)(B) (1998)


13 38 U.S.C. § 4312(d)(1)(B); 38 U.S.C. § 4312(d)(2)(B) (1998)

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In Defense of CEO Pay

In their new book, Myths and Realities of Executive Pay (Cambridge University Press, 2007), Ira Kay and Steve Van Putten argue that the heightened interest—and outrage—over high executive pay is unfounded. The Watson Wyatt Worldwide executive compensation consultants argue that most companies really do tie CEO pay to corporate performance. Workforce Management New York bureau chief Jessica Marquez recently spoke to Kay about his book.


Workforce Management: What are the major myths about executive pay and why do you believe they are myths?


Ira Kay: A major criticism of executive pay is that CEOs are overpaid. What people mean by that is they are overpaid relative to the performance of the companies they manage. Critics who say this believe the reason for this disconnect is due to managerial power, which basically says that executives have enormous power over their boards of directors, who just rubber-stamp their pay packages. Both aspects of that statement are false.
When people say there is no pay for performance, they are looking at the wrong measure. They are looking at pay opportunity, meaning they look at new grants of stock an executive gets in a year. Then they look at the stock price appreciation for that year and say there is no correlation between pay and performance.


For example, a CEO of a high-paying company and a CEO of an underperforming company could each get $5 million worth of stock option grants in 2006. So critics see the compensation of the CEO of the underperforming company and say that’s not pay for performance. But in fact, those stock option grants might not be in the money, while the CEO at a high-performing company might make $8 million from those grants. We need to look at realizable pay. That is what they actually make.


WM: But aren’t the floors on executive pay so high that it doesn’t even matter if it’s linked to performance?


Kay: The minimums on executive pay aren’t high because the executives are setting their own pay. It’s because of the labor market. Boards are agreeing to pay this much because they think the executives are worth it. The executives are highly motivated by the upside. There are people who are outraged by how much [former Home Depot CEO] Robert Nardelli and [former Hewlett-Packard CEO] Carly Fiorina made when they left their companies, but they were disappointed too, because they should have made hundreds of millions of dollars.


WM: How do you know that executive pay contributes to company performance?


Kay: It’s very hard to prove causality. But if you look over time, executive pay has risen with high performance at companies. These executives take enormous risks. They buy companies and they sell companies.


WM: Why do you think companies should align employee compensation with performance?


Kay: Research shows companies that give employees stock or options outperform those companies that don’t give employees access to stock or options. The recent accounting rule changes that force companies to expense options are now causing companies to move away from that model, and it concerns me.


WM: But even if a company aligns employee pay with performance, won’t employees see the huge discrepancy between what they are making and what their CEOs are making?


Kay: My impression is that while some employees think their CEOs are overpaid, most employees at successful companies do not begrudge their CEO’s high pay. I am worried about how these issues affect morale and productivity, but morale at U.S. companies is fine.


Workforce Management, September 24, 2007, p. 8 — Subscribe Now!

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Tech Workers Generally Happy, but Stressed Out

Technology professionals seem to be happy with their jobs, but they are also extremely stressed and likely to recommend careers in other fields to their friends, according to a new report from Dice.com.


The Dice Tech Appeal Index measures a person’s inclination to recommend the information technology field to others as opposed to another industry. Some 1,000 individuals were surveyed, including 565 adults currently working in IT.


For IT companies, there is good news in the survey, which was released Wednesday, October 3. Ninety-one percent of survey participants say they are somewhat or very satisfied in their current job. What’s more, 92 percent of respondents note they intend to stay in the IT field for at least the next six months.


The bad news is that despite the general satisfaction with their jobs, IT professionals are more inclined to recommend a career in other industries to their friends than they were a year ago. Recommending jobs in financial services went up by almost 10 percentage points to 56 percent, as it did for media and entertainment, which moved to 44 percent from 34 percent.


“Although the satisfaction and loyalty levels of IT professionals continue to be strong, we’re seeing evidence of possible retention issues over the long term,” said Scot Melland, chairman, president and CEO of Dice Holdings Inc., parent company of New York-based Dice, in a release.


One key culprit may be work-related anxiety. The study found that 91 percent of respondents associate the work with stress—mostly due to workload, dealing with clients and pace of the job.


The fear of exporting work overseas also weighs on the minds of IT professionals. Forty-six percent of survey participants say they are somewhat or very concerned about offshoring, an increase from 39 percent a year ago.


—Gina Ruiz