Category: Archive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

—Mark Schoeff Jr.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

—Ed Frauenheim

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

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

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

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

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

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

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

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

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

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

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

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

—Gina Ruiz

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

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

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

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

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

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

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

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

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

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

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

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

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

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

—Ed Frauenheim

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

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

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

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

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

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

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

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

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

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

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

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

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

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

—Jessica Marquez

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

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

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

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

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

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

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

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

In a concession to airlines, carriers will receive between 10 and 17 years to reach 100 percent funding, depending on how they have frozen their pension plans.

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

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

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

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

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

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

—Mark Schoeff Jr.

A national debate on immigration reform has stoked the employee verification market.

USIS, a provider of background screening services, launched its I-9 product in May, while Premier Employment Screening Services added an I-9 feature to its line in June.

The timing is propitious, as congressional action—and massive immigrant marches in the spring—raised the issue’s profile. If final legislation emerges this year, it is likely to include tougher border security and work-site enforcement provisions, two areas on which conservatives and moderates agree.

“It’s a pretty safe bet that I-9 is going to be part of the solution,” says Timothy Dowd, president of USIS’ commercial services division. “Having (immigration) on the front page every day and the ambiguity of (potential) outcomes creates a lot of interest in what we’re doing.”

Premier accelerated the development of its verification product because of a high volume of inquiries about employment eligibility compliance, says Chris Baker, the company’s CEO.

“The majority of Premier’s I-9 verification clients are utilizing the service now in order to be proactive ahead of anticipated increased penalties for noncompliance,” Baker says.

Immigration reform may put the same kind of fear into companies that has been generated by the Sarbanes-Oxley overhaul of financial controls.

“The I-9 debate is prompting many employers to decide that it’s in their best interest to retain an independent, nongovernmental entity to conduct I-9 audits as a preventative best practice,” Baker says.

Premier plans to charge $12 to $18 for each employee verification. The standard price is $8 per screening for the USIS product.

The House and Senate versions of immigration legislation would require employers to verify the legal status of their employees and would impose large fines and criminal sanctions on companies that knowingly hire illegal workers.

The USIS product will submit a request to search Social Security and Department of Homeland Security files after receiving employee information from a company. It claims a turnaround time of 24 to 72 hours, and a maximum of 10 days if results are contested.

The Basic Pilot electronic verification system established by the Department of Homeland Security has been called flawed, inefficient and unreliable by critics. About 8,600 companies have signed up for the pilot program. Immigration legislation would require every U.S. employer to join the electronic system.

But before any final measure can pass, it must first be approved by a House-Senate conference committee. House conservatives have balked at Senate provisions for guest worker programs and for establishing a path to naturalization for undocumented workers.

The process will not begin until after a series of national hearings on the Senate bill that House committees are holding this summer. With a fall start, the conference may have to conclude during a lame-duck session following the election.

“The American people need to know what’s in the bill and we need to hear directly from them about it,” says House Speaker J. Dennis Hastert, R-Illinois.

One business advocate of comprehensive reform says the House hearings may help her cause.

“We think bringing these hearings to the field might engender more support for getting the conference together,” says Laura Reiff, co-chair of the Essential Worker Immigration Coalition.

—Mark Schoeff Jr.

The low-cost labor route may dead-end in tomorrow’s economy. So says scholar Edward Lawler, co-author of the just-released book “The New American Workplace.” The book aims to update a seminal 1973 study about work in America, and Lawler discussed the findings at the Society for Human Resource Management’s annual conference in June.

As he does in the book, Lawler argued to his SHRM audience that companies focused on cutting costs through measures such as low wages and skimpy benefits will struggle to adapt effectively in the fast-moving global economy. You can go “only so far” with a low-cost approach, he said.

Lawler wrote the new book with James O’Toole, the principal author of the original “Work in America” study more than 30 years ago. The new book was financed in part by SHRM.

The 1973 study, sponsored by the federal government, cited evidence that too many Americans were engaged in narrow, repetitive and routine jobs, especially in manufacturing, and that was leading to mental and physical health problems.

In “The New American Workplace,” Lawler and O’Toole say executives in the 1970s and 1980s redesigned some jobs to make them more challenging and satisfying, automated other tasks, and exported many of the remaining “bad” jobs. Now, they say, the U.S. has chosen to have the most capital- and knowledge-intensive industries in the global economy.

But the country faces a number of challenges. To survive competitively, the U.S. economy must be in a state of constant change, where inefficient products, companies and industries are continually replaced.

The country is not creating enough new good jobs, Lawler and O’Toole say. They also see evidence of decreasing economic mobility. And while workers face a wider array of choices than ever before, the authors say that most American workers bear increased risk in areas such as employment security, health care and retirement.

The topic of economic insecurity in America has been getting more attention in the past few years, as companies distance themselves from traditional pension plans and corporate giants such as General Motors announce major layoffs.

In the wake of the traditional bureaucratic, hierarchical management model, Lawler and O’Toole see three alternatives today. One is what they call “low-cost operators,” which concentrate on trimming costs in a bid to keep prices low. Work there, they write, is in many ways “similar to the routine, low-level tasks that were the norm in manufacturing in an earlier era.”

The companies Lawler and O’Toole call “global-competitor corporations” are large and geographically spread out, and they compete for financial capital, skills, knowledge and technology. The firms may pay employees well and offer opportunities to develop new skills, but the relationship between such companies and employees is “transactional, not one based on loyalty.”

Then there are “high-involvement companies,” which provide workers with challenging jobs, a voice in the management of their tasks and a commitment to low turnover and few layoffs. The authors say employees in these firms tend to share in company profits or from gains in productivity and enjoy generous benefits.

During his presentation, Lawler said that the latter two management styles make the most sense. But, he said, “Our hearts and minds are with the high-involvement approach.”

—Ed Frauenheim

Mercer Human Resource Consulting is under investigation by Texas authorities for allegedly violating state laws by receiving rebates from insurance companies and for not disclosing commissions paid by insurance companies to Mercer’s parent organization, Marsh & McLennan Cos. 

The Texas Department of Insurance filed a notice July 11 saying it is considering disciplinary action against the company, which also operated as a life and health insurance counselor without a proper license, according to the notice. Mercer says the allegations in the letter are unfounded.

The investigation in Texas is partially attributable to a string of problems that has beset Marsh & McLennan since New York Attorney General Eliot Spitzer alleged that Marsh, the world’s largest insurance broker, had steered business to insurers in exchange for illegal payments. Marsh paid $850 million early last year to end the investigation without admitting wrongdoing, though several Marsh executives faced criminal charges and a handful pleaded guilty to criminal charges of fraud. 

It was through the investigation by Spitzer that Texas officials found payments totaling $125,000 paid to Marsh by the insurance companies whose business Mercer steered toward them. Such an arrangement constitutes fraud and creates a conflict of interest between Mercer and its client, says Robert Walt, an attorney for the Texas Department of Insurance.

The events leading to the Texas investigation began in 2000, when Mercer was hired by the Houston Independent School District to restructure the school system’s health benefits administration. 

During the next five years Mercer was paid more than $20 million to outsource the school system’s benefits. School officials, who are not under investigation, say they have saved money, but a portion of those savings came from $800,000 in rebates Mercer received from insurance companies. Though the rebates were passed on to the school district, receiving them is illegal in Texas, Walt says, as it is in several other states.

“To paraphrase, Mercer said to the HISD, ‘You will save beaucoup bucks if you go with us because you will get lower [insurance] rates’ ” and savings in the form of rebates, Walt says. 

Mercer also allegedly brokered deals between insurance companies and the school districts that it worked for, passing commissions from those deals to the schools, which saw the money as part of their savings. A competing insurance broker, Richardson-Eagle, complained to the Department of Insurance, saying such an arrangement was only possible because Mercer was foremost a fee-based consultant, not a broker, and so could afford to pass commissions on to its clients. In its notice, the Department of Insurance said Mercer violated state law by engaging “in an unfair method of competition.”

The Houston Independent School District also created a purchasing coalition with other nearby school districts. The other districts paid a fee to join the purchasing coalition in hopes of receiving lower insurance rates. But Texas insurance officials contend the plan was intentionally misleading because each school district is rated by health insurers separately and therefore cannot realize savings by joining purchasing coalitions. 

Nonetheless, officials from the other school districts in Dallas, Aldine and Katy have said the coalition saved them money.

A Mercer spokeswoman, Stacy Bronstein, wrote in an email that once the department of insurance “understands our arrangement with the school district, we are hopeful that they will conclude that we are in compliance and that the Department should be supporting, not challenging, a cooperative structure that saves money for the districts and their taxpayers.” 

The investigation in Texas has been a boon to plaintiffs in three civil lawsuits filed against Mercer by former employees of the school district and Richardson-Eagle, says Jim Reed, the plaintiff’s attorney in the cases. Reed is an attorney with Looper Reed & McGraw in Houston. Before the Department of Insurance issued its letter, one of Reed’s cases against Mercer was dismissed by a state court in pretrial summary judgment, a decision Reed is appealing.

“We believe the Texas Department of Insurance letter confirms every one of our allegations,” Reed says. 

Texas officials told Workforce Management that they are waiting to meet with an attorney representing Mercer before proceeding.

—Jeremy Smerd