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The Bush administration is making the most of its waning weeks by issuing regulations that will take effect just before President-elect Barack Obama is sworn in.

Among the highest in profile are changes to a major employee leave law that has not been modified since it was enacted in 1993. In mid-November, the Department of Labor circulated rules that it said would clarify rights and obligations under the Family and Medical Leave Act.

They take effect January 16, which should prevent Congress from halting them. But Capitol Hill critics want to change them nonetheless.
The FMLA allows workers to take 12 weeks of unpaid leave for the birth or adoption of a child or to deal with a personal or family member’s ailment. The new regulations expand the law to provide 26 weeks of leave for people who care for seriously injured or ill military personnel.

The 762-page final regulation, which was the product of a two-year information-gathering process, tightens FMLA rules. It allows employers to demand recertification of a medical condition twice annually. An HR department can directly contact an employee’s health care provider.

Employees taking leave must tell their supervisors the same day or following day. Previously, notice could be delayed. Employers can deny “perfect attendance” awards to workers on FMLA leave and don’t have to grant it in increments smaller than they allow other leave.
Under the new rules, the time an employee spends in “light duty” work doesn’t count against FMLA. Also, a company must explain in writing why it is denying leave.

“Generally, this is a step in the right direction,” said Lisa Horn, manager of health care at the Society for Human Resource Management. “It should improve communication between employers and employees.”

The changes fell short of defining “serious health condition” or ironing out problems with intermittent leave.

“It’s a mixed bag for employers,” said Debra Friedman, a partner at Cozen O’Connor in Philadelphia. “The Department of Labor did not address all of the employer’s concerns or resolve them.”

While praising military leave, FMLA advocates charge the Bush administration with limiting other leave rights.

“This is no time when workers can afford to lose their jobs,” said Sharyn Tejani, senior policy counsel at the National Partnership for Women and Families.

She criticized the agency for not doing an empirical FMLA study. “You shouldn’t change regulations for the entire country based on employer complaints,” she said
.
An FMLA champion on Capitol Hill is drawing Obama’s attention to the changes.

“I respectfully request that the president-elect’s transition team take a close look at how we may expeditiously redress any new regulations that undermine access to FMLA leave,” wrote Rep. Carolyn Maloney, D-New York, in a letter to Obama chief of staff Rahm Emanuel.

Maloney’s staff acknowledges that the regulations can’t be stopped. They would have to be rewritten by the Obama administration.
In the meantime, employers will have to significantly revise leave procedures.

“You’re going to have to dot all your i’s and cross your t’s in order to make certain the information you’re providing the employee vis-à-vis the new forms and new procedures is correct,” said Ellen McLaughlin, a partner at Seyfarth Shaw in Chicago.

—Mark Schoeff Jr.

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The November terrorist attacks in Mumbai, India, bumped reports about new Somalian pirate attacks off the front page and appear to have reset the immediate agenda for corporate risk analysis.

The loss of life and the commercial threat posed by both incidents, however, pale in comparison to the December report from Mexico’s attorney general that 5,400 people were slain in the first 11 months of 2008 in the drug-fueled war gripping cities that are home to U.S. maquiladoras.

“Now I’m getting more calls from companies concerned about northern Mexico than Mumbai,” said Mike Ackerman, managing director of Miami-based Ackerman Group, which specializes in counterterrorism and serves 65 of America’s top 100 multinationals. “Northern Mexico is a shooting gallery.”

The State Department has issued a travel alert for both Mexico and India, and the European Union has provided new resources to combat piracy, but no initiative addresses the immediate business need to conduct global operations or the ultimate responsibility HR executives bear for protecting employees in an increasingly dangerous world.

Piracy, like kidnapping and drug running, is a profit-oriented business that operates with some predictability. The terrorists who attacked Mumbai pose a far greater challenge for corporate security.

“No one foresaw the nature of the attacks in Mumbai,” Ackerman said. “But Mumbai has a history of terrorist attacks and proper precautions could have been taken.”

In fact, any Ackerman client traveling to Mumbai would have been warned off staying at the two hotels that were targeted because they did not have strong perimeter security.

The business risk posed by global terrorism is now a permanent part of the landscape.  

“It’s not going to go away,” Ackerman said. “I don’t want to discount what happened in Mumbai, but India has larger problems, with extremists operating on a number of fronts, and a separate problem with ransom kidnappings. There are both criminal risks and terrorist risks in India and beyond.”

HR executives must be aware of both criminal and terrorist activity but also understand that the countermeasures are different. In high-risk areas for kidnappings in India, incidents involving executives for Adobe, Expedian Solutions and Satyam Computer Services have occurred when the executives or family members were walking or driving. Proper precautions and training to avoid kidnappings are now part of standard corporate security offerings.

With terrorists, however, the dangers lie in hotels, commercial aircraft and government facilities such as train stations. “In Mumbai, the focus was on the hotels where Westerners stay because the terrorists wanted to strike at the economy, which they did with huge success,” Ackerman noted.

The fatal mistake, Ackerman said, is that companies undervalue risk analysis. The first step in risk mitigation is to use at least one intelligence service that also suggests preventive strategies.

“Companies can purchase intelligence services for $6,000 to $10,000 a year for two sources,” he noted. “But then you’ve got to read the stuff. The corporate security director may be the first line of defense, but ultimately the HR director is responsible for gauging the risk to employees.”

A 2008 survey of 600 large multinational companies conducted by iJET Intelligence Risk Systems found that less than half track terrorism as part of their risk monitoring process. HR executives will also need to step up their screening procedures for employees.

The Ackerman Group’s assessment of the Mumbai attacks cites an Indian police report that a software engineer for the local division of U.S.-based Yahoo was responsible for putting out the Mumbai terrorists’ e-mail claiming credit for the attacks. 

Ackerman advises HR executives to not only conduct a formal screening during the hiring process, but also continue screening employees every two years for indications of criminal or terrorist behavior.

“In addition, local managers and HR staff should constantly monitor employees for any attitudinal changes, lifestyle changes or signs of intensified religious beliefs or disaffection,” he said.

Besides terrorism, piracy remains a significant risk not only for the shipping industry but for any company that relies on commercial cargoes. In the first nine months of 2008, 199 acts of piracy occurred, including 115 vessels boarded, 31 hijacked and 23 fired on, according to the International Maritime Bureau’s Piracy Reporting Center.

Worldwide, 581 crew members were taken hostage, nine were kidnapped, nine were killed and seven are missing and presumed dead. As of December 1, 14 vessels with more than 250 crew members remained in the hands of Somali pirates.

In 2008, pirates collected more than $30 million in ransom money from their work in the Gulf of Aden, according to BGN Risk, the London-based business security and anti-piracy firm. The special risk insurance levy for crossing the Gulf of Aden jumped from an average of $500 per vessel per voyage in 2007 to $20,000 in 2008.

Proper insurance coverage for all commercial ships crossing the Gulf of Aden would add $400 million a year in insurance and transport costs, according to BGN Risk, with these costs passed on to commercial customers.

—Fay Hansen

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General Motors, which is seeking a government bailout, paid up to $700 in year-end inflation adjustments to each of its 284,000 hourly retirees on Monday, December 15, said GM spokesman Tony Sapienza.

With an additional 73,000 surviving spouses receiving as much as $455 each, the total cost to GM may surpass $200 million.

Ford Motor Co. intends to make its payments next week, said Ford spokeswoman Marcey Evans. They will go to 115,000 hourly retirees as part of longstanding contract provisions with the United Auto Workers. Chrysler LLC did not respond immediately to a request for numbers on its payments.

GM’s cash crisis had retirees worried whether the so-called Christmas bonuses would come this year. GM has indicated it barely has enough cash on hand to stay in business into January.

Dick Danjin, a GM retiree and retired UAW representative, said he wasn’t surprised since payment is called for in GM’s union contract.

“Both the corporation and union are fully aware of the obligation,” said Danjin, who lives in northern Michigan. He said he received his payment.

The lump-sum payments help to offset inflation much as cost-of-living allowances paid to active employees do. They are often called “Christmas bonuses” by retirees because they arrive in December every year.

GM’s lump sums pay retirees $23.33 for every year of service, Sapienza said. The minimum payment is $233, and the maximum is $700. Ford’s payments are similar.

The money comes from the automakers’ pension funds.

GM and Chrysler are awaiting word from President George W. Bush on whether they will receive a federal rescue package. GM is asking for $8 billion. Chrysler wants $7 billion.

The president is weighing what strings to attach to the loans, which may be drawn from either the Federal Reserve or a $700 billion bailout package for banks and financial institutions.

Craig Fitzgerald, an auto analyst with Plante & Moran in suburban Detroit, said that if GM had failed to make the payments, the company would have risked a “world war” with the UAW.

Said Fitzgerald: “GM didn’t need that given all the other battles it’s fighting.”

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

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Employers can’t deny permanent total disability benefits for illegal immigrants on the basis that their immigration status would prevent them working in the U.S. legally, a state appeals court ruled.

In the ruling Friday, December 12, Illinois’ 1st Judicial District Appellate Court also said it agreed with appeals courts across several other states that “have almost uniformly held” that the Immigration Reform and Control Act of 1986 does not preclude awarding workers’ comp benefits to illegal immigrants.

The case of Economy Packing Co. v. Illinois Workers’ Compensation Commission dealt with Ramona Navarro, a Mexican national who slipped and injured herself in May 2002 while working on an assembly line, court records state.

An arbitrator awarded her temporary total disability benefits of $147 per week for 60 weeks and permanent total disability benefits of $371 per week for life. The arbitrator also ruled Navarro to be an “odd-lot” worker, meaning she is permanently and totally disabled and her limited skills would prevent her from finding future work.

The Illinois Workers’ Compensation Commission and a trial court agreed, and Economy appealed. The employer argued that “undocumented aliens” are always unemployable because of immigration law regardless of their physical capabilities.

In order to receive permanent total disability benefits under an odd-lot theory, Navarro therefore needed to prove that she is not employable because of age, training, education or experience, Economy argued.

The appeals court disagreed.

It found that although immigration law prevents Navarro from legally working in the U.S., she would still be able to work elsewhere had she not sustained an injury on the job.

It also found that an employer has the burden of producing “sufficient evidence that suitable jobs would be regularly and continuously available to the undocumented alien but for her legal inability to obtain employment.”

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

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A group of local small-business owners who won a court victory in November that could have lowered the cost of their workers’ compensation insurance are likely to have their win tempered by the Ohio General Assembly.

State Rep. William Batchelder of Medina, chairman of the House insurance committee, told Crain’s Cleveland Business on Thursday, December 11, that he expects to pass during the current lame-duck session of the General Assembly legislation that would give the Ohio Bureau of Workers’ Compensation breathing room to make the changes directed by the Cuyahoga County Common Pleas Court decision.

“Legislatively, we may have to do something to provide more time,” Batchelder said. But he added that he basically supports the idea of changing the system to reduce the rate shock some employers have seen.

Judge Richard McMonagle on November 18 ordered the bureau to change the way it sets rates for worker injury insurance by July 1, 2009. His decision said the current rate-setting policy violates the intent of the Legislature.

The ruling in a class-action lawsuit was on a request for a preliminary injunction to force the Bureau of Workers’ Compensation to change immediately the way it sets rates and to recover past overcharges.
 
Regardless of what the Legislature does, the small-business owners expect to continue their class-action suit to trial. Attorney James DeRoche said small businesses statewide might be entitled to as much as $1.5 billion from the bureau because of past overpayments.

The issue pits two factions of small businesses against each other. One set of employers, which brought the lawsuit, saw their workers’ comp premiums rise—in some cases astronomically—after they made claims. It is this group that has brought the class-action suit.

The others have been able to keep premiums low by joining groups composed largely of employers with unblemished claims records. The groups, managed by organizations such as the National Federation of Independent Businesses and chambers of commerce, have been getting discounts from the Bureau of Workers’ Compensation of as much as 90 percent below base rates.

Because the bureau must balance what it brings in from premiums against what it pays out in claims, if it gives some employers a discount, it must offset that with higher rates to other employers. And it is usually employers that are kicked out of a group after having a claim that see the steepest increases in rates.

Aladdin Baking Co. of Cleveland saw its premiums rise to $55,000 a year from $12,000 after it was dropped from its group in 2006 because two of its 48 employees were injured on the job, according to executive vice president Connie Nahra.

McMonagle said in his ruling, “The discounts given to group employers are unlawful, and should not be relied upon as to what employers should actually be paying in premiums.”

Batchelder acknowledged that the system in place for nearly two decades is unfair and needs to be fixed as soon as possible.

“I share their pain,” he said of the plight of the business owners who filed the suit.

He said the Bureau of Workers’ Compensation has told him it may need 2½ years to bring rates back into balance. “I don’t think so,” he said.

Filed by Jay Miller of Crain’s Cleveland Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Even though the economic downturn has made the potential value added to companies by strategically oriented human resources departments all the more important, two out of five corporate management teams still don’t view HR as a strategic asset, according to a new study.

But the survey of 250 global human resources decision makers by Workforce Management and EquaTerra, a Houston-based information technology and business process transformation consulting firm, also had some good news for HR professionals. Among companies with 50,000 or more employees, 71 percent of management teams now see HR as a strategic player. Many HR leaders report recent progress in increasing HR’s strategic role, often as the result of new management refocusing HR operations on more business and mission-critical activities.

Additionally, the study found companies that recognize HR’s strategic importance also tend to report higher levels of satisfaction with the entire HR function, including non-strategic transactional activities.

EquaTerra Global Research managing director Stan Lepeak, who co-authored the study with executive director Lowell Williams and managing director Brad Everett, said that the sizable minority of companies that don’t recognize HR’s strategic potential are putting themselves at an increasingly serious disadvantage.

“I would think the need [for strategic HR] is exacerbated by the economy,” Lepeak said. “Organizations are in turmoil, some of them are on the edge of bankruptcy, executives are being pushed out. How do you recruit new talent when you’ve got a tarnished image, or keep from losing all your best people? How do you keep productivity up? You should be looking to HR to help address these problems, and to put in changes that can keep them from happening again in the future.”

Though HR leaders have made progress in becoming strategic players, most still see executives’ lack of understanding of HR as an impediment to progress. Seventy-eight percent either somewhat or totally agreed that making HR more strategic would require “a significant change in the mind-set of executives and business unit leaders.”

Lepeak said that although shortsighted executives are part of the problem, much of the responsibility lies with HR departments themselves.

“The HR people may feel that executives see them just as a back office group that runs the payroll, and they may complain that they’re not being offered a seat at the table,” Lepeak said. “But sitting back and waiting for the opportunity isn’t a good idea. In most cases, if you step up and show value, you’re going to be invited in, not pushed back. If you’ve never taken the initiative, it’s kind of your own fault.”

Most HR leaders in the survey seem to have a clear idea of what sort of activities were strategic and added value to the organization, but a minority may be hindering themselves through misplaced priorities. When asked what HR activities would contribute the most value to the business, 70 percent of respondents cited human capital management, and 63 percent picked “perform as a strong partner in corporate and strategic planning efforts.”

Competence at traditional HR functions generally ranked further down the scale—except, notably, among HR leaders at companies who primarily see HR as a cost center. They were 11 percent more likely than the rest to select “achieve operational excellence” as the best way to generate value and make HR more strategically important.

Lepeak said that while achieving adequate performance at functions such as payroll and benefits administration is crucial to keep organizations running smoothly, there’s relatively little value to be generated in improving beyond that. “Executives are looking for HR to be good enough at the operational work—the basic blocking and tackling—but to perform a lot of other activities as well,” he said.

Indeed, the study found that in companies where HR is viewed more strategically, there tends to be a higher opinion of HR’s overall capabilities, even in parts of the function that aren’t strategic.

Lepeak said that although it may be that companies with strategically minded HR departments also happen to be better at performing payroll or benefits administration, “it’s more likely that if you act more strategic and are seen as adding value, you get the benefit of the doubt from management in other areas. If you’re succeeding, people are happy, and they’ll assume the processes are working great. On the other hand, if you’re not seen as adding value, maybe your transactional work is going to get more scrutiny.”

In other findings, 88 percent of respondents said that making HR more strategic has more to do with innovative thinking and executive support than having a bigger HR budget. Fifty percent said that finding enough time to devote to strategic activities was the biggest obstacle to being a strategic player. Slightly more than half favored the use of automation and outsourcing to enable HR staff to concentrate upon value-creating activities.

—Patrick J. Kiger

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According to a new survey by Dice Holdings, the New York-based tech career firm that runs Dice.com, 72 percent of tech companies questioned said the current economic environment has caused them to scale back hiring plans for the next six months.

That’s up from 53 percent in June. And almost half of tech companies surveyed, 48 percent, said layoffs are likely in the next six months, compared with just 32 percent in June.

“Given how tight the labor market still is for technology professionals, it is not surprising to see it ease along with the economic retrenchment,” said Tom Silver, Dice’s chief marketing officer, in a statement.

Last month, Dice reported that the number of job postings on its site fell 20 percent compared with last year.

Job cuts are also expected to affect tech salaries. Some 53 percent of hiring managers and recruiters surveyed by Dice said they expect flat salaries, and 27 percent anticipate lower salaries for new hires this year.

While the recent Dice.com survey is nationwide, New York-based tech firms have recently slashed staff. Razorfish, Microsoft’s interactive agency; Thumbplay, a mobile entertainment provider; and Heavy.com, a male-oriented entertainment site, are among the New York companies that have laid off workers in the past few months.

Filed by Amanda Fung of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Filed by Amanda Fung of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Workforce Management’s online news feed is now available via Twitter.

Mumbai ranked second to Jerusalem on a list of the most dangerous places for outsourcing—even before the recent terrorist attacks plunged the city into chaos.

In fact, India had two regions ranked among the top five most dangerous places for outsourcing, according to a survey of 448 corporate development and outsourcing destination specialists conducted by Black Book Research and Brown-Wilson Group. The survey ranked 50 of the largest established and emerging offshore locations—from the safest to most dangerous—based on threat of terrorism, crime, climate hazards, and other factors (locations in the U.S. and the U.K. were excluded).

The results were not overly surprising. Jerusalem, Mumbai, Rio de Janeiro/Sao Paulo (Brazil), Manila/Cebu/Makati (Philippines) and Delhi/Noida/Gurgaon (India) were ranked as the most dangerous places for outsourcing in the report.

The safest outsourcing locales? Singapore, followed by Dublin (Ireland), Santiago (Chile), Krakow/Warsaw (Poland) and Toronto (Canada).

The terror attacks in Mumbai, along with the prospect that President-elect Barack Obama could follow through with policies that could penalize outsourcers with tax disincentives, have many U.S. corporate executives rethinking their offshore outsourcing strategies.

That could spell trouble for several outsourcing locations, particularly India. U.S. companies alone are expected to spend around $25 billion this year on IT outsourcing contracts with vendors on the subcontinent.

Study authors Doug Brown and Scott Wilson noted that the risks involved with many offshore locations may begin influencing corporate decisions to outsource to vendors at home or in locations that are closer to home.

“Outsourcing buyers are now keenly aware they can no longer justify offshore cost savings where their business continuity is in jeopardy,” they noted.

The Most Dangerous 10
1. Jerusalem (Israel)
2. Mumbai (India)
3. Rio de Janeiro/Sao Paulo (Brazil)
4. Manila/Cebu/Makati (Philippines)
5. Delhi/ Noida/Gurgaon (India)
6. Kingston (Jamaica)
7. Kuala Lumpur (Malaysia)
8. Johannesburg (South Africa)
9. Bangkok (Thailand)
10. Bogota (Colombia)

The Safest 10
1. Singapore
2. Dublin (Ireland)
3. Santiago (Chile)
4. Krakow/Warsaw (Poland)
5. Toronto (Canada)
6. Prague/Brno (Czech Republic)
7. Budapest (Hungary)
8. Monterrey (Mexico)
9. Beijing (China)
10. Cairo (Egypt)

Filed by Matthew Scott of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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