August 2014 final

Supreme Court Rules in Favor of Hobby Lobby

ERISATurns 40!

NLRB Recess Appointments Invalid!

2014 TN SHRM State Conference

& Expo

Cindy Kolb, J.D.2014 Chair

of the Employment Lawand Legislative

Affairs ConferenceLittle Rock

ESOP Fiduciaries Not Entitled to

Presumption of Prudence

TM

www.HRProfessionalsMagazine.com

Volume 4 : Issue 8

The things employees say when you’re not around can cause legal troubles for you. Fisher & Phillips provides practical solutions to workplace legal problems. This includes helping you find and fix these kinds of employee issues before they make their way from the water cooler to the courthouse.

1715 Aaron Brenner Drive • Suite 312 • Memphis, TN 38120 • 901.526.0431 www.laborlawyers.com

What you don’t hear can still hurt you.

JUST PUT IT ON THE COMPANY

CARD…NOBODY WILL NOTICE.

YOU’RE REALLY SHOWING OFF YOUR BEST ASSETS TODAY.

I NEVER WEAR THE SAFETY GOGGLES. THEY LEAVE A MARK.

THEY’RE WORRIED ABOUT OVERTIME. I’M JUST WORKING

OFF THE CLOCK.

ATLANTA BALTIMORE BOSTON CHARLOTTE CHICAGO CLEVELAND COLUMBIA

PORTLAND SAN ANTONIO SAN DIEGO SAN FRANCISCO TAMPA WASHINGTON, D.C.

NEW ENGLAND NEW JERSEY NEW ORLEANS ORLANDO PHILADELPHIA PHOENIX

IRVINE KANSAS CITY LAS VEGAS LOS ANGELES LOUISVILLE MEMPHIS

COLUMBUS DALLAS DENVER FORT LAUDERDALE GULFPORT HOUSTON

FISH-216 Memphis HR Pro 8.625x11.125.indd 1 10/4/13 10:19 AM

Bringing Human Resources & Management Expertise to You

Features 4 note from the editor 5 Profile: Cindy Kolb, J.D.12 ESOP Fiduciaries Not Entitled to Presumption

of Prudence18 DOMA – The Windsor Decision’s Impact on

Retirement Plan Designs20 ERISA Turns 40!24 For the HR Professional Company Retirement Plans

Spell Opportunity, Responsibility and Liability 29 A New Chapter for Retirement

Departments10 Supreme Court Rules in Favor of Hobby Lobby – What Does it

Mean for Employers? 14 Benefits: Add Some Life to the Workplace22 Benefits Strategy: Outcomes-Based Health Risk Management26 NLRB: Recess Appointments Invalid!28 TN Law: Legislative Update30 Health Care Reform: Preparing for the 2015 Affordable Care Act31 Social Media in the Workplace Global Study32 Employment Law: The Intersection of Race and Gender34 Organization Change: Leading with Integrity36 Immigration: Why Small Business Should Be Worried About ICE38 EQ: 5 Steps to Stay Positive

Industry News 6 Highlights from Strategic Leadership for HR Executives Seminar 7 2014 TN SHRM State Conference & Expo in Sevierville 8 13th Annual Employment Law & Legislative Affairs Conference Agenda25 Mid-South Compensation Association Annual Seminar31 Highlights from Bass Berry Sims Seminar37 Register for Online HRCI Certification Exam Prep Course

Next IssueHighlights from the 2014 TN SHRM State Conference & Expo in Sevierville and The 13th Annual Employment Law & Legislative Affairs Conference Agenda

EditorCynthia Y. Thompson, MBA, SPHR

PublisherThe Thompson HR Firm

HR Consulting and Employee DevelopmentArt Direction

Park Avenue DesignContributing Writers

Sally F. BarronBruce E. BuchananBrenda N. Canale

Harvey DeutschendorfLatosha Dexter

Janyne Peek EmsickJimmy Hinton

Dwayne O. LittauerKristen MintonKayla O’Neal

Paul R. O’RourkeGary PeeplesTammy Quinn

Ricky ReynoldsBlake Rogers

Charles Sims, Jr.Robin B. Taylor

Tanja L. ThompsonBen Watkins

Board of AdvisorsAustin Baker

Jonathan C. HancockRoss Harris

Diane M. Heyman, SPHRJohn E. Megley III, PhD

Terri MurphySusan NiemanRobert Pipkin

Michael R. Ryan, PhD

www.HRProfessionalsMagazine.com

57%of American workers have saved less

than $25K for retirement

Contact HR Professionals Magazine:

To submit a letter to the editor, suggest an idea for an article, notify us of a special event, promotion, announcement, new product or service, or obtain information on becoming a contributor, visit our website at www.hrprofessionalsmagazine.com. We do not accept unsolicited manuscripts or articles. All manuscripts and photos must be submitted by email to [email protected]. Editorial content does not necessarily reflect the opinions of the publisher, nor can the publisher be held responsible for errors.

HR Professionals Magazine is published every month, 12 times a year by the Thompson HR Firm, LLC. Reproduction of any photographs, articles, artwork or copy prepared by the magazine or the contributors is strictly prohibited without prior written permission of the Publisher. All information is deemed to be reliable, but not guaranteed to be accurate, and subject to change without notice. HR Professionals Magazine, its contributors or advertisers within are not responsible for misinformation, misprints, omissions or typographical errors.

©2011 The Thompson HR Firm, LLC | This publication is pledged to the spirit and letter of Equal Opportunity Law. The following is general educational information only. It is not legal advice. You need to consult with legal counsel regarding all employment law matters. This information is subject to change without notice.

HTTP://HRProfessionalsMagazine.com /Exclusives

10 Steps to Reduce Turnover

WEB EXCLUSIVES

3www.HRProfessionalsMagazine.com

a note from the Editor

Cynthia Y. Thompson | [email protected]

Sign up for our RSS News Feed to receive up to the minute HR Alerts on changing legislation affecting

our workforce.www.HRProfessionalsMagazine.com

With Fall right around the corner, our focus turns to retirement planning and deferred compensation. HR professionals and Benefits Managers are gearing up for 2015, planning and revising their retirement plans for the coming year. We think you will enjoy and appreciate the many articles we have included in

this issue to assist you. In addition, you will want to read about the two recent

Supreme Court decisions that the HR community has been anxiously awaiting

on the Hobby Lobby case and the NLRB recess appointments.

As the Official Media Sponsor for the 2014 TN SHRM Conference and Expo in

Sevierville September 17-19, we are delighted to bring you details about the

Conference on Page 7. If you are reading our August digital issue, you can click

on the page to go straight to registration! Our AR SHRM friends can review

the entire agenda for the 13th Annual Employment Law and Legislative Affairs

Conference (ELLA) September 18-19 in Little Rock on Pages 8 and 9. If you

have not yet registered for this informative legislative conference, just click on

the ad below from our August digital issue.

If you are unable to attend these excellent conferences, please follow me on

Facebook.com/HRProfessionalsMagazine and on Twitter @cythomps and I will

keep you updated with the latest photos and comments on the top speakers

and topics. We will also be bringing you articles on the top presentations from

each Conference in our September and October issues.

If you are interested in becoming certified as a PHR or SPHR but do not have the time to attend a traditional class, please consider joining me for the Online HRCI Certification Exam Prep Class that will begin on August 18. Classes will be held from 6-7 PM on Monday and Thursday. See page 38 for details. I hope you will also read my Web Exclusive this month on “10 Steps to Reduce Turnover” at http://HRProfessionalsMagazine.com/Exclusives. And don’t forget to join us for the month compli-mentary HRCI webinar sponsored by Data Facts on August 21. Watch your email for your invitation!

4 www.HRProfessionalsMagazine.com

on the cover

CINDY KOLB, J.D.2014 Chair of the Employment Law andLegislative Affairs ConferenceLittle Rock

Cindy Kolb, J.D., is the 2014 Chair of the Employment Law and Legislative Affairs Conference, (ELLA), hosted by the Arkansas SHRM State Council, Inc., which will be held September 18-19 in Little Rock. Cindy practices labor and employment law at Cross, Gunter, Witherspoon & Galchus, P.C. (CGWG) in the firm’s Little Rock office, where she also provides guidance on matters involving insurance defense, insurance coverage and professional liability defense.

Cindy believes that the ELLA Conference is a valuable and critical resource for HR professionals and members of the legal community, who are required to stay on top of the ever-changing laws and regulations that employers must deal with every day. The ELLA Conference provides up-to-date information from dynamic speakers. It also provides an opportunity for HR professionals and lawyers who practice employment law to interact, share ideas and even have some fun!

Cindy is an active member of Arkansas SHRM and the Central Arkansas Human Resources Association (CAHRA). She is a frequently-requested speaker on employment law topics – such as social media in the workplace, employee leave issues and how to properly use background checks – for SHRM-affiliated and other industry groups around the state, as well as CGWG in-house seminars. Cindy has had two articles on insurance coverage issues published in Arkansas Business and authored an article in last month’s issue of HR Professionals Magazine.

Cindy is also involved in the Arkansas legal community, having served as the Chair of the Labor and Employment Section of the Arkansas Bar Association in 2012-2013 and is a member of the Judge Henry Woods Inn of Court. An Ohio native, she graduated from Case Western Reserve University School of Law in Cleveland, Ohio and has been practicing law for 17 years – 14 of those years in Arkansas. Cindy earned her undergraduate degree in History and Economics from Miami University in Oxford, Ohio.

An active community volunteer, Cindy is a current member of the Board of Directors of the Museum of Discovery, and has also devoted her time and efforts to the Arkansas Repertory Theatre and the Susan G. Komen Breast Cancer Foundation. Cindy and her husband, Joe, live in Little Rock with their 4 and 5 year old daughters.

Cindy KOLB, J.D.


Highlights from Strategic Leadership for HR ExecutivesStrategic Leadership for HR Executives was held on June 17 in Little Rock in the Virginia Bailey Conference Room at Union Station. The seminar was from 1 PM to 5 PM and was followed by a wine and cheese reception. The seminar was in partnership with the Central Arkansas HR Association (CAHRA).

HR PROFESSIONALS QUARTERLY SEMINARS

Rick Roderick, Director with Cross, Gunter, Witherspoon & Galchus was the keynote speaker. Rick discussed best practices for creating a legally sound social media handbook policy. He also discussed the NLRB’s recent memos and decisions that impact your company’s policies regarding social media and Internet use.

We caught a photo op with a group of attendees and Matt Swain, Sales Director for Oklahoma, Arkansas, and Mississippi for Ultimate Software.

Mitch Maddox is a Technology Evangelist for Ultimate Software, and his topic was how to evolve your talent strategies to prepare for a changing workforce. Mitch discussed ways to connect and engage with employees in new ways to foster collaboration and inspire new ideas.

Rhonda Benton, SPHR, Director of Employee Relations for Arkansas Children’s Hospital, attended the Strategic Leadership for HR Executives Seminar.

Cole D. Rogers is an Employee Benefits Advisor with Regions Insurance in Little Rock. Cole’s topic was how to unlock the value of voluntary benefits through proper strategic analysis. He also discussed how to integrate voluntary benefits through a benefit strategic plan.

Francine Barton Del Giacco was a participant at our quarterly seminar in Little Rock.

A slide from Cole Rogers’s presentation on integrating voluntary benefits with your core offerings.


Tennessee SHRM Conference & Expo

September 17-19, 2014 The 2014 Tennessee Human Resource State Conference and Expo will be held in Sevierville, Tennessee, at the Sevierville Convention Center.

Register Now!www.tnshrmconf.com

Keynote Speakers

Dr. Jerry Punch“Life in the Fast Lane”

Connie Podesta“Life Would be Easy... If it weren’t for other people

Vallie Collins “Miracle on the Hudson”

Hallerin Hilton Hill“The Wisdom Advantage”

Register Now!Online:www.tnshrmconf.com

This year’s conferenceprovides an opportunity forHR professionals from allover the state to learn, share,network and grow. The TN SHRM State Conference is hosted by the Tennessee Valley Human Resource Association.

16 HRCI credits!

Location: Sevierville Events Center, Wilderness at the Smokies1424 Old Knoxville Highway, Sevierville, Tennessee 37876Resort Information: www.wildernessatthesmokies.comFor Hotel Reservations: (877) 325-9453 Mention “TN SHRM Conference”when making reservations for the SHRM conference rate of $99.00/night.________________________________________________________________________Stone Hill Lodge (attached to Events Center) at $99/night Rate Code: 1209STATEHRiver Lodge (Lower Hotel at Resort) at $99/night Rate Code: 1409STATEH


Thursday, September 18th Session

Legislative Update - Wayne Young

Concurrent # 1

a. Building a Legally Sound Compensation System – Bruce Johansson

b. Fiduciary Responsibilities/Fee Disclosure – Stephen J. Smith

c. DOMA/Same Sex Marriage Issues in Employment Law – Brian Vandiver

Concurrent # 1

a. Building a Legally Sound Compensation System – Bruce Johansson

b. Fiduciary Responsibilities/Fee Disclosure – Stephen J. Smith

c. DOMA/Same Sex Marriage Issues in Employment Law – Brian Vandiver

Lunch and Lunch Speaker – UAMS SEARCH Program – Laura Collins

Concurrent # 2

a. Wage and Hour: Issues for 2014 and Beyond – Robert Darling, DOL

b. Recent Changes in Federal Contractor Hiring Regulations – David Ankeny

c. Outsmarting the Smartphone: Addressing Issues in the BYOD Workplace – Jess Sweere

Mock Trial – Abtin Mehdizadegan, Jess Sweere, Greg Northen

ELLA Legislative Reception Sponsored by CGWG (everyone is invited to mingle with AR legislators!)

8:15 – 9:15 a.m.

9:30 – 10:30 a.m.

10:45 – 11:45 a.m.

11:45 a.m. – 1:15 p.m.

1:30 – 2:30 p.m.

2:45 – 4:30 p.m.

4:45 p.m.

AR SHRM Employment Law & Legislative Affairs Conference


Friday, September 19th Session

Healthcare Reform – Dr. Cal Kellogg

Concurrent # 3

a. Handbook Workshop # 1 (2 rooms)

b. Attendees can pick 2 station topics to attend with 30 minutes at each station

c. Attorneys to give very brief intro on their specific handbook topic before opening it up to questions

d. Moderators will assist with timing at each station and flow of questions

• Missy Duke – Compensation Policies

• Jane Kim – Conduct and Discipline Policies

• Khayyam Eddings – FMLA and Other Leave Policies

• Ben Brenner – Social Media and IT Policies

e. Discipline & Termination – Rick Roderick

Concurrent # 3

f. Handbook Workshop # 2 (2 rooms)

g. See above for details

• Missy Duke – Compensation Policies

• Jane Kim – Conduct and Discipline Policies

• Khayyam Eddings – FMLA and Other Leave Policies

• Ben Brenner – Social Media and IT Policies

h. Discipline & Termination – Rick Roderick

8:00 – 9:00 a.m.

9:15 – 10:30 a.m.

10:45 a.m. – 12:00 p.m.

AR SHRM Employment Law & Legislative Affairs Conference


A few weeks ago, the Supreme Court issued its much-anticipated decision in two recent cases brought by companies challenging provisions of the 2010 Patient Protection and Affordable Care Act (the “ACA”). The regula-tions in question require employers with 50 or more full-time employees to provide medical insurance coverage for 20 specific methods of birth control approved of by the Food and Drug Administration.

) BackdropConestoga Wood Specialties Corporation (a Pennsylvania company) and Hobby Lobby Stores, Inc. (an Oklahoma Company) sought relief from the requirements of the ACA in the District Courts of their respective states and reached differing results through the appellate process. The Third Circuit Court of Appeals denied Conestoga’s request for relief, while the Tenth Circuit Court of Appeals sided with Hobby Lobby in its request for relief. The Supreme Court addressed the differing opinions of the lower courts to resolve the question and issued an opinion which was in itself divided.

The Court’s 50-plus page majority opinion (written by Justice Alito) provides a background of the ACA (Patient Protection and Affordable Care Act of 2010), the RFRA (Religious Freedom Restoration Act of 1993), and the RLUIPA (Religious Land Use and Institutionalized Persons Act of 2000), as well as instructing the reader on the workings of the HHS (Department of Health and Human Services), the HRSA (Health Resources and Services Administration), and the FDA (Food and Drug Administration). The 35-plus page dissenting opinion also is instructive on the history of the law and regulations leading up to the present day, but its writer (Justice Ginsburg) reaches a differing conclusion as to its interpre-tation and the meaning of “the exercise of religion.”

As a comparison, remember that employees are protected under Title VII of the Civil Rights Act in the exercise of their religion, and an employer must accommodate an employee’s sincerely held religious beliefs, as long as the accommodation would not cause an undue hardship to the operation of the employer’s business. In the Hobby Lobby case, the employers sought protection under the Religious Freedom Restoration Act, which prevents the government from “substantially burden[ing] a person’s exercise of religion.” In essence, the Supreme Court was asked to decide whether a for-profit employer should be allowed an accommodation for its sincerely held religious belief, if it can have one, and whether such an accommo-dation would cause an undue hardship to other parties.

) ForefrontThe primary issue in the Hobby Lobby opinion is whether or not a closely-held, for-profit corporation should be entitled to the same exemption from the ACA regulations as other organizations who are exempt. Currently, religious employers (such as Churches) are exempt, and so are certain other religious nonprofit organizations who object to providing coverage for contraceptive services on religious grounds. In order to obtain the exemption, the employer must certify that it is a nonprofit organi-zation that “holds itself out as a religious organization” and “opposes providing coverage for some or all of any contraceptive services required to be covered… on account of religious objections.” Hobby Lobby and Conestoga requested to be exempt as well.

) Exercise of ReligionThe reasoning behind Hobby Lobby and Conestoga’s request to be exempt from the particular requirement relating to contraceptives was that the company owners believe that it violates their religious beliefs for them to pay for, or otherwise facilitate the use of, 4 of the methods of birth control

Supreme Court Rules in Favor of Hobby Lobby

– What Does it Mean for Employers?

BURWELL V. HOBBY LOBBY STORES, INC. – the Supreme Court crafts an opinion on employers’ religious objectionsto the Patient Protection and Affordable Care Act

By SALLY F. BARRON


approved of under the ACA. The 4 objectionable methods are classified as “abortifacients,” meaning that they operate after the fertilization of an egg and could result in the destruction of an embryo; specifically, they include “morning-after” pills and IUDs. Hobby Lobby and Conestoga do not object to providing coverage for the other 16 methods.

Conestoga’s mission statement includes its vision of making a “reasonable profit in [a] manner that reflects [the owners’] Christian heritage.” Hobby Lobby’ s statement of purpose commits its owners to “operating the company in a manner consistent with Biblical principals.” None of the parties disputed that the company owners hold a sincere belief that compliance with the regulations at issue would compromise their religious beliefs. All of the Court agreed that it is not the Court’s position to determine whether a belief, sincerely held, is reasonable; it is only necessary to determine that the belief is honestly held. The Court did not agree, however, as to whether requiring the companies to comply with the ACA mandates would substan-tially burden the companies’ exercise of their religious beliefs.

) Who is a PersonBefore discussing the relative burdens on the parties and the available solutions to the conflict, the Court first had to decide that Hobby Lobby and Conestoga were “persons” within the meaning of the law. The dissenting justices opined that for-profit corporations are legal fictions and are not the type of “persons” the law was designed to protect. The majority of the Court found, however, that the plain language of the Religious Freedom Restoration Act makes it “perfectly clear that Congress did not discriminate … against men and women who wish to run their businesses as for-profit corporations in the manner required by their religious beliefs,” and, therefore, “a federal regulation’s restriction on the activities of a for-profit closely held corporation must comply with RFRA.”

) The SolutionThe majority opinion states that a closely-held profit-making corporation should be allowed the same accommodation as a religious nonprofit corpo-ration under these particular circumstances, finding that making a profit and “perpetuat[ing] religious values” shared by a company’s owners are not mutually exclusive activities. Since the Court found that the “perpetuation of its religious values” constitutes the exercise of religion by an entity the RFRA was designed to protect, the Court then addressed the question of whether the regulation in question is the least restrictive means of furthering the compelling interest of women’s health. The opinion states that it is not.

The Court points to system already put in place by the government for religious nonprofit corporations as a reasonable alternative to the ACA mandates. This alternative does not require employees to give up their right to choose their preferred method of birth control. Under this system, employees would still have access to all forms of contraception approved by the FDA, at no cost to the employee; the costs would be covered by third-party insurers, who would, arguably, suffer no net economic burden. The Court also suggests that the government could cover the costs, which would be minimal as compared to the cost to employers who would have to pay substantial fines if they chose not to comply with the ACA mandates. The ultimate issue is not whether employees will have access to their preferred methods of contraception; the real issue is who will foot the bill.

) On the HorizonIn the wake of the Supreme Court’s decision of these two cases, lawmakers are busy at work proposing legislation that would close the “coverage gap”

and require for-profit corporations to provide and pay for all approved forms of contraceptive and other preventative health care services. The proposed legislation is called the “Protect Women’s Health from Corporate Interference Act.” In the meantime, corporations are happy with less government interference. In the eyes of some, this singular decision has opened the floodgates for discriminatory practices by employers. Several gay and transgender rights organizations are reportedly withdrawing their support for other laws currently pending in the legislature (i.e., the Employment Non-Discrimination Act) that contain exemptions for religiously affiliated employers, citing public confusion about interpre-tation of the Hobby Lobby decision as the reason. There is undoubtedly confusion about the opinion and the scope of its application.

For now, the Supreme Court has stated that its decision applies only to closely-held companies, which are defined as corporations in which 5 or fewer individuals own more than 50% of the stock. Interestingly, there are studies indicating that most companies in the U.S. are closely held. The opinion applies only to the specific mandates of the ACA that were addressed by the Court, however, and it should not be read to exempt employers in general from any other requirements.

The opinion has, certainly, churned the waters of public opinion, and it will be interesting to see what remains afloat.

Sally F. Barron, Associate AttorneyFisher & Phillips Memphis Office

[email protected]


On June 25th, the U. S. Supreme Court issued an opinion in the Fifth Third Bancorp v. Dudenhoeffer case. The case involved an employee stock ownership plan (ESOP) with a 401(k) feature. Under the plan, participants could direct

the investment of their 401(k) contributions into company stock, with that stock then being held in the ESOP portion of the plan. Employer contri-butions were generally invested in company stock under the ESOP portion of the plan, though the participant could then redirect the investment of those employer contributions into any or all of 20 mutual funds which were offered as investment options. When the value of the company stock declined, the participants sued the plan fiduciaries for a breach of fiduciary responsibility, claiming that based on both publicly available information and insider information the fiduciaries knew or should have known that the stock was overpriced, excessively risky, and had ceased to be a prudent investment. The plaintiffs essentially alleged that the fiduciaries should have sold the stock which was already held, and should have refrained from further purchases of stock at inflated values, either by removing the stock as an investment option for participants or by publicly disclosing the negative insider information so the market price would correct to a true lower value before additional stock was purchased.

In general, lower federal courts have previously applied a legal presumption of prudence for plan investments in company stock (the "Moench presumption"), unless there had been an "abuse of discretion." Every federal Court of Appeals which had addressed the presumption had adopted it in one form or another. As one federal Circuit Court of Appeals had stated, "mere stock fluctuations, even those that trend downhill signifi-cantly, are insufficient to establish the requisite imprudence to rebut the Moench presumption" of prudence. That presumption generally has been applied at the outset of a civil suit, often resulting in a dismissal of a suit. After the Sixth Circuit Court of Appeals held that the presumption should not be applied at the outset during the pleadings stage (making it more difficult to get an early dismissal of the suit), the Supreme Court agreed to review the Sixth Circuit decision.

The Supreme Court held that ESOP fiduciaries are not entitled to any presumption of prudence, at any stage of a suit, thereby overturning decades of lower court decisions to the contrary. An ESOP fiduciary is instead "subject to the same duty of prudence that applies to ERISA fiduciaries in general…except that they need not diversify the fund's assets…." Thus, the question for an ESOP fiduciary may be whether it is prudent to invest at all in company stock, with no presumption of prudence. While an ESOP fiduciary may not be liable for losses arising from a lack of diversification

with respect to the investments in company stock, any ERISA fiduciary may be liable for imprudent actions or inactions regarding investments, whether into company stock or some other investment.

As the Court stated, “Congress recognizes that ESOPs are ‘designed to invest primarily in’ the stock of the participants’ employer, … meaning that they are not prudently diversified. And it has written into law its ‘interest in encouraging’ their use.” The italicized emphasis is in the Court’s language. Congress has stated “INTENT OF CONGRESS CONCERNING EMPLOYEE STOCK OWNERSHIP PLANS.—The Congress… has made clear its interest in encouraging [ESOPs] … The Congress is deeply concerned that the objectives sought by this series of laws will be made unattainable by regulations and rulings which treat [ESOPs] as conven-tional retirement plans, which reduce the freedom of the employee trusts and employers to take the necessary steps to implement the plans, and which otherwise block the establishment and success of these plans.”

Although Congress has provided tax incentives and specifically excepted ESOP fiduciaries from the normal duty of prudent diversification, the Court found no provision for a presumption of prudence as to the fact of investing in company stock. The Court recognized that its elimination of the presumption of prudence could cause legitimate concerns. "Thus, in many cases an ESOP fiduciary who fears that continuing to invest in company stock may be imprudent finds himself between a rock and a hard place: If he keeps investing and the stock goes down he may be sued for acting imprudently …, but if he stops investing and the stock goes up he may be sued for disobeying the plan documents in violation of [ERISA]." However, the Court did not believe that a presumption of prudence is the appropriate way to avoid meritless suits or to balance the interests of employers, participants and Congress. "Such a rule does not readily divide the plausible sheep from the meritless goats. That important task can be better accomplished through careful, context-sensitive scrutiny of a complaint's allegations" and the complaint must state a "plausible claim." In other words, presume nothing, but instead take a careful look at what is being alleged to see if it is plausible and sufficient.

The Court also rejected another argument by some plan sponsors - that if a plan requires, rather than just permits or encourages, investments in company stock, then the fiduciaries must follow the terms of the plan. Noting that ERISA requires a fiduciary to follow the terms of a plan only to the extent those terms are consistent with the requirements of ERISA, and that ERISA requires fiduciaries to act prudently, the Court stated that "the duty of prudence trumps the instructions of a plan document, such as

By PAUL R. O’ROURKE

Retirement plan investments in company stock.

Did the U. S. Supreme Court just make them riskier?

ESOP FiduciariesNot Entitled to Presumption of Prudence


an instruction to invest exclusively in employer stock….[A]ny provision…which purports to relieve a fiduciary from responsibility…for any…duty…shall be void as against public policy." Further, "trust documents cannot excuse trustees from their duties under ERISA."

Although the Moench presumption of prudence is gone, the Court's decision contains language which may make it more difficult for a plaintiff to state a plausible claim, and thus survive a motion to dismiss in the early pleadings stage. For publicly-traded companies, at least, the market price will normally be accepted by a court as the best indication of value. A claim that a share value other than the market should have been used for plan purposes will generally be an insufficient basis for a claim, at least in the absence of "special circumstances." The Court didn't define what may constitute "special circumstances" so the scope of that term will likely be an issue for future litigation. Where applicable (generally only for publicly-traded companies), a court would have to consider whether fiduciary activity or inactivity based on insider information would violate securities laws under the circumstances. Again, ERISA does not obligate a fiduciary to violate securities laws. Insider trading prohibitions may affect the advisability of having, or not having, individuals with insider information in positions of fiduciary responsibility with respect to plan investments. A plaintiff must plausibly allege a legal alternative action that a prudent fiduciary could have taken and which a prudent fiduciary under the circumstances would not have viewed as more likely to harm participants than to help them. For example, disclosing negative nonpublic information, selling stock, or ceasing to buy stock could each negatively affect the value of all shares, including shares held by an ESOP. In general, a careful, context-sensitive scrutiny of a complaint's allegations will be required of any court to determine whether a complaint is a "goat" and should be dismissed.

It should be recognized that with the demise of a presumption of prudence, an ERISA fiduciary may be required to demonstrate that (s)he acted not just prudently, but rather as a "prudent expert" - "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." Documentation is important.

In summary, there is no longer a presumption of prudence when a plan invests in company stock. Claims based upon publicly-available infor-mation will not stand. Following plan language is not an absolute defense. Other than relief from the duty to diversify investments, for investments involving company stock a fiduciary must act under the same prudent expert standard of care as any ERISA fiduciary. The Court's requirements for claiming a breach of fiduciary responsibility appear to be intended as a balance against meritless suits, but uncertainty about the meaning of important language in the decision may leave fiduciaries uneasy for some time. Greater clarity will only come from litigation. While some complaints may be dismissed for failing to state a plausible claim, complaints which express a plausible claim in the view of the court will survive a motion for dismissal in the early stages, and those cases will move on to more protracted and expensive stages. That, in turn, may lead to more settlements than in the past, if for no other reason than to avoid the expense of litigation.

Paul R. O’Rourke, ShareholderBaker, Donelson, Bearman, Caldwell & Berkowitz, PC

[email protected]


Life insurance ownership is at an all-time low. LIMRA reports that 41 percent of Americans — 95 million people — have no life insurance at all. And 43 percent of individuals who have life insurance say they don’t have enough.

Are these people your employees? You bet they are! So how can you help close this gap and keep your workers from falling through the financial safety net that life insurance provides? Let’s take a closer look at the reasons behind this lack of coverage.

No insurance or not enough insurance The uninsured are not necessarily those workers who have lost their jobs or those employed by a company that doesn’t offer benefits. Even in businesses that offer coverage, not all workers are eligible to enroll as a result of waiting periods or minimum work-hour rules. Some employees simply choose not to enroll, often because they feel their share of premiums is unaffordable. Without life insurance, employees jeopardize their families by placing them at tremendous financial risk. For instance, 34 percent of households admit they would immediately have trouble meeting everyday living expenses if a primary wage earner died today, according to LIMRA. And 76 percent of America’s workers say they live paycheck to paycheck at least sometimes, according to a 2013 CareerBuilder survey.

Not having enough insurance is also risky. Being underinsured has potential dire consequences, not only for employees and their families, but also for employers and taxpayers. And employees who lack sufficient coverage to shield themselves from financial hardship carry a heavy mental burden.

Why don’t workers have coverage? The reasons consumers give for not having life insurance (or enough life insurance) vary. Generally, they have access to this type of coverage from many different channels, but they don’t purchase for several reasons.

• They procrastinate. Many people procrastinate over their purchases and won’t actively seek out insurance until they need it and it’s too late. For example, LIMRA notes that 54 percent of those likely to buy life insurance in the next year say they just “haven’t gotten around to it.” More than one-third of these customers say they haven’t bought life insurance because no one has approached them.

• They don’t feel well informed. A lot of people put off making life insurance purchases because the transactions are not always simple. Many don’t understand what type of policy they need or how much coverage they should have and they’re worried about making the wrong decision. When consumers don’t understand their choices, especially the type of coverage they need for their own circumstances, they won’t buy. In fact, 44 percent of people who say they need life insurance haven’t bought because they don’t know how much to buy, according to LIMRA.

• They put other financial matters first. Consumers are postponing the purchase of additional insurance right now because they have other financial priorities or feel they can’t afford it. The economy has taken its toll on household finances, job opportunities and rising food and gas prices. Squeezing additional insurance premiums into their budgets just seems too difficult for many people at the moment.

Help provide a financial safety net for youremployees with voluntary life coverage. You want to offer a competitive benefits package. And you know your employees are counting on you to provide the majority of their benefits. By integrating voluntary life coverage into your core group offerings, you can help protect your workers against increased financial pressure without hurting your bottom line.

There are a number of different types of life coverage available, and you may want to offer multiple options so your employees can choose what’s best for their personal situations. For instance, group term life insurance is typically a lower-cost option that’s simple to explain and understand. Guaranteed issue coverage is usually available, even for smaller groups, and most policies can be converted to permanent coverage later on. Some policies even include riders for additional coverage for long-term care expenses, travel, catastrophic events and other special situations.

Personal benefits communication is important. LIMRA’s research shows that many underinsured consumers like the personal interaction of face-to-face purchases when buying life insurance. This method allows them to gauge or establish trust and honesty with their advisor, as well as ask questions and obtain additional information, advice and recommendations.

Choosing a voluntary carrier that offers one-to-one benefits counseling as a complimentary part of its enrollment services can help your employees make smart choices when purchasing life insurance. A 2014 post-enrollment survey by Colonial Life proves the effectiveness of this method. Virtually all employees (97 percent) surveyed say personal benefits counseling improved their understanding of their benefits and that this type of communi-cation is important (98 percent). And personal benefits counseling can help employees overcome many of the objections they might have about purchasing life insurance right now.

You can offer life-changing coverage. Life insurance provides a strong financial safety net that can protect your employees in the event of a tragedy. You can easily — and inexpensively — provide your employees this important safety net by offering voluntary benefits that include life insurance coverage.

Add some

LIFE to the workplaceMore than 40 percent of adults lack this most basic coverage. Make sure your employees aren’t among those without life insurance.By BLAKE ROGERS, JIMMY HINTON and RICKY REYNOLDS

Ricky ReynoldsArkansas/Oklahoma territory sales manager

Colonial Life & Accident Insurance [email protected]

www.coloniallife.com

Jimmy HintonMississippi territory sales managerColonial Life & Accident Insurance [email protected] www.coloniallife.com

Blake Rogers Tennessee territory sales manager

Colonial Life & Accident Insurance [email protected]

www.coloniallife.com


HealtHcare reform • HealtH • PHarmacy Benefits GrouP Benefits • Voluntary Benefits life insurance • executiVe strateGies

the employee benefits landscape is more complex than ever. stephens insurance works with Hr professionals of public and private companies, non-profit organizations, and municipalities. together, with our clients, we offer cost-effective and custom-designed employee plans and services that help recruit, retain and reward employees.

to learn more, call us at 800-852-5053, email us at [email protected], or visit us at stephensinsurance.com.

arkansas insurance Producer license #301051 stePHensinsurance.com

navigate the Complexities of employee Benefits

With StephenS inSurance

@Stephens_Inc

Your employees need to be educated thoroughly about the plan you choose. It will reduce the burden on your HR staff later. But since your employees deal infrequently with their plan, they will forget many of the details. So you need initial employee training that is simple and straight-forward. In language they understand. An initial, printed handout is fine, but probably won’t last. If you have a company intranet, it should include a FAQ section about the retirement plan. You should expect a lot of help and guidance from your plan administrator.

How will you be sure your plan stays compliant with changing regulations?Compliance with federal regulations is a moving target. Government rules and regulations governing pension plans grow more complex each year, and government scrutiny increases. It is critical that your plan includes a “compliance

watchdog.” That person probably is not on your staff.

The American Institute of Certified Public Accountants’ (AICPA’s) Employment Benefit Plan Audit Quality Center (EBPAQC) is a national community of CPA firms that demonstrate a commitment to audit quality of employee benefit plans. As a member, we have proven our company’s commitment. We are a “compliance watchdog.”

Now for the commercialWatkins Uiberall (You-ber-all) maintains a full-time team of employee benefit plan audit professionals. We are thoroughly knowledgeable about GAAP, GAAS, ERISA and DOL requirements.

It is such an important part of our firm that we established a separate Watkins Uiberall subsidiary, Plan Administration & Consulting, LLC (PAC). PAC creates a customized benefit plan that matches the uniqueness of your business. A plan that reduces the administrative burden on your staff, assists you in meeting your fiduciary responsibilities and communicating the benefits to your employees. If you have an existing plan, we can serve as administrator and/or auditor.

An employee retirement plan is a three-legged stool.

Which of 7 different plans is best for your company?There are two basic objectives of employee retirement plans. To help employees save tax-deferred money for retirement and to help the company retain its employees.

There’s a variety of employee retirement plan types. Each comes with a tremendous responsibility for business owners and for human relations executives. The well-being of every employee and the business is at stake. Employees depend on you and your staff for correct and prompt answers about their retirement plan.

Every company needs a cost-effective, realistic plan that meets the unique needs of both the employees and the company. There are seven types of plans. All provide tax-advantaged retirement savings for the plan sponsor (company). Each is complex. Some more than others. Do you know which is right for your company?

• 401(k) Plan – Allows employees to make pre-tax or after-tax deferrals for retirement savings• Safe Harbor 401(k) Plan – Type of 401(k) not subject to ADP/ACP or Top-Heavy testing• Money-Purchase Pension Plan – Allows the sponsor to make a fixed, tax-deductible contribution rate to participants annually• Profit Sharing Plan – A defined contribution plan based on company profits• Cash Balance Plan – Allows plan sponsor to contribute and deduct larger amounts than allowed in defined contribution plans• 403(b) Plan – Similar to 401(k) but only available to government and non-profit sponsors• ESOP – Defined contribution plan that allows for tax-advantaged change of ownership of the sponsor to the employees

In addition, there also are several non-qualified plans for the benefit of executives. They include the colorfully named Top Hat Plan, Rabbi Trust, Golden Parachute and Golden Handcuffs.

The company doesn’t benefit if employees don’t know the benefitsIf your employees are not aware constantly of the plan and its benefits, and if they don’t understand how the company’s role benefits them, the company fails to benefit from its efforts and contributions.

Call or email Trey Watkins at 901/761-2720, [email protected].

34765 Watkins Uiberall Ad.indd 1 7/18/14 1:39 PM


Your employees need to be educated thoroughly about the plan you choose. It will reduce the burden on your HR staff later. But since your employees deal infrequently with their plan, they will forget many of the details. So you need initial employee training that is simple and straight-forward. In language they understand. An initial, printed handout is fine, but probably won’t last. If you have a company intranet, it should include a FAQ section about the retirement plan. You should expect a lot of help and guidance from your plan administrator.

How will you be sure your plan stays compliant with changing regulations?Compliance with federal regulations is a moving target. Government rules and regulations governing pension plans grow more complex each year, and government scrutiny increases. It is critical that your plan includes a “compliance

watchdog.” That person probably is not on your staff.

The American Institute of Certified Public Accountants’ (AICPA’s) Employment Benefit Plan Audit Quality Center (EBPAQC) is a national community of CPA firms that demonstrate a commitment to audit quality of employee benefit plans. As a member, we have proven our company’s commitment. We are a “compliance watchdog.”

Now for the commercialWatkins Uiberall (You-ber-all) maintains a full-time team of employee benefit plan audit professionals. We are thoroughly knowledgeable about GAAP, GAAS, ERISA and DOL requirements.

It is such an important part of our firm that we established a separate Watkins Uiberall subsidiary, Plan Administration & Consulting, LLC (PAC). PAC creates a customized benefit plan that matches the uniqueness of your business. A plan that reduces the administrative burden on your staff, assists you in meeting your fiduciary responsibilities and communicating the benefits to your employees. If you have an existing plan, we can serve as administrator and/or auditor.

An employee retirement plan is a three-legged stool.

Which of 7 different plans is best for your company?There are two basic objectives of employee retirement plans. To help employees save tax-deferred money for retirement and to help the company retain its employees.

There’s a variety of employee retirement plan types. Each comes with a tremendous responsibility for business owners and for human relations executives. The well-being of every employee and the business is at stake. Employees depend on you and your staff for correct and prompt answers about their retirement plan.

Every company needs a cost-effective, realistic plan that meets the unique needs of both the employees and the company. There are seven types of plans. All provide tax-advantaged retirement savings for the plan sponsor (company). Each is complex. Some more than others. Do you know which is right for your company?

• 401(k) Plan – Allows employees to make pre-tax or after-tax deferrals for retirement savings• Safe Harbor 401(k) Plan – Type of 401(k) not subject to ADP/ACP or Top-Heavy testing• Money-Purchase Pension Plan – Allows the sponsor to make a fixed, tax-deductible contribution rate to participants annually• Profit Sharing Plan – A defined contribution plan based on company profits• Cash Balance Plan – Allows plan sponsor to contribute and deduct larger amounts than allowed in defined contribution plans• 403(b) Plan – Similar to 401(k) but only available to government and non-profit sponsors• ESOP – Defined contribution plan that allows for tax-advantaged change of ownership of the sponsor to the employees

In addition, there also are several non-qualified plans for the benefit of executives. They include the colorfully named Top Hat Plan, Rabbi Trust, Golden Parachute and Golden Handcuffs.

The company doesn’t benefit if employees don’t know the benefitsIf your employees are not aware constantly of the plan and its benefits, and if they don’t understand how the company’s role benefits them, the company fails to benefit from its efforts and contributions.

Call or email Trey Watkins at 901/761-2720, [email protected].

34765 Watkins Uiberall Ad.indd 1 7/18/14 1:39 PM


I. Introduction

For nearly 17 years, the federal Defense of Marriage Act (DOMA) precluded recognition of same-sex marriages under more than 1,000 federal statutes which provide rights and benefits based on marital and spousal status. In June 2013, the Supreme Court struck down Section 3 of DOMA in United States v. Windsor. The legal landscape is rapidly changing as more states recognize same-sex marriages. Before the Windsor decision, nine states and the District of Columbia recog-nized same-sex marriage. As of July 1, 2014, nineteen states and the District of Columbia recognize in-state same-sex marriages. Additionally, there are currently three states with limited recognition of out-of-state same-sex marriage.

Federal laws, such as the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code) provide benefits to spouses; however, these laws do not define “spouse.” Before the Windsor decision, these laws relied on Section 3 of DOMA, which defined “marriage” as a legal union between a man and a woman, and “spouse” refers only to a person of the opposite sex. The Court in Windsor held Section 3 of DOMA unconstitutional because it violates the constitutional guarantee of equal protection under the Fifth Amendment’s Due Process Clause. The Court determined that DOMA resulted in disparate treatment of same-sex couples because same-sex couples marry under the same state laws as heterosexual couples and only marriages between heterosexual couples were recognized for federal purposes. The Court stated that Congress’s principal purpose in enacting DOMA was to impose inequality, rather than to further an interest such as governmental efficiency. The Court left Section 2 of DOMA intact, which provides that a state is not required to recognize a same-gender marriage that was treated as a marriage under the laws of another state.

However, the Windsor decision did not provide new federal definitions for “marriage” and “spouse.” Employers and plan sponsors were left wondering how the Windsor decision would impact employee benefits provided to spouses in same-sex marriages where a couple was married in one jurisdiction and residing in another.

Following the Court’s ruling, the Internal Revenue Service (IRS) and U.S. Department of Labor (DOL) have issued guidance on how the Windsor decision impacts the design and operation of employer-sponsored benefit plans. Recent guidance from the IRS and DOL clarified that the “state of celebration” approach applies for federal tax purposes and ERISA’s spousal protections. Both the IRS and DOL’s guidance states the term “spouse” includes an individual married to a person of the same sex if the individuals are lawfully married in a jurisdiction that recognizes such marriages, and the term “marriage” includes a marriage between individuals of the same sex. Further, on April 4, 2014, the Treasury Department and the IRS issued Notice 2014-19, which provides that, effective June 26, 2013, the date of the Windsor decision, qualified retirement plans must recognize the same-sex spouse of a participant on a prospective-only basis.

II. Retirement Plans

Historically, same-sex spouses have been excluded from benefits and rights under qualified retirement plans. As a result of the Windsor decision and recent guidance from the Treasury Department, IRS and DOL, many rights and protec-tions under qualified retirement plans are now extended to same-sex spouses.

A. Survivor Annuities under Certain Tax Qualified Plans

Under both ERISA and the Code, certain tax-qualified pension plans are required to provide survivor annuities to married participants, whereby upon the death of the participant, the “spouse” has a right to survivor benefits unless previ-ously waived by both the participant and spouse. Before Windsor, same-sex spousal consent was not required for a participant to elect a different form of payment. Now, same-sex spouses are treated as married and a participant may no longer elect a form of payment other than a survivor annuity without spousal consent.

B. Hardship Distributions

A 401(k) plan may permit participants to receive a hardship withdrawal in the event of certain financial hardships set forth in the regulations. Prior to enactment of the Pension Protection Act of 2006 (the “PPA”), the financial hardship acts were limited to those affecting the participant, the spouse (using the DOMA definition) or a tax dependent of the participant. In 2006, the PPA expanded the list of hardship events to include hardship expenses (such as medical or funeral expenses) relating to a “primary benefi-ciary” under the plan, which could include a same-sex spouse if designated by the participant. However, if a plan had not been amended for this permissive expanded hardship definition, plan administrators could only look at the hardship expenses relating to the participant, an opposite-sex spouse and a tax dependent. Now, a participant may take a hardship withdrawal for a same-sex spouse’s qualifying expenses regardless.

C. Rollover Rules

Retirement plans are generally required to allow a deceased participant’s spouse to make an eligible rollover distribution to an eligible retirement plan. In a helpful step for employees who wished to provide their same-sex spouse with death benefits, the PPA amended the Code to allow a non-spouse beneficiary to direct a trustee-to-trustee transfer of death benefits from a tax-qualified plan to an “inherited IRA” established by the beneficiary for this purpose. Now, same-sex spouses may choose to make rollovers to any eligible retirement plan.

D. Required Minimum Distributions

The Code provides required minimum distribution rules that generally set forth the amount that a retirement plan participant must withdraw a “minimum distribution” on an annual basis upon attainment of age 70½ or, if later, the year in which the participant retires. These rules allow a deceased participant’s spouse to begin taking distributions no later than April 1 following the year in which the participant attains, or would have attained, age 70½. Now, a participant’s surviving same-sex spouse can also defer distri-bution until the participant would have attained age 70½, rather than having the funds distributed within 5 years of the participant’s death.

E. Qualified Domestic Relations Orders

ERISA and the Code generally disallow alienation or assignment of retirement plan benefits. An exception, however, exists for a Qualified Domestic Relations Order (QDRO). Before Windsor, a same-sex spouse could not receive benefits payable to the participant pursuant to a QDRO unless a written order referred to a tax-dependent same-sex spouse. Now, same-sex spouses can receive benefits payable pursuant to a QDRO without having to refer to a tax-dependent same-sex spouse.

III. CONCLUSION

Employers are faced with many decisions regarding employee benefit plans. In light of the Windsor decision, recent IRS and DOL guidance provides clarity and direction on a prospective basis. Understanding recent guidance will allow employers to remain compliant when drafting and modifying employee benefit plans.

Robin B. Taylor, AttorneyOgletree, Deakis, Nash, Smoak & Stewart, P.C.

[email protected]

DOMA – The WINDSOR DECISION’S Impact On Retirement Plan Designs

By ROBIN B. TAYLOR


`

Financial Planning has never been more important than it is today! Changes in the economy, taxes and interest rates have made every financial picture more complex than ever before.

We focus on:

Financial Needs Analysis Retirement Income Planning Disability Income Protection Life & Health Insurance Long Term Care Insurance Guaranteed College Scholarships College Funding Solutions Executive & Employee Group Benefits Charitable Contribution Strategies


This year’s Labor Day will mark the 40th anniversary of the Employment Retirement Income Security Act of 1974 (ERISA) being signed into law by President Gerald Ford. Massive change has taken place over the 40 years, not just in the race, gender, fashion, and glasses of those surrounding President Ford in the photos marking the occasion, but in the way Americans save for retirement. In 1974, private retirement plans were almost exclusively traditional pension plans, technically known as defined benefit plans. One of ERISA’s main goals was to help ensure workers received the pension their employers had promised to give them. Defined benefit plans provide certainty for employees in retirement because they provide a steady stream of income for the entire life of the participant, or the participant and his or her spouse. On the flip side, employers face uncertainty of unfunded obligations based on actuarial data and market fluctuations. In 1978, Congress passed the Revenue Act of 1978 allowing employees to defer their own compensation and defer taxation. This section became known as 401(k) and has become one of the most well known sections of the Internal Revenue Code to date. In 1981, the Internal Revenue Service issued rules allowing the funding of 401(k) plans through employee salary reductions, and thus started the spark that led to an inferno of change in Americans saving for retirement. By 1996, assets in 401(k) plans surpassed $1 trillion with more than 30 million participants. Today, assets in 401(k) plans hold more than $2.8 trillion and cover more than 50 million participants. Section 401(k) plans are part of an even larger classification of defined contribution plans which, opposed to defined benefit plans, provide defined amounts of money and allow participants to face the uncertainty of life expectancy and market risk. Employers celebrated the chance to shift market risk and funding obligations to employees and employees, especially those savvy in market investing, celebrated retaining more control over their money and better understanding their account. Even though one of ERISA’s main goals was to provide certainty for employees in retirement, the rise of defined contribution plans arguably has led to more uncertainty for Americans in retirement, albeit in total compliance with ERISA. While many generations believe that 401(k) was around long before Disco and the Love Boat, this vehicle for retirement savings is relatively young. Some Baby Boomers are just now facing the prospect of having to live off of what they personally contributed to a plan throughout their working years. This shift in the responsibility of saving for retirement from employers to employees must be taught mainly through employer education because many of the younger genera-tion’s parents have never had to bear such responsibility.

How can employers get more employees engaged in saving for retirement through a 401(k) plan?

1. COMMUNICATE

A. Target and Personalize Employees today are bombarded with information, especially about retirement

and investing. Studies show that simple reminders for those not participating increase enrollment through enrollment cards, text messages and emails. However, employers should recognize that different forms of communication may resonate better with Baby Boomers, Generation X or Millennials. Simple reminders can include: communication on an employee’s birthday that they are one year closer to retirement, asking if they have considered increasing their contribution; reminders during open enrollment for the health plan to think about their retirement health; New Year’s resolution reminders to resolve to save more for retirement. Employers should use a combination of targeted and personalized communication to achieve optimum results. Frequent distribution of reminders, projected benefit graphs and illustrations, newsletters, and benefit statements should all be tools that an employer uses to keep the retirement plan at the forefront of an employee’s priorities.

B. Don’t rely solely on electronics Do not underestimate the power of word of mouth and human contact. Many

companies share information about the retirement plan on their website, but it is important to provide more information (preferably in person) about enrollment and contributions. Many plans provide investment advice services or offer one-on-one meetings to participants by qualified financial advisors to help participants meet their retirement goals.

C. Empower Employees Furnishing good information and finding a platform that allows

employees to monitor investment options and make changes often is crucial. If employees feel like they are in control, they will be more likely to be engaged in saving for retirement. If employees hear their peers talking about their retirement savings, they are more likely to take steps to become engaged.

2. MATCH

Employers will always attract more participants and contributions when they sweeten the deal with a match, even if it is not dollar for dollar. Many companies find that employees will contribute more if the employer increases the threshold amount, and lowers the match itself. For example, changing the match from $.50 on every dollar up to 4 percent to $.25 on the dollar up to 8 percent, results in participants contributing more overall dollars and a greater portion of their salary.

3. AUTOMATIC ENROLLMENT

If all else fails, capitalize on the apathy of employees. Employers find large and significant gains in rates of participation when they adopt a policy of automatic enrollment. Firms, especially small and mid-sized companies, have been slow to implement automatic enrollment features. Larger companies have a much higher rate of utilization of automatic enrollment. For plan years beginning after 2007, legislation created two new types of automatic contribution arrangements, an Eligible Automatic Enrollment Arrangement (EACA) and a Qualified Automatic Enrollment Arrangement (QACA). To complicate matters, an EACA can also be an QACA. A. EACA – This type of automatic contribution arrangement requires

employers to give notice of the automatic contribution arrangement and must uniformly apply the plan’s default percentage to all employees. It may allow employees to withdraw automatic enrollment contribution by making a withdrawal election as required by the terms of the plan (not earlier than 30 days or later than 90 days after the first contri-bution was withheld). Employees must be 100 percent vested in these contributions.

B. QACA is an automatic contribution arrangement with a special “safe harbor” provision that exempts the plan from ADP and ACP testing. A QACA must specify a schedule of uniform minimum default percentages starting at 3 percent and gradually increasing with each year that an employee participates. Under a QACA, an employer must make a minimum of either (1) a matching contribution of 100 percent of an employee’s contribution up to 1 percent of compen-sation, and a 50 percent matching contribution for the employee’s contribution above 1 percent of compensation and up to 6 percent of compensation or (2) a non-elective contribution of 3 percent of compensation to all participants, including those who choose not to contribute anything to the plan.

The Pension Protection Act of 2006 also provided some protection from fiduciary liability for EACA and QACA plans where employers used specific diversified default investments called qualified default investment alternatives. The U.S. Department of Labor provides infor-mation on automatic enrollment at: http://www.dol.gov/ebsa/pdf/automaticenrollment401kplans.pdf In conclusion, the one constant over the last 40 years is that retirement plans and the rules that govern them change often. Employers need to constantly evaluate their retirement plans and consider ways to make them more effective for employees and employers alike. In the future, it may be what the majority of Americans depend on in their retirement years.

Kristen Minton, Associate General Counsel

Regions [email protected]

ERISA Turns 40!By KRISTEN MINTON

ERISA Turns 40!


SETTING YOU ON THE RIGHT PATH FOR SUCCESSFUL BENEFITS MANAGEMENT

Monitoring changes with today’s employee benefit laws can be overwhelming for even the most seasoned HR professionals. And, with more than 50 categories of regulations, nearly every aspect of the employer-employee relationship is impacted.

Regions Insurance is able to assist you each step of the way in navigating today’s benefits rules, while helping you manage and protect your organization’s growth, profitability and people.

WE SEE THE BIG PICTURE.

Tom Hayes Employee Benefits Practice [email protected]

479-684-5259

Katrina McKinney Sales & Marketing [email protected]

Find Regions Insurance offices in these states: Alabama, Arkansas, Georgia, Indiana, Louisiana, Mississippi, South Carolina and Tennessee

Company health plan costs have been outpacing inflation, increasing over the past 10 years at an average annual rate of more than 13 percent. Contributing to the problem is the fact that a small percentage of any company’s insured population typically generates a disproportionate percentage of the organization’s healthcare costs. In fact, a review of Lockton’s InfoLock® data revealed that 77 percent of costs are generated by only 37 percent of the population. As a result, more companies are aggressively seeking ways to control their healthcare costs. One option is an outcomes-based Lockton Health Risk Solutions® program.

What Are the Characteristics of a True Outcomes‑Based Program? Some employers lack an understanding of an outcomes-based program and believe the implementation of a wellness program should be sufficient to reduce healthcare costs. While a wellness program is an important element of any cost-reduction strategy, an organization must understand the difference and implement a true outcomes-based program, such as a Lockton Health Risk Solutions® program, to experience a bend in the cost curve. ❖ A successful outcomes-based program includes the following characteristics:❖ Alignment with the organization’s business objectives❖ Buy-in from individuals at all levels of the organization, including a leadership

team that supports a culture of health through carefully crafted policies and work environments

❖ An understanding of cost management opportunities and receptiveness to using economic motivators

❖ Integrated plan design for health, wellness, disability, and workers’ compensation❖ Effective data integration from claims, health risk assessments, and biometric health

screenings that are used to identify risks and measure progress❖ Active engagement and shared financial accountability for medical expenses on the

part of employer and employees

The Importance of Measurement and Evaluation The only way to understand the financial and clinical effectiveness of a program is to regularly measure and evaluate its results. Therefore, an evaluation process should be established at the outset. Employers should evaluate the following:❖ Participation levels ❖ Health risks ❖ Cost implications Assess participation levels. Participation should be assessed as soon as possible. This measurement can be an early indicator of the effectiveness of the communication methods used to launch the program with employees. Employers who are experiencing low participation rates should investigate further to understand the root cause, whether it’s general dissatisfaction or perhaps a misunderstanding of the program elements. An anonymous survey or focus group can be an effective tool in developing this insight. Assess health risks. Next, an assessment of health risks should be performed through a biometric screening. Some employers choose to host a biometric screening event at the workplace to encourage high participation levels. Key elements to be measured during a biometric screening include weight, blood pressure, cholesterol, glucose, fitness, nutrition, and smoking. These indicators will provide a baseline of lifestyle-related risks. Ideally, participants should be assessed on an annual basis for these elements. When a minimum of two years of data is available, it becomes possible to begin measuring effectiveness. Determine cost implications. The biometric elements noted previously can be tied to a population health analysis that is conducted using InfoLock® to provide employers with an understanding of cost implications related to lifestyle risk factors.

Changing Behavior to Improve Health A true outcomes-based program will not only drive employee engagement, but it will also require employees to change their behavior to improve and maintain their health. Many factors can affect an individual’s health and well-being. Although certain factors cannot be changed, such as family history and genetic risk factors, there are those key factors that are well within an individual’s power to address and improve. Getting individuals to make lifestyle changes that can lower their health risks may not

be easy, however, so employers must make it clear that even modest changes can lead to some degree of meaningful improvement. The most common chronic conditions, which tend to occur in a cluster, are heart disease, diabetes, high blood pressure, and high cholesterol. This is a good news/bad news situation. The bad news is that these conditions are common because so many individuals make poor decisions about fitness, nutrition and other behaviors. The good news is that learning to make better decisions can significantly improve and even reverse these conditions. A biometric screening can measure an individual’s status and risk with regard to these conditions. For example, a glucose measurement will classify an individual as having a normal glucose level, prediabetes, or established diabetes. For an individual with diabetes, the goal should be to lower the glucose level, potentially getting it back to within normal range.

For all of these common conditions, medical assessment and treatment may be important elements of management. However, it is clear that specific lifestyle choices can and do have an impact (see illustration on the previous page). Again, using diabetes as an example, healthy eating, physical activity, and weight loss provide a significant cumulative effect in reducing risk for both men and women.

Measuring Nutrition and Exercise Habits While it is easy to measure and track weight, body mass index (BMI), and waist circumference over time, measuring and tracking nutrition and exercise habits is not as easy. Employers typically rely on surveys to collect self-reported data. Unfortunately, self-reported data is not always accurate; experience shows that people tend to provide survey responses that show themselves in a more favorable light. Therefore, when members provide negative or less than ideal responses, employers can take it at face value because people typically do not lie to make themselves look less favorable. In contrast, any positive self-reported data should be analyzed with an understanding that it may have been over reported. Research suggests that the key areas of lifestyle and behavior choices can be assessed effectively via standardized questions if they’re asked a certain way. To measure individuals’ health-related behaviors related to smoking, exercise, nutrition and alcohol consumption, consider asking the questions shown in the table below.

Assessing Smoking Status

For more information on Lockton, please contact Ashley Pace in Lockton’s Memphis office.

901 757 6902 [email protected]

Outcome‑Based Health Risk Management: More Than a Wellness ProgramBy TAMMY QUINN and KAYLA O’NEAL

How to Measure Nutrition and Exercise HabitsSmoking Abstinence

Q: Do you smoke cigarettes? Criterion for “no use of tobacco” is met if response is “not currently

a smoker.”

Adequate Physical Activity

Q: How many days in a usual week do you engage in vigorous and/

or moderate intensity activities for at least 10 minutes?

Q: On the days you engage in vigorous and/or moderate intensity

activities, how many minutes are you active?

Criterion is met if the combination of vigorous and moderate physical

activity totals 30 minutes or more on four or more days per week.

Proper Nutrition

Q: How many servings of fruits and vegetables do you consume in a

typical day?

Question should be accompanied by examples of a serving of fruits

and vegetables.

Alcohol Consumption

questionnaire.

Criterion is met if consumption of alcoholic beverages is two or fewer

drinks per day for men and one or fewer drinks per day for women.


Ashley PaceLockton’s Memphis Office

901 757 [email protected]

Smoking status can be more formally assessed via an affidavit, which places a higher emphasis on truthful reporting. Alternatively, a cotinine test of the blood can be used to assess whether an individual is smoking. Keep in mind this blood test is not foolproof; there are ways to “beat the system.”

Measuring Cardiovascular Fitness Physical activity helps maintain bone density and muscle tone, especially as individuals’ age. Plus, physical activity of at least moderate intensity helps to condition the heart and improve cardiovascular health. In addition to asking the questions related to exercise noted previously, employers can measure employees’ cardiovascular fitness using a three-minute step test.

Progress Reports Over Time Tracking these four key parameters is sufficient to gauge the status and progress over time of a population with regard to healthy lifestyle and behavior choices. Controlling these factors can go a long way toward reducing the risk of key diseases, such as heart disease, diabetes, high cholesterol, and high blood pressure. In addition, they can help reduce or improve the severity of these diseases once established.

The Challenge of ROI Although these lifestyle factors can and should be tracked, ROI can be challenging to prove, especially in a short period of time or with small populations. Regardless, it is clear that most individuals could benefit from better lifestyle choices. Beyond financial impact, there is value in improving these statistics. An employer with a healthier employee population has the potential to experience enhanced productivity and reduced absenteeism.

Navigating the Compliance Landscape A fundamental component of an outcomes-based program is holding employees accountable for changing their behaviors. Employers sometimes express concern, however, over whether it is legal to require employees to meet certain health standards to qualify for incentives (such as premium discounts) or be assessed penalties (higher premiums). Such programs are, in fact, legal if they meet specific criteria. A program is considered a HIPAA Wellness Program if the associated reward (or penalty) is both:❖ Related to a healthcare plan (premium discount or deductible waiver) AND❖ Contingent upon the health plan member satisfying a standard that is related to a

health factor In addition, a program must meet these five requirements to operate within HIPAA nondiscrimination rules:1. Beginning in 2014, the reward or penalty may not exceed 30 percent of the total cost

of the employee’s coverage. Federal agencies have proposed a 50 percent threshold for tobacco use. (For additional information on requirements, please contact your Lockton account team for a copy of Employer’s Guide to Wellness Programs.)

2. The program must be reasonably designed to promote good health. 3. Individuals who cannot attain the plan’s desired goal (or should not try) due to a health

condition must be given an alternative standard to attain the reward or avoid the penalty. 4. The plan must notify individuals about the availability of alternative standards.5. Individuals who are eligible for the program must have the opportunity to qualify

for the reward (or avoid the penalty) under the program at least once each year.

Designing an Outcomes‑Based Program When designing an outcomes-based program, an employer will make decisions about standards their employees must meet to qualify for incentives. Common standards are shown in the table below.Sample Incentive Requirements Waist Circumference Women: < 35 inches Men: < 40 inches Weight BMI < 30 Blood Pressure < 130/85 mmHg Cholesterol—LDL < 130 mg/dL Tobacco Use Negative Health plan members who meet three of the five outcomes as measured during annual screenings receive a premium reduction in the next plan year.

Providing Fair Alternatives If it is unreasonably difficult due to a medical condition for a health plan member to achieve the standards for the reward under an employer’s program, or if it is medically inadvisable for a health plan member to attempt to achieve the standards for the reward under an employer’s program, he or she may request a reasonable alternative program or measure or a medical exclusion form for his or her personal physician to complete.

Addressing Employee Concerns Typical feedback suggests employees are not comfortable sharing personal health information with their employer. And in many cases, HIPAA regulations prevent sharing such information. Therefore, employers should consider using an outside vendor to administer an outcomes-based incentive program. An outside vendor can obtain the necessary data to administer the incentive and manage the appeal process on behalf of the employer while maintaining employee privacy.

Long‑Term Commitment Although an outcomes-based program can be effective in reducing healthcare spend, it is not a quick fix. In fact, for most organizations, a Lockton Health Risk Solutions® program must be in place an average of three to five years for significant savings to become evident. During that time, employers can measure progress year over year. Analysis of the data collected annually will provide a basis for making program adjust-ments along the way to drive the behaviors required for eventual cost reduction. During those three to five years, a Lockton Health Risk Solutions® program must drive high levels of employee engagement, and those engaged employees must make specific changes in their behavior for the program to be effective. Financial incentives and disincentives both seem to be effective motivators for employees who need to make lifestyle changes to improve their health. However, for those changes to be sustained over time, an organization must also undergo culture changes.

Managing Culture Change An outcomes-based program spells major culture change for many organizations, and such change does not happen overnight. Employers may face some resistance from employees when introducing an outcomes-based health and wellness program. Employee attitudes and expectations often take the following forms:❖ Co-pay mentality❖ Fear of having to pay more for healthcare ❖ Feeling of entitlement ❖ Lack of awareness that the employer has been absorbing increased healthcare costs❖ Concern about their employer potentially having access to their personal infor-

mation Understanding these dynamics and designing communications around them can allay concerns and encourage employee acceptance and engagement. To ensure success, most organizations will benefit from a phased approach to building a new culture of health. An example of such an approach is described to the right.Phase 1: Build Awareness❖ Communicate early and often to employees about upcoming changes and demon-

strate leadership buy-in.❖ Offer a small premium discount to employees who complete a health risk assessment.❖ Promote preventive tests and care.❖ Offer an educational series that is focused on healthy behaviors.Phase 2: Offer RewardsOffer gift cards to employees for a variety of healthy activities, such as:❖ Flu shot❖ Preventive exam❖ Cancer screening❖ Wellness class attendance❖ Personal coaching for lifestyle changes❖ Athletic event participationPhase 3: Require Responsibility.❖ Implement both “carrots” and “sticks” to drive desired behaviors:❖ Employees are awarded points for healthy behaviors – Positive biometric outcomes – Care management of chronic conditions – Participation in disease management programs – Participation in athletic events❖ Employees with enough points earn discounts on their premiums.❖ Employees who do not engage are charged significantly more for premiums. A phased approach like this gives employees time to adapt to the new expectations for a healthy lifestyle. Over time, the result will be that employees who engage in a healthy lifestyle will no longer subsidize those employees who choose not to be engaged.

SummaryAn employer’s best opportunity to create a healthier employee population while reducing healthcare costs is through a true outcomes-based Lockton Health Risk Solutions® program. An effective program will use a strategic combination of incentives and disincentives, along with careful data analysis, to hold employees accountable for their own health. Over time, as costs are decreased, healthy employees will no longer subsidize the healthcare costs of their colleagues who continue with unhealthy habits.

Sources1 The Kaiser Family Foundation and Health Research and Education

Trust 2011 annual national survey of non-federal private and public employers with three or more workers.

2 Annals of Internal Medicine, Sept. 6, 2011.3 Pronk NP, Lowry M, Kottke E, et al. The

association between optimal lifestyle adherence and short-term incidence of chronic conditions among employees. Population Health Management. 2010;13(6): 289-295.


IRAs became available to American workers in 1975. Three years later Congress created the 401(k). In the 39 years since, American workers have accumulated more than $23 trillion in assets in tax-advantaged retirement plans.

Today about 80 percent of heads of house-holds nearing retirement have accrued benefits in employer-sponsored retirement plans. That includes private-sector-employer plans as well as various levels of government-employer plans.

Sixty-one percent of all American households have benefits of a company-sponsored retirement plan.

Employer defined-contribution (DC) plans account for $5.9 trillion. Another $3 trillion in benefits are contained in private-sector defined benefit (DB) plans.

State and local government plans contain $3.9 trillion in assets and federal government plans another $1.8 trillion. Annuity reserves have assets of $2 trillion, and IRA assets total $6.5 trillion.

HR Executive Responsibilities What should all these numbers mean to today’s human resources executive? Three things: Oppor-tunity, responsibility and liability.

The numbers demonstrate the dependence of employees’ future on federal tax-advantaged retirement plans, as well as the variety and complexity, and the ever-changing regulations that govern these plans.

If your firm has no plan, it is depriving the owners, as well as the employees, of a tremendous financial

opportunity. The simple concept of compounding savings year after year on every dollar’s full value before taxes has enormous benefit over a worker’s career with the company.

With the opportunity to amass assets at such a tax-advantaged rate comes a tremendous responsi-bility. That responsibility sometimes falls completely on the human resources executive, and always to at least some degree.

Profit Sharing Plans A friend of mine opened a one-man advertising agency in 1967. He instituted a profit sharing plan as soon as he could. The firm grew, and every year 15 percent of everyone’s salary went into the profit sharing plan tax-free. Millions accumulated.

In those early days it was legal for him to vest employees in their accumulated assets at only 10 percent a year. That helped retain employees who didn’t want to leave only partly vested. If an employee did leave, say after five years, 50 percent of that employee’s assets remained in the fund to be divided proportionately among the remaining employees, including the owner.

Profit-sharing plans such as his have changed a lot over the years. For one thing, a company can’t stretch vesting over a period of years. The point is that things were pretty simple in the ‘Sixties. Not so today.

Today, just the number and variety of company-sponsored, tax-advantaged plans that are available complicates things. It creates a responsibility to select and design the kind of plan that suits each individual company, and there are a lot of factors to be considered.

You could become an expert yourself on these over-a-half-dozen plans, or you could hire a consulting firm that knows the ins and outs of each. A firm that can help you select and then design the plan that’s right for your company.

Employer Sponsored Defined Contribution Plans Assets in employer sponsored defined contri-bution (DC) plans have grown faster than assets in other types of employer-sponsored retirement plans over the past quarter-century. They have increased from 26 percent of employer plan assets in 1985 to 40 percent at the beginning of this year.

Obviously, the income these accounts provide depends a lot on what decisions the plan participants make in regard to allocating, or investing, the assets.

Usually, younger employees want more of their portfolios invested in equities, including mutual funds and other pooled equity investments. Company stock of their employers, if available, is often a favorite investment for younger employees.

According to the Employee Benefit Research Institute (EBRI), at the end of 2012 64 percent of 401(k) participants in their 20s had more than 80 percent of their assets in equities.

For the HR professionalcompany retirement plans spell opportunity, responsibility and liabilityBy BEN WATKINS

On the other hand, participants in their 60s had only 48 percent of their 401(k) assets in equities. Only 20 percent held 80 percent or more in equities. Older participants, as you would expect, prefer more stable investment vehicles than equities.

Benefits of a Third Party AdministratorS electing a partner for asset allocation is a big responsibility, and, of course, your responsibility doesn’t end there. Employee training is crucial. Employees need to understand their plan completely, and in many cases they will need to be involved in asset allocation decisions.

Last, but not least, is the liability of knowing that your plan is impeccable in every respect regarding meeting all the government’s constantly changing rules and regulations.

You need a third-party plan administrator and auditor that are up-to-the-minute on every government requirement. An auditor that is both knowledgeable and experienced in dealing with plans like yours.

Every company is confronted with two competing economic realities. The need to attract and keep high quality workers with competitive compensation packages, and a need to keep its product and services competitively priced. The right tax-advantaged retirement plan impeccably maintained plays a big role in both.

Ben Watkins is a member of Memphis CPA firm, Watkins Uiberall, as well as the member in charge of the firm’s subsidiary, Plan Administration & Consulting, LLC, of Memphis. Together, they offer one of the Mid-South’s most experienced and complete resources for company retirement plan design, maintenance and auditing. Mr. Watkins can be reached at 901/761-2720 or [email protected].

Ben Watkins, CPA

(L-R) Dale Harris, PHR; Steve Rimmer, Tisch McDaniel, Pat Myers

Members of the SHRM-Memphis Board of Directors enjoyed dinner at Central BBQ with Steve Rimmer, who was the speaker at the July 15 meeting. Steve is with Human Resources Transactions Services at PriceWa-terhouseCoopers in New York, NY.

SHRM-Memphis Spotlights


Please join the Mid South Compensation Association for the annual Total Rewards Seminar which will be held at the Hamilton Eye Institute, 930 Madison Ave, Memphis, TN 38103 on Thursday, August 21, 2014.

The seminar begins promptly at 8:30 a.m. and ends at 4pm. Breakfast and lunch will be provided.

Scheduled events at this year’s seminar include:

• A Strategic Total Rewards panel including participants from HR and Compensation leadership roles from across the Mid-South.

• Sales Compensation discussion presented by Chris Nagle, VP and Region Leader & Igor Uroic, Manager, Atlanta Office of the Alexander Group.

• Merit Pay Program Design and Effectiveness Study presented by Brian Repsold, Principal Compensation Consulting Group of Verisight Inc.

• A keynote address by the Hay Group on the future of total rewards

• Excel Show and Tell

• And much more!

The cost for the seminar is $35.00 for MSCA members, $45.00 for SHRM or WorldatWork members,

$60.00 for non-members.

To register please visit http://www.msca-memphis.org and go to Meetings and Events.

We look forward to seeing you there!

The Mid South Compensation Association (MSCA) is a member of World at Work Local Network, an alliance of Human Resources organizations supporting excellence in the field of Compensation, Benefits, and Work Life. MSCA offers high quality, dynamic and responsive programs to our members and facilitates professional development by offering seminars and courses annually. MSCA was a nominee for local association of the year through World at Work.

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In the much-anticipated recent decision of Noel Canning v. NLRB, 573 U.S. ____ (2014), the U.S. Supreme Court upheld the ruling of the D.C. Circuit, which invalidated President Obama’s recess appointments to the National Labor Relations Board (NLRB) and which will result in the invalidation of all NLRB decisions issued during the time that these

appointees served on the Board. Specifically, the Court held that President Obama’s recess appointments of Members Sharon Block, Terence Flynn, and Richard Griffin violated the Recess Appointments Clause of the U.S. Constitution and thus were invalid. As a result, from January 4, 2012 through August 4, 2013, with those three appointments being deemed invalid, the NLRB lacked the necessary quorum of members to issue decisions.

The January 2012 Recess Appointments Pursuant to the Supreme Court’s ruling in New Process Steel v. NLRB, 130 S. Ct. 2635 (2010), the NLRB, comprised of five members (when all positions are filled), cannot issue decisions or take other action absent a valid three-member quorum. Following the expiration of Member Craig Becker’s term on January 3, 2012, the NLRB was left with only two members whose appointments had been confirmed by the U.S. Senate – Chairman Mark Pearce and Member Brian Hayes. Accordingly, in an effort to avoid an effective shut-down of the NLRB, on January 4, 2012, President Obama invoked his interpretation of the Recess Appointments Clause of Article II, Section 2 of the Constitution and appointed Block, Flynn and Griffin as Board members.

The D.C. Circuit’s Decision On February 8, 2012, a three-member panel of the NLRB consisting of Members Hayes, Flynn, and Block issued an order that Noel Canning – a Pepsi-Cola bottler and distributor – violated various sections of the NLRA. Noel Canning petitioned for review by the D.C. Circuit, arguing on appeal that the order by the NLRB was invalid and unenforceable because the Board did not have a valid quorum of three members at the time the order issued because the recess appointments of Members Block, Flynn, and Griffin were constitutionally invalid. The D.C. Circuit agreed, holding that the January 4, 2012 recess appointments by the President were unconstitutional for two reasons: first, because the appoint-ments were not made during “the Recess” as contemplated by the Recess Appointments Clause of the U.S. Constitution and, second, because the vacancies filled by the recess appointments did not “happen” during “the Recess” of the Senate as required by the same constitutional provision.

The Supreme Court’s Significant Decision in Noel Canning On June 26, 2014, the Supreme Court unanimously agreed with the D.C. Circuit’s conclusion that the Recess Appointments Clause did not give the President authority to make the three appointments to the NLRB in the manner in which they were made. The Supreme Court’s holding, however, is a narrow one. While the Court agreed with the judgment of the D.C. Circuit, it rejected that court’s reasoning. In a 5 to 4 decision, Justice Breyer wrote the opinion for the majority (joined by Justices Kennedy, Ginsburg, Sotomayor and Kagan) and concluded (contrary to the D.C. Circuit’s analysis) that the Recess Appointments Clause applies to both intra-session and inter-session recesses. The majority of the Court further concluded that while the President may make appoint-ments during any break between sessions, regardless of duration, appointments made during an intra-session recess “of more than 3 days but less than 10 days is presumptively too short to fall within the Clause” except for “a national catastrophe.” Further, the Court held (also contrary to the D.C. Circuit) that the Clause applied to vacancies that arise prior to a recess but which continue to exist during a recess, as well as vacancies that first come into existence during a recess.

Finally, the Court considered whether U.S. Senate pro forma sessions – those occurring

By TANJA L. THOMPSON and BRENDA N. CANALE

SUPREME COURTHolds NLRB Recess Appointments


where no business is transacted – should be excluded when calculating the length of a recess and the majority concluded that the Senate’s pro forma sessions could work to break up a recess as long as the Senate “says it is in session” and, pursuant to its own rules, retains the capacity to transact business. Thus, the Court concluded that the appointments at issue occurred during a three-day recess – a time period too short to bring the recess within the scope of the Recess Appointments Clause.

Impact of Noel Canning Under the precedent set by the Court in New Process Steel, the NLRB cannot legally render decisions or otherwise act without a quorum of at least three members. Thus, in light of the Noel Canning decision, more than 700 reported and unreported decisions issued by the NLRB from January 4, 2012 through August 4, 2013 (when the Senate confirmed new members, creating a valid five-member NLRB), presumably will be invalidated. The decision also calls into question other official acts by the NLRB during this time period, such as the appointments of a number of NLRB Regional Directors throughout the country. The Court’s holding does not find other recess appoint-ments to the NLRB, such as the President’s appointment of Craig Becker to the NLRB in March 2010 invalid as Becker was appointed during a two-week intra-session recess and, as such, appears to be presumptively valid.

As was the case following the Court’s decision in New Process Steel, the NLRB now will now need to reconsider many of the decisions issued by the improperly constituted NLRB. And, unlike the decisions reconsidered in the wake of New Process Steel, where invalidated cases had been decided by a bipartisan two-member NLRB, the decisions at issue here include many high-profile, highly controversial decisions in which the NLRB departed from long-standing past precedent. A number of these decisions included strong dissents and many of the decisions have impacted large numbers of employers who were not parties to the actual cases because of their precedent-setting conclusions. Accordingly, the number of cases to be revisited may take a significant period of time to resolve.

Noteworthy decisions that likely will be revisited and reconsidered include: Banner Health System (invalidating a blanket policy which prohibited employees from discussing ongoing internal investiga-tions with other employees and requiring the employer to establish a specific, legitimate business justi-fication for such a policy); Costco Wholesale Corp. (invalidating a policy which prohibited employees from making defamatory statements about the company); J.W. Marriott LA Live (invalidating a policy which prohibited employees from remaining in the building for more than 15 minutes after their shifts ended); WKYC-TV, Gannett Co. (finding that employer must continue to deduct union dues from employees’ paychecks following the expiration of a collective bargaining agreement); Piedmont Gardens (reversing 34 year-old precedent and finding that employee witness statements taken by employer during the course of an internal investigation were not exempt from disclosure to union); Supply Technologies, LLC (invalidating employer’s mandatory arbitration policy on the basis that it interfered with employee’s rights to file a claim under the National Labor Relations Act (NLRA)); Alan Ritchey, Inc. (imposing obligation on newly unionized employer to bargain with union prior to imposing discretionary discipline on an employee even though the parties had yet to negotiate a first collective bargaining agreement); and Hispanics United of Buffalo (finding a violation of the NLRA where nonunion employer fired employees for posting harassing comments on Facebook).

In light of the significant number of cases to be reconsidered as well as the time involved in the reconsideration process, the NLRB likely will experience a significant backlog. Accordingly, it is antic-ipated that decisions in new cases or undecided cases may be delayed. Thus, the NLRB may experience a delay in issuing much-anticipated decisions, such as Purple Communications (involving a company handbook provision which limits employees to using employer-provided electronic communications for business purposes only – an acceptable policy under existing law, but seemingly at odds with the mindset of the current NLRB majority) and Browning Ferris (revisiting 30 year-old standard for joint employer status). Additionally, the NLRB may experience a delay in finalizing new rules to expedite NLRB election procedures.

Noel Canning is Good News for Employers, But Employers Should Still Proceed with Caution While the decision in Noel Canning should invalidate hundreds of NLRB decisions, the current, Democratic-controlled NLRB continues to have a pro-labor agenda that appears very similar to

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Tanja L. Thompson, ShareholderLittler [email protected]

that of the NLRB that issued the invalidated decisions. Thus, it is likely that upon reconsid-eration, most cases will result in the same or a similar outcome. These cases, however, may take some time to issue as there are new members on the NLRB and new majority and dissenting opinions will need to be written. In the meantime, employers should continue to work closely with their labor counsel to ensure appro-priate labor relations and litigation strategies are appropriately pursued given the current as well as the anticipated state of the law.


In response to lobbying efforts by groups representing employers’ interests, the Tennessee legislature recently made significant amendments to several state employment laws. These changes

are part of a continued effort by lawmakers to harmonize Tennessee employment law with federal employment law. The legislature has also enacted sweeping reforms to Tennessee’s workers’ compen-sation system. Each change is summarized below, followed by a brief discussion of how these changes might affect Tennessee employers.

A. DAMAGES CAPSFirst and most significantly, state-law discrimination and retaliation claims are now subject to compensatory-damages caps. The cap amounts vary based on the size of the employer being sued, up to a maximum of $300,000 for employers with more than 500 employees. This change makes the damages available under the Tennessee Human Rights Act (THRA), the Tennessee Public Protection Act (TPPA), and the Tennessee Disability Act consistent with those under Title VII of the Civil Rights Act. The caps are structured as follows:

• 8‑14 employees $25,000 • 15‑100 employees $50,000 • 101‑200 employees $100,000 • 201‑500 employees $200,000 • 501+ employees $300,000

B. RETALIATORY DISCHARGE LIMITED Next, the common-law tort of retaliatory discharge has been eliminated. Employees who wish to bring state-law whistleblower claims must now do so only under the TPPA. Additionally, would-be plaintiffs under the TPPA must report the allegedly illegal activities to an entity other than their employer. And because common-law retaliatory discharge claims are no longer viable in Tennessee, plaintiffs can prevail on state law whistleblower claims only if they show that their protected activities were the sole cause of their termination rather than a substantially motivating factor under the common law. The sole-cause standard is often difficult for plaintiffs to satisfy.

C. INDIVIDUAL LIABILITY ELIMINATEDThe amendments also insulate managers and supervisors from individual liability under the THRA. Previously, individual supervisors and managers could be held liable under the THRA if they “aided and abetted” the alleged discrimination or harassment. This statutory change, like the others, aligns Tennessee law with federal law because supervisors may not be sued in their individual capacities under Title VII.

D. SIMULTANEOUS STATE AND FEDERAL COURT ACTIONS ELIMINATEDEmployers that find themselves being sued in both federal and state court for the same alleged employment law violations will have an easier time extricating themselves from state court. In particular, once an employer moves for dismissal in such a scenario, the concurrent state-court lawsuit must be dismissed.

E. CHANGES TO WORKERS’ COMPENSATION SYSTEMSeveral significant changes to Tennessee’s workers’ compensation system took effect on July 1 of this year. The first change is that trial courts are no longer involved in adjudicating claims. Instead, a new administrative tribunal, the Court of Workers’ Compensation Claims, has been created to handle workers’ compensation cases. The Tennessee Rules of Civil Procedure and the Tennessee Rules of Evidence govern in the hearings conducted by this new court. Final appellate authority over workers’ compensation appeals, however, continues to reside with the Tennessee Supreme Court.

A second change alters the balance between claimants and employers. The workers’ compensation statute has been amended to reflect that the statute should be applied impartially so that neither claimants nor employers are favored. Previously, the statute was to be construed remedially, which had the effect of favoring claimants over employers.

The statutory definition of “injury” has been amended as well. Under the new definition, all injuries must arise “primarily” in the course and scope of employment. In other words, employment must be a 50% or greater cause of the injury. Causation must be established by a prepon-derance of the evidence, and the opinion of a treating physician as to a claimant’s impairment may be rebutted by the same preponderance standard. All injuries are now classified as whole-person injuries, and the maximum total benefit period has been lengthened to 450 weeks (vs. 400 weeks under the former law). And a claimant is deemed to have reached maximum medical improvement when his or her treating physician has ended all active medical treatment and the claimant is being treated only for pain.

Finally, employers also have expanded access to medical records under the new system. Rather than obtaining a claimant’s medical records pursuant to a release, employers and case managers have general authorization to communicate with a claimant’s treating physician. Providers, in turn, must release treatment records to employers and claimants within 30 days of treatment.

F. SUMMARYWhat do these changes mean for employers? For starters, the new damages caps reduce the value of plaintiffs’ cases on a prospective basis. This means that settlement terms will likely become more favorable to employers. And as discussed above, the abolition of the common-law tort of retaliatory discharge will sharply limit the types of cases that can be brought and make it harder for plaintiffs to meet the standard of proof, thereby reducing the costs of defending against whistle-blower suits. The amendments also serve to streamline proceedings by permitting employers to litigate in one forum rather than two, thereby saving employers from unnecessarily duplicative litigation expenses.

Similarly, the changes to Tennessee’s workers’ compensation system are aimed at making the system more efficient for claimants and employers and reducing the administrative costs to the state. Many observers believe that the workers’ compensation reforms—which were spearheaded by Governor Bill Haslam—will make Tennessee a more attractive state to businesses and insurers. All of these changes ought to be welcomed by employers.

Gary Peeples is currently a federal appellate law clerk. After his clerkship ends, Gary will join Burch,

Porter & Johnson in Memphis as an associate. The views expressed in this article are solely those of the author and do not necessarily reflect the views of his

employer or any other member of the federal judiciary.

TENNESSEE LEGISLATIVE UPDATE:

SIGNIFICANT CHANGES FAVOR EMPLOYERSBy GARY PEEPLES


JJohn F. Kennedy once said, “Change is the law of life. And those who look only to the past or present are certain to miss the future.” This is certainly true of preparing for retirement. If we continue to expect that the ways of the past will see us through to our futures, we will be left behind. The methods that helped prepare us for retirement are quickly disappearing, and we must start using others.

Today’s companies are rewriting the retirement rules for working Americans. Traditional pension plans, which gained prominence in the 20th century, are rapidly disappearing because of the high costs involved in funding them. Some corporations are defaulting on their plans, and an increasing number of companies have underfunded or at-risk plans.

To help protect employees with corporate pensions, the federal government has enacted laws requiring employers to meet a 100% funding target for their defined-benefit plans. Companies that sponsor pension plans are also required to pay higher insurance premiums to the Pension Benefit Guaranty Corporation (PBGC), which was created by Congress in 1974 to help protect American workers from the risk of pension default. Premiums have increased because the PBGC itself is facing a deficit as a result of more companies defaulting on their pension plans.

Because of these costly requirements, it is becoming less and less attractive for companies to provide traditional pensions to retirees. Employers with underfunded plans may simply choose to eliminate them, and even companies with healthy plans may decide that defined-benefit plans are not worth the cost. As a result, it is likely that more companies will offer defined-contribution plans like the 401(k) to attract new employees and to help employees fund their own retirements.

Thus, it is important to be aware that you may have less help from your employer and will probably have to rely more on your own savings and investments to fund your retirement.

The government has tried to help by raising contribution limits to most employer-sponsored retirement plans. You can contribute money to these plans on a pre-tax basis. Your contributions and any earnings accumulate on a tax-deferred basis. Of course, remember that distributions from most employer-sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% federal income tax penalty.

A number of companies are taking steps to help workers fund retirement. Many have instituted automatic-enrollment in their defined-contribution plans to encourage more employees to participate. Some are enhancing the benefits of their plans by increasing the amount they contribute to employee accounts and/or enhancing matching contributions.

Many companies that still have traditional pension plans should be able to pay their promised benefits. But in light of recent trends, it would be wise to consider all possible sources of retirement income when reviewing your retirement strategy. With the changing retirement landscape, there may be no better time than now to size up your current situation. Your company-sponsored retirement plan will be just one piece of your retirement funding pie.

What’s Your Retirement Vision?Wouldn’t it be disappointing to dream about a comfortable retirement and then find yourself unable to enjoy your leisure years because of limited financial resources? Unfortunately, this is a possibility for people who underestimate retirement expenses and the rising cost of living.

Evaluate Spending and CostsAlthough your expenses may change when you retire, reductions in some areas (such as clothing and transportation to and from work) could be offset by higher costs in others. For example, your home energy expenses may be higher if you spend more time at home, and health-related costs typically increase as you grow older.

Some expenses, such as food and housing, may stay about the same. Home-related expenses represent at least 42% of spending for Americans aged 50 and older, regardless of whether they are retired. One study found that even though three out of five workers expect to spend less in retirement, half of retirees said their spending in the early years of retirement was about the same or higher than it was when they were working.

Where you live could play a significant role in your overall expenses. If you’re living on a limited income, your money might go further in some cities and states than it could in others (see the cost-of-living chart). You’ll need to consider not only the cost of housing, food, and utilities but also taxes. States have varying rules for taxing pension and Social Security income, and property and sales taxes may vary not only by state but by county.

Enjoy the Lifestyle You WantAs you calculate the savings it may take to retire, remember to factor in your retirement wants as well as your basic needs. What do you picture for your retirement? The top retirement dream for today’s older Americans is vacation and travel. Perhaps you’d like to see South America or go fly fishing in Alaska. Maybe you want to work on your golf or tennis game, or enjoy a hobby that you don’t have time for now. You might like to volunteer for your favorite charity or move closer to your children and grandchildren.

Sixty-nine percent of middle-income Americans say they’d like to work in retirement in order to “stay busy.” While this could be a worthwhile goal, wouldn’t it be nice to work on your own terms — to pursue your passion instead of a paycheck?

If you’re young, retirement may seem too far off to worry much about. If you’re approaching the end of your working years, you may have a clearer picture of life after work. Regardless of your age, a solid financial strategy could help you retire more comfortably.

Charles Sims, Jr., President/[email protected]

The Sims Financial Group, Inc.www.SimsFinancialGroup.com

A New Chapter for RetirementBy CHARLES SIMS, JR.


2015 is only a few months away. Here are a few things employers should consider doing or avoiding to prepare for Affordable Care Act (ACA) implementation in 2015. By way of background, the Affordable Care Act has two employer penalties:

• No-Offer Penalty. If an applicable large employer does not offer minimum essential coverage to 95% (reduced to 70% for 2015) of its full-time employees and at least one full-time employee qualifies for a subsidy on the exchange, the annualized penalty is $2,000 times all of its full-time employees after the first 30 (increased to 80 for 2015).

• Inadequate Offer Penalty. If the employer offers its full-time employees the opportunity to enroll in minimum essential coverage, but the coverage either lacks minimum value or is not affordable, a $3,000 annualized penalty applies only with respect to those particular full-time employees who qualify for a subsidy on the exchange.

Both the no-offer and the inadequate offer penalties are applied on a monthly basis.

Do I Need a Strategy to Avoid the Penalty? Some employers will need to do little or nothing to avoid the penalty. For example, an employer may not employ part-time or seasonal employees and may offer coverage that is affordable and has minimum value to all employees effective on the first day of the month after two months of employment.

Choose Measurement Periods. Some employers have employees to whom health coverage has not been offered. If those employees are considered full-time under the ACA, they could count toward triggering an employer penalty. An employer wanting to deny coverage to employees because they are not full-time may consider adopting one of the permis-sible measurement and stability periods for ongoing employees. For determining the full-time status of newly hired variable hour, seasonal and part-time employees, an employer can use one of the permissible measurement periods (during which hours are measured to determine if the employee is full-time) and stability periods (during which the employee's status as full-time or not is locked in). Measurement periods can be from three to 12 months and stability periods must be at least six months and meet certain other requirements. Plan documents likely will have to be amended to implement these choices.

Choose an Affordability Safe Harbor. To avoid the inadequate offer penalty, coverage must be affordable: employee-only coverage must cost no more than 9.5% of the employee's household income. Since employers generally don't know an employee's household income, most employers will choose a safe harbor way of determining affordability. These are based on the employee's actual Form W-2, box 1 income for the year, the employee's base hourly rate, or the federal poverty level.

Decide whether to add a Minimum Value Option. To avoid the inadequate offer penalty, coverage must have minimum value (the plan would pay at least 60% of a model set of claims). Consider whether a lower tier, less expensive minimum value plan should be put in place and offered to those full-time employees who were previously excluded from coverage.

Install Systems for Employee Information Reporting. Employers with 50 or more full-time and full-time equivalent employees will have to prepare information returns for each full-time employee stating if the employee and his dependents were offered coverage, the months offered, the employee’s share of the monthly premium for the lowest cost option, the number of full-time employees each month, etc. Reporting must be on IRS Form 1095–C (employee statement) and Form 1094–C (transmittal), or an approved substitute. Reports must

be furnished to employees by the Form W-2 deadline. Simplified reporting is allowed in some cases. The forms that must be sent out in early 2016 will be based on 2015 monthly data. Employers should consider installing systems to track this data on each employee throughout the year so these reports can be sent out timely.

What if I Use Staffing Company? You may be an employer that obtains full-time workers from a staffing company. If you supervise such workers and they work side-by-side with your regular employees, the staffing company workers may be considered your employees for purposes of the employer penalty. Depending on the portion staffing company workers represent of your workforce, you may want to find out if the staffing company is offering the workers health coverage that is affordable and has minimum value. Coverage offered by a staffing company will be treated as made by you if you pay the staffing company more for employees that enroll in the coverage than for employees who do not enroll in the coverage.

Qualifying for Delay until 2016. These penalties can be delayed for one year for employers with between 50 and 99 full-time and full-time equiv-alent employees (however reporting on workers and

coverage in 2015 is not delayed). An employer of this size will not qualify for this one-year delay if it makes certain reductions in its workforce (other than for bona fide business reasons) or makes certain reductions in its health coverage after February 9, 2014.

Do I Qualify for Fiscal Year Delay? Employers with 100 or more full-time and

full-time equivalent employees who had a fiscal plan year as of December 27, 2012 (and didn't change it), may qualify to delay the effective date of the penalty until the first day of their plan's fiscal year beginning in 2015. An employer qualifies for this delay if:

• At the open enrollment period that ended most recently before February 9, 2014, the plan was offered to at least ½ of the full-time employees or ⅓ of all employees (full-time and part-time); or

• As of any date during the 12 months ending February 9, 2014, the plan covered at least ⅓ of the full-time employees or ¼ of all employees (full-time and part-time).

The above discussion only scratches the surface of these rules. You should consult with your legal advisor for more details.

Dwayne O. Littauer, Esq., Shareholder

The Kullman [email protected]

www.kullmanlaw.com

Preparing for 2015 Affordable Care Act ImplementationBy DWAYNE O. LITTAUER


Proskauer Releases 2014 Social Media in the Workplace Global StudySurvey shows sharp increase in ongoing business misuse – over 70% of companies resort to taking employee disciplinary action – and offers corporate best practices Proskauer released recently its 2014 global survey, Social Media in the Workplace Around the World 3.0. Among the survey’s key findings: While nearly 90 percent of companies use social media for business purposes and almost half allow employees to use social media for non-business activities, more than 70 percent of employers report having to take disciplinary action against employees for misuse (a significant uptick from 35 percent in 2012). “When we published our first survey in 2011, there was a sense of novelty and even mystery about social media usage in the workplace. Harnessing social media for business lacked the sophistication and prominence that it has today,” said Daniel Ornstein, London-based co-head of Proskauer’s International Labor & Employment Law Group. “This year, we found a marked increase in the number of businesses that have implemented social media policies and other measures to address the risks arising out of social media misuse by their employees. The shift from novel to normal is now a reality.” In addition to implementing policies, the survey also highlighted that businesses are now taking precautions to protect against specific risks associated with misuse of social media, such as:

• Misuse of confidential information (80 %) • Misrepresenting the views of the business (71 %) • Inappropriate non-business use (67 %) • Disparaging remarks about the business or employees (64 %) • Harassment (64 %) According to Erika Collins, New York-based co-head of Proskauer’s Inter-national Labor & Employment Law Group, “The near ubiquitous use of social media for business has led to a maturing appreciation of workplace risks arising out of its misuse – the more that people use social media for business purposes, the greater the chances that the line between personal use and business use will continue to blur.” “The survey clearly reveals that many businesses have yet to implement significant measures to protect themselves from social media misuse. Conducting annual audits, employee training and including ex-employees in your social media strategy are among the best practices we recommend to employers in this year’s report,” added Yasmine Tarasewicz, Paris-based co-head of Proskauer’s International Labor & Employment Law Group. The Proskauer study was conducted in collaboration with its affiliate law firms around the world. More than 110 respondents from a broad range of multina-tional businesses participated in the survey, detailing their social media policies and practices in jurisdictions including Argentina, Brazil, Canada, China, Denmark, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Spain, The Netherlands, the United Kingdom and the United States.View the full Social Media in the Workplace Around the World 3.0 survey and best practices. http://bit.ly/1p28AtQ - - - - -

Labor Talk: An Employment Law Update

Bass, Berry & Sims held a complimentary seminar focused on developments in labor, employment, and employee

benefits law on June 26 at the Marriott Memphis.

Attendees also heard an overview of the new Tennessee Employment Law Legislation

effective on July 1,2014.

Tim Garrett and Michael Moschel provided an analysis of troubling issues related to employee classification and a look forward at the anticipated revisions to

the FLSA exemptions.

Tim Garrett Michael Moschel

Carrie Erickson and Sarah Krause gave an overview of how benefits may differ based on employee classifications

( e.g., full-or pat-time; Highlight compensated; regular, temporary, seasonal or leased), including under ERISA,

the Internal Revenue Code and PPACA.

Sarah Krause Carrie Erickson


In Shazor v. Professional Transit Management, the Sixth Circuit Court of Appeals rendered a decision that has weighed on my mind. The defendant, Professional Transit Management Ltd. (PTM), provides management services to transit authorities. In 2008, Marilyn Shazor, an African-American woman, was assigned by PTM to serve as the CEO of a regional transit authority. After assuming the role, male senior management officials began to

question Shazor’s allegiance to PTM. They privately criticized Shazor for a perceived lack of loyalty after she declined training opportunities and canceled meetings with company officials. They specu-lated that Shazor and the transit board’s chair were conspiring to have the transit board hire Shazor directly. In e-mails, she was referred to as a “prima donna,” disrespectful and disloyal, and they predicted she would “eventually fail in a big way.” These officials also referred to Shazor and the female board chair as “the girls,” and to the board chair as the “Wicked Witch.”

Shazor’s one-year performance review was mixed. She was given high marks for work quality but criticized for her leadership skills. Nonetheless, she was recommended for a three percent raise. Later, officials engaged in email communication in which they referred to Shazor as “one helluva bitch.” In 2010, Shazor was fired for allegedly dishonest statements she made to the transit authority board. PTM replaced Shazor with a Hispanic woman. Shazor filed suit asserting race and gender discrimination.

The Court’s DecisionThe trial court dismissed Shazor’s claims. The Sixth Circuit reversed. On her race discrimination claim, the court found she established a prima-facie case of discrimination sufficient to survive summary judgment because she had shown that she was replaced by someone outside of her protected class. Although her replacement was a minority, she was still outside of Shazor’s protected class.

In regard to her sex discrimination claim, the court determined that it “cannot be untangled from her claim of race discrimination” stating that “where two bases of discrimination exist, the two grounds cannot be neatly reduced to distinct components.” In reaching this determination the court relied on the “sex-plus” theory of discrimination. “Sex plus” refers to policies or practices by which an employer classifies employees on the basis of sex plus another characteristic, such as race or age. According to the court, the protected classifications of race and sex “do not exist in isolation.” Rather, “African-American women are subjected to unique stereotypes that neither African-American men nor white women must endure. And Title VII does not permit plaintiffs to fall between two stools when their claim rests on multiple protected grounds.” Therefore, PTM could not undermine Shazor’s case by showing that “white women and African-American men received the same treatment.”

Lessons for EmployersEmployers must consider employees’ protected traits as a whole, rather than as separate individual aspects. If Shazor had brought only a sex discrimination claim she might not have been successful. This case also highlights the critical role e-mails can play in litigation. Management and supervisory employees should be warned that they should not put anything in an e-mail that they would not want read in court. Usually, I end my articles with lessons for employers, but this case is different.

Lessons for All of UsThis case has caused some self-reflection that has led me to some observations that I think are important to share.

In my practice I occupy a unique position. I have often been called upon to defend companies that have been accused of discrimi-nating against individuals that are in my protected classes – women and minorities. And although progress has been made in regard to employment discrimination, I am not naïve enough to believe that discrimination has been eradicated. I know for a fact that it still exists as I experience it myself. I have been discriminated against because I am a woman or because I am black. I have been stereotyped because I am a woman or because I am black. And I recognize that it also happens to others. However, I have never consciously thought of myself as a unique minority by virtue of the fact that I am black and I am a female. The Shazor case causes me to reflect on whether I have ever been discrimi-nated against because I am a woman and because I am black. Do I agree with the court’s pronouncement – made by three men – that I, as a black female, am “subjected to unique stereotypes” that others are not the victim of?

The sad but honest answer is that I think the court was correct. I am a unique minority in that I am subjected to stereotypes that white women and black men are not subject to. And I recognize the potential for those stereotypes to form the foundation for discrimination. I have, either consciously or unconsciously, tempered my words at times or not pushed an agenda so that I would not be viewed as the “angry black woman.” I have questioned whether a desired hairstyle is “too ethnic” because although the business world values the quota fulfillment my race and gender provide, I am still expected to “professionally” suppress my race-and-gender-specific personality traits and characteristics. On a regular basis I am placed in situations where I am the only black woman in the room and have been openly dismissed by my white male counterparts as inconsequential. I have been mistaken as the court reporter or the paralegal in situations where there was no valid reason to relegate me to a position other than attorney. So yes, black women do occupy a unique position; and in Shazor the court recognized it for what it is. And we should recognize it for what it is and evaluate ourselves, our perceptions, and our treatment of others.

Shazor v. Professional Transit ManagementA Black Female Defense Attorney’sSelf-Examination of the Intersection of Race and Gender

By LATOSHA DEXTER

Latosha Dexter, SPHR

Of CounselRainey, Kizer, Bell &

Reviere [email protected]

www.raineykizer.com


Ogletree Deakins lawyers in Jackson, Mississippi work closely with Human Resource professionals, business executives, and in-house counsel to anticipate, prevent and resolve legal issues in the workplace. Our experience and knowledge of our clients’ industries and legal challenges enable us to serve their interests effectively and efficiently.

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Integrity.

Back StoryThe “conversation” was almost 25 years ago while I was a technical recruiter in one of Chicago’s “Best Places to Work” companies. This was before LeBron James, back when Michael Jordan was leading the Chicago Bulls to its first championship victory in its historic “three-peat.” The United States presidency was transitioning from George H.W. Bush to William Clinton. Michael Bolton was crooning “How am I Supposed to Live Without You?” to which Whitney Houston replied “I Will Always Love You.” It was before LMSs, 360˚s, and almost a decade before the world learned of Marcus Buckingham’s Strengthsfinder and Gallup’s Engagement research.

Here’s what happened. For a year, I’d been given permission to leave early on Wednesdays to direct a children’s music program. December was chocked full of rehearsals, pageants and Christmas services. My boss, Steve, knew about this part-time work because he’d approved my flex schedule. After Christmas, I returned to the office and recall standing in Steve’s doorway asking, “How was your holiday?” He described Christmas with his parents in Indiana and in particular, spending Christmas Eve alone in a hotel. Still in my Christmas choir mode, I asked, “Did you all go to church?” to which he responded without hesitation, “People who go to church are hypocrites.”

“I go to church,” I replied.

Silence. Steve’s response was silence.

A bit stunned, I returned to my office. Rather than defend myself, I began a personal quest to pursue ongoing alignment between my talk and my walk – between what I espouse about myself and my action.

Integrity DefinedIntegrity is commonly defined as “walks the talk.” In fact, this definition serves as the brand promise of my consulting firm. We inspire organizations around the world to walk their talk, one leader at a time. A second definition I really like comes from a google image search. “Integrity is a concept of consistency of actions, values, methods, measures, principles, expectations, and outcomes. It can be regarded as the opposite of hypocrisy.” (I’ve not been able to identify the source. If you know it, please let me know!)

In sum, one is perceived to have integrity when their actions match their words and intentions. Hypocrisy is the opposite, when words and actions are out of sync.

Interestingly, integrity, in this form, is absent of morality. It’s not telling you what integrity looks like, but instead requires the integrity-holder to own his or her intentions and to follow up with consis-tency in action. As a result, the manager who has a short temper and knows it, and says “I struggle with managing my temper,” still walks with integrity when her fuse fires just as much as the supervisor who insists on organization and planning and strives to always make commitments to deadlines. In both cases, the leader is walking his or her talk.

I like this definition because it frees me from imposing my idea of what is “right” on others. As a consultant, I prefer to facilitate a team’s defining of shared ideals, visions and values, and then helping sustain them with actions that align with their vision.

HR Application: Integrity andEmployee SurveysI often apply this concept of integrity to the various survey processes HR leaders often administer for our firms. As HR professionals, we generally play two roles:

• Organizational Champion • Departmental Role Model

First, as Organizational Champions we are often the face and voice of employee and 360˚ feedback surveys as well as responsible for administering the process. We launch the organization-wide initiative. We implore employees to provide their honest feedback. If the process we’ve designed is robust, we engage the employees who provide feedback to participate in action-planning for improvement.

By JANYNE PEEK EMSICK, PH.D.

Leading with

Integrity.

Early in my human resources career, a casual conversation with my boss changed the trajectory of my work and play. It lasted about 30 seconds while I stood in the doorway to his office after a busy Christmas holiday. This quick interaction served as the impetus for developing our “Walk Your Talk Change Model,” TM a simple framework that has helped leaders and their organizations drive integrity by aligning leadership practices with their vision and values.

The Power of Walking Your Talk.


Remember, when employees sacrifice to provide meaningful feedback, they are counting on us to use the results to drive change. Unfortunately, “work” often gets in the way and organizational leaders prioritize other responsi-bilities and the follow-through employees are counting on lags.

As Organizational Champions, we can ask the question: Do employees trust the survey process we are re-administering and the feedback they will provide will actually make a difference?

Second, as Departmental Role Models, we have the additional responsi-bility to “practice what we preach.” Because of our responsibility to the larger organization, we often neglect taking our own feedback seriously and grow lax in taking the same meaningful action we request of others. The primary question this level is: Do the people we lead in HR identify us as leaders who actually practice the same process we champion for the organization?

A New Perspective and a Framework for ChangeWhat if, rather than viewing these surveys as performance measurement or comparison tools, what if we envisioned these tools as vehicles for “integrity checks?” What if these assessments were seen as tools that help align both individual and collective leadership behaviors with the organization’s vision and values? A mechanism whose greatest value is in launching an integrity alignment process?

The “Walk Your Talk Change Model”TM provides a simple framework for increasing integrity by using surveys to align intention with action.

ASPIRE: The Aspire stage defines your “talk.” It’s an invigorating stage that evokes excitement and hope for a future. It includes developing your organizations’ mission, vision and core values (MVV), as well as any leadership competencies essential to embody the MVV. When an organization has already articulated these aspirations, Aspire can focus on re-energizing leadership and employees around the MVV. The Assess stage is dependent upon a fierce commitment to the Aspire stage’s inspirations.

ASSESS: The Assess stage measures your reality against aspirations. Rather than generic assessments measuring standardized competencies, custom assessments are of greatest value. Survey items need to specifically assess what is essential for your organization to embody its unique vision and core values. The Assess stage provides the data necessary to engage the next stage, Transform.

TRANSFORM: The Transform stage is much like the New Year’s Resolution process many of us espouse. We look in the mirror. Feel how our clothes fit. We realize we want to look or feel better. We envision how we would like to look or feel (Aspire). Next we step on the scale, or we visit our doctor for a physical and receive data on our, weight, cholesterol, etc. (Assess). Compelled to change, we plan a new way of eating and exercising. This “aha!” of commitment and the subsequent plan are the primary deliver-ables of the Transform stage.

The Transform stage answers three key questions, and includes four key steps.

Key Questions1. Given our aspirations, what is our current reality as experienced by

employees in the organization?2. How would we prioritize bridging the gap between reality and our vision?3. What is our action plan? Key Steps 1. Gap analysis (reality against vision) 2. Brainstorming options to bridge the gap 3. Prioritize options and develop an Action Plan 4. Launch Action Plan

A major mistake is to confuse the early “aha!” with sustained change. Certainly, without a powerful commitment to an action plan that clearly bridges the gap between the reality and vision, change has no hope. The accountability embedded in the Sustain stage provides the solution.

SUSTAIN: The Sustain stage is the most important component of the framework. Without investing in the Sustain stage, change rarely sticks. Sustain success includes a Who (will serve to hold us accountable), How (will accountability interactions take place) and When (how often). It’s like engaging a personal trainer to help you stick with your New Year’s Resolution!

It’s easier to start tight and then loosen up. Start with more frequent and detailed accountability. I’ll often schedule weekly follow-ups during the first month. Then, as leaders demonstrate signs of ownership, the frequency shifts to every other week, increasing to monthly then quarterly. (Helpful time and cost-savings hint: For driving accountability with individual leaders, I’ve learned monthly 20-minute “Power Coaching” sessions can be as effective as lengthier sessions. Of course, to drive development, more dialogue time is needed.)

Once the four-stage cycle is completed, the process repeats, revisiting Aspire – energizing leaders and employees around the mission vision and values – and continuing through Assess, Transform and Sustain.

From Hypocrisy to IntegrityAlmost 25 years ago, I thought I was being confronted as a hypocrite. Since then, I’ve had the opportunity to thank Steve for his comments and, ironically, Steve has absolutely no recollection of the interaction. It’s a 30 second conversation he cannot remember but that I will never forget.

Janyne Peek Emsick, PhDPresident, intégrow inc.

[email protected]

Twitter@JanynePEmsick

THIS IS AN ADVERTISEMENT. Ben Adams is Chairman and CEO of Baker Donelson and is located in our Memphis office, 165 Madison Avenue, Suite 2000, Memphis, TN 38103. Phone 901.526.2000. ©2014 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

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As an immigration compliance attorney who represents a number of small employers, the question inevitably arises as to whether a small company should invest the money, time and effort to conduct an internal I-9 audit. Or should the company take a risk that they will not receive a Notice of Inspection (NOI) from Immigration and Customs Enforcement (ICE)? Small, especially family-owned, businesses are less likely to be as worried about a NOI as a large company. Why? Because they are not going to get as much media attention as Chipotle Mexican Grill or American Apparel did when they received NOIs. Second, a family-owned business likely will not face any derivative shareholder lawsuits.

Over 3,100 Employers Served with NOIs in FY 2013 The most recent statistics for FY 2013 show over 3,100 employers were served with NOIs. It is unknown exactly how many of those were small employers, but a majority of cases that were litigated involved small employers. Of the over 3,100 NOIs, many of them ended with an assessment of a penalty/fine based upon the substantial number of substantive violations cited by ICE. Since the percentage of alleged violations is often 50% or more, the penalty would be $935 per violation plus or minus any aggravating/mitigating factors. If, for example, a small business has 100 employees and 50% of the I-9 forms have substantive violations, the company would owe $935 x 50 or $46,750.

Resolving I-9 Compliance Errors Addressing and resolving I-9 compliance errors can be a very tricky business. Although ICE ultimately holds all employers accountable for compliance with the law, they have never published any formal guidance on how to correct and remedy I-9 errors. Moreover, I-9 problems will also frequently uncover other serious issues, including unauthorized employment and/or discriminatory conduct in the hiring process. As the number of ICE audits have increased over the past few years, many small companies have retained immigration counsel that specialize in counseling employers on navigating the troubled waters of I-9 compliance. In particular, specialized immigration counsel can determine, through inspection of I-9 forms and supporting documentation, whether the company has committed substantive errors on the I-9 forms and/or employs any undocu-mented workers. Many of the substantive violations on the I-9 forms can be corrected in order to mitigate or entirely eliminate the potential penalties. If the immigration attorney discovers any unauthorized workers, they can be terminated, which could save the employer from potential liability of between $375 and $16,000 per unauthorized worker for actual or constructive knowledge of their unauthorized status.

Who Should Conduct I-9 Self-Audit? You may ask – “why wouldn’t a company just conduct its own I-9 audit and save the cost of attorney’s fees?” Although this may sound logical, this strategy is fraught with problems. One, the person conducting the I-9 self-audit may not have the training on how to properly correct and annotate the I-9 according to ICE’s standards. Two, without this training, the employer representative may actually make matters worse – by destroying old I-9 forms after

creating new I-9 forms or backdating the I-9 forms to make them appear to be timely completed. Additionally, if this representative is the same person who completed Section 2 for the employer, it is just human nature not to locate your own errors.

Immigration Compliance Policy Another reason to retain legal counsel is to draft a comprehensive Immigration Compliance Policy, which should answer a number of important questions. The first seems so simple – “Who is in charge of the company’s Immigration Compliance Policy?” Hopefully, the answer is clear, but occasionally it is not. An Immigration Compliance Policy can also clearly establish whether a company retains supporting documents with the I-9 forms. It is not required under federal law but may be very helpful when the attorney conducts an audit, and in the event ICE serves the company with a NOI. Under state law, Tennessee requires a company to retain one document, such as a U.S. passport or permanent resident card, or enroll in E-Verify. Furthermore, the federal government has repeatedly emphasized the importance of having a consistent policy on retention of supporting documentation. An effective policy should also state whether the company utilizes E-Verify. A small company may not have considered E-Verify and, through legal counsel, can make an informed decision on its use. In some cases, an attorney will discover that a small company is located in a state, city or county which mandates E-Verify for all employers or contractors with government agencies. Or the company may be required under FAR (Federal Acquisition Rule) E-Verify to use E-Verify for all current employees on the project and all new hires. FAR E-Verify applies to those contracts for at least $150,000 on a federal project or a subcontract on a federal project of at least $3,000. An Immigration Compliance Policy should also cover the law on retention of I-9 forms for former employees, which is three years from the date of hire or one year from termination, whichever is longer. The policy can also cover other immigration-related issues of which the company may not have been aware. Another benefit of an Immigration Compliance Policy is if a small business receives a NOI from ICE, it should be able to demonstrate good-faith efforts to comply with immigration law. Since ICE has discretion in determining whether to fine a company and how much to fine, it is important to show good faith.

Be Proactive Obviously, retaining an immigration compliance attorney to be proactive, not reactive (to an ICE NOI) is going to cost the company attorney’s fees. However, it is most likely any penalties will be much smaller with legal counsel conducting an I-9 audit and drafting an Immigration Compliance Policy well in advance of the NOI.

By BRUCE E. BUCHANAN

Bruce E. Buchanan, AttorneySiskind Susser P.C.

[email protected]

Why Small Businesses

Should Be Worried About ICE?


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Have you ever had one of those days where it seems that the world is one big pigeon, just waiting to crap on your front steps? Sure, we all have. Then someone comes along and tells you to keep

positive. You feel like strangling them on the spot. While our mind is telling us we should be positive, our feelings are screaming at us to tell the world where to stick it. Regardless of how we feel however, we realize that it will not do us any good to continue to have our own pity party and we need to move on.

There are things we can do, that will help us turn our attitude around, brighten our day and shorten our stay in a negative state the next time it seems the world is out to get us.

Here are 5 things we can do.

Step away and get a reality checkWhen we are in a negative state, we have a tendency to see problems as greater than they are, overreact and see trappings in a situation that really don’t exist. This causes the position and problem to snowball and get worse. Ask yourself this question, “Is there anything I can do at this time to keep the problem from getting worse?” Or, “How could this problem have been worse than it is?” This may help us to see there is some light at the end of the tunnel. If we feel stuck in negativity we can ask someone we trust to give us their perspective. As they are not caught up emotionally in the problem as we are, they will be able to see in a clearer and unbiased manner.

Look for a positive and focus on itWhen you have just found out some bad news it will not be easy to focus on something positive. Try to shift your thinking, however, away from the negative to a situation that has gone well, good ones or something that has brought you joy and happiness in the past. If it makes it easier just try to think of something neutral. Do whatever it takes to shift your focus. At the time of receiving bad news it may feel you are the only one who is having a difficult time. The life stories of most highly successful people will usually include at least one chapter on overcoming tragedies and failures. Remind yourself of this next time things have gone off the rails for you. Nietzsche said that “What doesn’t kill us will make us stronger.” People who have survived adversity and gone on to better their lives believe this and look back on their difficult times with a sense of pride for having overcome them.

Look past the situationThink of difficult situations that you have been through in your past. Become aware that this too will pass. Try to imagine what it will be like a year, five years or ten years from now looking back on this time. It will help us focus on doing the difficult work that we need to do to get through a crisis, while at the same time giving us perspective that this is only one thing in our ongoing lives. This helps keep us from getting overwhelmed by our present negative situation or events.

Ask for and accept helpSuccessful people have a strong support network that they can count on to support them in times of need. If you have such a network, this is the time to reach out and ask for help. Knowing when we need help and asking for it is a sign of strength, not of weakness. We feel good when we are able to help others, so let others experience that same feeling by being able to help us in times of need. Support networks don’t happen by accident, they are built up over time with effort and consistency. The way to develop a strong support network is to be part of such a network by offering and helping others freely in times of need. What we put out to others comes back to us multiplied. If you don’t have an immediate support network, or have recently moved to an area where you don’t know anyone, there are organizations in the community whose purpose it is to offer support in your situation. Reach out to them in difficult times.

Develop an Attitude of GratitudeEvery morning, before I start my day I have a gratitude book in which I write in at least ten things which I am grateful for. When I’m having a bad day, to go back to that list helps me and I become aware of all the good there are in my life. Developing an awareness of all the positives and remembering them is a powerful tool that helps us overcome adversity and the difficult times that are an inevitable part of life. While remembering all the things we have to be grateful for is a good practice in our everyday lives, it is especially important during difficult times.

By HARVEY DEUTSCHENDORF

Harvey DeutschendorfEmotional Intelligence Expert,

Speaker, and Author ofThe Other Kind of Smart

[email protected]

Twitter@theeiguy

“ But I have found that in the simple act of living with hope, and in the daily effort to have a positive impact in the world, the days I do have are made all the more meaningful and precious. And for that I am grateful.” ~ Elizabeth Edwards

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