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Your source for the latest developments in workplace rights and employment law, "Today's Workplace" is the blog (weblog) written by Paula Brantner, Program Director of Workplace Fairness. In each entry, Paula focuses on legal and political information relevant to employee rights and fairness issues in the workplace.
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Thursday, March 27, 2003
I will be out of the office for a Workplace Fairness board meeting until Tuesday, April 1, so I will be unable to keep up with my blog posts during that time. However, I hope to be able to post some exciting new web site developments we're discussing this weekend after I return.
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Wednesday, March 26, 2003
If you read the news at all, you may have read several articles recently about the sorry state of the airline industry. Even before the war started, airlines were hemorrhaging money left and right, and now airline travel is down significantly due to safety concerns. See USA Today article.) So guess who's bearing the brunt of this economic decline? That's right, airline employees--not the CEOs who in many cases have guided the airlines into their respective messes. Almost daily, there's a new report of wage concessions made by airline employees and/or massive layoffs affecting thousands of workers. Here's some of the latest news:
• American Airlines: Yesterday (3/25), the union representing pilots at American Airlines, the Allied Pilots Association, said that its board would likely vote by the end of this month on a wage-concession deal the union was hammering out with management at American. (See Reuters article.) While no specifics are forthcoming, the union has said it was working to strike a deal that would help the airline avoid bankruptcy, and its rank and file would have final say on any agreement. AMR, American's parent corporation, has said it needed to cut structural costs by about $4 billion a year to keep flying. It is in talks with all three of its major unions over a call it made last month for $1.8 billion in annual wage concessions. However, today (3/23) it has been reported that these talks have hit a major snag, due to the airline's intention to fire nearly 1,000 pilots immediately, before allowing the union to present a plan to cut costs by other means, including changes in work rules. (See Associated Press article.)
• Continental Airlines: Continental Airlines CEO Gordon Bethune says the nation's fifth-largest carrier must cut 1,200 more jobs and eliminate $500 million more in annualized costs by year's end to ensure its survival. Some of the cost cuts did start at the top, with this week's departure of five senior executives, including C.D. McLean, chief operating officer and the airline's No. 3 executive. Bethune said management, including those leaving, determined that a 25% cut in executive staff was appropriate. (See USA Today article.) The 1,200+ jobs to be cut by year's end include 125 pilots, 500 reservations agents, 350 airport agents and 250 others. At this point, Continental plans to achieve the job cuts through voluntary programs, rather than from union concessions. Since September 11, 2001, Continental has already trimmed its costs, service and ranks by about 20%, and more than 4,300 Continental workers remain laid off or on unpaid leaves.
• Delta Air Lines: Delta Air Lines, said Monday (3/24) that it will cut about 12% of its flights, but refuses to say just how that will affect Delta employees. (See Reuters article.) A Delta spokesperson refused to say whether the carrier plans to get rid of planes or whether the cutbacks will result in job cuts for some of its more than 60,000 employees, responding that the carrier was "still evaluating the effect on our staffing, but [] would discuss any decisions we would make with our employees first." Delta also just released details of Chairman and Chief Executive Leo Mullin's compensation package. Even though Delta posted a $1.27 billion net loss in 2002, Mullin's pay package was worth about $13 million last year, more than twice what he received in 2001. (I'd hate to see what would have happened if Delta had actually done well!) Mullin says that he has reduced his salary by 10 percent effective March 1 "to demonstrate his commitment to share the burden of Delta's cost reduction goals." (Mighty generous of him...) The carrier also released news that its executives got cash bonuses totaling $17.3 million last year, as the company posted huge losses, slashed thousands of jobs and sought millions of dollars in federal aid, and that it had used another $25.5 million in cash to create special funds guaranteeing certain executives' pensions in the event of a bankruptcy, according to a filing the Atlanta-based airline made Tuesday (3/25) with the Securities and Exchange Commission. (See Atlanta Journal-Constitution article.) It was probably wise from a PR perspective that Delta did not announce employee pay cuts and/or layoffs at the same time they announced the doubling of its CEO's pay and huge executive bonuses, but watch this one closely, because we can all see what's coming.
• Northwest Airlines: Northwest Airlines said Friday (3/21) that it will cut 4,900 jobs and reduce its flight schedule by 12%. The airline says it will use layoffs, attrition, voluntary leaves and leave open positions unfilled to make the job cuts, and will offer affected employees a relief package including pay, medical coverage and flight privileges. The cuts include 2,000 mechanics, 1,400 flight attendants, 630 baggage handlers and customer service agents, 250 pilots, 125 cleaners, 300 management and 150 clerical positions, and 40 stock clerks, and come after Northwest has already had laid off about 12,000 employees due to the slump in the airline industry. (See Associated Press article.)
• United Airlines: The carrier is using its status in bankruptcy to extract all kinds of wage concessions from its employees. And where that has failed, it has tried to invoke the power of the bankruptcy court to override existing labor contracts. On March 17, United Airlines' parent, the UAL Corporation, asked a federal bankruptcy court judge yesterday to set aside its labor agreements as it seeks deep wage and benefit cuts for its employees. The motion proposed a series of agreements that would permanently reduce wages and benefits by $2.56 billion a year and make changes in schedules for flight crews; pension plans; job security; and various clauses that govern staffing levels and job duties. UAL also wants to create a low-fare airline--a move strongly opposed by its employee unions. The unions affected by United's move include the Air Line Pilots Association, the Association of Flight Attendants; the International Association of Machinists and Aerospace Workers, which represents mechanics and other airport workers; and the Professional Airline Flight Control Association, representing traffic controllers. (See New York Times article.)
United's pilots reacted strongly to the court filing: "Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law," said Paul Whiteford, chairman of the Air Line Pilots Association's master executive council at United and one of the union members on the airline's board. "To seek to wipe out this contract by the stroke of a judge's pen is disheartening." One expert commented that the abrogation of a contract is "like the voiding of a sacred oath. It's asking for cooperation under threat, [and is] going to greatly embitter relations between labor and management." The bankruptcy court has not yet responded to United's filing.
• US Airways: US Air, in bankruptcy proceedings like its code-share partner United, recently announced that 5% of workers' pay would be deferred 18 months because of war. (See USA Today article.) US Airways also just announced that it had reached a deal with its pilots on a new pension plan, which was considered the last major obstacle to the airline's emergence from bankruptcy. (See Associated Press article.). The pension conversion, which requires the approval of the federal Pension Benefits Guaranty Corporation (PBGC), will change the pilots' pension from a defined-benefit plan to a defined contribution plan. (For more information about the significance of this difference, see March 11 blog entry.)
Pretty disheartening, isn't it? And it's not likely to get any better soon. There has been some talk of another federal bailout, but the Bush administration seems to think that all these bankruptcies and wage cuts are what the airline industry needs. (See USA Today article.) According to one senior administration official, bankruptcy is a "healthy" process to deal with the drop in demand and high labor costs that the industry faces, and that the administration plans to avoid "getting in the way" of what's seen as a necessary restructuring of the industry. Bush may have a fight with Congress over this one, however; Senate Majority Leader Bill Frist said that he expected Congress to approve airline relief as lawmakers requested a meeting with the administration to discuss whether to add the aid to a special war funding request from the White House. (See Reuters story.)
Even after workers and the airlines agree on something, one cannot be certain that the deal will ultimately be honored. Former TWA employees have seen it all: bankruptcy, a buyout by American Airlines, a loss in seniority compared to American employees, and ultimately massive layoffs as American consolidated its workforce on the basis of seniority. Some employees of TWA even faced a little extra difficulty when working for the airline: pregnancy discrimination. In the mid-1970s, the EEOC and several TWA employees filed a class action lawsuit against the airline, claiming that TWA’s former maternity leave of absence policy for flight attendants, which required female flight attendants to go on leave immediately upon becoming pregnant, violated the law. (For more information, see our page on pregnancy discrimination. Nearly two decades later, in 1995, the lawsuit was settled. One of the terms of the deal was that each class member would receive ten travel vouchers for each covered pregnancy, which could be used by the class member or her family at any time during her life. Many class members therefore decided to hang onto the vouchers rather than use them immediately, since in their retirement years, they would have more time to travel and were likely to receive better tax treatment when using the vouchers. That was their undoing, as a bankruptcy court recently ruled that American Airlines purchase of TWA's assets did not create a continuing obligation for American to honor the TWA coupons. (See In re: Trans World Airlines, Inc., decided by the 3rd Circuit Court of Appeals on March 13, 2003.) The court ruled that the claims were general unsecured claims and, as such, were accorded low priority, rather than higher-priority claims that might have caused American to back out of the sale. (See St. Louis Post-Dispatch article.) So after discriminatory forced leave, and nearly two decades of litigation, many of the flight attendants were left with nothing but useless coupons.
This case is a sad but timely reminder to employees and unions who are considering buyouts and early retirement packages--don't accept anything that will only benefit you in the future. Given all the current flux in the industry and the lack of sympathy at the top, your airline just might not be around to honor any so-called promises. And if that happens, let's hope your CEO is mostly compensated in stock options, so that he pays a significant price as well.
Other good sources of information about the airline industry and its current woes:
JoeSentMe.com: Joe Brancatelli's home page for business travelers
Today In the Sky: Ben Mutzenbaugh's travel blog on USA Today
• American Airlines: Yesterday (3/25), the union representing pilots at American Airlines, the Allied Pilots Association, said that its board would likely vote by the end of this month on a wage-concession deal the union was hammering out with management at American. (See Reuters article.) While no specifics are forthcoming, the union has said it was working to strike a deal that would help the airline avoid bankruptcy, and its rank and file would have final say on any agreement. AMR, American's parent corporation, has said it needed to cut structural costs by about $4 billion a year to keep flying. It is in talks with all three of its major unions over a call it made last month for $1.8 billion in annual wage concessions. However, today (3/23) it has been reported that these talks have hit a major snag, due to the airline's intention to fire nearly 1,000 pilots immediately, before allowing the union to present a plan to cut costs by other means, including changes in work rules. (See Associated Press article.)
• Continental Airlines: Continental Airlines CEO Gordon Bethune says the nation's fifth-largest carrier must cut 1,200 more jobs and eliminate $500 million more in annualized costs by year's end to ensure its survival. Some of the cost cuts did start at the top, with this week's departure of five senior executives, including C.D. McLean, chief operating officer and the airline's No. 3 executive. Bethune said management, including those leaving, determined that a 25% cut in executive staff was appropriate. (See USA Today article.) The 1,200+ jobs to be cut by year's end include 125 pilots, 500 reservations agents, 350 airport agents and 250 others. At this point, Continental plans to achieve the job cuts through voluntary programs, rather than from union concessions. Since September 11, 2001, Continental has already trimmed its costs, service and ranks by about 20%, and more than 4,300 Continental workers remain laid off or on unpaid leaves.
• Delta Air Lines: Delta Air Lines, said Monday (3/24) that it will cut about 12% of its flights, but refuses to say just how that will affect Delta employees. (See Reuters article.) A Delta spokesperson refused to say whether the carrier plans to get rid of planes or whether the cutbacks will result in job cuts for some of its more than 60,000 employees, responding that the carrier was "still evaluating the effect on our staffing, but [] would discuss any decisions we would make with our employees first." Delta also just released details of Chairman and Chief Executive Leo Mullin's compensation package. Even though Delta posted a $1.27 billion net loss in 2002, Mullin's pay package was worth about $13 million last year, more than twice what he received in 2001. (I'd hate to see what would have happened if Delta had actually done well!) Mullin says that he has reduced his salary by 10 percent effective March 1 "to demonstrate his commitment to share the burden of Delta's cost reduction goals." (Mighty generous of him...) The carrier also released news that its executives got cash bonuses totaling $17.3 million last year, as the company posted huge losses, slashed thousands of jobs and sought millions of dollars in federal aid, and that it had used another $25.5 million in cash to create special funds guaranteeing certain executives' pensions in the event of a bankruptcy, according to a filing the Atlanta-based airline made Tuesday (3/25) with the Securities and Exchange Commission. (See Atlanta Journal-Constitution article.) It was probably wise from a PR perspective that Delta did not announce employee pay cuts and/or layoffs at the same time they announced the doubling of its CEO's pay and huge executive bonuses, but watch this one closely, because we can all see what's coming.
• Northwest Airlines: Northwest Airlines said Friday (3/21) that it will cut 4,900 jobs and reduce its flight schedule by 12%. The airline says it will use layoffs, attrition, voluntary leaves and leave open positions unfilled to make the job cuts, and will offer affected employees a relief package including pay, medical coverage and flight privileges. The cuts include 2,000 mechanics, 1,400 flight attendants, 630 baggage handlers and customer service agents, 250 pilots, 125 cleaners, 300 management and 150 clerical positions, and 40 stock clerks, and come after Northwest has already had laid off about 12,000 employees due to the slump in the airline industry. (See Associated Press article.)
• United Airlines: The carrier is using its status in bankruptcy to extract all kinds of wage concessions from its employees. And where that has failed, it has tried to invoke the power of the bankruptcy court to override existing labor contracts. On March 17, United Airlines' parent, the UAL Corporation, asked a federal bankruptcy court judge yesterday to set aside its labor agreements as it seeks deep wage and benefit cuts for its employees. The motion proposed a series of agreements that would permanently reduce wages and benefits by $2.56 billion a year and make changes in schedules for flight crews; pension plans; job security; and various clauses that govern staffing levels and job duties. UAL also wants to create a low-fare airline--a move strongly opposed by its employee unions. The unions affected by United's move include the Air Line Pilots Association, the Association of Flight Attendants; the International Association of Machinists and Aerospace Workers, which represents mechanics and other airport workers; and the Professional Airline Flight Control Association, representing traffic controllers. (See New York Times article.)
United's pilots reacted strongly to the court filing: "Our contract is the product of 52 years of good-faith collective bargaining conducted under federal labor law," said Paul Whiteford, chairman of the Air Line Pilots Association's master executive council at United and one of the union members on the airline's board. "To seek to wipe out this contract by the stroke of a judge's pen is disheartening." One expert commented that the abrogation of a contract is "like the voiding of a sacred oath. It's asking for cooperation under threat, [and is] going to greatly embitter relations between labor and management." The bankruptcy court has not yet responded to United's filing.
• US Airways: US Air, in bankruptcy proceedings like its code-share partner United, recently announced that 5% of workers' pay would be deferred 18 months because of war. (See USA Today article.) US Airways also just announced that it had reached a deal with its pilots on a new pension plan, which was considered the last major obstacle to the airline's emergence from bankruptcy. (See Associated Press article.). The pension conversion, which requires the approval of the federal Pension Benefits Guaranty Corporation (PBGC), will change the pilots' pension from a defined-benefit plan to a defined contribution plan. (For more information about the significance of this difference, see March 11 blog entry.)
Pretty disheartening, isn't it? And it's not likely to get any better soon. There has been some talk of another federal bailout, but the Bush administration seems to think that all these bankruptcies and wage cuts are what the airline industry needs. (See USA Today article.) According to one senior administration official, bankruptcy is a "healthy" process to deal with the drop in demand and high labor costs that the industry faces, and that the administration plans to avoid "getting in the way" of what's seen as a necessary restructuring of the industry. Bush may have a fight with Congress over this one, however; Senate Majority Leader Bill Frist said that he expected Congress to approve airline relief as lawmakers requested a meeting with the administration to discuss whether to add the aid to a special war funding request from the White House. (See Reuters story.)
Even after workers and the airlines agree on something, one cannot be certain that the deal will ultimately be honored. Former TWA employees have seen it all: bankruptcy, a buyout by American Airlines, a loss in seniority compared to American employees, and ultimately massive layoffs as American consolidated its workforce on the basis of seniority. Some employees of TWA even faced a little extra difficulty when working for the airline: pregnancy discrimination. In the mid-1970s, the EEOC and several TWA employees filed a class action lawsuit against the airline, claiming that TWA’s former maternity leave of absence policy for flight attendants, which required female flight attendants to go on leave immediately upon becoming pregnant, violated the law. (For more information, see our page on pregnancy discrimination. Nearly two decades later, in 1995, the lawsuit was settled. One of the terms of the deal was that each class member would receive ten travel vouchers for each covered pregnancy, which could be used by the class member or her family at any time during her life. Many class members therefore decided to hang onto the vouchers rather than use them immediately, since in their retirement years, they would have more time to travel and were likely to receive better tax treatment when using the vouchers. That was their undoing, as a bankruptcy court recently ruled that American Airlines purchase of TWA's assets did not create a continuing obligation for American to honor the TWA coupons. (See In re: Trans World Airlines, Inc., decided by the 3rd Circuit Court of Appeals on March 13, 2003.) The court ruled that the claims were general unsecured claims and, as such, were accorded low priority, rather than higher-priority claims that might have caused American to back out of the sale. (See St. Louis Post-Dispatch article.) So after discriminatory forced leave, and nearly two decades of litigation, many of the flight attendants were left with nothing but useless coupons.
This case is a sad but timely reminder to employees and unions who are considering buyouts and early retirement packages--don't accept anything that will only benefit you in the future. Given all the current flux in the industry and the lack of sympathy at the top, your airline just might not be around to honor any so-called promises. And if that happens, let's hope your CEO is mostly compensated in stock options, so that he pays a significant price as well.
Other good sources of information about the airline industry and its current woes:
JoeSentMe.com: Joe Brancatelli's home page for business travelers
Today In the Sky: Ben Mutzenbaugh's travel blog on USA Today
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Tuesday, March 25, 2003
A new survey has been released that indicates that more than one-third of federal employees who took part in a government-wide survey released today said they were considering leaving their jobs, with a little less than half of the 34.6 percent who are considering leaving said they were planning to retire within three years. According to the Federal Human Capital Survey, conducted by the federal Office of Personnel Management, government officials now appear to have identified retention of federal employees as a major concern. Or should we say another major concern, since the so-called "brain drain," or the impending exodus of large groups of employees from federal employment has already been identified as a looming and very significant problem for federal agencies. (See the Washington Post's series on the "Empty Pipeline.")
The Washington Post reports that Bush administration officials call the results "troubling." That's right, they are. But what can you expect? You take a group of workers who are significantly underpaid compared to the private sector, make them wait months for the meager raises they do get, threaten to privatize entire departments, and deny civil service protections and union rights to newly created agencies playing a critical role in our nation's anti-terrorist efforts. Is it any wonder that employees are looking to get out? Here's a look at some of the reasons why:
• Pay: After months of wrangling, it was finally announced in the last week that federal employees will finally receive raises this year. (See Washington Post article.) Federal employees will receive a 3.1 percent increase in their base pay and a 1 percent increase in their "locality pay" under an executive order issued by President Bush. In most years, decisions on annual raises are settled before New Year's Day, but politics slowed this one down. The raises are retroactive to January 1, 2003, however.
• Privatization: The Department of Health and Human Services is the latest federal department proceeding towards privatization of jobs that have previously been held by civil service employees. (See Washington Post article.) For a good summary of the employee's perspective on agency privatization, see the American Federation of Government Employees (AFGE) fact sheet on privatization, which claims that privatization will "transform the civil service into a `spoils system,' which would consist of a largely union-free workforce of poorly-compensated contractor employees with no protectionsagainst politically-inspired dismissals and discipline."
• Homeland Security: On March 1, 2003, more than 170,000 employees from 22 government agencies became part of the new Department of Homeland Security. (See Government Executive Magazine article.) While unionized employees from other agencies for now have been allowed to retain their unionized status (see Labor-Management Obligations in DHS memo dated March 12, 2003), new agency employees, such as airport screeners hired by the Transportation Safety Administration (TSA). Clashes have already begun: many union groups have opposed the limitations on union membership for TSA workers (see AFL-CIO Executive Council statement, and AFGE has initiated a special "Airport Screeners campaign" to push for unionization of the TSA workforce. There are already charges that TSA discriminated against minorities and older workers in hiring its airport screeners. (See Seattle Post-Intelligencer article.)
These are just a few of the reasons that a number of government employees are very dissatisfied with the conditions of their employment. But if the Bush administration is truly worried about retaining a quality federal workforce, they are reasons that should be examined very closely.
The Washington Post reports that Bush administration officials call the results "troubling." That's right, they are. But what can you expect? You take a group of workers who are significantly underpaid compared to the private sector, make them wait months for the meager raises they do get, threaten to privatize entire departments, and deny civil service protections and union rights to newly created agencies playing a critical role in our nation's anti-terrorist efforts. Is it any wonder that employees are looking to get out? Here's a look at some of the reasons why:
• Pay: After months of wrangling, it was finally announced in the last week that federal employees will finally receive raises this year. (See Washington Post article.) Federal employees will receive a 3.1 percent increase in their base pay and a 1 percent increase in their "locality pay" under an executive order issued by President Bush. In most years, decisions on annual raises are settled before New Year's Day, but politics slowed this one down. The raises are retroactive to January 1, 2003, however.
• Privatization: The Department of Health and Human Services is the latest federal department proceeding towards privatization of jobs that have previously been held by civil service employees. (See Washington Post article.) For a good summary of the employee's perspective on agency privatization, see the American Federation of Government Employees (AFGE) fact sheet on privatization, which claims that privatization will "transform the civil service into a `spoils system,' which would consist of a largely union-free workforce of poorly-compensated contractor employees with no protectionsagainst politically-inspired dismissals and discipline."
• Homeland Security: On March 1, 2003, more than 170,000 employees from 22 government agencies became part of the new Department of Homeland Security. (See Government Executive Magazine article.) While unionized employees from other agencies for now have been allowed to retain their unionized status (see Labor-Management Obligations in DHS memo dated March 12, 2003), new agency employees, such as airport screeners hired by the Transportation Safety Administration (TSA). Clashes have already begun: many union groups have opposed the limitations on union membership for TSA workers (see AFL-CIO Executive Council statement, and AFGE has initiated a special "Airport Screeners campaign" to push for unionization of the TSA workforce. There are already charges that TSA discriminated against minorities and older workers in hiring its airport screeners. (See Seattle Post-Intelligencer article.)
These are just a few of the reasons that a number of government employees are very dissatisfied with the conditions of their employment. But if the Bush administration is truly worried about retaining a quality federal workforce, they are reasons that should be examined very closely.
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Monday, March 24, 2003
In tough economic times, the conventional workplace wisdom is that companies scale back their benefit programs. Not only is cost cutting a significant concern, with benefit cuts marginally more palatable than layoffs, but some companies may feel less pressed to offer comprehensive benefit packages when the job market is much less competitive. So you might guess that many or most companies are cutting back on benefits right now. You may only be partially right, however--some companies are cutting back, while others still offer an increasing number of job perks, and continue to look for new ways to reward their employees. And some think that even the cuts may not last long.
First, the cutbacks: Charles Schwab, a company itself known for championing retirement savings and 401(k) plans through its eponymous founder, recently announced that it would no longer make matching contributions to employees' retirement plans. (See New York Times article--free registration required). Schwab's 401(k) plan had been among the more generous plans out there, offering participating employees $2 for every $1 they put into their accounts, up to $250 a year, and then matching employee contributions dollar-for-dollar, up to 5 percent of their annual compensation. Schwab announced the 401(k) cutbacks were in lieu of further layoffs, as the company has already reduced its workforce by 35 percent--a total of 9,000 jobs have been eliminated since the end of 2000. Schwab joins some other major employers who have also eliminated 401(k) matches, such as Goodyear Tire and Rubber, Great Northern Paper, Tech Data, the El Paso Corporation and the CMS Energy Company. While data is hard to come by, since most is not available for the last couple of years and thus does not reflect the decline in economic conditions, one survey showed a decline in the average percentage matched between 1999 and 2000, from 3.3 percent to 2.5 percent, which held steady in 2001.
Is this a sign of a longer-term trend, that we will see as long as the economy is weak and perhaps even beyond? Some experts don't think so. One analyst pointed out that cutting the 401(k) match is a drastic and high-profile move, and that some of his clients had thus opted to make less visible benefit cuts, such as increasing the amount that employees pay for health care benefits. (See Houston Chronicle article.) Another believes that there are other ways to cut costs, likening the cut of 401(k) matches to "using a hatchet when a scalpel would be more appropriate." While some employees may think that other benefits, such as health care, are more important, some experts believe that employees now expect company-matched contributions to be part of a basic benefits package, and that it will be important for companies to maintain the matches to compete for workers. Many of the companies that have announced cuts in matching contributions have publicly claimed that the cuts are only intended to be temporary, due to the poor economic condition of the company at the time of the announcement. It is therefore likely that company employees will be keeping a very close eye on the bottom line as they push for a quick restoration of a benefit that may have played a role in inducing them to accept employment with that particular company.
The relative ease with which employers have announced these 401(k) cuts is also a reminder of how 401(k) plans may offer less protections to employees than defined benefit pension plans. As union official Jesse Sanchez, who works at Goodyear, one of the companies recently announcing cuts, remarked, "this just goes to show what can happen when a company sweetens its 401(k) plan while it eliminates its more traditional defined benefit program -- there's no protection." Sanchez has always viewed 401(k) plans as a supplement to a traditional company pension; now he is even more convinced of that.
And now for some of the perks that have survived our current economic decline: aside from benefits like flex time, family leave, and on-site day care, which are common if not common enough, workers at Edelman, a global public relations firm based in New York and Chicago, have a few additional perks. (See Carol Kleiman's Working column.) Edelman has instituted an annual employees awards program that provides one week of extra vacation and $1,000 for 10 employees each year to "pursue a passion." To qualify, employees submit in writing exactly what they dream of doing. Edelman also offers its Chicago employees monthly on-site manicures and massages. High-tech firms continue to lead the way in extra and more off-beat perks: The Omni Group, a Seattle software company, was considered a perks leader back in 1997 when it installed a big-screen TV, game systems and a Foosball table. Today its 25 employees enjoy two big-screen TVs, two pinball machines, a pool table, free home maid service, free in-house massages and two meals a day cooked by an on-site chef. (See Seattle Times article.) Another Seattle technology company, Aventail, raised the employee contribution for certain health plans but still offers a Friday beer cart, subsidized gym memberships, on-site massages, bus allowances and free sodas. It's no secret why companies choose these kind of lifestyle-oriented benefits, however: According to The Omni Group's president, "It's a business strategy...One of our original goals was to free people's time so they could work more." Companies also hope that these extra perks will help retain quality employees, as the cost of training replacements can be very high, especially in some specialized workplaces.
While a massage or a manicure is certainly no real substitute for a 401(k) contribution or health care subsidy, in workplaces where those benefits are already necessary to attract talented employees, they can make certain companies stand out above the rest. Let's hope that enough companies continue to retain attractive benefit packages that even the companies facing financial difficulties in these tough economic times will be forced to find some other place to make cuts, instead of compromising the retirement plans of their employees.
First, the cutbacks: Charles Schwab, a company itself known for championing retirement savings and 401(k) plans through its eponymous founder, recently announced that it would no longer make matching contributions to employees' retirement plans. (See New York Times article--free registration required). Schwab's 401(k) plan had been among the more generous plans out there, offering participating employees $2 for every $1 they put into their accounts, up to $250 a year, and then matching employee contributions dollar-for-dollar, up to 5 percent of their annual compensation. Schwab announced the 401(k) cutbacks were in lieu of further layoffs, as the company has already reduced its workforce by 35 percent--a total of 9,000 jobs have been eliminated since the end of 2000. Schwab joins some other major employers who have also eliminated 401(k) matches, such as Goodyear Tire and Rubber, Great Northern Paper, Tech Data, the El Paso Corporation and the CMS Energy Company. While data is hard to come by, since most is not available for the last couple of years and thus does not reflect the decline in economic conditions, one survey showed a decline in the average percentage matched between 1999 and 2000, from 3.3 percent to 2.5 percent, which held steady in 2001.
Is this a sign of a longer-term trend, that we will see as long as the economy is weak and perhaps even beyond? Some experts don't think so. One analyst pointed out that cutting the 401(k) match is a drastic and high-profile move, and that some of his clients had thus opted to make less visible benefit cuts, such as increasing the amount that employees pay for health care benefits. (See Houston Chronicle article.) Another believes that there are other ways to cut costs, likening the cut of 401(k) matches to "using a hatchet when a scalpel would be more appropriate." While some employees may think that other benefits, such as health care, are more important, some experts believe that employees now expect company-matched contributions to be part of a basic benefits package, and that it will be important for companies to maintain the matches to compete for workers. Many of the companies that have announced cuts in matching contributions have publicly claimed that the cuts are only intended to be temporary, due to the poor economic condition of the company at the time of the announcement. It is therefore likely that company employees will be keeping a very close eye on the bottom line as they push for a quick restoration of a benefit that may have played a role in inducing them to accept employment with that particular company.
The relative ease with which employers have announced these 401(k) cuts is also a reminder of how 401(k) plans may offer less protections to employees than defined benefit pension plans. As union official Jesse Sanchez, who works at Goodyear, one of the companies recently announcing cuts, remarked, "this just goes to show what can happen when a company sweetens its 401(k) plan while it eliminates its more traditional defined benefit program -- there's no protection." Sanchez has always viewed 401(k) plans as a supplement to a traditional company pension; now he is even more convinced of that.
And now for some of the perks that have survived our current economic decline: aside from benefits like flex time, family leave, and on-site day care, which are common if not common enough, workers at Edelman, a global public relations firm based in New York and Chicago, have a few additional perks. (See Carol Kleiman's Working column.) Edelman has instituted an annual employees awards program that provides one week of extra vacation and $1,000 for 10 employees each year to "pursue a passion." To qualify, employees submit in writing exactly what they dream of doing. Edelman also offers its Chicago employees monthly on-site manicures and massages. High-tech firms continue to lead the way in extra and more off-beat perks: The Omni Group, a Seattle software company, was considered a perks leader back in 1997 when it installed a big-screen TV, game systems and a Foosball table. Today its 25 employees enjoy two big-screen TVs, two pinball machines, a pool table, free home maid service, free in-house massages and two meals a day cooked by an on-site chef. (See Seattle Times article.) Another Seattle technology company, Aventail, raised the employee contribution for certain health plans but still offers a Friday beer cart, subsidized gym memberships, on-site massages, bus allowances and free sodas. It's no secret why companies choose these kind of lifestyle-oriented benefits, however: According to The Omni Group's president, "It's a business strategy...One of our original goals was to free people's time so they could work more." Companies also hope that these extra perks will help retain quality employees, as the cost of training replacements can be very high, especially in some specialized workplaces.
While a massage or a manicure is certainly no real substitute for a 401(k) contribution or health care subsidy, in workplaces where those benefits are already necessary to attract talented employees, they can make certain companies stand out above the rest. Let's hope that enough companies continue to retain attractive benefit packages that even the companies facing financial difficulties in these tough economic times will be forced to find some other place to make cuts, instead of compromising the retirement plans of their employees.
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Friday, March 21, 2003
Now that the U.S. is at war, how will war affect the workplace? For some, a conflict halfway around the world will have little or no impact on their day-to-day schedules, but others will notice some significant changes. Some workplaces have reportedly become more patriotic, with American flags, pins and pictures of loved ones serving in the military becoming more prominently displayed. (See Journal Gazette article). Many workplaces do not have policies preventing workers from displaying patriotic symbols at work, while others, placing an emphasis on appropriateness and professionalism, may forbid some displays, but not others. Other workplaces are dealing with the effects of anti-war protests, which have caused many protesting employees to miss work entirely, while others not participating in the protests cannot get to work on time. (See San Francisco Chronicle article). We can expect a decline in workplace productivity, as workers debate and discuss the war, surf the 'Net looking for the latest news updates, and generally worry about our nation and our safety instead of focusing on work that may seem relatively inconsequential.
Things may get downright hostile in some workplaces: it's reported that one employee, a strong supporter of the war, walked off the job when her boss, an avid anti-war activist, took over her computer to fax-blast information about an upcoming protest. (See Washington Post article). In some workplaces, the debate is healthy, and helps to calm employees' fears, while in others, workers report feeling silenced, afraid to speak out, or having become a target for speaking out contrary to the opinions of coworkers. Business travel will be affected: 21 percent of companies surveyed have banned international travel, while 48 percent have adjusted their domestic travel policies. (See Business Travel Coalition survey results.) Security measures put in place after September 11 will be continued and in some cases strengthened: for example, America Online, Inc. has set up a telephone hotline for employees to report suspicious activity or seek help.
Just as September 11 affected the workplace both positively and negatively (positive: increased sense of community; negative: baseless suspicion and harassment of workers based on religion and national origin), so too will this war, regardless of its duration, affect the community we have at work. We should all do our part to minimize the negative effects of workplace dissent and heightened suspicion of others caused by the war and the threat it poses to foreign and domestic security, while using this time to confront the fear we all face by building stronger bonds with our coworkers and employers.
Things may get downright hostile in some workplaces: it's reported that one employee, a strong supporter of the war, walked off the job when her boss, an avid anti-war activist, took over her computer to fax-blast information about an upcoming protest. (See Washington Post article). In some workplaces, the debate is healthy, and helps to calm employees' fears, while in others, workers report feeling silenced, afraid to speak out, or having become a target for speaking out contrary to the opinions of coworkers. Business travel will be affected: 21 percent of companies surveyed have banned international travel, while 48 percent have adjusted their domestic travel policies. (See Business Travel Coalition survey results.) Security measures put in place after September 11 will be continued and in some cases strengthened: for example, America Online, Inc. has set up a telephone hotline for employees to report suspicious activity or seek help.
Just as September 11 affected the workplace both positively and negatively (positive: increased sense of community; negative: baseless suspicion and harassment of workers based on religion and national origin), so too will this war, regardless of its duration, affect the community we have at work. We should all do our part to minimize the negative effects of workplace dissent and heightened suspicion of others caused by the war and the threat it poses to foreign and domestic security, while using this time to confront the fear we all face by building stronger bonds with our coworkers and employers.
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Thursday, March 20, 2003
Wondering how employers are coping with the loss of workers due to the deployment of military reservists? It's never easy to lose valuable workers on extremely short notice, which is now happening all across the country as a number of reservists face imminent deployment or escalated training activity. Some employers appear to be coping better than others, however, as the stories of two reservists demonstrate. While certain employers are going above and beyond their legal obligations to actively assist reservists with the transition from civilian to military life, others seem to be resisting compliance with their relatively minimal legal obligations to accommodate reservists.
Albany, New York police officer Eric Woodard anxiously awaits his deployment as a member of the National Guard. However, for Woodard, being called up is less of a struggle than it is for many other reservists, as Woodard's employer, the city of Albany, has pledged to cover the difference between his current civilian salary and his pay as a reservist. (See Employers Extend Help to Soldiers.) Woodard's employer is one of several enlightened employers who realize that a reservist's main focus should be on his or her military mission, rather than whether foreclosure or bankruptcy is about to be visited upon themselves and their families left behind. Some reservists find their salaries cut in half or more after entering full-time military service--a financial drain that is difficult to plan for, especially on relatively short notice.
Under USERRA, the Uniformed Services Employment and Reemployment Rights Act, employers are required to hold jobs for reservists and Guard members called to active duty, as well as count the period of military duty as service with the employer for benefit eligibility, vesting and accrual purposes. Activated reservists and their family members who need continued health insurance benefits are also covered by COBRA (the Consolidated Omnibus Budget Reconciliation Act) and HIPAA (the Health Insurance Portability and Accountability Act), which ensures that reservists and their family members do not lose health coverage while the reservist is away from his or her civilian job. Reservists and families who need additional information about their legal rights under USERRA and other applicable laws should contact Employer Support of the Guard and Reserve (ESGR) or the Department of Labor's USERRA E-Laws Advisor for additional information.
Even under USERRA, however, employers are not required to pay workers who are away on military missions. An increasing number of employers do, however. ESGR publishes an "Outstanding Employers" honor roll to recognize those employers who provide more support for their reservist employees than the law requires. On the list are a number of major employers: American Express, Bank of America, ChevronTexaco, Coca-Cola, and Dell Computers, just to cite a few at the beginning of the long list. Admittedly, it's easier for large employers like most on the list--they are more readily able to absorb the loss of personnel than is possible for a smaller business and less likely to suffer major economic losses when losing a relatively small number of employees. Some small businesses that are owned by or who employ reservists find it much more of a struggle to cope with the loss of a key employee, and may find it impossible to maintain the employee's salary while also hiring temporary help to cover that person's responsibilities. (See War's Call on Workers is Stress on Businesses and Call-Ups Pinch Business.) Small businesses affected by military callups may be eligible for an economic injury disaster loan from the Small Business Administration (SBA). While the taxpayer-subsidized loans will not cover lost income or profits, they can help businesses that are having trouble covering necessary operating expenses after an essential employee is called to active duty. (See the SBA's Reservists web guide for more information.)
What an employer shouldn't do, however, is make life difficult and/or penalize employees with military obligations. Not only is that against the law, under USERRA, but may also prove to be a very unwise business decision, as Americans rush to embrace patriotism more than ever. The story of soldier # 2: Erik Balodis of Tucson recently filed a lawsuit claiming that his employer, auto parts retailer Pep Boys, fired him in June, due to his military commitments. After Balodis was fired, he claims his family of four was forced into bankruptcy and lost their home as a result. (See USA Today article.) Balodis' lawsuit claims that Pep Boys made repeated requests to the Navy Reserve to exempt Balodis from service and training obligations, and that he was fired after attending a drill exercise. (Pep Boys also loses additional patriotism points for writing a letter dated September 11, 2001 to Navy officials asking that Balodis not be called up.) To be fair, Balodis' claims have not yet been proven at this initial stage in his lawsuit. Pep Boys denies the allegations and is vigorously contesting Balodis' claims that military-based discrimination caused him to be terminated.
Whether or not Balodis ultimately prevails, the allegations he makes in his lawsuit provide a textbook example of how employers should not respond to the needs of their reservist employees, regardless of any business hardship. Smart employers during this difficult time are doing everything they can to assist their employees in responding to the war effort; those who don't not only subject themselves to lawsuits, but a great deal of negative public opinion.
Albany, New York police officer Eric Woodard anxiously awaits his deployment as a member of the National Guard. However, for Woodard, being called up is less of a struggle than it is for many other reservists, as Woodard's employer, the city of Albany, has pledged to cover the difference between his current civilian salary and his pay as a reservist. (See Employers Extend Help to Soldiers.) Woodard's employer is one of several enlightened employers who realize that a reservist's main focus should be on his or her military mission, rather than whether foreclosure or bankruptcy is about to be visited upon themselves and their families left behind. Some reservists find their salaries cut in half or more after entering full-time military service--a financial drain that is difficult to plan for, especially on relatively short notice.
Under USERRA, the Uniformed Services Employment and Reemployment Rights Act, employers are required to hold jobs for reservists and Guard members called to active duty, as well as count the period of military duty as service with the employer for benefit eligibility, vesting and accrual purposes. Activated reservists and their family members who need continued health insurance benefits are also covered by COBRA (the Consolidated Omnibus Budget Reconciliation Act) and HIPAA (the Health Insurance Portability and Accountability Act), which ensures that reservists and their family members do not lose health coverage while the reservist is away from his or her civilian job. Reservists and families who need additional information about their legal rights under USERRA and other applicable laws should contact Employer Support of the Guard and Reserve (ESGR) or the Department of Labor's USERRA E-Laws Advisor for additional information.
Even under USERRA, however, employers are not required to pay workers who are away on military missions. An increasing number of employers do, however. ESGR publishes an "Outstanding Employers" honor roll to recognize those employers who provide more support for their reservist employees than the law requires. On the list are a number of major employers: American Express, Bank of America, ChevronTexaco, Coca-Cola, and Dell Computers, just to cite a few at the beginning of the long list. Admittedly, it's easier for large employers like most on the list--they are more readily able to absorb the loss of personnel than is possible for a smaller business and less likely to suffer major economic losses when losing a relatively small number of employees. Some small businesses that are owned by or who employ reservists find it much more of a struggle to cope with the loss of a key employee, and may find it impossible to maintain the employee's salary while also hiring temporary help to cover that person's responsibilities. (See War's Call on Workers is Stress on Businesses and Call-Ups Pinch Business.) Small businesses affected by military callups may be eligible for an economic injury disaster loan from the Small Business Administration (SBA). While the taxpayer-subsidized loans will not cover lost income or profits, they can help businesses that are having trouble covering necessary operating expenses after an essential employee is called to active duty. (See the SBA's Reservists web guide for more information.)
What an employer shouldn't do, however, is make life difficult and/or penalize employees with military obligations. Not only is that against the law, under USERRA, but may also prove to be a very unwise business decision, as Americans rush to embrace patriotism more than ever. The story of soldier # 2: Erik Balodis of Tucson recently filed a lawsuit claiming that his employer, auto parts retailer Pep Boys, fired him in June, due to his military commitments. After Balodis was fired, he claims his family of four was forced into bankruptcy and lost their home as a result. (See USA Today article.) Balodis' lawsuit claims that Pep Boys made repeated requests to the Navy Reserve to exempt Balodis from service and training obligations, and that he was fired after attending a drill exercise. (Pep Boys also loses additional patriotism points for writing a letter dated September 11, 2001 to Navy officials asking that Balodis not be called up.) To be fair, Balodis' claims have not yet been proven at this initial stage in his lawsuit. Pep Boys denies the allegations and is vigorously contesting Balodis' claims that military-based discrimination caused him to be terminated.
Whether or not Balodis ultimately prevails, the allegations he makes in his lawsuit provide a textbook example of how employers should not respond to the needs of their reservist employees, regardless of any business hardship. Smart employers during this difficult time are doing everything they can to assist their employees in responding to the war effort; those who don't not only subject themselves to lawsuits, but a great deal of negative public opinion.
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Wednesday, March 19, 2003
With our nation on the brink of war, you can expect that until the war is over, or at least subsided somewhat, that domestic issues, such as jobs and the economy, are going to be neglected. One place where the war focus will become immediately obvious is in the news media. As we track workplace-related stories for our site's Today's News Headlines feature, we've already noticed a decline in the number of workplace-related stories--a decline which we expect to continue for a while, with war on everyone's mind. If the workplace issues affecting you aren't going away, even during the war, then you have to continue to speak out, to make sure these issues aren't simply pushed aside, just because politicians and reporters think all the American public cares about is the war. At our site's Action Center, you can contact national, state, and local media outlets to let them know what's on your mind. While of course, we would like you to comment on workplace-related issues, you can use our site to quickly and easily contact the press about any issue that's on your mind: the war, foreign policy, the economy, or anything else you care about. You can also contact your members of Congress on the Action Center's Elected Officials page about anything you desire. While this is the home of Workplace Fairness' action alerts on various issues, including judicial nominations and tax fairness, we encourage you to use our site to contact your members of Congress about any subject that's important to you right now. It's a very important time for all citizens to play an active role in politics and public opinion, and that starts with speaking out. Our site makes speaking out very easy, so no excuses--speak out now!
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Tuesday, March 18, 2003
It may not come as much of a surprise to our readers that more discrimination suits are filed in tough economic times. (See Kansas City Business Journal story.) As noted by a state antidiscrimination agency official in that article,
What's causing all the age discrimination complaints? Experts say that the increase largely attributable to the convergence of a weak economy and an aging work force. Nearly 50 percent of the labor pool is made up of baby boomers, and the percentage of workers over 65 has increased from the last decade. Succinctly put, there are now more older workers for employers to discriminate against, and more economic incentives to do so. According to Laurie McCann, senior attorney with AARP, the leading advocacy organization for older workers,
Some companies are approaching their older employees a little differently, however, and possibly avoiding lawsuits from disgruntled employees in the meantime. (See Retired, But Still On the Job.) Recognizing that older workers still have something to contribute, and that a wave of retirements and/or layoffs could mean a significant "brain drain," some companies have started innovative programs to allow older employees to keep working rather than fully retire. One firm, Aerospace, based in El Segundo, California, implemented a "retiree casual" program, which allows retirees to be hired back from time to time to solve problems, work on special projects and keep their valuable institutional knowledge on tap, while continuing to earn the same wages they did as full-time employees. Program participants are not allowed to accrue additional benefits nor work more than 1,000 hours per year, but that is because those receiving company pensions cannot both work full-time and earn a pension.
What Aerospace is doing not only benefits their older workers, but is a smart business move as well. The company not only is better able to deal with economic fluctuations than companies who have to lay off workers, then rehire and retrain new workers when the economy improves, but they also prevent the knowledge their workers have accumulated from benefiting their competitors. One survey found that only 16 percent of major companies offered a post-retirement work program, while others show that more than 25 percent of retirees find part-time or temporary employment to bridge the gap between the time they leave their primary careers and move into full retirement. In many cases, that means they leave their companies and work for the competition. While the Aerospace program is more appropriate for workers in their 60s and 70s, who don't want to fully retire but who also don't want a full workload, rather than workers in their 40s and 50s who have decades of full productivity left, it nonetheless represents a significant improvement over how some companies treat their older workers. Perhaps it's something that companies who want to avoid the costs of litigation should seriously consider instead of mass layoffs.
Laid-off employees think they have nothing to lose in filing a complaint when they think they haven't gotten a fair shake. I've been with the agency for 30 years, and I can tell you that whenever we're in good times, we don't see large volumes of cases.Older workers, in particular, are extremely vulnerable to economic fluctuations. So, not surprisingly, age discrimination complaints are up. (See New York Times article--free registration required). The Equal Employment Opportunity Commission (EEOC), the federal agency responsible for initially processing discrimination complaints, reports a 24 percent rise in age-discrimination complaints over the last two fiscal years, reaching levels not seen since the early 1990's. (See EEOC ADEA charge statistics).
What's causing all the age discrimination complaints? Experts say that the increase largely attributable to the convergence of a weak economy and an aging work force. Nearly 50 percent of the labor pool is made up of baby boomers, and the percentage of workers over 65 has increased from the last decade. Succinctly put, there are now more older workers for employers to discriminate against, and more economic incentives to do so. According to Laurie McCann, senior attorney with AARP, the leading advocacy organization for older workers,
The knee-jerk reaction of employers is often that they need to cut costs, and since older workers are perceived as costing more, they become targets of layoffs.Stereotypes about older workers also abound. Particularly pernicious is the belief that older employees are unable to keep up with and adapt to new developments, especially in sectors of the economy that say youth is essential to innovation and progress, like technology. According to one industry expert, "in the technology industry today, 35 is over the hill," due to the relentless quest for youth that has always permeated the culture of technology. Such stereotypes are not limited to technology-related jobs. In another article examining age bias in detail (see Too Old to Work?), the author notes:
The problem is that workplace culture has, for the most part, stuck to old ways of thinking about older workers. In many elite job markets -- investment banking, computer programming, publishing -- youth is celebrated, and regardless of how young older workers may feel, they only have to look around to realize that they represent the old school, not the new wave.Another contributing factor leading to the rising number of complaints is the perception of many companies that they can get away with age discrimination, as long as there's some kind of economic rationale behind the decision. While a company cannot defend a race-discrimination claim by saying it acted for economic reasons, such as ''customer preference'' -- that it would happily hire black waitresses, but its racist customers would stop coming -- companies frequently defend age discrimination cases by claiming older workers were selected because they were highly paid will often prevail. Especially in this economy, some companies are taking a calculated risk that their economic excuses will be accepted by courts in the event they are challenged by laid-off workers. Instead of targeting just one or a few workers, companies now decide to phase out entire job categories disproportionately held by older workers for "business reasons."
Some companies are approaching their older employees a little differently, however, and possibly avoiding lawsuits from disgruntled employees in the meantime. (See Retired, But Still On the Job.) Recognizing that older workers still have something to contribute, and that a wave of retirements and/or layoffs could mean a significant "brain drain," some companies have started innovative programs to allow older employees to keep working rather than fully retire. One firm, Aerospace, based in El Segundo, California, implemented a "retiree casual" program, which allows retirees to be hired back from time to time to solve problems, work on special projects and keep their valuable institutional knowledge on tap, while continuing to earn the same wages they did as full-time employees. Program participants are not allowed to accrue additional benefits nor work more than 1,000 hours per year, but that is because those receiving company pensions cannot both work full-time and earn a pension.
What Aerospace is doing not only benefits their older workers, but is a smart business move as well. The company not only is better able to deal with economic fluctuations than companies who have to lay off workers, then rehire and retrain new workers when the economy improves, but they also prevent the knowledge their workers have accumulated from benefiting their competitors. One survey found that only 16 percent of major companies offered a post-retirement work program, while others show that more than 25 percent of retirees find part-time or temporary employment to bridge the gap between the time they leave their primary careers and move into full retirement. In many cases, that means they leave their companies and work for the competition. While the Aerospace program is more appropriate for workers in their 60s and 70s, who don't want to fully retire but who also don't want a full workload, rather than workers in their 40s and 50s who have decades of full productivity left, it nonetheless represents a significant improvement over how some companies treat their older workers. Perhaps it's something that companies who want to avoid the costs of litigation should seriously consider instead of mass layoffs.
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Monday, March 17, 2003
Recently I read an article that I just can't get out of my head. Even though the article doesn't specifically address workplace issues, we may all be confronting this issue in the workplace very soon. It helped me put my finger on what's really bothering me about the policies of the Bush Administration. It's not my intent to turn this blog, or even this post, into a political diatribe: I know that many fine people, including many who wholeheartedly support workplace fairness, vote Republican and/or voted for President Bush. But I still can't ignore this article, called "Bush Weighs Life's Worth, Cost of Rules." The article starts as follows:
When a Oregon health plan tried to adopt a similar calculation a decade ago to attempt to ration scarce health care resources, the proposal met strong opposition from groups representing the disabled and the elderly, saying it was based on prejudices of able-bodied people, and from religious groups who regarded the proposal as a government intrusion on "the sanctity and dignity of life." Interestingly enough, at the time the Oregon proposal was released, the White House, occupied at the time by the first President Bush regarded the Oregon plan as a dangerous precedent, and launched an administration effort to block it. However, this new effort has some strong White House allies, including John D. Graham, administrator of the White House Office of Information and Regulatory Affairs, who's leading the charge. Graham wants agencies to identify what types of people would benefit from regulation and by how much, with the ultimate goal being "some consistency across agencies in how they address analytic issues...It is not desirable to have the same disease, for example Alzheimer's disease, evaluated differently by the various federal agencies."
It's not a huge leap, then, to imagine this analysis being applied to workplace issues. In fact, some of the opponents cited in the article already see the connection.
In fact, given some of the workplace-related initiatives that have taken place during this administration, you have to wonder if it's already happening. Immediately after President Bush took office, his first major legislative act as president was to repeal OSHA's new ergonomic standard in March 2001. The President said,
In December 2002, the president repealed another provision designed to benefit workers--an experimental paid family leave program. (See AP story). It's not that the program was costing anyone money--it had never been utilized, due to the recent economic decline which has depleted the unemployment trust funds of many states. But the potential that states might be pressured was enough, according to the Department of Labor. Repealing the rule “removes the impetus for individuals, be they members of the public or legislators, to encourage the use of the trust fund specifically for this purpose,” said Emily Stover DeRocco, assistant labor secretary for employment and training. Again, the value of a mother who can't afford unpaid leave to take care of her sick child when trying to also pay medical bills can't be very high, if states are now not even allowed to consider potential ways of helping her.
As reported here earlier (see February 3 entry), coming soon are proposed changes to the laws determining who is eligible for overtime pay and to the Family & Medical Leave Act. These proposed changes are expected in late May, so continue to check this site for analysis of the proposed changes and your ability to comment. You can bet (more than you're already betting in your workplace NCAA pool) that the value of a worker's life, and the time away from work necessary to maintain balance, sanity and a family life, will again not be valued very highly, at least when compared with the dollars and cents of employers' payroll costs.
The Bush White House is pushing federal agencies to slash the dollar value they place on human life, a move that has ignited an ethical debate with administration critics and allies alike.The rest of the article is focused on how agencies like the Environmental Protection Agency calculate the benefits of rule changes, such as cutting power plant emissions, by assigning a uniform value to each life saved (currently $6.1 million under the EPA standard). The administration is now putting pressure on agencies to change the calculus, claiming that the method is unfair and economically unsound, because it fails to recognize differences in quality of life. Under the current calculation, an elderly person with chronic illness is equal in value to a healthy child with decades to live.
When a Oregon health plan tried to adopt a similar calculation a decade ago to attempt to ration scarce health care resources, the proposal met strong opposition from groups representing the disabled and the elderly, saying it was based on prejudices of able-bodied people, and from religious groups who regarded the proposal as a government intrusion on "the sanctity and dignity of life." Interestingly enough, at the time the Oregon proposal was released, the White House, occupied at the time by the first President Bush regarded the Oregon plan as a dangerous precedent, and launched an administration effort to block it. However, this new effort has some strong White House allies, including John D. Graham, administrator of the White House Office of Information and Regulatory Affairs, who's leading the charge. Graham wants agencies to identify what types of people would benefit from regulation and by how much, with the ultimate goal being "some consistency across agencies in how they address analytic issues...It is not desirable to have the same disease, for example Alzheimer's disease, evaluated differently by the various federal agencies."
It's not a huge leap, then, to imagine this analysis being applied to workplace issues. In fact, some of the opponents cited in the article already see the connection.
Indeed, opponents fear that consequences could ripple across the bureaucracy as agencies apply the method to an array of laws intended to protect human health -- from toxic-waste cleanup to workplace safety and food labeling.And the very entities that stand to gain from a relaxation of environmental standards--business and industry--also have much at stake in the workplace.
In fact, given some of the workplace-related initiatives that have taken place during this administration, you have to wonder if it's already happening. Immediately after President Bush took office, his first major legislative act as president was to repeal OSHA's new ergonomic standard in March 2001. The President said,
in exchange for uncertain benefits, the ergonomics rule would have cost both large and small employers billions of dollars and presented employers with overwhelming compliance challenges.The health and safety of workers, many of whom have suffered crippling on-the-job injuries due to ergonomic practices known to be unsafe, is considered an "uncertain benefit," while the cost to employers is a quantifiable number (billions--even though many ergonomic adjustments cost little or nothing to implement).
In December 2002, the president repealed another provision designed to benefit workers--an experimental paid family leave program. (See AP story). It's not that the program was costing anyone money--it had never been utilized, due to the recent economic decline which has depleted the unemployment trust funds of many states. But the potential that states might be pressured was enough, according to the Department of Labor. Repealing the rule “removes the impetus for individuals, be they members of the public or legislators, to encourage the use of the trust fund specifically for this purpose,” said Emily Stover DeRocco, assistant labor secretary for employment and training. Again, the value of a mother who can't afford unpaid leave to take care of her sick child when trying to also pay medical bills can't be very high, if states are now not even allowed to consider potential ways of helping her.
As reported here earlier (see February 3 entry), coming soon are proposed changes to the laws determining who is eligible for overtime pay and to the Family & Medical Leave Act. These proposed changes are expected in late May, so continue to check this site for analysis of the proposed changes and your ability to comment. You can bet (more than you're already betting in your workplace NCAA pool) that the value of a worker's life, and the time away from work necessary to maintain balance, sanity and a family life, will again not be valued very highly, at least when compared with the dollars and cents of employers' payroll costs.
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Friday, March 14, 2003
Did you ever read some study or report in the newspaper, and then months later wonder how to find the information again? Or hear some interesting statistics you'd like to have at your fingertips, but don't know where to look? Have you wanted to keep track of the latest legislative developments, or wondered what employment laws people in other states were trying to get passed this year? I know that I have--it's pretty much impossible to keep track of all the facts, figures and legislative campaigns out there.
That's why we've created two new areas in our site's "News and Issues" section. In "Workplace By the Numbers," you'll find a compilation of the latest news articles that contain information about workplace-related studies and reports. Along with a link to the news article reporting on the statistics, you'll find a short summary of the conclusions reached by the researchers, as well as a link to the original report, if it's available on the web. Even after the original news article is no longer available online, the summary will remain available at our site, serving as a resource for additional research if necessary.
In the "Federal and State Legislative News" area of our site, we've compiled all the stories we can find about legislative developments going on right now across the United States. The summaries cover the U.S. Congress and what's happening on the federal level, plus a map makes it easy to find out what's going on in your state or other states around the country. We will also soon be adding regulatory news to this area, so that you can also keep track of noteworthy activities by the EEOC, Department of Labor, and other government organizations whose work affects your rights in the workplace.
We hope you find these two new topical compilation areas helpful, and if there are any others you would like to see, please let us know, via e-mail, and we'll see what we can do to make our site even more helpful to you.
That's why we've created two new areas in our site's "News and Issues" section. In "Workplace By the Numbers," you'll find a compilation of the latest news articles that contain information about workplace-related studies and reports. Along with a link to the news article reporting on the statistics, you'll find a short summary of the conclusions reached by the researchers, as well as a link to the original report, if it's available on the web. Even after the original news article is no longer available online, the summary will remain available at our site, serving as a resource for additional research if necessary.
In the "Federal and State Legislative News" area of our site, we've compiled all the stories we can find about legislative developments going on right now across the United States. The summaries cover the U.S. Congress and what's happening on the federal level, plus a map makes it easy to find out what's going on in your state or other states around the country. We will also soon be adding regulatory news to this area, so that you can also keep track of noteworthy activities by the EEOC, Department of Labor, and other government organizations whose work affects your rights in the workplace.
We hope you find these two new topical compilation areas helpful, and if there are any others you would like to see, please let us know, via e-mail, and we'll see what we can do to make our site even more helpful to you.
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Thursday, March 13, 2003
Last year, when the Democrats held a 10-9 majority on the Senate Judiciary Committee, the Judiciary Committee voted to approve exactly one hundred judicial nominees, including 17 circuit court nominees. (See Sen. Leahy's floor speech (from the former chair of the Judiciary Committee).) Many of these nominations were controversial, but nonetheless passed through the committee for votes on the Senate floor. Only two nominees didn't make it, due to the extremity of their prior records. One of those nominees was Priscilla Owen. Now that the Republicans command a majority in the Senate and on the Judiciary Committee, guess who's back under consideration? That's right, a nominee that last year's incarnation of the committee already found to be the worst of the worst.
This time, she says she'll judge fairly. (See today's AP article.) I suppose her 9-year history of doing otherwise shouldn't count. Politics is politics, I suppose, but the committee said in essence back in September: we'll approve many of the President's nominees, but we won't approve this one. Even though the nominees have to agree to follow stare decisis, that doesn't bind the people voting on them at all, I guess.
Why is Priscilla Owen's nomination such a bad idea? Because Owen's record shows that she sides with corporate interests and is an opponent of employees’ rights. Anchoring the far-right end of a very conservative court, Owen consistently favors big business and special interests over the claims of ordinary Americans. Before joining the court, Owen primarily represented large corporations, as a partner at a Houston law firm. On the Texas Supreme Court, she has tended to distort or rewrite the law to reach her desired outcome, voting consistently to dismiss the claims of injured workers and consumers. (See NELA's Case Analysis, prepared last year, for examples of some of the points raised below, and the Alliance for Justice's judicial website, IndependentJudiciary.com for more information on Owen's record).
• Justice Owen distorts the law to condone workplace bigotry.
In several cases, Justice Owen has dissented from Texas Supreme Court rulings affecting the rights of employees, including the right to be free from discrimination. In one case, Owen’s interpretation of a key Texas civil rights law would have effectively rewritten part of that law and made it much more difficult for employees to prove discrimination. In another employment case, the majority explained that Owen’s dissent “defie[d] the Legislature’s clear and express limits on our jurisdiction.”
• Justice Owen consistently votes against access to the courts and jury decisions supporting workers and individual plaintiffs.
Many of Justice Owen’s dissents would have seriously impaired ordinary citizens' ability to access the courts and to obtain justice, and often are dismissive of juries and of jury findings. In one example, Owen’s dissenting position was criticized by other justices as an attempted “judicial sleight-of-hand to circumvent” the Texas Constitution’s protection of jury trial rights. She also voted to reverse a $2.5 million judgment for a man who was killed while working along an interstate highway, by disregarding the testimony of the company’s own managers about the extreme safety hazards and the company’s failure to comply with state safety guidelines, and instead concluding there was no evidence of a “likelihood of serious injury.”
• Justice Owen protects employers by deliberately ignoring the big picture.
To further justify decisions shielding corporations, she separates allegations to analyze without context. Separating allegations, she finds each insufficient. For example, in a harassment case involving a male supervisor who bullied female employees by charging them like a bull, screaming profanities, forcing them to do menial cleaning chores and making them stand in his office while he leered at them, she found the evidence insufficient, viewing the allegations individually rather than part of a collective pattern of harassment.
• Justice Owen's delay in writing opinions has caused extreme harm to parties before her court.
She delayed for over two years a ruling concerning a quadriplegic teenager who had been awarded $40 million in damages in his case against Ford Motor Company, leaving his destitute family unable to provide the specialized medical care he desperately needed. Her own colleagues were embarrassed by and apologized for the inexcusable delay. She eventually ruled on grounds neither briefed nor argued by any of the parties. While the case was pending, the plaintiff died for lack of nursing care which the family could not afford.
• Justice Owen is outside the mainstream on her own conservative court.
She votes consistently to the far right of her colleagues (all Republicans) on the conservative Texas Supreme Court. She commonly dissents from their majority opinions to pursue a very narrow right-wing agenda. On one occasion, her colleagues said of Justice Owen’s dissent that it was “nothing more than inflammatory rhetoric and thus merits no response.”
• Justice Owen votes in favor of her campaign contributors.
Owen is almost legendary in her home state for ruling in favor of corporate contributors to her judicial re-election campaigns, voting for contributors over 80% of the time. After receiving an $8,600 contribution from Enron, Justice Owen wrote an opinion that saved Enron a significant amount in school taxes. After receiving a defense firm’s $14,000 campaign contribution, Owen voted that the woman couldn't sue the law firm who she claimed gave her bad legal advice in a criminal case that landed her in jail. According to Owen, the woman had no standing to sue because she was a convicted felon, although the the basis of the lawsuit was whether she should have received a felony conviction.
After reading this, if you aren't convinced that Priscilla Owen's nomination should have continued to remain DOA, then there's not much more I can say. But if you're now angry that we again have to waste valuable time and energy fighting this nomination, then take action now at WF's Action Center. The Senate Judiciary Committee previously got it right last September when they rejected her nomination. Senate politics may have changed, but Justice Owen's record hasn't.
Demand Fair Judges: Stop Priscilla Owen
This time, she says she'll judge fairly. (See today's AP article.) I suppose her 9-year history of doing otherwise shouldn't count. Politics is politics, I suppose, but the committee said in essence back in September: we'll approve many of the President's nominees, but we won't approve this one. Even though the nominees have to agree to follow stare decisis, that doesn't bind the people voting on them at all, I guess.
Why is Priscilla Owen's nomination such a bad idea? Because Owen's record shows that she sides with corporate interests and is an opponent of employees’ rights. Anchoring the far-right end of a very conservative court, Owen consistently favors big business and special interests over the claims of ordinary Americans. Before joining the court, Owen primarily represented large corporations, as a partner at a Houston law firm. On the Texas Supreme Court, she has tended to distort or rewrite the law to reach her desired outcome, voting consistently to dismiss the claims of injured workers and consumers. (See NELA's Case Analysis, prepared last year, for examples of some of the points raised below, and the Alliance for Justice's judicial website, IndependentJudiciary.com for more information on Owen's record).
• Justice Owen distorts the law to condone workplace bigotry.
In several cases, Justice Owen has dissented from Texas Supreme Court rulings affecting the rights of employees, including the right to be free from discrimination. In one case, Owen’s interpretation of a key Texas civil rights law would have effectively rewritten part of that law and made it much more difficult for employees to prove discrimination. In another employment case, the majority explained that Owen’s dissent “defie[d] the Legislature’s clear and express limits on our jurisdiction.”
• Justice Owen consistently votes against access to the courts and jury decisions supporting workers and individual plaintiffs.
Many of Justice Owen’s dissents would have seriously impaired ordinary citizens' ability to access the courts and to obtain justice, and often are dismissive of juries and of jury findings. In one example, Owen’s dissenting position was criticized by other justices as an attempted “judicial sleight-of-hand to circumvent” the Texas Constitution’s protection of jury trial rights. She also voted to reverse a $2.5 million judgment for a man who was killed while working along an interstate highway, by disregarding the testimony of the company’s own managers about the extreme safety hazards and the company’s failure to comply with state safety guidelines, and instead concluding there was no evidence of a “likelihood of serious injury.”
• Justice Owen protects employers by deliberately ignoring the big picture.
To further justify decisions shielding corporations, she separates allegations to analyze without context. Separating allegations, she finds each insufficient. For example, in a harassment case involving a male supervisor who bullied female employees by charging them like a bull, screaming profanities, forcing them to do menial cleaning chores and making them stand in his office while he leered at them, she found the evidence insufficient, viewing the allegations individually rather than part of a collective pattern of harassment.
• Justice Owen's delay in writing opinions has caused extreme harm to parties before her court.
She delayed for over two years a ruling concerning a quadriplegic teenager who had been awarded $40 million in damages in his case against Ford Motor Company, leaving his destitute family unable to provide the specialized medical care he desperately needed. Her own colleagues were embarrassed by and apologized for the inexcusable delay. She eventually ruled on grounds neither briefed nor argued by any of the parties. While the case was pending, the plaintiff died for lack of nursing care which the family could not afford.
• Justice Owen is outside the mainstream on her own conservative court.
She votes consistently to the far right of her colleagues (all Republicans) on the conservative Texas Supreme Court. She commonly dissents from their majority opinions to pursue a very narrow right-wing agenda. On one occasion, her colleagues said of Justice Owen’s dissent that it was “nothing more than inflammatory rhetoric and thus merits no response.”
• Justice Owen votes in favor of her campaign contributors.
Owen is almost legendary in her home state for ruling in favor of corporate contributors to her judicial re-election campaigns, voting for contributors over 80% of the time. After receiving an $8,600 contribution from Enron, Justice Owen wrote an opinion that saved Enron a significant amount in school taxes. After receiving a defense firm’s $14,000 campaign contribution, Owen voted that the woman couldn't sue the law firm who she claimed gave her bad legal advice in a criminal case that landed her in jail. According to Owen, the woman had no standing to sue because she was a convicted felon, although the the basis of the lawsuit was whether she should have received a felony conviction.
After reading this, if you aren't convinced that Priscilla Owen's nomination should have continued to remain DOA, then there's not much more I can say. But if you're now angry that we again have to waste valuable time and energy fighting this nomination, then take action now at WF's Action Center. The Senate Judiciary Committee previously got it right last September when they rejected her nomination. Senate politics may have changed, but Justice Owen's record hasn't.
Demand Fair Judges: Stop Priscilla Owen
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Wednesday, March 12, 2003
Elsewhere in the Workplace Fairness web site, you will learn a great deal about what is required to litigate a case: where to file, how to find a lawyer, what agency to file with--all the kinds of information you need to fight back in court or before a government agency. Today, though, I'd like to shine a little spotlight on those people for whom litigation isn't enough. These folks aren't just leaving it all in the hands of their lawyers--they recognize that it's not just the court who will determine their fate. Most recently, I read about Patricia Garrett traveling to Washington to oppose 6th Circuit judicial nominee Jeffrey Sutton. (See Birmingham News story.) Ms. Garrett is a registered nurse who was director of neonatal nursing at the University of Alabama in Birmingham Hospital. In 1994, Ms. Garrett was diagnosed with breast cancer and subsequently underwent treatments which required her to take substantial leave from work. Upon returning to work in July 1995, Ms. Garrett’s supervisor informed Garrett that she would have to give up her director position, which required her to accept another, lower paying position as a nurse manager. Ms. Garrett challenged her demotion under the Americans with Disabilities Act, and her case, Board of Trustees of the University of Alabama v. Garrett, went all the way to the U.S. Supreme Court. She ultimately lost before the Supreme Court, which ruled that she could not bring her ADA case against a state entity without violating the 11th Amendment of the Constitution--a case argued for the other side by none other than Jeffrey Sutton. At Thursday's press conference, Ms. Garrett reminded the crowd that "Jeffrey Sutton has been an outspoken advocate for elevating the rights of states above the rights of people with disabilities. In Mr. Sutton's eyes, I and others with disabilities seem to be pawns in a game of power between the federal government and the states." This is also not the first time that Ms. Garrett has spoken out about her experience; in October I attended the "National Strategy Conference to Stop the Supreme Court's Rollback of Civil Rights," where Ms. Garrett's eloquent message reminded the crowd of the need to keep advocating for her and others like her who have lost their jobs due to discrimination.
Twice last summer I had the opportunity to work with a very powerful group of women who had been fighting discrimination against them for over a quarter of a century. The large group of female plaintiffs (approximately 1100) in the case of Hartman v. Powell had been battling the U.S. Information Agency (USIA) since 1974. In 2000, a classwide settlement was reached to compensate each of the class members for the sex discrimination that kept them from being given jobs as foreign language broadcasters, writers, editors and technicians at USIA. Their decades-long battle wasn't over, however, as each woman realized the effect of our tax laws which would excessively penalize their lump sum back wage awards. (See my Monday (3/10) post for more on this issue). This group of very articulate and passionate women then took their campaign to Capitol Hill, lobbying for the Civil Rights Tax Relief Act. (See story about their lobbying efforts). While the bill didn't pass last year, much of the progress that has been achieved thus far in terms of awareness of this issue and bill cosponsors is due to their persistent efforts.
All of these women provide a great example for those who have encountered discrimination. It's not just about a lawsuit against an employer, but about the entire justice system, which requires vigilance on all fronts.
Twice last summer I had the opportunity to work with a very powerful group of women who had been fighting discrimination against them for over a quarter of a century. The large group of female plaintiffs (approximately 1100) in the case of Hartman v. Powell had been battling the U.S. Information Agency (USIA) since 1974. In 2000, a classwide settlement was reached to compensate each of the class members for the sex discrimination that kept them from being given jobs as foreign language broadcasters, writers, editors and technicians at USIA. Their decades-long battle wasn't over, however, as each woman realized the effect of our tax laws which would excessively penalize their lump sum back wage awards. (See my Monday (3/10) post for more on this issue). This group of very articulate and passionate women then took their campaign to Capitol Hill, lobbying for the Civil Rights Tax Relief Act. (See story about their lobbying efforts). While the bill didn't pass last year, much of the progress that has been achieved thus far in terms of awareness of this issue and bill cosponsors is due to their persistent efforts.
All of these women provide a great example for those who have encountered discrimination. It's not just about a lawsuit against an employer, but about the entire justice system, which requires vigilance on all fronts.
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Tuesday, March 11, 2003
Here's a fairly novel idea (unfortunately) that really should be tried more often in policy debates. Let's call it the "how do you like them apples!" or the "good enough for the gander" approach. Take some controversial new policy proposal on the table, and then analyze what would happen to lawmakers if they were subjected to the same policies they're trying to impose on the American public. In a recent New York Times article, reporter Mary Williams Walsh asks a very appropriate journalistic question, "What if a Pension Shift Hit Lawmakers, Too?" In this case, a proposal increasingly gaining favor in the private sector to adjust the way pensions accrue and are distributed would cost most members of Congress hundreds of thousands of dollars. But will this knowledge affect the debate, or will members of Congress ignore the consequences of a policy shift that in all likelihood, they will never have to live with?
Congress is expected to debate pension legislation in the months ahead, including proposals that would affect benefit levels and the strength of the pension system itself. An especially contentious debate is looming over regulations proposed by the Bush administration on how companies could convert their traditional pension plans to the cash-balance variety. In traditional pension plans, also known as "defined benefit plans," you are promised a specified monthly benefit at retirement. The amount of your benefit is stated either as an exact dollar amount, such as $100 per month at retirement, or calculated using a plan formula that considers such factors as salary and service - for example, 1 percent of your average salary for the last 5 years of employment for every year of service with your employer. Another type of retirement plan is called a "defined contribution plan." This type of plan does not promise you a specific amount of benefits at retirement. In these plans, you or your employer (or both) contribute to your individual account under the plan, sometimes at a set rate, such as 5 percent of your earnings annually. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans. (See the Department of Labor's (DOL) What You Should Know About Your Pension Rights.)
Increasing gaining favor in the private sector is a variety of plan called the "cash-balance plan," called that because employees periodically receive notice of a hypothetical cash balance that they can track as it grows. Since the 1980's, hundreds of large companies have switched from traditional (defined benefit) to cash-balance plans. These plans combine features of the traditional pension with yet another type of retirement plan, the 401(k) (a defined contribution plan), in which employees manage their own retirement money and sometimes receive matching contributions from employers. Neither defined contribution nor cash-balance plans are inherently inferior to defined benefit plans for all workers. Contributions to defined contribution plans generally are invested on your behalf, and so you will ultimately receive the balance in your account, based on contributions plus or minus investment gains or losses. The value of your account will fluctuate due to the changes in the value of your investments, which in past years have made these types of plans very lucrative and more valuable than some defined benefit plans, but much less so in an economic downturn such as the one Americans are currently facing.
However, two significant problems with cash-balance plans, especially in conjunction with the conversion process, have emerged. One charge is that the plans discriminate against older workers. The reason that older workers are so adversely affected by cash-balance conversion is because of the way traditional defined benefit plans are most commonly calculated. According to AARP, the leading advocacy organization for older workers, benefits in traditional defined benefit plans are based on a worker's tenure with one employer and average salary in late career, when earnings have peaked, while in a cash balance plan, workers build up benefits throughout their careers, and the balance is portable when changing jobs. When companies switch plans, longtime workers miss out on the benefit spike they would have received under a traditional plan, and they are too close to retirement to make up the difference in a cash balance plan. (See AARP Bulletin story.) A second common problem with cash-balance conversions is that they're all too often simply calculated incorrectly, to the worker's disadvantage of course. A 2002 audit by DOL's Inspector General showed that 22 percent of the 60 conversion plans studied miscalculated lump-sum benefits for workers who quit their jobs before normal retirement age, underpaying them by as much as $55,629 each. See AARP Bulletin story and the DOL audit report.) Columnist Molly Ivins has also recently drawn attention to this issue. See Rescue Your Pension Plan.
Back to the politicians: no cash-balance conversion plan is currently in the works for Congress (although legislation to do so may be introduced on the basis of this study). However, what is happening now are plans to lift the current moratorium on cash balance conversions, imposed by the IRS in 1999. The Bush administration has proposed regulations that would settle the issue, laying out basic rules for making cash-balance conversions legal. Public comment will be accepted until Thursday (3/13/03), and hearings are scheduled in April. (For advice about making comments, see CWA letter information.) If the proposed regulations take effect, the moratorium will be lifted. For Rep. Bernard Sanders (I-VT), that's not acceptable. In response, he commissioned the study by the Congressional Research Service, a nonpartisan branch of the Library of Congress, hoping that the new findings would "show the hypocrisy" of colleagues who would let other people undergo pension conversions but would not have to suffer ill effects themselves. (See Sanders' press release, "What Is Good For The American Worker Should Be Good For Members of Congress.") What the study found is that if, for example, if House Majority Leader Tom DeLay (R-TX), had a cash balance pension plan instead of a traditional defined benefit pension plan his pension benefits would be reduced by $357,057 or 58.7% under a cash balance conversion – from $608,143 under the current traditional defined benefit pension plan to $251,086 under the cash balance plan. If Speaker of the House Dennis Hastert (R-IL), had a cash balance plan instead of a traditional defined benefit pension plan his pension benefits would be reduced by $376,117 or 69% -- from $540,572 to $164,455. Will this make a difference in the policy debate? It should, but probably won't. For the New York Times story, DeLay did not respond to a request for comment, while Hastert's office questioned whether it was fair to single out members of Congress for scrutiny when the entire federal compensation system is skewed toward smaller paychecks and larger pensions compared with the private sector. (Now why do you think that is? Do you suppose the politicians involved had anything to do with it?)
Just like the Congressional budget rules that require offsets of all new tax cuts with revenue raisers designed to balance the budget, maybe we should also keep looking for other ways to force Congress to live with the policies it seeks to impose on the American public. This new cash-balance conversion analysis provides a very good precedent for that.
Congress is expected to debate pension legislation in the months ahead, including proposals that would affect benefit levels and the strength of the pension system itself. An especially contentious debate is looming over regulations proposed by the Bush administration on how companies could convert their traditional pension plans to the cash-balance variety. In traditional pension plans, also known as "defined benefit plans," you are promised a specified monthly benefit at retirement. The amount of your benefit is stated either as an exact dollar amount, such as $100 per month at retirement, or calculated using a plan formula that considers such factors as salary and service - for example, 1 percent of your average salary for the last 5 years of employment for every year of service with your employer. Another type of retirement plan is called a "defined contribution plan." This type of plan does not promise you a specific amount of benefits at retirement. In these plans, you or your employer (or both) contribute to your individual account under the plan, sometimes at a set rate, such as 5 percent of your earnings annually. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans. (See the Department of Labor's (DOL) What You Should Know About Your Pension Rights.)
Increasing gaining favor in the private sector is a variety of plan called the "cash-balance plan," called that because employees periodically receive notice of a hypothetical cash balance that they can track as it grows. Since the 1980's, hundreds of large companies have switched from traditional (defined benefit) to cash-balance plans. These plans combine features of the traditional pension with yet another type of retirement plan, the 401(k) (a defined contribution plan), in which employees manage their own retirement money and sometimes receive matching contributions from employers. Neither defined contribution nor cash-balance plans are inherently inferior to defined benefit plans for all workers. Contributions to defined contribution plans generally are invested on your behalf, and so you will ultimately receive the balance in your account, based on contributions plus or minus investment gains or losses. The value of your account will fluctuate due to the changes in the value of your investments, which in past years have made these types of plans very lucrative and more valuable than some defined benefit plans, but much less so in an economic downturn such as the one Americans are currently facing.
However, two significant problems with cash-balance plans, especially in conjunction with the conversion process, have emerged. One charge is that the plans discriminate against older workers. The reason that older workers are so adversely affected by cash-balance conversion is because of the way traditional defined benefit plans are most commonly calculated. According to AARP, the leading advocacy organization for older workers, benefits in traditional defined benefit plans are based on a worker's tenure with one employer and average salary in late career, when earnings have peaked, while in a cash balance plan, workers build up benefits throughout their careers, and the balance is portable when changing jobs. When companies switch plans, longtime workers miss out on the benefit spike they would have received under a traditional plan, and they are too close to retirement to make up the difference in a cash balance plan. (See AARP Bulletin story.) A second common problem with cash-balance conversions is that they're all too often simply calculated incorrectly, to the worker's disadvantage of course. A 2002 audit by DOL's Inspector General showed that 22 percent of the 60 conversion plans studied miscalculated lump-sum benefits for workers who quit their jobs before normal retirement age, underpaying them by as much as $55,629 each. See AARP Bulletin story and the DOL audit report.) Columnist Molly Ivins has also recently drawn attention to this issue. See Rescue Your Pension Plan.
Back to the politicians: no cash-balance conversion plan is currently in the works for Congress (although legislation to do so may be introduced on the basis of this study). However, what is happening now are plans to lift the current moratorium on cash balance conversions, imposed by the IRS in 1999. The Bush administration has proposed regulations that would settle the issue, laying out basic rules for making cash-balance conversions legal. Public comment will be accepted until Thursday (3/13/03), and hearings are scheduled in April. (For advice about making comments, see CWA letter information.) If the proposed regulations take effect, the moratorium will be lifted. For Rep. Bernard Sanders (I-VT), that's not acceptable. In response, he commissioned the study by the Congressional Research Service, a nonpartisan branch of the Library of Congress, hoping that the new findings would "show the hypocrisy" of colleagues who would let other people undergo pension conversions but would not have to suffer ill effects themselves. (See Sanders' press release, "What Is Good For The American Worker Should Be Good For Members of Congress.") What the study found is that if, for example, if House Majority Leader Tom DeLay (R-TX), had a cash balance pension plan instead of a traditional defined benefit pension plan his pension benefits would be reduced by $357,057 or 58.7% under a cash balance conversion – from $608,143 under the current traditional defined benefit pension plan to $251,086 under the cash balance plan. If Speaker of the House Dennis Hastert (R-IL), had a cash balance plan instead of a traditional defined benefit pension plan his pension benefits would be reduced by $376,117 or 69% -- from $540,572 to $164,455. Will this make a difference in the policy debate? It should, but probably won't. For the New York Times story, DeLay did not respond to a request for comment, while Hastert's office questioned whether it was fair to single out members of Congress for scrutiny when the entire federal compensation system is skewed toward smaller paychecks and larger pensions compared with the private sector. (Now why do you think that is? Do you suppose the politicians involved had anything to do with it?)
Just like the Congressional budget rules that require offsets of all new tax cuts with revenue raisers designed to balance the budget, maybe we should also keep looking for other ways to force Congress to live with the policies it seeks to impose on the American public. This new cash-balance conversion analysis provides a very good precedent for that.
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Monday, March 10, 2003
The news just in from Congress: the Civil Rights Tax Relief Act, one of the most important pieces of civil rights legislation pending before Congress in the last several years, has been reintroduced. (The bill numbers are HR 1155(House) and S 557 (Senate). You can continue to track the bills' progress at the Thomas legislative site). You may wonder why this bill is so important, as tax issues don't always tend to be the most interesting in the world, to say the least. Did you know, however, that everyone who succeeds in challenging discrimination by settling with their employer or winning in court now can face a second form of discrimination? That extra discrimination is caused by our tax code, which causes money received in the form of discrimination awards to be taxed at a higher rate than other kinds of court awards. Our tax code operates so unfairly that some employees who win their cases end up owing more money in taxes than they received for winning their cases! (See New York Times story of Cynthia Spina.)
This additional discrimination comes in three forms:
• Taxation of Emotional Distress Awards: Awards received for "pain and suffering" or "emotional distress" are taxed in all cases where there has not been a physical injury. This discriminates against those involved in discrimination and civil rights cases. While emotional damages received because of an accident causing physical injury are tax free, damages to compensate for the very same psychological injury caused by employers who intended to discriminate, are not.
• Higher Taxation of Back-Pay Awards: Awards received in discrimination cases that are designed to cover lost wages (back pay or front pay) are considered taxable income, just as if they had been earned on the job. However, IRS regulations require that all wages be taxed in the year received, even though many awards cover several years worth of wages. This can put workers in a higher tax bracket than would have applied if they had not been discriminated against and cause those who have been discriminated against to pay much higher taxes than those who never face job discrimination.
• Double Taxation of Attorneys Fees: Most people must hire a lawyer to bring a discrimination lawsuit in order to succeed, and the law requires that the employer must pay the attorney's fee if you are successful. However, the amount that goes to the attorney for working on the case is taxed twice In most parts of the country, the IRS says that both the attorney and the employee owe taxes on the same amount of money, even though the employee never sees the money. In some cases, this means that employees who win their lawsuits are left owing all their award and more to the IRS--for winning their case! New this year: the National Taxpayer Advocate has identified this particular problem at the top of the list of legislative priority items to be fixed in the Internal Revenue Code. For more on this issue, see Taxpayer Advocate Report. (The legislative section begins on page 156 of the report. It’s a PDF file, and I found the quickest way to get to the correct page is to go to the search function (the binocular button) and input “nonphysical personal injury.” The first time, it will take you to the table of contents (this is the first (and let’s presume most important) recommendation the Advocate makes), but if you do “find again,” you’ll end up where you need to be.)
The National Employment Lawyers Association, WF's sister organization, has taken the lead in lobbying for the passage of this bill over the past several years. However, many groups with extremely diverse political and philosophical perspectives have also supported this bill, including the U.S. Chamber of Commerce, the American Small Business Alliance, the American Bar Association, the Leadership Conference for Civil Rights, and AARP. These groups understand that unfairly taxed settlements benefit no one but the IRS: businesses face higher settlement and litigation costs, while plaintiffs are not made whole for the harm that they have suffered even after undergoing litigation for that specific purpose. These groups have also succeeded in coming together for past lobby days, where affected plaintiffs travel to Washington to tell their stories. We expect that additional lobby days will be needed this year to make sure the bill passes in 2003. (Read about past lobby days.)
Even if you are not currently a civil rights plaintiff or attorney, we need you to speak out. As long as current tax law penalizes civil rights cases, some meritorious cases will not be brought, while others will cost both sides far more than they should. Don't let this issue slip through the cracks...it may seem like a minor tax issue, but to those affected, it's very serious indeed. And that person might someday be you.
Take Action Now:
Stop Taxing Discrimination Awards Unfairly!
Stop Taxing Discrimination Awards Unfairly! (current plaintiffs only)
More Information about the CRTRA:
NELA Civil Rights Tax Relief Page
Taxpayer Advocate Report
This additional discrimination comes in three forms:
• Taxation of Emotional Distress Awards: Awards received for "pain and suffering" or "emotional distress" are taxed in all cases where there has not been a physical injury. This discriminates against those involved in discrimination and civil rights cases. While emotional damages received because of an accident causing physical injury are tax free, damages to compensate for the very same psychological injury caused by employers who intended to discriminate, are not.
• Higher Taxation of Back-Pay Awards: Awards received in discrimination cases that are designed to cover lost wages (back pay or front pay) are considered taxable income, just as if they had been earned on the job. However, IRS regulations require that all wages be taxed in the year received, even though many awards cover several years worth of wages. This can put workers in a higher tax bracket than would have applied if they had not been discriminated against and cause those who have been discriminated against to pay much higher taxes than those who never face job discrimination.
• Double Taxation of Attorneys Fees: Most people must hire a lawyer to bring a discrimination lawsuit in order to succeed, and the law requires that the employer must pay the attorney's fee if you are successful. However, the amount that goes to the attorney for working on the case is taxed twice In most parts of the country, the IRS says that both the attorney and the employee owe taxes on the same amount of money, even though the employee never sees the money. In some cases, this means that employees who win their lawsuits are left owing all their award and more to the IRS--for winning their case! New this year: the National Taxpayer Advocate has identified this particular problem at the top of the list of legislative priority items to be fixed in the Internal Revenue Code. For more on this issue, see Taxpayer Advocate Report. (The legislative section begins on page 156 of the report. It’s a PDF file, and I found the quickest way to get to the correct page is to go to the search function (the binocular button) and input “nonphysical personal injury.” The first time, it will take you to the table of contents (this is the first (and let’s presume most important) recommendation the Advocate makes), but if you do “find again,” you’ll end up where you need to be.)
The National Employment Lawyers Association, WF's sister organization, has taken the lead in lobbying for the passage of this bill over the past several years. However, many groups with extremely diverse political and philosophical perspectives have also supported this bill, including the U.S. Chamber of Commerce, the American Small Business Alliance, the American Bar Association, the Leadership Conference for Civil Rights, and AARP. These groups understand that unfairly taxed settlements benefit no one but the IRS: businesses face higher settlement and litigation costs, while plaintiffs are not made whole for the harm that they have suffered even after undergoing litigation for that specific purpose. These groups have also succeeded in coming together for past lobby days, where affected plaintiffs travel to Washington to tell their stories. We expect that additional lobby days will be needed this year to make sure the bill passes in 2003. (Read about past lobby days.)
Even if you are not currently a civil rights plaintiff or attorney, we need you to speak out. As long as current tax law penalizes civil rights cases, some meritorious cases will not be brought, while others will cost both sides far more than they should. Don't let this issue slip through the cracks...it may seem like a minor tax issue, but to those affected, it's very serious indeed. And that person might someday be you.
Take Action Now:
Stop Taxing Discrimination Awards Unfairly!
Stop Taxing Discrimination Awards Unfairly! (current plaintiffs only)
More Information about the CRTRA:
NELA Civil Rights Tax Relief Page
Taxpayer Advocate Report
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Sunday, March 09, 2003
As I suspected, I didn't have an opportunity on my trip to post, which will explain the absence of blog posts during the last week. However, I'm now back on the job, with lots of interesting developments just waiting to be commented upon, so I'll do my best to catch up a little this week.
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Tuesday, March 04, 2003
If you're having trouble getting your daily fix of your favorite cartoon, you really should know about UComics.com. Although my local paper doesn't run my personal favorite, editorial cartoonist Tom Toles, I can still get a daily dose of Toles from UComics, by signing up for their daily subscription service, which delivers each day's comic straight to my e-mail box (one selection costs nothing, while multiple selections require an annual subscription). I chose Toles, because of his insightful political analysis, especially on the issues related to the economy and workplace that we at Workplace Fairness care about most (see February 20's edition to see what I mean), but you can choose from dozens, if not hundreds of comic strips, from the old standards Garfield, Doonesbury, and Cathy, to newer voices such as Ann Telnaes and The Boondocks. Those interested in workplace humor may want to check out 9 to 5 and Bottomliners (no Dilbert here, though--you'll have to go to dilbert.com for that). Wiley's Nonsequitur gets in a few shots at lawyers and the justice system along the way--his latest book isn't called "The Legal Lampoon" for nothing! (One of Wiley's previous books was called "Dead Lawyers and Other Pleasant Thoughts," so the most recent title isn't quite so bad...) While life or work may be making you cry, you're guaranteed to find something at UComics.com to make you feel a little better.
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Monday, March 03, 2003
I will be traveling this week to San Francisco for business this week, and my computer access will be spotty, making it difficult to keep up with postings to this blog. I will do my best to post some blog entries; however, I may not be able to produce daily posts. I am attending a seminar, sponsored by NELA, on the Fair Labor Standards Act, Family & Medical Leave Act and the Equal Pay Act, so I will attempt to include some interesting tidbits of information from this seminar upon my return next week.
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