Reports from New York

vol.5-2 U.S. HRM in 2010 - Major Employment Reform in the U.S. -
Short Term Victory or Long Term Disaster?(January, 2010)

There are 2 versions ? one from the House of Representatives and one from the Senate. Fortunately the final version will NOT likely include a ‘public option’ or government system to provide health care for the entire U.S. population. But it will expand health care coverage to more than 30 million people and that will not be cheap.

An economist created the concept of the “Iron Triangle” for health care in the late 1960’s.

The 3 corners of the ‘Iron Triangle” of are accessibility, cost control and quality. He maintained that the 3 ‘angles’ of the triangle are all inter-related, so you can’t increase one without impacting the others. For example, if you increase the ‘accessibility’ angle (much like Congress is planning to do on a large scale), you will decrease the ‘quality’ angle and negatively affect ‘cost control.’ If the projected savings are not achieved, taxes will go up to cover the extra costs of insuring so many new people.

How does that affect the employment situation in the U.S.?

  since the ultimate design of the Health Care Bill is still very uncertain, along with its costs to employers and employees, employers will be reluctant to hire employees with eligibility for group health insurance;

  the Senate has proposed taxing ‘rich’ insurance plans to cover the extra costs. That means companies who offer employees generous health insurance plans may create extra tax liabilities for their people. For example, the government defines a ‘rich’ plan as one that provides an indirect benefit of $6,000/year (currently non-taxable). Under the new Health Care Reform, employees who are eligible for health insurance worth more than $6,000/year would be taxed on the difference. If a plan was worth $10,000/year, an employee might be required to pay additional ‘income’ tax on $4,000 ($10,000 - $6,000)

Ironically, the people who favor health insurance reform most strongly are members of public and private sector unions. They usually have very rich health insurance plans, so they would incur sizable tax increases.

Health care reform could drive up the cost of labor in the U.S. or result in significant quality declines. The government deficits needed to fund this massive increase in accessibility could weaken the U.S. economy further as foreign capital is redirected to countries with higher returns or more stable currencies.

The U.S. public has asked its government to focus more action on creating jobs and reducing deficits, while the U.S. Congress and President have focused on introducing the costly health care reform while it still has a commanding majority to pass such legislation. As the public sentiment builds against this action, the 2010 elections could end the rule of the Democratic majority and reduce government’s power to create jobs.

There are other

There are 2 ways being discussed to cover the additional cost - 1) tax ‘rich’ health care insurance plans (which ironically may include many labor union plans who support the Democrats and Mr. Obama fiercely) or
2) a ‘millionaires’ tax on people with incomes over $1 million.

President Obama and his administration have been very busy. Despite the extreme challenges of nuclear proliferation in North Korea and Iran and the severe recession in the U.S. and world economies, his administration is pressing on for more labor reforms. These reforms will make it far more challenging for companies to manage their work forces in the U.S

1) Employee Free Choice Act

Let’s start with the Employee Free-Choice Act. This is legislation that would greatly help unions organize private employers, where they have seen union representation plummet to 7.5% of workers. The severe decline in auto-industry jobs will accelerate the decline in union membership especially with the United Auto Workers (UAW).

Until mid-June, it appeared that the Employee Free Choice Act was dead. Senator Pryor of Arkansas stated as much through a spokesperson ? “The Employee Free Choice Act is dead, and I am not working on a compromise to this bill.” (source: LaborUnionReport.com, 06/16/2009)

But Senator Harkin of Iowa is determined to bring this job-destroying legislation to the Senate in July. He seems more confident in the Democratic Senate passing this bill since Al Franken was just certified as the winner of the Minnesota Senate race after 8 months of litigation. President Obama strongly stated during his campaign that we wanted this bill enacted and approval by the House of Representatives, with their large Democratic majority, is almost certain. If the Senate can put together a simple majority in favor, the entire world of labor relations in the U.S. will dramatically change for the worse. The sacred right of the employee to choose whether to join or not join a union by secret ballot will disappear.

2) Healthy Families Act

The Healthy Families Act was introduced into the House and Senate June 17, 2009. This bill would require employers (with at least 15 employees) to provide employees with up to 56 hours of paid sick leave. This leave could be used for the employee’s own medical needs OR to care for a child, parent, spouse or any other blood relative, or for an absence resulting from domestic violence, sexual assault or stalking.

If a company already has a paid sick leave plan, the company plan must comply with all Healthy Family Act requirements. For example, most companies provide paid sick leave for the employee’s illness only, not the illness of a family member. Also, companies may only provide a few sick days per year while this plan would provide a minimum of 7 days (based on an 8-hour schedule). Finally, it allows employees to take paid absence due to stalking, domestic violence or sexual assault. These issues are extremely private and hard to verify.

Companies will be prohibited from counting any absences covered by the Healthy Families Act towards an employer’s absence policy. Employees might be encouraged to abuse paid time off under this Act, making it more challenging for management to assure employees report to work predictably.

This ‘one size fits all’ approach will affect smaller and manufacturing companies severely and limit a company’s flexibility. If passed, it’s likely that in future years the amount of paid time might be increased to 10 or 15 days per year. (“Bill Would Guarantee up to 7 Paid Sick Days”, Steven Greenhouse, 05/16/2009)

It’s too early to tell if employer associations and voters can organize effectively to defeat this bill. A recession seems to be a strange time to introduce increased paid absences for employees.

3) Paid Vacation Act

If mandatory paid sick days aren’t enough, Rep. Alan Grayson of Florida introduced the Paid Vacation Act to Congress. This Act would mandate a minimum of one week of paid vacation for employers with more than 100 employees. Three years after the effective date of the law, those same companies would be required to provide 2 weeks of paid vacation (100+ employees) while companies with 50-100 employees would be required to provide 1 week.

Some people may think Rep. Grayson has an ulterior motive in proposing this legislation. After all, if people had more paid vacation they might choose to visit Disney World in Rep. Grayson’s state of Florida thereby spending precious tourist dollars. But Rep. Grayson has other reasons for supporting this bill.

According to the Center for Economic and Policy Research, 28 million Americans (about 25% of the work force) don’t get any paid vacation. The U.S. is last among 21 industrial countries when it comes to mandatory paid leave. For example, France currently provides employers with 30 days of paid leave. (source: Politico.com, 05/22/2009)

4) Ledbetter Fair Pay Act (FPA)

The Fair Pay Act (FPA) really doesn’t create any new causes of action for employees who feel they’ve been discriminated against because of gender, race, national origin, religion, age or disability. There are several laws in place that protect people from pay discrimination, such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), the Americans with Disabilities Act (ADA), the Rehabilitation Act and the Equal Pay Act.

The chief aim of the FPA, approved in January 2009 (retroactive to May 28, 2007), was to lengthen the period of time that an employer has to defend its compensation decisions. It eliminates statute of limitations defenses for claims of pay discrimination years ago for employees who are still with the company and claim they have lower pension benefits, lower salaries, or lower benefits than others because of decisions made years ago.

Human resources groups must decide whether to do audits of past compensation decisions or policies affecting compensation. A statistical analysis of past and current employee compensation rates should be considered to determine if protected categories of employees (race, age, etc.) have been treated fairly.

It’s too early to determine the impact of this new Act on pay discrimination claims or damages paid. Perhaps the current recession is discouraging people from making claims, particularly if there’s a fear a claim might jeopardize a person’s job security.

If a claim is raised though, a company will need the proper records to defend decisions made by management years ago, many of whom may be gone from the company. The best strategy to avoid problems in this area is to have rigorous record-keeping procedures and training for managers making compensation decisions. All managers should be required to articulate a valid business reason for their decisions. Policies should be reviewed to ensure that pay decisions are reviewed by independent people within the organization. Employees must be encouraged to raise concerns about pay early. (source: “Human Resources Action Plan for the Lilly Ledbetter Fair Pay Act”, Alison Davis, 04/13/2009)

The best outcome is employees feel satisfied with the fairness of compensation decisions and don’t feel the need to make a claim. This is a hallmark of good management.


「Reports from New York」はニューヨークでHRMに関する活動をしているPhilip S. Kozlowskiからのレポートです。
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