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Building Blocks for HR Excellence
By Michael
R. Hatcher
This article originally appeared
as a "Legal Brief" in the January 2007 issue of America's
Community Bankers Magazine and it has been reprinted with permission
from the publication.
Effective Human Resources policies and practices can significantly
enhance the performance of any organization. Large corporations
can and do deploy considerable resources to this discipline.
But whether your business is large or small, it is imperative
to start by achieving excellence in basic Human Resources compliance.
This article addresses three areas that the Human Resources
department just has to get right.
First, we address federal affirmative action requirements. Second,
we consider wage and hour compliance, one of the most litigated
areas of employment law. Next, we look at combating sexual harassment.
Federal Affirmative Action Requirements
While often used as a synonym for “diversity”
and other broad concepts, affirmative action specifically refers
to the requirements imposed on federal government contractors
by Executive Order 11426 and implementing regulations from the
Office of Federal Contract Compliance Programs (OFCCP) at the
Department of Labor.1
Critically, financial institutions are frequently covered by
the Executive Order under special eligibility criteria.
Federal government contractors are covered by the non-discrimination
provisions of the E.O. 11426 and implementing regulations, subject
to several strictly defined exceptions, the broadest of which
is for contractors with less than $10,000 in federal contracts.
Financial institutions with federal share and deposit insurance
are considered to be government contractors within the meaning
of Executive Order 11426 and, the “under $10,000”
exception specifically does not apply to depositories of federal
funds and issuing and paying agents for U.S. Savings bonds and
notes.2
Further, government contractors are generally required to
implement formal, written affirmative action plans if they have
fifty (50) or more employees and federal contracts
worth more than $50,000. Once again, however, the dollar limitations
on applicability do not apply to financial institutions that
are depositories of federal funds or issuing and paying agents
for U.S. savings bonds and notes.3
Essentially, covered contractors must conduct reasonable self-analyses,
comparing utilization of women and racial/ethnic minorities
to the availability of qualified women and minorities in the
relevant job market. If “utilization” does not reach
at least 80% of “availability,” the contractor must
establish goals to reach “availability” with specific
action plans for attaining the goals.
One key element of affirmative action compliance that has recently
been clarified by OFCCP relates to internet applicants. Under
the new regulations, all employers with fifty or more employees
must solicit and retain demographic information regarding internet
applicants. Data, including gender, race, and ethnicity, on
all applicants considered for employment must be maintained
for at least 1 year.
The new rule defines “internet applicant,” prescribes
the records the contractors must maintain, and explains the
records OFCCP will require contractors to produce when evaluating
a contractor’s compliance with adverse impact analysis.
It is imperative that financial institutions determine whether
they are covered by federal affirmative action requirements.
Because of the significant consequences of non-compliance, if
covered, financial institutions should ensure compliance, seeking
expert advice and counsel, as necessary.
Wage and Hour Compliance
The Fair Labor Standards Act (FLSA) requires that most employees
be paid at least the federal minimum wage for all hours worked
and overtime pay at time and one-half the regular rate of pay
for all hours worked over 40 in a work week.4
Several classes of employees may be exempted from application
of the overtime requirements if certain conditions are met.
The potentially exempt classes are:
- Executives
- Administrators
- Professionals
- Outside salespeople
- Some computer professionals
In order to be exempted, class members must meet two tests:
(1) salary basis test and (2) duties test.
Salary Basis Test
Pursuant to the Salary Basis Test, to be exempt, the employee
must be paid at least $455 gross per week ($23,660 annually).
The salary must not be dependent on job performance or the hours
worked.
Duties Test
The work must relate directly to the management or general
business operations of the employer or the employer’s
customers. In general, the employee must exercise discretion
and independent judgment in significant matters.
In the financial services context, an exempt employee’s
specific duties may include:
- Collecting and analyzing information
- Determining appropriate financial products
- Advising the customer regarding financial products
- Marketing, servicing, or promoting the employer’s
financial products
Wage and hour claims are one of the largest areas of employment
related EEOC charges and federal lawsuits. There are many traps
for the unwary in this area, particular as relates to the classification
of employees as either “exempt” or “non-exempt.”
The rules arising out of the court cases are often counter-intuitive.
Human Resources professionals and in-house counsel need to work
together to ensure compliance in this critical area.
Sexual Harassment
Most companies recognize and address the most egregious instances
of sexual harassment. Many companies, however, do not adequately
educate their managers that sexual harassment includes much
more than inappropriate physical contact.
Sexual harassment includes quid pro quo harassment, where
submission to sexual conduct is made a condition of employment
or submission to or rejection of sexual conduct is used as a
basis for making employment decisions affecting the individual.
As most employers know, , hostile work environment claims can
be asserted based on sexually-charged jokes, pictures, overtures,
etc. in the workplace when that environment unreasonable interferes
with an individual’s work performance or creates an intimidating,
hostile, or offensive working environment.
Less obviously, claims may be made based on subtle behaviors
and actions including uninvited letters, phone calls, and gifts,
as well as uninvited touching.
There are several actions a company may take to lessen the
risk of sexual harassment claims. Courts have recognized an
affirmative defense to such claims if the employer:
- Has an anti-harassment policy with sufficient complaint
procedures
- Exercises reasonable are to prevent and promptly correct
any sexually harassing behavior
- Acts promptly to resolve the complaint
- Complaining employee unreasonably fails to take advantage
of preventative or corrective opportunities
In order to minimize the risks of sexual harassment claims,
all employers should review and, as necessary, strengthen their
anti-harassment policies and complain procedures. All employees
should be trained on the policies and procedures and managers
should be held accountable for preventing such activity in the
first instance and promptly addressing any complaints that are
brought to their attention.
A special word should be said about retaliation claims (whether
or not in the context of a sexual harassment claim). First,
an employer may be held liable for retaliation even if the underlying
discrimination claim is unproven – or even if the underlying
claim is dismissed. Second, a recent Supreme Court decision
has extended liability to a new category of claims for which
previously companies would not have been liable.
Retaliation can generally be defined as any adverse employment
action in response to protected activity. Adverse action can
include termination, harassment, reduction in hours, job transfers
and denial of training. Protected activity includes complaining
of discrimination, alleging harassment, going to a state agency,
or requesting an accommodation.
A 2006 Supreme Court decision, in Burlington Northern
v. White, established for the first time that an adverse
action supporting a retaliation claim that does not cause tangible
economic harm, e.g., reassignment to a lesser job or suspension
without pay that is later repaid, can still constitute retaliation
in violation of Title VII. This is a significant departure from
prior case law and may require reevaluation of unresolved claims.
All managerial level employees should be trained (and periodically
re-trained) on their obligation to not engage in retaliatory
conduct. Employers should take special care to ensure that individuals
who have engaged in protected activity are not subject to decisions
that could be deemed retaliatory. It is often a good idea to
require an additional and higher level of review for any employment
action involving an employee with an unresolved sexual harassment
complaint.
Conclusion
Human Resources professionals are responsible for a myriad
of day-to-day activities throughout an organization. It is imperative
that they be adequately trained, and provided with appropriate
resources, to avoid costly lawsuits or intrusive government
enforcement actions. Three areas of current high risk for employers
are (1) federal affirmative action compliance, (2) wage and
hour claims, and (3) sexual harassment/retaliation claims.
The purpose of this article is to highlight several of the
more common “traps for the unwary” and encourage
all employers to ensure that their Human Resources professionals
are provided the resources they need to protect the company
from unnecessary litigation.
FOOTNOTES
1
41 C.F.R. 60-1, et seq.
2
41 C.F.R. 60-1.5.
3
41 C.F.R. 60-1.7.
4
29 U.S.C. 206 and 207
For more information, please contact:
Copyright
© 2007, Davis Wright Tremaine LLP.
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