Reflecting uncertain economic conditions and a conservative cost management environment, U.S. employers are projecting moderate pay raises for employees in 2012. Employers do expect to fund their annual bonuses fully for workers in 2011, as corporate profits have increased, according to survey data from consultancy Towers Watson.
The Salary Budget Survey of 773 U.S. companies, conducted by Towers Watson Data Services in June and July 2011, found that companies are planning pay increases that will average 2.8 percent in 2012 for their salaried nonexecutive employees. This represents a moderate increase from the average 2.6 percent raise workers are receiving in 2011 and 2.6 percent they received in 2010. Similar raises for 2012 are planned for executives and nonexempt employees.
“Until the economy shows some solid and consistent improvement, most companies are keeping their salary budgets relatively tight,” said Laura Sejen, rewards global practice leader at Towers Watson. “At the same time, companies also recognize the need to reward their top performers or risk losing them to competitors and, as a result, continue to differentiate pay raises based on individual performance.”
According to the Towers Watson survey, workers who receive the highest performance ratings will be in store for median salary increases of 4.5 percent, which is 80 percent more than workers with average ratings will receive (2.5 percent). Workers with below-average performance ratings are expected to receive median merit increases of 1.4 percent.
Three employer surveys released in July 2011 showed slightly more optimistic pay raise expectations. A Mercer survey indicated that 97 percent of U.S. organizations were planning to award base pay increases in 2012, with an expected average increase for U.S. workers of 3 percent, up slightly from 2.9 percent in 2011 and 2.7 percent in 2010.
Hay Group reported that U.S. employees could expect median pay increases of 3 percent in 2012, consistent with salary increases for 2011 but below the 4 percent increases seen from 2005 to 2008.
WorldatWork projected that salary budgets will rise by 2.9 percent in 2012 and that, based on individual performance ratings at year-end 2011, high performers can expect an average pay increase of 4 percent, middle performers a pay increase of 2.7 percent, and low performers an increase of 0.7 percent. 08-29-2011. Society of Human Resource Management.
Those extra airline fees that generate billions of dollars for the nation’s air carriers have become a part of life for most business travelers. But not all airline fees are legitimate business expenses in the eyes of corporate America.
For example, 91% of corporate travel managers who were surveyed recently said they would reimburse employees for checked-baggage fees, but only 3% said they would cover in-flight entertainment charges.
The survey of 651 travel managers in the U.S. and Canada was conducted by the GBTA Foundation, the research arm of the Global Business Travel Assn., a worldwide trade group for travel managers.
About half of travel managers said they would reimburse for in-flight meals, and 10% said they would allow travelers to charge their employers to upgrade seating on domestic flights, according to the survey released this month.
As for hotel charges, 89% of travel managers said they would reimburse parking costs and 84% said they would pick up the tab for Internet access, whereas 9% said they would pay for goodies from in-room mini bars, and 4% said they would reimburse for the costs of in-room movies and other entertainment, the survey found.
Joe Bates, research director for the foundation, said most travel managers don’t track extra airline fees because the charges are so new that many companies don’t yet have the ability to record and tally them.
“The biggest issue is that it’s hard to find the information,” he said.
But if you’re a business traveler, you might not have to worry about getting caught sneaking an unauthorized charge onto your expense report. According to the survey, 72% of travel managers said there are few or no consequences for violating corporate travel policies. 08-29-2011. Hugo Martin, Los Angeles Times.
Ahead of this coming Friday’s national unemployment report from the U.S. Labor Department, it was reported late last week that a 15-day strike at Verizon Communications fueled a surge in new jobless benefit claims last week, but the job market still looks weak after stripping out those effects.
Initial jobless claims rose by 5,000 to a seasonally adjusted 417,000 in the week ended Aug. 20, the Labor Department said Thursday. Claims filed in the previous week were revised up to 412,000 from 408,000.
Separately, an index of regional manufacturing activity by the Federal Reserve Bank of Kansas City remained flat in August despite signs of a downturn elsewhere in the U.S. The index remained at three for the month, unchanged from July, as the relatively healthy farm and energy sectors helped the region. Figures above zero indicate expansion.
Other regional manufacturing surveys suggest a slowdown in the overall economy, though jobless claims and other key indicators aren’t showing substantial deterioration yet.
The Labor Department said the Verizon strike added at least 8,500 new jobless claims last week and another 12,500 claims in the week ending Aug. 13. “Those claims have inflated the national total,” a Labor economist said.
Workers at Verizon, who weren’t paid by the company during the walkout, began returning to work Monday evening. Verizon’s unions had called the strike, involving 45,000 workers, to protest concessions the company is seeking on pensions, health care and job security. After the strike figures are stripped out, Thursday’s report paints a mixed picture of the overall market.
“The labor market may be improving but the rate of improvement is very sluggish with layoffs remaining fairly elevated,” said Steven Wood, chief economist at Insight Economics LLC.
The four-week moving average of new claims, which smooths out often-volatile weekly data, increased 4,000 to 407,500, the Labor Department said. Economists generally say the labor market is improving significantly when claims drop below 400,000, a level breached only once since April.
“We are concerned about the potential for weakening in job growth in coming months in response to recent plunging sentiment in response to market and political turmoil, but we aren’t seeing it yet in the latest claims results,” said Morgan Stanley economist Ted Wieseman.
Thursday’s report showed the number of continuing unemployment benefit claims—those drawn by workers for more than a week—fell by 80,000 to 3,641,000 in the week ended Aug. 13. Continuing claims are reported with a one-week lag. 08-29-2011. HRM Partners.
The National Labor Relations Board has issued new regulations requiring companies to post notices informing employees of their rights to unionize, a vote of confidence in unions in a year that has seen organized labor come under attack as governments try to cut costs in a stumbling economy.
The ruling came after the board received 7,034 comments about the proposed rule from workers, employees and members of Congress.
The final rule, issued Thursday, was decided because employees might not know about their rights to unionize because of declining union membership. Unions have become less common in the workplace: 11.9% of employed wage and salary workers belonged to a union last year, down from 20% in 1983. The board is also concerned that no one is required to inform workers of their rights under the National Labor Relations Act, passed in 1935. President Obama issued an executive order in 2009 saying that employees needed to be informed of their NLRA rights.
The NLRB has come under fire this year for what businesses and some Republicans are calling an attack on business. It is investigating whether Boeing has engaged in unfair labor practices by transferring some employees to North Carolina from Washington to avoid unionization. The NLRB is also looking into speeding up union elections, which business groups oppose.
In a statement after the ruling, the National Right to Work Legal Defense Foundation said the rule was “designed to push workers into compulsory unionism.”
Organized labor applauded the ruling. AFL-CIO President Richard Trumka said that “this rule gives clear information to employees about their rights under this fundamental labor law so that workers are better equipped to exercise and enforce them.” A blog post on the AFL-CIO website mocked the response by business, saying “NLRB says Workers Need to Know Their Rights, Biz World Flips Out.” 08-26-2011. The Los Angeles Times.
The new NLRB rule will apply to any employer covered by the NLRA, excluding states or political subdivisions not subject to board jurisdiction. The NLRB estimated in its notice of proposed rulemaking that the “great majority” of 6 million small businesses in the United States will be required to comply with the notice posting requirement. The final rule included a summary of current board standards for more than two dozen types of businesses, along with the board’s general retail standard providing coverage of an employer with an annual gross volume of business of $500,000 or more, and the nonretail standard giving the board jurisdiction over employers with annual inflows or outflows across state lines that meet or exceed $50,000.
In the final rule, which becomes effective on November 14, 2011, the NLRB provided that employers must post the mandatory notice in all areas where they customarily place notices to employees concerning personnel rules or policies. In workplaces where 20 percent of workers are not proficient in English and speak another language, the employer must provide the notice in the language the employees speak. But if an employer’s workforce includes two or more groups totaling at least 20 percent of employees who are not proficient in English, the employer must either post the NLRA notice in both languages or post the notice in the language spoken by the greater number of employees, while providing copies in the second language to employees who are not proficient in English.
Notices will be available in printed form from NLRB, or may be downloaded from the NLRB website. Notices will be available in languages other than English, and the rule provides that an employer will not be liable for failing to post a notice in a language other than English if it is not yet available from NLRB.
Employers that post notices to employees on internet or intranet pages or bulletin boards must also post the NLRA notice “no less prominently than other notices to employees.” The board dropped its proposal that notices be printed in color and that they be distributed by e-mail. 08-25-2011. The Los Angeles Times; Bureau of National Affairs.
Dancers at a hostess club in Los Angeles sued the club owners for a variety of labor law violations, alleging that they were paid only for the minutes they danced with patrons, were denied overtime compensation, and were subjected to “exploitative, substandard and degrading working conditions,” an immigrant rights advocacy group announced Aug. 17 (Hernandez v. Goliath Inc., Cal. Super. Ct., No. BC462953, lawsuit announced 6/6/11).
The lawsuit was initially filed June 6 but not served to give the defendants, Goliath Inc., which owns Club 907, and its owners, an opportunity to settle. When settlement talks broke down, the Coalition for Humane Immigration Rights of Los Angeles (CHIRLA) made the complaint public on August 17.
In their proposed class action lawsuit, the hostess dancers, also known as “taxi” dancers, because patrons pay by the minute for the time they spend with dancers, alleged they were required to work a minimum of 36 hours per week, but were paid for only a fraction of that time—and well below the legally required minimum wage rate.
The dancers also routinely worked more than 40 hours per week and/or eight hours per day, but were not paid the required overtime compensation. Club 907 failed to keep adequate records of the time worked by the “taxi” dancers, and failed to provide them with accurate wage statements, also a violation of state labor laws.
Other alleged violations included failing to provide required meal and rest breaks, unlawfully deducting wages if the dancers had to leave work early, and requiring the dancers to reimburse the club for shortages caused by patrons who absconded without paying for time spent with the plaintiffs.
Club 907 also failed to provide the dancers what the complaint called “basic workplace amenities required by law,” including a place to sit when not with patrons, or a place to consume drinks during breaks. The club prohibited the dancers from bringing food or water into the establishment, instead requiring them to buy such items from the club.
The defendants did not provide the dancers with a private place to change clothes, and also unlawfully video-taped them in the locker room where they did change clothes, the lawsuit alleged.
Club managers subjected the dancers to sexual harassment, including quid pro quo sexual propositions by managers, who also “turned a blind eye” to unwelcome sexual contact and lewd behavior by patrons, the complaint added.
The club’s conduct violated numerous provisions of the California Labor Code, applicable wage orders issued by the Industrial Welfare Commission, and California common law, the dancers alleged.
Plaintiffs brought the complaint as a class action seeking to recover on behalf of themselves and other similarly situated employees the unpaid minimum wage and overtime compensation, penalties and interest, additional compensation due for missed meal and rest periods, and damages for being subjected to sexual harassment and a hostile work environment.
The dancers also brought the case as a representative action pursuant to California’s Private Attorney General Act (PAGA), to recover the applicable civil penalties for the alleged violations of the various labor code provisions.
Voorhees said the class, which includes all hostess dancers at Club 907 from 1994 through December 5, 2010, would number “in the hundreds.”
In a statement e-mailed to BNA, Jeffrey S. Ranen, an attorney with Lewis Brisbois Bisgaard & Smith LLP who is representing Goliath, said:
“Club 907 vehemently denies the frivolous claims in this case. The Club complied with all California labor laws and the records will prove that Club 907′s employees received well more than the minimum hourly wage. The sexual harassment allegations are false and being driven by a long term, disgruntled former employee who had a falling out with her supervisor. This case is nonsense, and Club 907 intends to aggressively defend against it and expects that a court will throw out the class action allegations. The Club believes that the attorneys’ attempt to try this case in the media is a veiled effort to infuse politics into this dispute and it will not be tolerated. We expect to be vindicated by a jury.”
In November 2010, the Los Angeles Police Department served a search warrant on Club 907, and seized a number of false identification documents. The LAPD notified Immigration and Customs Enforcement (ICE), whose agents reported that during subsequent interviews, women employees of the club admitted they were in the country illegally, and that managers of the club knew that, according to an affidavit submitted in April in support of a federal criminal complaint against four club managers (United States v. Baquiax, C.D. Cal., No. CR 11-0794M, filed 4/14/11).
The affidavit noted that ICE in 2009 had received anonymous reports that Club 907 knowingly hired illegal immigrants as dancers and also that prostitution took place at the club. Voorhees said the club closed after a second LAPD raid in December 2010. 08-23-2011. Bureau of National Affairs.
Nearly one of every 10 mid-sized or big employers expects to stop offering health coverage to workers after insurance exchanges begin operating in 2014 as part of President Barack Obama’s health care overhaul, according to a survey by a major benefits consultant.
Towers Watson also found in its July survey that another one in five companies are unsure about what they will do after 2014. Another big benefits consultant, Mercer, found in a June survey of large and smaller employers that 8 percent are either “likely” or “very likely” to end health benefits after the exchanges start.
The surveys, which involved more than 1,200 companies, suggest that some businesses feel they will be better off dropping health insurance coverage once the exchanges start, even though they could face fines and tax headaches. The percentage of companies that are already saying they expect to do this surprised some experts, and if they follow through, it could start a trend that chips away at employer-sponsored health coverage, a long-standing pillar of the nation’s health system.
“If one employer does it, others likely will follow,” said Paul Fronstin of the Employee Benefit Research Institute. “You would see this playing out over the course of years, not months.”
A large majority of employers in both studies said they expect to continue offering benefits after these exchanges start. But former insurance executive Bob Laszewski said he was surprised that as many as 8 or 9 percent of companies already expect to drop coverage a couple of years before the exchanges start.
Such a move could lead to more taxes for both companies and employees, since health benefits currently are not taxed, and companies could be fined for dropping coverage. It also would give their employees a steep compensation cut if they don’t receive a pay raise, too.
“Dropping coverage is going to be very difficult for these (companies) to do,” said Laszewski, a consultant.
Towers Watson’s Randall Abbott said the survey results should be seen as a snapshot of how companies are thinking now, not as a final decision, because there still are many unresolved variables. Companies may change their thinking once they learn more about how the exchanges will work or whether employees will accept them.
The health care overhaul also faces court challenges, and President Obama is up for re-election next year, two more variables that could shape what happens in 2014 and afterward.
The Obama administration took issue with the Towers Watson survey, pointing out that studies by the nonpartisan Congressional Budget Office and nonprofits like Urban Institute reached different conclusions.
An Urban Institute study projected that the overhaul will have little effect on employer-sponsored insurance. When lawmakers debated the legislation, the CBO projected it would only have minimal impact on employer plans. About 3 million fewer people would be covered through work, but they’d be able to get insurance elsewhere.
Health and Human Services spokesman Richard Sorian said the administration expects to see a rise in employer-sponsored health insurance, not a decline.
“History has shown that reform motivates more businesses to offer insurance,” said Sorian. “Health reform in Massachusetts uses a similar structure, and the number of people with employer-sponsored insurance in Massachusetts has increased.”
But according to Dick Powers, a spokesman for Massachusetts Health Connector, a state agency that administers its universal health law, the total is flat. He said the number of people with employer-sponsored coverage climbed after Massachusetts enacted reform in 2006 but has dropped back down to around pre-reform levels since the economy tanked in 2008.
The percentage of employers in the state that offer their workers health insurance has risen from 69 percent before reform to 77 percent.
Companies that decide to drop coverage likely will be those that have a low percentage of workers enrolled in their plans and high staff turnover, Abbott said. This could include retail or hospitality businesses. For those companies, benefits are not crucial to retaining workers, and their employees may find better options on the exchange.
“Health care is high-cost, fast-growing expense they would like to eliminate,” Abbott said.
Last year, the average annual health insurance premium for employer-sponsored family coverage was $13,770 per worker, with companies picking up most of that tab, according to the Kaiser Family Foundation and Health Research and Educational Trust. That cost has more than doubled since 2000.
The exchanges aim to provide a marketplace for individuals, families and small businesses to buy coverage. Many consumers will be eligible for tax credits to make their premiums more affordable.
The Towers Watson survey focused on companies ranging in size from 500 employees to more than 10,000. Smaller companies may be more inclined to consider exchanges after being battered by benefits cost increases of 10 percent or more in recent years, said Dan Mendelson, CEO of the research firm Avalere Health.
Benefits consultants say most companies, especially large employers, will continue to offer coverage because they need to attract and keep workers. But that could change if a competitor drops coverage first.
Michael Turpin, a national practice leader at broker and consultant USI Insurance Services, said one of his clients plans to drop coverage as soon as any competitor does. The client, a major entertainment industry company he declined to identify, will be at a financial disadvantage if it doesn’t.
“In those industries … if somebody makes the first move, the others are going to follow like dominoes,” Turpin said. 08-24-2011. Associated Press.
A stimulus plan requirement directing employers to offer subsidized COBRA coverage to qualifying individuals is coming to an end Aug. 31. Normally, employers can charge 102 percent of plan premiums for health care continuation coverage under the Consolidated Omnibus Budget Reconciliation Act, but the American Recovery and Reinvestment Act created a temporary requirement to offer COBRA coverage at 35 percent of the regular cost for up to 15 months. Although employers paid the other 65 percent, they could offset the cost through payroll tax credits. To trigger eligibility for continuation coverage at the subsidized rate, involuntary employment termination had to occur between Sept. 1, 2008, and May 31, 2010. That means the requirement expires Aug. 31 for the last of the eligible individuals. 08-24-2011. Bureau of National Affairs.
A majority of large employers surveyed by the National Business Group on Health (NBGH) said they plan to require employees to contribute a higher percentage of health care premium costs in 2012, according to results of the survey released by the NBGH Aug. 18.
Speaking the same day at a briefing discussing the results of NBGH’s annual midyear survey of large U.S. employers, Helen Darling, president of the organization, said U.S. employers continue to struggle with health care costs, with the estimated per-employee cost in 2012 hitting $11,983. To combat the ever-rising costs, employers are turning to cost-management techniques such as increased cost-sharing and focusing on health improvement initiatives, Darling said.
According to the report, Large Employers’ 2012 Health Plan Design Changes, 53 percent of employers plan to increase the percentage of premium costs that employees pay, but most employers said they plan to increase the contribution amount by less than 10 percent.
Two provisions of the Patient Protection and Affordable Care Act that employers anticipate having the most impact on plans in 2012 are the requirement to extend dependent coverage to children up to age 26 and the restrictions on annual benefit limits, Darling said.
Of the 83 employers surveyed in the NBGH report, 59 percent said they do not plan to make any changes to their annual benefit limits for 2012, but 27 percent said they will make changes to their annual limits for wellness and preventive services.
The restrictions on annual benefit limits are being phased in until 2014, when they will be banned.
While PPACA continues to affect health plans, Darling cautioned against linking new health care law requirements with rising health care costs.
“We have serious health care cost problems completely independent of the Affordable Care Act,” Darling said. “We have to solve these problems no matter what the impact of health care reform is. No matter what happens with the Affordable Care Act, we are still going to struggle with this massive problem.”
Among other key findings of the June survey of large employers, NBGH reported that:
• Employers budgeted for 2012 a median increase of 7.2 percent in the cost of health care benefits, compared with a 7.4 percent budgeted increase in 2010.
• 73% of employers plan to offer at least one form of a consumer-directed health plan (CDHP) in 2012, with the most common CDHP offering being a high-deductible health plan with a health savings account.
• Asking employees to pay a higher percentage of the cost of health insurance premiums was ranked by employers as the most effective cost-sharing strategy (25 percent). The second- and third-ranked most effective cost-sharing strategies for 2012 were offering CDHPs (23 percent) and implementing wellness initiatives to improve employee health (17 percent). 08-22-2011. Bureau of National Affairs.
Residents of other states who work for California companies are protected by the state’s overtime laws during business trips here, the California Supreme Court decided on June 30, 2011.
Employment lawyers are predicting that the ruling will reduce business travel to the state and trigger hundreds of lawsuits against California companies in the coming days. Firms now typically pay employees in accordance with the labor laws of the states in which they live.
The court said the ruling would protect Californians from being replaced by less-expensive temporary workers from out of state. “Not to apply California law would also encourage employers to substitute lower-paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market,” Justice Kathryn Mickle Werdegar wrote for the state high court.
The ruling came in a case brought against Oracle Corp., a California software company, by employees who live in Arizona and Colorado and wanted to benefit from California’s generous overtime law during business trips. Oracle is headquartered in Redwood Shores, about 20 miles southeast of San Francisco.
California law says nonexempt employees who work more than eight hours a day or 40 hours a week are entitled to overtime at a rate of 1 1/2 times their normal pay. Overtime pay rises to double the regular rate for work in excess of eight hours on the seventh
workday. Arizona has no overtime law, and Colorado’s law does not extend beyond
“Previously most employers in California believed that a non-California resident was not subject to California employment laws, even if that person came into the state for a brief period of time,” said Robert S. Span, a lawyer who represented the airline,
hotel and restaurant industries in the case. Those industries were involved to
support Oracle. California employers may now have to revamp payroll and
tracking systems to ensure that visiting employees are paid according to
California law, Span said. “And if you extend California law in the overtime
area, will you also be extending other California labor laws to employees who
live out of state?”
Charles S. Russell, who represented the workers in the case, said the ruling probably would extend only to minimum-wage law and other requirements considered to be matters of health and safety. In addition, he said the case against Oracle involved claims that could cost the corporation tens of millions of dollars. Russell also described the decision as a victory against outsourcing. Companies may no longer skirt wage laws by bringing in temporary workers from other places, he said. “This is a win for
California employees because they are not going to have to compete unfairly
with temporary workers brought into the state and also a win for temporary
employees because they are going to be paid the same overtime wages California
employees would be paid,” Russell said.
The case, filed as a class action, was brought by employees who worked for Oracle all around the country and spent 20 to 110 days in California over three years. “That California would choose to regulate all nonexempt overtime work within its borders without regard to the employee’s residence is neither improper nor capricious,” Justice Werdegar wrote for the court. She said that nothing in the language of state overtime
laws implied that they applied only to residents.
Laura Maechtlen, an employment lawyer, said the decision would greatly expand the use of California’s wage law. “Employers subject to the decision could face a slew of additional claims by nonresident employees claiming that they were improperly classified as exempt and/or owed overtime for work performed in California,” said Maechtlen, whose San Francisco-based practice is focused on employment litigation and includes the defense of wage and hour class and collective actions. “Plaintiffs will
undoubtedly push the envelope of this ruling in the class-action context,” she
Los Angeles employment lawyer Anthony J. Oncidi said the ruling would trigger more litigation.”The court has extende California’s unique pro-employee overtime rules to workers who do not even live here,” Oncidi said. “This will only result in more lawsuits against California employers and fewer unemployed lawyers.” 07-01-2011, Los Angeles Times.