Posts filed under ‘HR’
Yesterday President Obama called on Congress to follow a growing number of states, cities, and private companies that have decided to “ban the box” on job applications. (https://www.whitehouse.gov/the-press-office/2015/11/02/fact-sheet-president-obama-announces-new-actions-promote-rehabilitation )
This and other criminal justice reforms might actually happen since a diverse coalition of libertarians, fiscal conservatives and traditional liberals are in agreement that the country is doing something wrong by incarcerating approximately a quarter of the world’s prisoners even though it accounts for 5% of its population . In fact, there are more than 2.3 million incarcerated people, including 1.6 million in state and federal prisons and over 700,000 in local jails and immigration detention.
If my reading of the political tea leaves is correct , the question is not if but when legislation banning pre-employment conviction questions will impact your credit union? What concerns me most about these proposals is the amount of complexity, liability and expense they could add to the hiring process for credit unions unless they are drafted responsibly.
For an example of what I’m concerned about I need look no further than the Big Apple which now prohibits pre-employment inquiries related to criminal convictions until a conditional employment offer has been extended. If a subsequent criminal background check reveals a criminal history than the employer must perform an analysis pursuant to state guidelines to determine if this history disqualifies the applicant. It must then provide him with a written explanation of the reasons why his employment is being denied and provide him with an opportunity to respond to these concerns prior to formally withdrawing the offer. (http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1739365&GUID=EF70B69C-074A-4B8E-9D36-187C76BB1098)
The good news is that this prohibition against pre- offer criminal inquiries does not apply to employers required by state, federal or local law to conduct criminal background checks for employment purposes or who are barred from hiring employees with criminal histories. This is a critical carve out for federally insured credit unions in New York City since, “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust,.., may not become, or continue” to be employed by or otherwise participate, directly or indirectly, in the conduct of a credit union without the prior consent” of the NCUA. 12 U.S.C.A. § 1785 (West)
The problem is that even with this carve out and a helpful 2008 guidance interpreting the statute (GUIDANCE REGARDING PROHIBITIONS IMPOSED BY SECTION 205(D) OF THE FEDERAL CREDIT UNION ACT, 2008) the question of who is and who is not subject to NCUA scrutiny is inevitably a fact-sensitive inquiry. For example, precisely when does an independent contractor influence or control the management or affairs of an insured credit union enough to be covered by this law? Furthermore this prohibition does not apply to de Minimis convictions.
My point is that even if you agree with the “ban the box” movement in concept, credit unions belong to an industry that will be faced with some of the most difficult questions in implementing any bans.
In order to avoid these pitfalls we should argue that any ban the box prohibitions should (1) be passed by Congress; (2) preempt state and municipal laws ; (3) Provide a “safe harbor” for good faith implementation (4) provide a definitive list of offenses for which a person is banned from working with a financial institution and (5) Limit damages for violations to back pay and a job offer.
For those of you in New York who want to get back at your HR person this morning, give her this morning’s blog before she’s had her first cup of coffee. It sounds like a bigger deal than it is, but only time will tell.
The Legislature yesterday sent the Governor three bills expanding state level protections against employment discrimination. Assuming that the Governor wants to remain Governor and signs this legislation these new laws will be in effect 90 days after he signs them. They clarify New York’s current law banning wage discrimination on the basis of sex; outlaw discrimination based on “familial status,” and extend New York’s ban against sexual harassment to all work places, regardless of how few employees they have.
New York law currently authorizes wage determinations to be made on “any other factor other than sex.” The legislation, S.1 (Savino)/A.6075 (Titus) clarifies this standard. It provides that a “bona fide factor” to determine wages can be used only if it is related to the position in question and is “consistent with business necessity.” Furthermore, if a factor has a disparate impact on the wages based on sex, and there are less discriminatory criteria available then the employer is also liable for wage discrimination. It authorizes damages equal to three times the amount of back wages owed so it further incentivizes pay wage lawsuits. The bill’s language closely tracks standards that have already been imposed by the federal courts interpreting the Civil Rights Act
But wait; there’s more: Employers can’t prohibit employees from inquiring about, discussing, or disclosing wage information. The bill does not create an affirmative obligation to provide wage information to your employees but prohibits you from refusing to provide this information if it is requested. Believe it or not, this provision is consistent with existing law as interpreted by the NLRB, which is out to extend union protections to every employee in America whether or not they want them.
S4 (Little/Russell) makes it illegal for employers to discriminate against someone because of their Familial status. The sponsors argue that the bill is necessary because “Women with children are less likely to be recommended for hire and promoted, and, in most cases, are offered less in salary than similarly situated men.”
S2 (Valesky/Galef) extends New York’s law banning sexual harassment to all employers. Currently, employers can be sued for sexual harassment under section 296 of the Executive law if they have four or more employees.
Now don’t break into HR induced hives, at least in the short-term. Many of these new prohibitions track federal law and are narrow enough to easily integrate into the existing policies I know you all have. The longer term impact remains to be seen. New laws mean new lawsuits with new interpretations. Over time, New York employers will have less flexibility in making hiring and promotion decisions than their counterparts in other states.
Now if you’ll excuse me, I want to start reading “How Good Do You Want to Be: A Champion’s Tips on How to Lead and Succeed at Work and in Life,” by my favorite college coach, Nick Saban of the Alabama Crimson Tide.
Some Good News on Housing
As housing goes, so goes the economy. So the announcement by the National Association of Realtors that existing home sales increased in June at their fastest pace in over eight years is some of the best economic news I’ve seen lately. It is likely to give comfort to Fed members uneasy about whether or not to start raising short term interest rates this year. According to the NAR, sales of existing homes increased 3.2 percent to a seasonally adjusted annual rate of 5.49 million in June from a downwardly revised 5.32 million in May. Sales are now at their highest pace since February 2007 (5.79 million).
One statistic that I’ve been keeping an eye on is the number of first time home buyers. Their noticeable absence from the market has been one of the key indicators that the post-recession economy we are living in still feels like a recession to many Americans. The NAR report revealed mix results on this front. The percent share of first-time buyers fell to 30 percent in June from 32 percent in May, but remained at or above 30 percent for the fourth consecutive month. A year ago, first-time buyers represented 28 percent of all buyers.
What remains to be seen is how much of the increase in housing activity reflects growing consumer confidence and how much reflects buyers rushing to buy before the Fed ends this period of historically low interest and mortgage rates.
Here is the NAR Press release.
Live from DC. . .It’s the Debbie Matz Show!
NCUA Chairman Debbie Matz appears before a House Financial Services Subcommittee today at 2:00 PM to answer questions about NCUA’s budget and operations. In addition to questions about NCUA’s budget process-or lack thereof-CUNA anticipates that we might also get some information about the pending Risk Based Capital Reform. You can watch it live over the Internet or probably download it tonight if you are having trouble sleeping. Here is a link to the hearing.
You’ve Come A Long Way Baby(?)
Nothing to do with credit unions but there is a provocative article in the New York Times reporting on the changing attitudes that young professional women are taking as they enter the workforce toward achieving a work/life balance. According to the column “The youngest generation of women in the work force — the millennials, age 18 to early 30s — is defining career success differently and less linearly than previous generations of women. A variety of survey data shows that educated, working young women are more likely than those before them to expect their career and family priorities to shift over time.”
It seems to me that those businesses that are mindful of this attitudinal shift by, for example, embracing workplace flexibility and going the extra mile to keep young parents from slipping down the corporate ladder even as they dedicate more time to their families, might be able to attract and keep employees who they otherwise couldn’t afford.
Let’s say one of your best employees is leaving because her husband found his dream job as a yoga instructor in Idaho. You love her work and she loves working for the credit union. You both decide that she will do work for the credit union as a consultant. She won’t manage anyone and she can work when she wants as long as she gets the special projects assigned to her done on time. She is free to consult for other credit unions as well but probably won’t have the time. Is she an employee or an independent contractor?
With the subtlety of a bull in a china shop, the US Department of Labor yesterday released guidance clarifying the legal test to be used determine if our consultant is an independent contractor or an employee in disguise. If you hire independent contractors, then this guidance is a must read.
Under the Fair Labor Standards Act, if you “permit or suffer” an individual to work then that individual is your employee. (I’m not making this up: Congress says that if you are suffering at the hands of an employer you must be an employee).
Not surprisingly, this antiquated phraseology is not of much use to employers. Over the years it has fallen on the courts and regulators to determine how to apply this language. The purpose of yesterday’s legally binding guidance is to emphasize to employers that the Fair Labor Standards Act has an expensive definition of employee, one that the DOL feels has been misapplied to the detriment of millions of employees denied benefits as independent contractors.
According to the DOL, the ultimate issue to be analyzed in deciding whether or not our consultant is an independent contractor is not how much independence she exercises but how dependent the contractor is on the credit union. As explained in the guidance:
Unlike the common law control test, which analyzes whether a worker is an employee based on the employer’s control over the worker and not the broader economic realities of the working relationship…An entity ‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent [on the business for which she is working].
To determine whether your employee turned consultant is an employee in disguise, you are going to examine these criteria: the extent to which the work performed is an integral part of the employer’s business; the worker’s opportunity for profit or loss depending on his or her managerial skill; the extent of the relative investments of the employer and the worker; whether the work performed requires special skills and initiative; the permanence of the relationship; and the degree of control exercised or retained by the employer.
Remember these are criteria to be considered, not elements that all have to be present for a person to be an employee. Ultimately, you have to weigh all of these factors and apply them to your situation. As you do so, remember that on both the state and federal level the regulators are emphasizing proper classification of employees in their oversight regimes.
One more thing. The IRS has an interest in seeing that you have properly paid your taxes, so it has its own test to decide whether that consultant you hired is an employee. The IRS still considers factors the DOL doesn’t consider relevant. You can find the IRS’s criteria at.
I will be back on Monday. I hope everyone enjoys their weekend.
I would have to double check with the Compliance Department, but I’ll bet that at least twice a year a credit union tells us that an examiner is in their office and has told them that they must require their employees to take at least two consecutive weeks of vacation. Is the examiner right, they want to know.
My decisively equivocal answer to that question is, not exactly, but a from a safety and soundness standpoint, it makes a lot of sense. First, you won’t find a statute or regulation specifying the amount of vacation time your employees must take. The most authoritative documents I’ve seen on the subject are two legal opinion letters issued by New York’s Department of Financial Services. In 1995, the Department issued a general industry letter to financial institutions in which it opined that the State considered it “prudent business practice for every bank” and branch to have vacation policies that at a minimum mandate that “those officers and employees involved or engaged in transactional business or having the ability to change the official records of” an institution take at least two consecutive weeks of vacation each year. This letter would only be binding on state-chartered credit unions and even then, only strongly encourages credit unions and banks to have mandatory vacation policies.
As for NCUA, Section 4-6 of its examination manual, which assesses a credit union’s internal controls, tells examiners to find out whether or not officers and employees in “sensitive positions” take two consecutive weeks of vacation each year, “if practical.” The manual doesn’t define what practical is, but it clearly provides a bit of wiggle room for that smaller credit union to point out that it doesn’t have enough staff to mandate vacation time policies. Chapter 18 of the Guide lists an employees unwillingness to take vacation as a money laundering red flag.
The reason for these policies is obvious enough. Two weeks should give you more than enough time to figure out if an employee is engaging in illegal activity at the credit union. (And here you thought your employer just wanted you to be well rested). Still, it is clear that on both the state and federal level, credit unions that ignore the role that vacation policies play in protecting them from being used for illegal activity may raise legitimate safety and soundness concerns.
This idea seems simple enough, but this is another example of how your IT and compliance activities have to be coordinated. For example, in 2005, a Type-A bank employee asked the DFS if its vacation policy recommendation meant that she couldn’t access e-mail while on vacation. Let’s face it, some of us are more addicted to email than Donald Trump is to his own ego. The DFS explained that while employees can access email while on vacation, financial institutions should ensure that this discretion does not allow employees to blur the lines between routine email communications and communications effecting transactions.
The distinction the Department was trying to make is all the more difficult in 2015 when many employees are allowed to bring their own smartphones to work and passwords can access the most important of databases. So what conclusions should you draw from all this? First, although examiner concerns have traditionally been geared toward employees who can execute transactions, it seems to me that in this day and age, virtually all your employees have that power. As a result, while there is no statute or regulation mandating your employees take a significant, consecutive amount of time off each year, such a policy makes sense. Besides, it’s a good mechanism to ensure that your credit union isn’t dependent on one employee to perform a core function.
Second, for these vacation policies to be most effective from a safety and soundness standpoint, your IT Department should know who has access to what credit union resources at any given time. Even if you don’t rigorously enforce a vacation policy, one of the most basic steps you can take from a cybersecurity standpoint is to limit access to employees who actually need it.
Finally, don’t assume that your employees would never embezzle from your credit union. The sad reality is that good people do bad things all the time. Your typical embezzler is not a 26 year old kid whose been working at the credit union for a year; but is the trusted middle-aged executive with bills to pay.
Come to think of it, I better put in for vacation time between Christmas and New Years. See you on Monday and Happy Fourth of July!
You can never have too much information, especially if your job is to help keep your credit union on the straight and narrow. When I started on my compliance journey, one of the greatest resources that I used, and continue to use to this day, were examination manuals.
Recently, federal examiners released an updated lending examination manual and because it includes the pending integrated mortgage disclosure requirements, it is well worth your read. For example, Section V-1.9 contains a great chart to answer the age old question of what costs should be included in mortgage finance charges. What these manuals do is provide concise but informative summaries on the issues that your examiners will be reviewing when they come into your credit union. Unfortunately, New York State’s Department of Financial Services does not have its manual available on its website. Perhaps that is something that can be addressed in the future. Even if you don’t do compliance, but just need to get a quick overview of a trending compliance issue, these manuals are a great place to start.
Another OCC resource to check out is the OCC’s semi-annual report on banking trends. Although many of the risks it highlights are hardly surprising, it is still worth taking a look. Like the NCUA, the OCC continues to be concerned with the usual suspects of evolving cyber threats, the temptation to relax underwriting standards too much as competition for loans heats up, and of course, interest-rate risks. Like their credit union counter parts, the OCC is concerned that smaller institutions in particular – those with less than $1 billion in assets – are still stretching out their investments too long in the search for higher yield. One day the examiners will be justified in this concern, I’m just not sure in what future decade.
Incidentally, one interesting little factoid that I pulled from the report has to do with auto lending. According to the OCC, 60% of loans originated by banks in the fourth quarter of 2014 had a term of 72 months or longer. In addition, the OCC is becoming concerned with collateral advance rates. It reports that the average loan to value ratio for used auto loans was 137%. In addition, loan to value ratios for borrowers with credit scores lower than 620 averaged 150%. Statistics like these justify the increased scrutiny that auto lending is getting from New York State Legislators and regulators.
Epilogue: DOL Posts Overtime Proposal
As expected, the U.S. Department of Labor formally posted proposed regulations increasing the salary threshold for employees to be considered exempt to $50,400. When the proposal came out, the Association staff HR guru Chris Pajak and I looked at some industry-wide numbers and this proposal could have a huge impact on many credit unions. For instance, many of the CEOs of the smallest credit unions have salaries hovering right around $50,000. The same is true for many of the people you probably consider exempt employees, such as your teller supervisors and your compliance directors. Even if these employees don’t typically work overtime, the regulations mean that if you currently don’t track the hours these employees work, you’re going to have to start.
One aspect of the proposed regulations that I haven’t talked about includes an exception for “highly compensated employees (HTE).” As a very general rule, if an employee receives a base salary of at least $23,000 but receives compensation of at least $100,000 and performs at least one of the functions of an exempt employee, then that employee is exempt from overtime pay requirements. The DOL is proposing to increase the HTE threshold from $100,000 to $120,000.
Epilogue: My Big, Fat Greek Default
Despite a last second request for emergency credit, Greece officially defaulted on a debt payment due to its international creditors last night. The next big date to look for is July 6, when the Greeks hold a referendum on whether or not to accept the latest loan bailout requirements.
Greece’s troubles are already having an impact on our economy. The stock market has tumbled, bond prices are gyrating, and with corporate profits declining in the second quarter it appears that those who thought that the economy was gaining momentum were, once again, overly optimistic.
If not, then they can no longer be classified as exempt employees and must get overtime. According to this morning’s news reports, that’s the core part of proposed regulations updating the Fair Labor Standards Act to be released by the Obama Administration’s Department of Labor later this week.
Under existing regulations, one of the conditions for an employee to be classified as exempt is that he or she makes a little more than $23,000. Critics point out that this threshold requirement is so low that it has allowed employers to contravene the intent of federal law by classifying an employee as the supervisor and expecting them to work 50-60 hour weeks without overtime pay. They argue that a $50,000 threshold simply adjusts the Act to where it would be had it kept pace with inflation.
Opponents of this well-meaning but fatally misguided view correctly point out that a $50,000 threshold won’t increase the salary of many employees, but simply decrease the amount of hours existing employees work and, in a best case scenario, encourage the hiring of more lower-paid employees.
To put this in practical terms, review a list of your exempt employees making less than $50,000 and estimate how many hours they work over 40 each week. Then figure out how much it would cost you to pay each of these employees time and one-half for these hours. This is how much the federal government effectively wants to tax you. Occasionally, it makes me wonder if we live in a capitalist country.