Posts filed under ‘HR’
That is the question that popped into my mind this morning after spotting an article reporting that TD Bank was slapped with a lawsuit yesterday alleging that it violated the Fair Labor Standards Act (FLSA) by misclassifying a “teller services manager” as an exempt employee. The lawsuit is by no means unique, but the simple fact that employees continue to bring these claims indicates that financial institutions are continuing to ignore the impact that the FLSA is having on their operations. In addition, with major regulations on employee classifications to be released within weeks by the Department of Labor, this and similar cases demonstrates why I feel that the Department of Labor will introduce the most potentially impactful regulations for credit unions this summer.
Remember that under the FLSA, employees are presumptively entitled to overtime if they work more than 40 hours a week. Very generally speaking, the law creates an exemption for employees who exercise managerial control. As I have previously explained, fueled by the Department of Labor, suits alleging the misclassification of non-exempt and exempt employees have become more common and more expensive. This trend was highlighted earlier this year when the Supreme Court upheld the right of the Department of Labor to classify mortgage originators as non-exempt employees.
The TD Bank case (Reinaldo Kuri v. TD Bank N.A ) is fairly typical. The employee in question alleges that even though he was given the title of manager, his duties included “spending the overwhelming majority of his time” engaged in the duties of non-exempt bank tellers and customer service representatives. In addition, he alleges that he “did not exercise any meaningful degree of independent judgment,” but instead had to rely on the policies, practices and procedures set by the Bank.
This argument shows why employers increasingly find themselves in a Catch-22 when it comes to classifying their employees. A typical credit union is too small to cleanly delineate exempt and non-exempt duties. Your typical manager chips in by helping out with teller duties and anything else that needs to be done around the credit union. In addition, any credit union that doesn’t have policies and procedures in place detailing how it expects its employees to carry out their duties is committing operational negligence.
Under existing regulations (29 CFR 541.700), you judge whether an employee is classified as exempt or non-exempt based on her primary duties. The good news is that under existing regulations, the amount of time an employee spends performing exempt work is not the sole criterion used to determine whether or not an employee is exempt. This means, for example, that the branch manager, whose primary duty is managing the branch but on any given week may spent the majority of his or her time performing non-exempt duties, can still be classified as an exempt employee. The bad news is that the Department of Labor is expected to propose narrowing this exception so that any employee who spends the majority of her time doing non-exempt work will be considered a non-exempt employee. Think of how much this could cost you in overtime.
But even without these proposed changes, financial institutions continue to ignore the changing employment landscape at their own risk. For instance, if TD Bank loses this lawsuit, it could be required to pay cumulative damages and reimburse employees for their unpaid overtime.
Few things get people as nervous as a conversation about race. In part this reflects the fact that the vast majority of decent people don’t want to be insensitive to the concerns of others, and in part it reflects the fact that issues of race are so complicated that no one really thinks a frank dialogue will bring about much consensus.
The latest entry into this muddled mess of policy confusion is The Joint Guidance on Joint Standards for Assessing the Diversity Policies and Practices of entities that are regulated by federal financial regulators, including the NCUA. It can best be described as a non-mandate mandate. On the one hand, it establishes a suggested framework for financial institutions to use in assessing their efforts towards creating and encouraging a diverse workforce. On the other hand, the guidance stresses that the proposed framework is completely voluntary and geared towards institutions with 100 or more employees which are, not coincidentally, already subject to workforce diversity reporting requirements.
The voluntary framework encourages credit unions to establish: quantifiable standards for assessing their commitment to diversity and inclusion; policies and procedures to foster diversity and inclusion by, for example, reaching out to minority and women’s organizations to expand their applicant pool; and policies for hiring minority contractors. Credit unions should make these efforts as transparent as possible by posting policies to their websites, for example. Credit unions are urged to assess how well they are achieving these goals and are also encouraged, but not required, to share these self-assessments with their regulators.
Does the Guidance apply to small credit unions? On paper yes, but the preamble to the policy statement tells us that: “When drafting these standards, the Agencies focused primarily on institutions with more than 100 employees. The Agencies know that institutions that are small or located in remote areas face different challenges and have different options available to them compared to entities that are larger or located in more urban areas. The Agencies encourage each entity to use these standards in a manner appropriate to its unique characteristics.” I would put this in your file for the day an examiner tries to ding you for not complying with this guidance.
As for those of you who do have at least 100 employees, even though the guidance is wholly voluntary, my guess is you already do much of what is suggested in this guidance. Taking a look at this guidance and incorporating it into your existing practices isn’t a bad idea if only because today’s voluntary guidance may someday become tomorrow’s mandate. This is particularly true if regulators conclude that institutions aren’t doing enough to foster diverse workplaces.
The most important proposal of the year has nothing to do with Risk-Based Capital or Field of Membership. It has nothing to do with overdraft fees or payday loans. In fact, it hasn’t even been released yet for comment. Nevertheless, your fearless blogger is going to go out on a limb and tell you that the most important regulatory proposal you will be confronted with this year is one that is expected to be issued by the Department of Labor this summer.
What I am referring to is the release of regulations redefining what constitutes an exempt or non-exempt employee under the federal Fair Labor Standards Act (FLSA). At the very least the regulations could impact the operation of your credit union; in a worst case scenario it will be another one of those unfunded government mandates.
Under the FLSA, employees are entitled to a minimum wage and to at least time and one-half overtime pay for every hour they work over 40 hours per week. As many of you are aware, however, so-called exempt employees are not entitled to overtime. As a gross over-simplification, an exempt employee is generally defined as someone whose duties involve supervising or exercising independent judgment.
In March of last year, President Obama directed the Department of Labor to scrutinize the existing DOL regulation. To give you a sense of where this is headed, a fact sheet that accompanied the President’s directive argued that “the overtime rules that established a 40-hour work week, a lynchpin of the middle class, have eroded over the years. As a result, millions of American workers have been left without the protections of overtime” even though they are expected to work 50-60 hours a week.
One way the DOL is expected to attack this perceived problem is to restrict the so-called primary duty test, which could have a profound impact on many smaller credit unions. For example, let’s say you have a four person branch. Your manager’s primary duty is to manage the entire branch. But, on any given week, he may spend a good deal of his time pitching in at the teller window or helping out originating mortgage loans. Under the existing regulations, you still can treat that manager as an exempt employee, but it is quite possible that the DOL will seek to limit the exempt designation solely to managers who spend the majority of their time taking on purely supervisory tasks. You may want to take a look at 29 CFR 541.106.
Technology can also influence the DOL’s proposal. A recent article in the Wall Street Journal reports an increase in lawsuits in which employees are suing employers who provide them cell phones with the expectation that they perform uncompensated work outside the work day. This is an issue I have always found intriguing. It’s one thing to send your top managers an email at 6:00 a.m., it’s another to send that same email to all of your employees irrespective of their work status.
These are just two examples of how the DOL’s regulation could impact your credit union. Regulations haven’t even been proposed yet, so we are a long way from seeing any of my worst case scenarios become realities. Nevertheless, given the potential scope of the proposal, you should all be keeping an eye out for the DOL regulations once published. It could have a uniquely negative impact on small businesses like credit unions.
New York City is about to impose restrictions on employers that will help answer this question.
Last Thursday the City Council passed by a 47-3 vote legislation that bars employees from requesting or using for employment purposes the consumer credit history of an applicant for employment or otherwise discriminating against an applicant or employee “with regard to hiring, compensation, or the terms, conditions or privileges of employment based on the consumer credit history of the applicant or employee “
“Surly there must be an exception for the financial services industry?” you say. After all we are talking about the capital of world finance where unethical financial gurus can hide billions of dollars easier than I misplace my cell phone.
Not really. The prohibition against credit reports does not apply to an “employee having signatory authority over third-party funds or assets valued at $10,000 or more; or that involves a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer.”
Since there is no categorical exception for banks and credit unions those of you in the city seeking to utilize this exception will have to parse the quoted language on a case-by-case basis. I would suggest it is worth doing so only for the most senior positions with the most direct control over your credit union
Another exception applies to a position “with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employers or client’s networks or databases.”
This does seem broad enough to cover a good portion of but not all of your I.T. staff but it is also vague enough to raise some troubling questions. For example, does the exception apply to persons whose duties authorize them to modify data security networks, or, more broadly, to individuals whose jobs enable them to access sensitive computer networks? If the narrower definition applies than you won’t be allowed to do credit checks on the Edward Snowden wannabes of the world who have no compunction against gaining unauthorized access to employer systems.
If you’re saying to yourself that, since you live outside of the Big Apple, you don’t have to worry about this measure you are wrong. Similar bills are already floating around the state legislature and the support for this measure will provide a real push to getting a similar measure approved on the state level.
Supporters of this proposal argue that credit checks don’t have any kind of direct relationship to a person’s competency. Over the last eight years many people have had their credit battered by flat wages and layoffs having nothing to do with how well they do their job. I get that. But at the end of the day, when you work for a bank or a credit union, you do take on an added obligation to handle money properly whether you are a teller, branch manager or a CEO. Credit unions should be able to decide for themselves what they need to know when evaluating applicants free of government micro managing. Here is a copy of the bill which is awaiting the Mayor’s signature. http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1709692&GUID=61CC4810-E9ED-4F16-A765-FD1D190CEE6C
Cyber Sharing Bill passes House
A strange thing is happening in the House of Representatives: It’s starting to pass substantive bills with bipartisan support. Is our long national nightmare of legislative ineptitude coming to an end?
Yesterday, the House passed HR 1560 which extends liability protections to businesses that voluntarily share cyber threat information. The legislation positions the government as a central clearinghouse for cyber threats.
The bill is consistent with a growing shift in emphasis away from cyber threat prevention and towards more quickly responding to cyber-attacks after they occur. (Your credit union will be subject to a data breach; the question is how quickly will you spot it?) The quicker a network of potential targets can talk to each other the quicker they can respond to data breaches. Here is a copy of the bill which has not yet been passed by the Senate. http://thomas.loc.gov/cgi-bin/query/F?c114:2:./temp/~c114VL7VIk:e2869:
Whether or not you work in a unionized workplace, the National Labor Relations Board has used an expansive view of federal law to insert itself into , and implicitly attempt to micromanage, the American workplace in a way that is directly impacting your credit union operations.
Those of you who think I’m exaggerating and\or those of you whose job it is to manage employees would be well advised to review the NLRB’s recent guidance outlining language that can and can’t be in workplace handbooks(http://www.nlrb.gov/reports-guidance/general-counsel-memos Report of the General Counsel Concerning Employer Rules). On the one hand the memorandum is an attempt to provide a concise compendium of handbook dos and don’ts based on its prior rulings; on the other hand it reads like an “April Fools” joke. Unfortunately it isn’t.
First, the NLRB correctly reminds us that handbook language violates federal law when “employees would reasonably construe the rule’s language to prohibit” concerted activity be it in a unionized or non-unionized workplace. The problem is that the mythical employee the NLRB is protecting apparently has a law degree, is utterly devoid of commonsense, behaves like an out-of-control teenager who has just been told she has to be home by 11:00PM and works for the NLRB. No other workplace could function in the workplace as pictured by the Board
In the-“ You can’t make this stuff up category” the NLRB explains that a workplace policy “that prohibits employees from engaging in. “disrespectful,” “negative,” “inappropriate,” or “rude” conduct towards the employer or management, absent sufficient clarification or context, will usually be found unlawful… Moreover, employee criticism of an employer will not lose the Act’s protection simply because the criticism is false or defamatory.”
Apparently the NLRB doesn’t think your average employee has a rudimentary grasp of the English language or can be expected to have the etiquette of a kindergartener.
But wait there’s more. Did you know that a policy banning “Disrespectful conduct or insubordination, including, but not limited to, refusing to follow orders from a supervisor or a designated representative.” Or another prohibiting “Chronic resistance to proper work-related orders or discipline, even though not overt insubordination will result in discipline.” Is illegal?
I want to give the NLRB the benefit of the doubt. Maybe it is so committed to protecting the Norma Rae’s of the world chafing under employer misconduct that it wants to give complaints about management malfeasance the widest possible protection. The problem is that its prohibitions also prohibit language intended to regulate employee to employee civility. For example it found the following policy to also violate the FLSA.
“Material that is fraudulent, harassing, embarrassing, sexually explicit, profane, obscene, intimidating, defamatory, or otherwise unlawful or inappropriate may not be sent by e-mail. …”We found the above rule unlawful because several of its terms are ambiguous as to their application to [concerted] activity—”embarrassing,” “defamatory,” and” otherwise . . . inappropriate.” We further concluded that, viewed in context with such language, employees would reasonably construe even the term “intimidating” as covering Section 7 conduct”
Finally even where the NLRB tries to be reasonable the distinctions it draws between lawful and unlawful conduct is so paper-thin that a properly designed handbook needs more qualifiers than a Viagra Ad. For example the following language is unlawful “ Do not discuss “customer or employee information” outside of work, including “phone numbers [and] addresses.” But this policy is legal “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination.”
If you are a board member helping select candidates to be your next CEO or you’re an Executive filling a slot on your management team, are you more likely to hire George Bailey or Mr. Potter? Be totally honest. George Bailey is a much nicer guy, but who’s more likely to be running a growing credit union ten years down the line? For that matter, should character even matter when making hiring decisions?
These questions came to mind recently after reading an intriguing bit of research in the most recent Harvard Business Review. According to at least one recent survey, the higher character ratings a CEO is given by his staff the better a company tends to perform.
According to the research, CEOs whose employees gave them high marks for character had an average return on assets of 9.35% over a two-year period. That’s was almost five times higher than the return generated by Executives given the lowest ratings. The cynics might be wrong after all.
The findings are based on research performed by a leadership consultancy. They identified what they considered to be the most universally identified moral principles – integrity, responsibility, forgiveness and compassion. They then sent anonymous surveys to employees at 84 companies and not-for-profits and followed up by interviewing many of the Executives. The highest performing Executives, both based on their character and financial performance, were given high ratings on all four principles. For example, they were described as standing up for what’s right, expressing concern for the common good, letting go of mistakes and showing empathy.
On the flip side, the ten worst performing management teams – euphemistically described as self-focused – were described as warping the truth for personal gain and caring mostly about themselves “no matter what the cost to others.”
Ultimately, it may be impossible to objectively quantify character. After all, we would all have a intriguing enough to ponder next time you start looking for a top executive.
NYS Budget Plan Set
Late last enough, the smoke rose from the State Capitol. It’s been reported that a budget plan has been agreed to for the 2015-2016 State Fiscal Year. It doesn’t look like this will have much of a direct impact on your credit union. More generally, budget negotiations in NYS begin and end with an annual struggle over state aid to education. The “framework agreement” reportedly includes a school aid increase of $1.6 billion and ethics reforms.
On that note, enjoy your Monday. They say Spring will arrive any day now. I am not holding my breath.