Government, Courts, and the World of Work

After the bruising battle over paid family leave, supporters of universal health care coverage were relieved when business lobbyists expressed enthusiasm for a legislative proposal to cover every resident in New Jersey. Perhaps proponents should be mindful of unintended consequences.

Most of the adult citizens who are uninsured are employed, primarily by a small business.  According to federal statistics, 54.3% of New Jersey employers with fewer than 50 employees provide health care coverage. This represents about 135,550 employers that employ 737,500 people. 

The biggest reason reported by small business for not offering health care benefits is expense.  In 2007, the average amount that employers paid toward their workers’ health insurance premium rose 9.4% to $7,139. Small employers actually pay more because they do not enjoy the economy of scale derived from a large headcount.

Proponents of universal coverage believe that the small employers who currently provide coverage will likely continue to do so because their premium costs would stabilize over time as more people become insured.  This assumes that as the insurance pool increases, premiums will drop. However, when the state reformed the small employer market in 1993, premiums have increased each year thereafter. In any event, research conducted by The Commonwealth Fund in 2002 indicates that even a 30% reduction in premiums would cause only about 15% of currently uninsured small employers to offer coverage.

It could be that the greatest risk of universal health care coverage is that small employers who are already providing health care insurance to their employees will simply choose not to sponsor a health care plan knowing that their employees will still be covered by a state–mandated plan. Advocates of universal coverage are taking a big leap of faith that small employers will not respond to this incentive to cut back or drop coverage entirely.

The state Senate today gave final legislative approval to a bill to allow workers to take paid leaves of absence to care for family members, voting 21-15 in favor despite the objections of opponents who said it will hurt the state’s economy and make New Jersey less competitive.

The paid family leave act (A873) would allow workers to apply for up to six weeks off to care for a newborn or newly adopted child, or a sick parent, spouse or child, and collect up to two-thirds of their pay, up to a maximum of $524 a week. The benefit would be funded by an average worker contribution of about $33 a year, levied through a mandatory employee payroll tax. The bill now goes to Gov. Jon Corzine, who has said he will sign it into law.Sponsors say employees should not be forced to choose between their jobs and their families when a new child arrives or a loved one has a health crisis. Opponents contend the measure will add to the cost of doing business in New Jersey and prompt some employers to take their jobs elsewhere.

However, the bill would not require small employers to grant a leave of absence or keep a job open with a guaranteed right to reinstatement.

In fact, on its way through the Legislature, the bill was substantively re-written to offer broader legal protection for business owners with fewer than 50 employees. It now gives small-business owners the right to fire and replace an employee who takes family leave if the company says it cannot operate without a key position filled. 

What’s certain is that the law wll require a learning curve for small business. It will require additional posting, notice, and reporting procedures. Will it be a hassle? You bet. Will it impose a new legal burden? Not really. Although for small businesses who think that they are immune to workplace regulations, mistakes could be costly.

Having passed the Assemby, the Senate postponed action on the so-called paid family leave.  The bill would entitle employees up to six weeks of wage continuation to care for ill family members and newborns.

Opposition has been fierce, but in the end an obscure constitutional requirement requiring a super-majority vote on procedural issues  caused the Senate  to postpone a vote until it reconvenes later this year.

Opponents have argued that the bill would cost jobs, even though employees would pay for the benefit and there is no empirical evidence suggesting wage insurance would cause employers to restrict hiring.  Nevertheless, the fear of red tape and absent employees has caused small business to mount a sustained attack. An economic down turn has caused even more anxiety.

Time appears to be  on the side of those who seek to derail the bill.  The economy appears to be in a recession and legislators do not want to be branded as insensitive to business.

On the other hand, some in the executive branch and their labor allies are anticipating a Democrat in the White House later this year and they would like nothing better than to get national recognition for paid family leave.  Indeed, there is speculation that the NJ bill will be a model for national legislation.

As noted in an earlier post, paid family leave represents good social-economic policy; but right now, opponents have the better political club.

In a curious mix of bipartisanship,  4 State Senators have proposed a bill that mirrors an Arizona law that requires employers to verify electronically the legal status of new hires and imposes stiff penalties for noncompliance.

The Arizona law encourages people to report employers who employ undocumented workers to the county sheriff. Under the law, the sheriff’s department conducts an investigation and makes a recommendation to the county attorney for penalites, which could include the revoking the firm’s license to conduct business.

One sponsor, Senator Sweeney, the Senate Majority Leader, is also a labor official.  Senator Pennacchio, a Republican,  is running for a US Senate seat.  Thus, a political confluence of left wing economic insecurity and right wing cultural angst.

This issue will be grinded out for the the remainder of the year.

The first President Bush vetoed the Family Medical Leave Act twice.  Bill Clinton signed it.  It requires employers with 50 or more employees to provide up to 12-weeks off for disability leave or for employees to care for ill family members.  The law is complex and creates a fair amount of litigation.

Now legislation has been introduced in both the House and Senate to extend FMLA coverage to employers with as few as 25 employees and include at least 24 hours of “school involvement leave.”

Could this be de ja vu all over again? The second President Bush is sure to veto the bill when it reaches his desk. What about the next guy (or gal)? Odds favor an expansion in 2009.

For those of you who have been reading this blog, you understand that the so-called paid family leave being advanced in NJ is not a leave law, per se.  Rather, the bill amends the temporary disability law so that employees can receive benefits for up to 6 weeks to care for ill family members.

Proponent’s of the bill mention that employees can still be fired.  However, in Delgado v. LA Weight Center’s, Inc. A federal court held that an employee can sue her employer for firing her in retaliation for filing a state disability claim.   This decision creates an exception to the at-will discharge rule.

Opponent’s of paid family leave are citing the Delgado case to argue that firing employees who are absent caring for ill family members will lead to frivolus allegations of retaliation, thereby creating a de facto right to reinstatement.

The drafters should seek to limit frivolous litigation and be certain that the bill does nothing to undermine at will employment.

A major study has reported that most diversity training efforts at American companies are ineffective and even counterproductive because it focuses too much time on compliance and not enough time on organizational culture and change.  

Several experts offered two reasons for this: The first is that businesses are responding rationally to the legal environment, since several Supreme Court rulings have held that companies with mandatory diversity training are in a stronger position if they face a discrimination lawsuit. Second, many companies, with the implicit cooperation of diversity trainers, find it easier to offer exercises that serve public relations goals, rather than to embrace real change.

I have trained thousands of supervisors at hundreds of companies since 1995 and I generally concur with the study’s findings.

For the most part, companies see diversity as a legal compliance issue, not as a meaningful opportunity to create a more productive working environment. Our research indicates that employers get sued regardless of training because of this.

In response, we have developed training that gets at the root causes of conflict and treats diversity as a corporate value, rather than as a legal necessity.  This type of value-based training is really not for everyone. By and large, it’s for employers that already get it.  Short of that, there is something to be said for preserving a defense to a discrimination suit.

Legislation has been passed to crackdown on employers who discriminate against employees for practicing their personal religious beliefs.

The legislation (A-3451) would expand the protections provided under the Law Against Discrimination to include protecting employees from losing promotions, retaining employment, or making a transfer based on the fact that the employee has specific religious obligations. The bill would require that an employer make an accommodation to the employee, unless the employee’s actions will cause undue hardship for the employer. 

Employees taking time off for religious purposes would be allowed to make up time with the employer at a mutually convenient time or the employee would have an option to take a leave with pay.

Governor Corzine has not indicated whether he will sign the bill. Or he may conditionally veto it.  In either case, the bill goes beyond Title VII protection and will apply to every NJ employer regardless of size.

The most common cause of workplace litigation is the perception of unfair discipline and discharge.   Many employers misunderstand this, and that’s why supervisory training makes no difference.

So, before considering supervisory training, consider this: Most employers are interested in production, efficiency, uncovering mistakes, and the elimination of waste. This requires the compulsory cooperation of employees by getting them to follow uniform procedures over and over again, and to make sure there are no deviations.   Since the whole system is based on repetition and finding and correcting mistakes, most feedback given by supervisors, even if  intended to be helpful, is viewed by employees as punitive.

Further, in a workplace where there is an absence of praise, discipline will almost always be perceived as punishment. 

But fair and ethical discipline requires thinking and acting from both sides of the brain.  It requires more than the use of punishment.  The best supervisors combine job expertise with people skills. To have a truly productive and litigation free environment, supervisors must motivate employees by tapping into their values– as opposed to merely threatening them, which is mistakenly seen as easier to do.  In short, the best supervisors are leaders, not dictators.

But the dirty little secret is that many employers are simply not interested in the leadership abilities of their supervisors because they believe that leadership skills– such as listening, articulating core values, coaching, mentoring, conflict resolution, cultural sensitivity– are incompatible with meeting production quotas, finding mistakes and eliminating waste.

Since many employers are not really interested in supervisory leadership, supervisors have no incentive to improve their people skills. Supervisory training is a waste of time without incentives encouraging supervisors to take leadership skills seriously. Training without incentives and role models from the top, leave supervisors feeling more disillusioned and cynical than ever. 

Its clear that discipline without leadership results in conflict; and conflict perpetuates litigation. But most employers have no insight into the problem and no genuine desire to break this vicious cycle.

The Department of Homeland Security’s (DHS) Rule on the Social Security No Match notice remains the subject of litigation. A federal judge in San Francisco has delayed its implementation, stating that if the rule were to take effect, it would result in “irreparable harm to innocent workers and employers” and therefore there should be a full hearing on whether DHS had failed to follow proper procedures for issuing a new rule.  In particular, the rule would force employers to fire employees within a 90-day period.  Consequently, the rule is on hold pending the outcome of the case or appeal.  If enforced, the rule would also have unintended negative consequences for the New Jersey’s economy. If enforced, it would require employers to fire undocumented workers, making it the weapon that could finally make a dent against illegal immigration. But it’s a mistake to believe that it will be good for the economy if a million undocumented workers were forced to leave the state’s labor force. State officials have no authority to deport undocumented workers so the likely outcome of mass firings of undocumented workers would be a thriving underground economy.