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Thursday, July 31st, 2008
EMPLOYMENT LAW TIP SHEET

2008 ANNUAL LABOR & EMPLOYMENT LAW UPDATE

The Labor and Employment Group is busy planning our Annual Labor & Employment Law Update. This years seminar will be held on Thursday, September 25, 2008, at Old Overton Club. We will be mailing out registration forms in the next few weeks.

OSHA DEVELOPMENTS

In the wake of the Sago Mine disaster of 2006, Congress felt pressure to modify the penalty structure for violations of the federal Mine Safety and Health Act. The President signed the Miner Act in 2006 and increased maximum penalties from $10,000 to $60,000. The amendments to the Mine Safety law resulted in a dramatic increase in the number of citations written, the dollar amounts of penalties, and the number of civil penalty contests that are being litigated. We have seen settlements become rarer and the number of cases set for trial going up.

In April 2006, the U.S. Senate Committee on Health, Education, Labor, and Pensions held a hearing on penalties for worker fatalities under the Occupational Safety and Health Act. The Committee received testimony from Peg Seminario, the Director of Safety and Health for the AFL-CIO. Ms. Seminario presented an abundance of statistics on worker fatalities, including the facts that the number of fatalities has remained constant over the past five years and that Latino and immigrant worker fatalities have increased, primarily in construction-related industries.

Ms. Seminario maintained that the vast majority of workplace deaths are preventable and that workplace safety and health measures are often ignored. She discussed the differences between the MSHA rules and the OSHA rules, including the much greater frequency of federal inspections under MSHA and the markedly higher penalties for violations. She said, according to OSHA inspection data, that the average serious penalty in fatality cases for FY 2007 was just $2,343 and urged the Senate to force OSHA to become more like MSHA.

The other cry being heard from organized labor and the Justice Department is that unless the criminal penalties are expanded and applied to individuals (as in the environmental laws), companies will not have incentives to comply. Their point is that seeing managers go to jail will make all companies more serious about safety compliance.

Although we know that much of the rhetoric is political, it is likely that businesses with the risk of workplace injuries will come under greater scrutiny in the current and perhaps future political climate. Our clients should be aware that OSHA may be coming and that an ounce of prevention is worth a pound of cure. Doing safety audits and self-evaluation projects to enhance workplace safety is highly recommended in today’s environment. Our firm has an extremely broad health and safety practice. We have experience in OSHA, MSHA, black lung, workers compensation, toxic exposure, co-employee and other categories of workplace safety law. Consultation regarding your worker safety programs is well advised, and there is no time like the present.

MAN BITES DOG – MANAGER WHO REFUSED TO FIRE SUBORDINATES WINS BIG VERDICT

This is an unusual case. Ronald Luri was General Manager in Cleveland, Ohio for Republic Services, a waste collection company. Luri claimed that an area VP for Republic told him to fire several employees who were about sixty years old. Luri refused, because he felt that doing so would be age discrimination. A few weeks later, Luri began getting write ups for not holding enough staff meetings and within six months was fired for poor performance.

Republic Services said that there had been complaints about Luri’s performance well before he refused to fire the workers. But Luri’s lawyers hired a computer forensics expert who proved that the earlier complaints were forgeries. At trial, the managers in question were forced to admit that they had backdated the complaints. Even so, Republic maintained that Luri’s termination for poor performance was fully justified.

The result? A $46 million jury verdict for Luri, the largest such award in Ohio history. The lesson? If, as Republic says, Luri really did have performance problems, it is best to be patient and address those issues through normal channels than to engage in falsehoods.

EMPLOYEE TURNOVER AND EXECUTIVE BONUSES – NEW STRATEGIES

Employee turnover is both disruptive and expensive. Hay Group Consultants estimate the cost of hiring and training a replacement at anywhere from 6 months’ to 18 months’ pay.

Now, some companies are taking new approaches to employee turnover – making reduced turnover rates a key component of executive and middle management bonus plans.

According to a Wall Street Journal article, Penske Automotive Group made CEO Roger Penske’s 2007 bonus contingent in part on keeping employee turnover below 31%. In previous years, annual turnover rates at Penske had been as high as 80%. In 2007, the rate was 30.8%, and Mr. Penske got his bonus.

Other companies, such as ExlService Holdings, believe that the key to controlling turnover rests with middle management instead of the CEO. At Exl, lower managers can earn substantial bonuses if they attain specific targets for employee turnover.

In yet another approach, PepBoys ties bonuses for senior management to turnover rates for middle management in the belief that keeping experienced middle managers leads to better team building, improved customer service, and less employee attrition on down the line.

Finally, while most of these approaches measure turnover in a way that includes both voluntary quits and involuntary discharges, a small group of companies, like Extreme Networks, tie executive bonuses to controlling voluntary turnover, i.e., reducing the number of employees who quit. These companies say that managers should not be rewarded for holding on to bad employees.

If your company is experiencing abnormally high turnover, these ideas might provide help.

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