october bulletin 2014

Denver 303.839.5177 Scottsdale 602.955.7558 Colorado Springs 719.667.0677 Fort Collins 970.223.4107 Toll Free 800.884.1328

Professional Fiduciaries – Do We Need One?Peggy Hoyt-Hoch, SPHR, CBP, GBA, Employment Law Services Attorney

The answer depends on your plan’s status and complexity and your named fiduciaries’ levels of knowledge, time commitment, and

comfort level. For example, if your fiduciaries are not comfort-able making the plan’s investment selections themselves, they might want to consider professional assistance for an extra level of protection. The Employee Retirement Income Security Act

(ERISA) allows for the transfer of some fiduciary responsibility for a retirement plan, such as a 401(k) or 403(b) plan, to a professional

fiduciary.

In the past 10 years, we have seen an increase in the use of professional fiduciaries by plan sponsors. Several of these professionals are actively marketing their services to plans. In light of this increas-ing use, we also see some plan sponsors making incorrect assumptions about the level of protection they are actually obtaining. This article briefly describes the types of services, as well as the level of fiduciary protection, if any, that each provides. The different titles originate from the number of the paragraph within ERISA that includes each definition.

As with all matters of discretion, your plan fiduciaries ought to carefully ensure that those they consider hiring really do offer the service and protection your plan needs. There are some very key differences in the actual level of plan services being marketed, as well as the legal level of fiduciary protection provided. Remember that some fiduciary actions can never be delegated —specifically, the very act of selecting a third party to delegate fiduciary responsibility to is one of those actions that cannot be delegated. So what fiduciary protection might be available?

First, ERISA section 3(38) refers to a registered investment manager who contractually accepts fidu-ciary liability. That is, the 3(38) has discretion to select, monitor, and replace non-performing plan investment funds. To operate as a 3(38) fiduciary, the provider must be a registered investment advi-sor, bank, or insurance company and must acknowledge its fiduciary status in writing. Be sure to include both the appointment of a 3(38), as well as their acknowledgement of fiduciary status in your service agreement with the 3(38). Remember that it is still the responsibility of the named fiduciary (generally the employer, board, or plan committee) to appoint and oversee the 3(38) fiduciary to ensure that the 3(38) is performing the service consistent with the contract and the investment policy given to them by the sponsor. The sponsor does not, however, have to monitor each investment deci-sion or otherwise micromanage a 3(38) fiduciary.

Professional Fiduciaries –

Do We Need One?

Page 3You Asked: What Is the

“Safe Harbor” Against Improper Deductions from

Exempt Employee Pay?

Page 4Unemployment Appeal

Results in Good Decision for Colorado Employers

Page 6Your Organization’s Career

Website: A Branding Opportunity

Page 7Know When and How

to Push Back

Page 8Practical Considerations

When Terminating the Employment Relationship

Page 9Same-Sex Training Policy

Violates Federal Law

Page 10Discipline for Attitude Does

Not Violate Due Process

Page 11 SurveyNews

EMPLOYMENT LAW | SURVEYS | HUMAN RESOURCES | TRAINING

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2 | The Bulletin | October 2014 | MSEC.org

Some plan sponsors may believe they have retained the services of a 3(38) fiduciary when, in fact, they have not. There are also investment consultants available that may be hired as 3(21) fiduciaries. This level of consultant only makes recommendations to the plan sponsor on which investment fund offerings should be selected for the plan. The decision to accept or reject those recommendations remains with the sponsor and, as such, so does the execution of the decision and the corresponding fiduciary liability. In this scenario, the investment consultant is considered a 3(21) fiduciary with the plan sponsor. On occasion, a plan sponsor believes they have hired a 3(38) fiduciary when, in fact, their contract only provides for 3(21) fiduciary status.

Also offering investment services to plans are non-fiduciary registered investment representatives. Their services and expertise may be helpful, but be aware that they do not share fiduciary status. Know what service and protec-tion you are getting before you enter into any contract for plan services.

Should your plan consider using a professional fiduciary? If so, shop around so that you may prudently and thoughtfully compare available services. Be sure you know what services and protections you need and are acquiring. Finally, while MSEC never acts as a fiduciary to a member’s retirement plan, we may consult, advise, and educate plan sponsors, committees, and boards about to plan operations and compliance. £

Our labor and employment attorneys partner with you to understand your business needs, your priorities, and your legal issues. As a result of that

partnership we have a clear understanding of how to best respond to your workplace issues and minimize your liabilities.

If you have questions, call 1.800.884.1328 or visit our website at MSEC.org.


What Is the “Safe Harbor” Against Improper Deductions from Exempt Employee Pay? Tina Harkness , Esq., SPHR, Information Resource Manager

It is not often that the U.S. Department of Labor (DOL) really helps employers out. But, with its 2004 changes to the federal Fair Labor Standards Act regulations the DOL created a “safe harbor”

for employers to protect them when they make improper deductions from exempt employee pay.

Inadvertent improper deductions are common given the complexity of the Salary Basis Test, which employers must meet to classify employees as exempt. The test requires employers to pay exempt executive, administrative, and professional employees a predetermined weekly salary that is not determined by the quantity or the qual-ity of their work. Employers may only make specified deductions from this salary. Consult our FYI Wage and Hour: Exemptions – Salary Basis Test for more information. If an employer does not pay an employee according to the Salary Basis Test, the employee is nonexempt and entitled to overtime pay.

All employers need to do to take advantage of this safe harbor is:

• clearly communicate a policy that prohibits improper pay deductions and includes a complaint mechanism,

• reimburse employees for any improper deductions, and

• make a good faith commitment to comply in the future.

To meet the first of these requirements, MSEC recommends a written policy distributed to employees at the time of hire, in employee handbooks, or published on an employer’s intranet.

Sounds easy, right? However, we find that many employers do not have such a policy and have not availed them-selves of this protection. Employers who do this will not lose exempt status for any employees they improperly deduct from unless they willfully continue making improper deductions after receiving employee complaints.

The DOL has even gone so far as to provide a sample model salary-basis policy on its website. Employers are not required to use the DOL’s model policy, and can create their own covering the same material. MSEC has created two shorter samples for members based on the DOL’s model policy. Click here to access MSEC’s samples, and contact MSEC with your questions. £


Unemployment Appeal Results in Good Decision for Colorado Employers Mark Parcheta, SPHR, Employment Law Services Attorney

As a contributing author to The Practitioner’s Guide to Colorado Employ-ment Law, I have the responsibility of reviewing the annual developments in unemployment compensation law and synthesizing that information for Colorado attorneys. I just completed the research for the 2014 update and thought I would share with the MSEC community a case that I found particularly interesting. There are numerous morals to this story, besides the obvious dangers of intimate relationships in the workplace.

In Yotes, Inc. v. ICAO (CO Ct. App. 2013), Mr. Miller quit his job and filed for unemployment benefits. Before quitting, he had an intimate relation-ship with a female co-worker. After the relationship was over, the female co-worker demanded that Miller take a paternity test to determine if he was the father of her child. Miller found the communication unwelcome and complained that the female co-worker was sexually harassing him. He wrote a complaint letter to his supervisor on a Saturday. The supervisor

called Miller three days later, on Tuesday, and set a meeting with Miller for Friday, six days after he filed his com-plaint. At that meeting, the supervisor authorized Miller to take a paid leave and excused him from meetings that involved the female co-worker until the supervisor could address the issue the following week. This delay was due to the supervisor’s travel schedule.

Miller received another unwelcome cell phone call from the female co-worker later that day, outside of the work-place, and he resigned. Miller asserted that Yotes normally handled important business matters within 48 hours and since it had not yet resolved his issue, Yotes wasn’t taking his complaint seriously. Should Miller receive unem-ployment benefits under these circumstances?

Miller’s unemployment claim ping-ponged its way through the unemployment system. A deputy initially granted Miller benefits, but a hearing officer overruled the deputy on appeal. Upon further appeal, the Industrial Claim Appeals Office reversed the hearing officer and granted benefits to Miller. Yotes appealed the ICAO’s decision to the Colorado Court of Appeals, a step not often taken in unemployment claims.

At issue were two sections of the unemployment statute. The ICAO granted benefits based upon C.R.S. § 8-73-108 (4)(o) which provides a full award of unemployment benefits if the claimant separates because of “personal harassment by the employer not related to the performance of the job.” In addition, the ICAO felt that Miller had been subjected to unsatisfactory working conditions in violation of C.R.S. § 8-73-108 (4)(c).

The Court of Appeals held that the co-worker’s behavior did not constitute harassment by the employer, therefore Section (4)(o) was not applicable. The female co-worker, who was not empowered to take tangible employment action, was not a supervisor and therefore not the claimant’s employer.

The court also found that Miller was not subjected to unsatisfactory work conditions. The court held that C.R.S. § 8-73-108 (4)(c) requires that an objective, not subjective, standard be applied. In determining whether the

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working conditions were objectively unsatisfactory, it looked at whether the conditions existed at the time of sep-aration and were likely to continue to exist. By quitting before Yotes could complete its investigation, Miller could not establish the second requirement.

The court also found that Yotes acted reasonably, since Miller was authorized to take leave until the investigation was completed. There was no risk of continuing harassment. Further, the court said Yotes was not responsible for protecting Miller from the co-worker’s off-duty cell phone call.

What are the morals of the story? If you feel the employee is “at fault” for the separation, don’t be shy about exer-cising your unemployment appeal rights, even up to the Colorado Court of Appeals. We would not have this good decision unless Yotes felt strongly enough to appeal. Second, in an unemployment context, what happens between employees outside of work shouldn’t be factored into what constitutes unsatisfactory work conditions. Third, make sure you apply an objective standard to the unemployment statutes. Here, Miller’s failure to let Yotes complete its investigation was fatal to his unemployment claim. Fourth, always take immediate action to prevent additional harassing conduct. Here, Yotes placing Miller on paid leave was persuasive to the court. Finally, react quickly to harassment complaints. While Yotes was successful here, this was not the textbook timing on how to handle a harassment complaint. The delay in responding cost Yotes an employee who thought it was not acting fast enough. £


Your Organization’s Career Website: A Branding OpportunityDavid Cabrera, MS, SPHR, CCP, Human Resources Services Consultant

The attributes of the employment relationship at your organization differ-entiate you as a place to work, given competing employment alternatives. This is known as your employment “brand”, and the goal of branding is to convince your target workforce that your employment offer best meets their interests and needs. One way to do this is through your career website.

Websites often focus on open jobs and employee benefits while an increasingly diverse workforce is focused on how the employment rela-

tionship will promote learning and development; connection, meaning, and purpose; and flexible and supportive work arrangements. Use your website to paint a compelling picture of a mutually beneficial relationship based on growth, impact, and common interests. Here are some suggestions:

Define the values and aspirations that drive your organization’s mission, culture, and way of doing business; highlight how these shape the employment experience and the opportunity to grow, contribute, and make a difference; and weave these into the “fabric” of your website.

Incorporate media “richness” to establish an emotional connection with applicants. Video messages from key lead-ers and employee testimonials can make your organization’s message real and compelling and help candidates assess their level of fit for the job and the organization. Consider using videos that speak to the organization’s social mission and the “feel” of working there.

Make sure that your website is easy to use, well-organized, and linked to Facebook, Twitter, LinkedIn, and You-Tube. An aesthetically pleasing, engaging, and energetic website will draw in candidates and leave a positive impression. The overall look and “feel” of your career website can be a representative expression of the values and aspirations that you are seeking to convey to like-minded job seekers. Your website can be a powerful tool in rep-resenting what your organization’s brand is about and what you have to offer job seekers in terms of careers and an engaging work experience. £


Know When and How to Push Back Ann Margaret Gallegos, MPA, IMPA, Human Resources Professional Staffing Consultant

As a consultant, I frequently hear from HR professionals struggling with decisions made by company leadership. One client was exasper-ated with a recent staffing decision made by a manager. The decision was perceived by the HR professional to be not only a bad decision but downright “unfair.” After additional fact-finding, it was clear this HR professional had some personal biases. Multiple emails had already been exchanged on this topic, which included input from a top-level executive. Most of us in the HR profession can relate to this situation. As Human Resource professionals, we are all too often called upon for advice or support to implement decisions too late in the process. Often, we hear little or nothing about a decision until after it has been made. Sometimes, we are asked to help to roll out a process with which we are not fully aligned. A former HR director once told me that HR is, and always will be, the “mop-up crew”. Aside from being part of the

mop-up crew, the following are some tools that have been derived from articles and many years of personal experience, to include in your personal toolkit to help manage these difficult situations:

• Know when to push back. Ask yourself the following question: Is the situation illegal? Immoral? Unethical? If yes, then it may be appropriate to push back and even involve a higher-level manager. If not, ask, does this situation warrant “falling on one’s sword?”

• Avoid engaging in a battle of emails. It will only set in motion a chain reaction that is virtually guaranteed to bring out the worst in everybody. Know when to cease with the email. It is too easy to find courage behind a keyboard. One rule of thumb to remember is if after two email exchanges you don’t believe your concerns have been heard, it’s time for a one-on-one meeting. Bottom line: there are some decisions warrant a face-to-face conversation.

• Keep to the facts. Do not let your feelings or biases take control of what you believe is “unfair.” Remember that “fairness” is subjective. This is where having a good poker face comes in handy.

• Provide options. People don’t like to be told what they cannot do. Instead, give at least three options of what they can do, even if one of the options is leaving things as they are.

• Avoid triangulating the situation. In other words, don’t bring a third party into the conflict in the hope of influencing the outcome. Although there will be times when it is necessary to bring in higher-level decision- makers, use that card judiciously.

• Be transparent about your next course of action. If you are not, you may damage your credibility.

• Finally, let the other person own his/her decision. Although you may not agree with the decision, when it is not your decision to make, let the decision-maker take responsibility. Then, do your best to support its execution.

These are just a few tips to help you get through an immediate situation. The greater goal is to get ahead of the game by becoming a strategic partner, so that you are an integral part of the decision-making process. As a stra-tegic partner, you can influence decisions rather than appear as a barrier to them. As a strategic partner, it is an expectation that you be part of the decision-making process. Don’t wait for an invitation to a seat at the table. Invite yourself! £


Practical Considerations When Terminating the Employment Relationship Kate Bartlett, MA, SPHR-CA, Human Resource Services Consultant

Deciding to terminate the employment relationship is one of the most difficult responsibilities managers have. Knowledge of the law and of best practices, as well as training, can help a manager end the relation-ship on a constructive note. Working with HR staff, managers must acquire the appropriate knowledge and receive skills training to make these important decisions and to conduct professional termination meetings.

If you find yourself considering involuntary termination, make sure you have taken the following steps first to support the employee’s success:

• Met regularly with the employee to make sure he or she knew what was expected—in specific, behavior-based language—and the conse-quences for failing to meet expectations

• Applied performance and behavioral standards consistently

• Based performance feedback and corrective counseling on facts and circumstances

• Verified that the written feedback provided in the employee’s performance appraisal is consistent with the verbal feedback given in performance discussions

• Documented the dates you met with the employee to discuss performance, as well as the substance of those conversations

• Provided opportunity for the employee to explain his or her “side of the story,” as well as to correct poor performance and/or inappropriate behavior

• Consulted with HR to ensure the performance/behavioral data you have gathered (together with the results of any formal investigation) and the resulting corrective counseling/discipline is consistent with your orga-nization’s policies, procedures, and practices

• Consulted with legal counsel to ensure the resulting corrective counseling/discipline (including termina-tion) complies with applicable federal and state laws

Involuntary termination decisions must be made objectively, supported by legitimate business reasons, and based on job-based criteria that are applied consistently. To ensure objectivity, you should take time before making a decision to check yourself and your own motivations. Speaking with another manager or with your HR representative can help to ensure that your evaluation of the situation is based on verifiable facts and not on your personal feelings (alone). Taking time to reflect on your decision is time well spent. Having an independent third-party review your documentation and stated reasons for termination is always a good precaution. The rami-fications of an involuntary termination are too serious to do otherwise. £


Same-Sex Training Policy Violates Federal Law Michael Johnson, Employment Law Services Attorney

On August 18, 2014, the Equal Employment Opportunity Commission (EEOC) announced a decision where a court found the employer’s “same-sex trainer policy” discriminated against female employees. EEOC and Clouse v. New Prime, Inc. (W.D. Miss. 2014).

Prime is an interstate trucking company that transports items through-out the United State, Mexico, and Canada. In an effort to recruit new drivers, Prime initiated a Prime Student Driver School to assist individu-als to obtain the necessary skills to participate in trucking. If a student was hired by Prime, the employee was then required to train with a

trainer. In 2004, Prime implemented a “same-sex trainer policy” that resulted in female applicants only being assigned to female instructors.

Importantly, before this policy was implemented, women were assigned trainers regardless of their gender. The new policy was adopted after New Prime, Inc. was involved in a sexual harassment case brought by three female truck drivers. The result of the new policy was female applicants were placed on waiting lists until female trainers were available to train. This waiting period could be longer than a year for female applicants whereas male appli-cants did not have a waiting list. The EEOC sued Prime, alleging this practice resulted in sex discrimination.

The court stated,

Prime contends it put the policy in place in order to protect female applicants. However, the policy is facially discriminatory, much like the policy in Johnson Control, in that it places limitations on the opportu-nities for female applicants to be trained versus men. Prior to this policy being implemented women were put on trucks with male or female drivers on a first come, first served basis. The same-sex policy created a waiting list for females while none existed for males. Therefore, there is no question the policy created an impermissible impediment to training and employment for female drivers that male drivers did not face.

The EEOC Regional Attorney said, “While Prime would like to claim it was protecting women, its policy denied employment opportunities to them. Women are entirely capable of understanding and assessing the risks of truck driving. But one of those risks should not be sexual harassment. Employers should prevent sexual harassment through training and strict enforcement of effective anti-harassment policies, not by segregating male and female employees.”

In this case, the employer failed to address the actual issue of how to prevent inappropriate conduct in the work-place and instead created inequalities among staff based on their gender. The employer should have taken steps to inform all staff, male and female, about what is considered appropriate conduct in the workplace per the employer’s anti-discrimination policy. The employer also should have provided training to all staff on that pol-icy including what steps an employee should take if he or she believed that the policy had not been followed. Instead, the employer implemented a policy that on its face, treated male and female staff members differently because of their gender. MSEC offers training on these issues and also provides employer handbook policy lan-guage that addresses anti-discrimination requirements. £


Discipline for Attitude Does Not Violate Due ProcessLorrie Ray, Esq., SPHR, Director of Membership Development

The University of South Dakota employed Christopher Keating as a professor. Christina Keller was his supervi-sor, and their working relationship was not pleasant. Keating filed a grievance against her, and she filed a sexual harassment claim against him. The department head, Timothy Heaton, investigated the grievance, found no merit, and told Keating this. Keating responded by telling Heaton that if Keller’s harassment claim was pursued, it “would make the situation extremely serious.” Later, Keating sent an email to Heaton saying there was “no way” he could trust Heaton “with another problem.” Keating also called Keller “a lying, back-stabbing sneak.”

Keating’s employment contract was not renewed due to the insubordinate statements he made to Heaton and the derogatory assertions he made about Keller. The university found his behavior to be in violation of its civility clause, requiring workers to “treat their colleagues, staff, students and visitors with respect” and “comport themselves” cooperatively at all times, “even when expressing disagreement.”

Keating claimed the university’s refusal to renew his contract was unconstitutional. The lower court found the school’s civility clause was impermissibly vague in violation of the Due Process Clause of the Fourteenth Amend-ment. The court granted Keating declaratory relief on this claim. The Eighth Circuit reversed the lower court ruling on the civility clause claim, holding that the clause “was not impermissibly vague as applied to Keating’s specific conduct,” and also found that the text of the policy “articulates a more comprehensive set of expectations that, when taken together, provides employees meaningful notice of the conduct required by the policy.” Keating v. Univ. of S.D. (8th Cir. 2014).

The court went on to define “unconstitutionally vague” as “fail[ing] to provide a person of ordinary intelligence fair notice of what is prohibited, or is so standardless that it authorizes or encourages seriously discriminatory enforcement.” The court reasoned that although the language in the clause was not specific, an ordinary person could determine that certain behavior would result in disciplinary action.

This is good news for governmental employers who expect employees to meet behavior standards that can vary in different circumstances. It also points out that letting employees know, in general, the type of behavior that is acceptable is imperative. £


Surveys Now Available 2014 Housing Authority/Property Management The 2014 Housing Authority/Property Management Survey collected data for 24 jobs. Sixteen organizations reported data for both the business classification positions and the property classification. Data also include percentage increases in pay for 2013 and projections for 2014 and 2015.

2014 Casino Compensation and Personnel Practices SurveyThe 2014 Casino Compensation and Personnel Practices Survey collected data for 81 benchmark jobs in the industry and is reflective of eight casinos located in Central City, Black Hawk, and Cripple Creek, Colorado. Also included are per-centage increases in pay for 2013 and projections for 2014 and 2015. Data are displayed for average turnover rates for 2013. In addition, benefit and personnel practices data were reported for health, dental, and life insurance; PTO (vacation, holidays, sick leave); and other miscellaneous benefits.

2014 BioSciences (Pharma) Compensation SurveyThis survey collected data for 64 benchmark jobs from 10 organizations. Included in this report is data for various levels of Research Associates, Scientists, Process Operators, and other positions associated with the pharmaceutical/biosciences industry. Data are displayed by all organizations and include Annual Bonus/Incentive as a percentage of base salary received for the last fiscal/calendar year and target incentive percentage.

Notice of Surveys Being ConductedDid you know that MSEC has over 40 compensation and benefits surveys available for FREE to our members? We’ve been conducting wage and benefit surveys regularly since 1947. Please help us create this valuable resource for you and all our members. Participate!

MSEC conducts surveys in the strictest confidence so that no participating organization can ever be matched to their information. The validation process ensures that the final product contains the most up-to-date and accurate informa-tion. Below is a list of the industry and benefit surveys presently being conducted. If you want to participate in any of these surveys, but have not received your questionnaire, please contact us. Thank you for your consideration in help-ing us produce the most reliable and trusted surveys in the region!

• Hotel Compensation Survey

• Mental Health Compensation Survey

• Mining Compensation and Benefits Survey

• 2014 Paid Time Off Survey (Vacation Policies, Consolidated Paid Time Off, Sick, FMLA Leave, and more)

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Thank you for reading The Bulletin

Special StudiesBehavioral Health Positions 7 national organizations. 01B/14 Director of Operations and Director of Business Development 3 organizations. 02B/14 Luxury Resort Hospitality Positions 8 hospitality organizations. 07B/14

EPIC Application Programmer/ Analyst 3 health care organizations. 08B/14

Alternative Work Arrangement – 9 Month Work Year 7 school district organizations. 09B/14

Want to participate?If you would like to participate in any of the above surveys and have not received a questionnaire, please call the Surveys Department. You can also download the questionnaire from our website at MSEC.org.

As always, it is the participation of our members that helps make MSEC surveys the number-one data source for the region. Thank you!

To request copies of the surveys, please contact the MSEC Surveys Department. Copies of these resources are available to authorized personnel of MSEC members. Call 800.884.1328, email [email protected], or go online to MSEC.org.

october bulletin 2014

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