I’m partial to lists, as you may have noted in past blogs. So, in celebration of the Banking Exchange website’s new Risk Channel, here’s my take on the top areas of human resources vulnerability.
There are too many for a single blog post, so I’ll continue the list next time—possibly even in a third blog.
To devise my list, I started by reviewing notes of training I presented to state bankers’ association conferences a decade ago. I was surprised to find that the “Nine H.R. Compliance Nightmares of 2003” are still the matters keeping us awake at night today.
Sure, there are a few new twists. Background checks didn’t include E-verify then, and employee privacy issues didn’t involve Facebook. But the topic headings remain basically the same.
Hiring the right people
Even back in 2003, the internet had vastly widened the pool of candidates for each job opening. And yet it is as difficult as ever to find the right person.
The final selection stage is usually the in-person interview. The interview is an imprecise tool, but it can be improved if the interviewer is trained to follow standard procedures. These procedures include asking for concrete examples of experience, or posing hypothetical problem situations and asking for solutions, instead of asking yes/no or leading questions.
“Why should I hire you?” or “What are your strengths?” will only elicit a self-serving canned response that is not a predictor of success on the job.
In my experience, background checks are often viewed as a formality, and little time or effort is devoted to them. Even if the bank delegates the chore of credit, criminal, and education record checks to a third-party provider, the HR manager should carefully review the results to make sure the right questions are being asked.
Remember, banks have special obligations under the Federal Deposit Insurance Act (FDIA) regarding the employment of individuals with certain criminal histories.
In recent years there have been moves at both the federal and state levels to restrict credit and criminal background checks because they have a disparate impact on protected groups. Often banks are exempt from these restrictions because of the FDIA provision, and the obvious financial fiduciary nature of the job, but it’s as well to check state law and the federal Fair Credit Reporting Act before denying a position based solely on the results of a credit or criminal record search.
Prior employers remain the best source of information relevant to a candidate’s likely performance on the job. It’s a hard slog to get them to talk to you because of the fear of a defamation or discrimination suit.
I think this fear is over-rated.
The risk of hiring someone based on incomplete information is much greater. But here are two questions that will usually get a response that you can follow up with the candidate if a red flag is raised:
1. Is the candidate eligible for rehire with your company?
2. Please tell me the dates of employment and position held.
Keep a firm grasp on the premise that honesty is an essential requirement in any job. If a reference check uncovers a discrepancy with statements on the application, think hard about hiring this person.
The bank can’t function if employees don’t show up for work.
Of course, the bank recognizes the need for time off for illness, vacations, and other valid reasons, ranging from jury duty to bereavement to National Guard training. Hopefully the bank has adopted clear policies covering all types of employee absence.
The aim of these policies is to ensure predictability and consistency in attendance, but even the best-drafted policies can be undermined by the “exceptional” case.
• The employee who frequently calls in sick on a Monday or the day after a holiday.
• The employee who calls in sick on the day a performance counseling session is scheduled.
• The exempt employee who claims to be working from home.
• The manager who would rather turn a blind eye to unexcused absences than confront a performance, conduct, or attitude issue in the workplace.
Since 2003, both the Americans with Disabilities Act (ADA) and the Family and Medical Leave Act (FMLA), the two principal laws affecting employee attendance, have been revised.
In the case of the ADA, the 2008 amendments have the effect of mandating that the bank, the employee, and the healthcare provider engage in a meaningful interactive process to determine what reasonable accommodation will enable a disabled employee to continue to perform the essential functions of the job.
Time off might be a reasonable accommodation. But you should explore other alternatives. These could include adjustments to the workspace, schedule, or duties, which will keep the employee in the active workforce.
New FMLA rules (also issued in 2008) extended the reasons for leave to cover family members of the military, and to clarify the Act’s provisions with regard to eligibility for leave, calculation of leave taken, the employee’s duty to give notice of the leave, and medical certification. New “General” and “Employee Rights and Responsibilities” notices were published incorporating the changes.
Some of the clarifying rule changes allow the bank to better control FMLA leave. I recommend you familiarize yourself with the now not-so-new notices so that you can adopt procedures in compliance with the Act that may make managing attendance easier.
The exempt-nonexempt divide
Banks have traditionally relied on the so-called “white collar” exemption to classify employees as salaried and not pay overtime for hours worked in excess of 40 a week. There is no white collar exemption!
Instead there are several exemptions that might apply. This is if, and only if, the job meets the very specific tests regarding the duties of the job, and the method and amount of payment set out in detailed regulations for that exemption under the Fair Labor Standards Act (FLSA.)
A few years ago, a perfect storm conspired to flood financial institutions with FLSA litigation.
First, class action plaintiffs’ lawyers, having more or less exhausted the possibilities of employment discrimination lawsuits, were attracted by the easy pickings if misclassification as exempt is proved.
In these cases, the employer has not been tracking hours worked, so the plaintiff’s allegations of endless overtime hours worked cannot be disproved. Damages are not limited to the individual named plaintiff, but cover all in the misclassified position. Several large banks have chosen to enter into multi-million-dollar settlements, rather than fight it out at trial.
Second, in 2010, the Department of Labor’s Wage and Hour Administrator issued an Interpretation that overturned years of precedents regarding the exempt status of mortgage lenders.
Based on a questionable rationale, the Interpretation found that mortgage lenders did not qualify for the administrative exemption from overtime pay.
This sent many bankers into a tailspin, trying to find another exemption that might apply. Others have decided to bite the bullet and reclassify mortgage lenders (and other lenders that deal with individual consumers) as non-exempt, taking cover under all the other recent regulatory changes imposed on mortgage lender compensation.
Although most commentators agree that the FLSA’s Depression-era protections are outdated in today’s high-tech workplace, and employers and employees alike would welcome more flexibility, don’t look for enforcement efforts to ease up any time soon.
Discrimination, harassment and retaliation, dealing with the poor performer, employee privacy versus employer rights, affirmative action obligations, and pay equity: watch this space.