About Adam Jacobson

Adam Jacobson is a former associate editor of the Risk Management Monitor and Risk Management magazine.
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McDonald’s Sued for Sexual Harassment at Franchises

This week, 25 women in 20 cities across the United States brought sexual harassment charges and lawsuits against fast food giant McDonald’s with the U.S. Equal Employment Opportunity Commission (EEOC), alleging that the company has neglected its duty to protect employees from harassment. In fact, the women claim, the company has often punished those who have spoken out against abuses, including cutting their hours and revoking promotion or training opportunities.

These are hardly the first claims that female workers have brought against the restaurant chain. In the past 10 years, the EEOC has filed multiple lawsuits against McDonald’s for allegations related to sexual harassment and inappropriate behavior at franchises across the country. In May 2018, 10 women filed harassment complaints, including “alleged groping, propositions for sex, indecent exposure and lewd comments by supervisors,” according to the Associated Press. They too alleged that they faced negative consequences when they objected to these abuses. Workers also launched strikes to protest against sexual harassment and other inappropriate treatment in May 2015 in Chicago and September 2018 in 10 cities.

These lawsuits correspond with a planned strike on Thursday, May 23, to protest low wages and the company’s refusal to get involved with franchises’ pay decisions and negotiations, as well as workers’ ability to create a union. The wider protest movement Fight for 15 (named for their demand for a $15 minimum wage) has backed the sexual harassment claims and lawsuits, as have the National Women’s Law Center’s Time’s Up Legal Defense Fund, the ACLU, and several law firms.

Because it operates on a franchise basis, McDonald’s has said that it has no responsibility or liability for any abuses (or wage decisions) at individual locations—that it is not a “joint employer” with its franchises, and franchise employees are not direct McDonald’s employees. In April, the Trump administration announced that it would reverse Obama-era interpretations of what qualified as a joint employer, which had made chains more liable for labor violations at their franchises. The Trump administration change is still in the proposal stage, but could clarify who can be held responsible for sexual harassment and wage disputes, relying on four factors: who can hire/fire the employee, who has control over work schedules, who sets pay rates and who maintains employment records. This change could make chain companies significantly less responsible for conduct at their franchises.

McDonald’s has stated that it provides comprehensive policies and training to help franchises prevent sexual harassment. The company also said that it has brought in experts to help “evolve” those processes, and set up an anonymous hotline to report harassment. However, advocates say that without visible enforcement of its policies, these steps are not enough. Workers at low-paying jobs, including fast food, are uniquely vulnerable to harassment and other workplace abuses. One 2016 study found that 40% of female fast food workers had been sexually harassed in the workplace, and that this was “substantially higher than in workplaces overall.” Additionally, the study found that 42% of female fast food workers who were harassed in their workplace “feel forced to accept it because they can’t afford to lose their job,” 21% said they faced negative professional consequences after reporting the inappropriate behavior, and 45% said they experienced physical and mental health problems as a result of workplace harassment.

As Risk Management has covered before, no matter what the industry, companies and their HR departments have the obligation to keep their employees safe from workplace harassment, and should implement strict HR policies to address it. These policies should include clear reporting guidelines (not just to tell an immediate supervisor, who is often the person harassing the employee) and strong disciplinary measures, as well as mandatory and regular anti-harassment training. For risk management and HR professionals reviewing their existing policies, these tips can help ensure they foster a workplace culture in which reporting harassment is encouraged and illegal or inappropriate conduct is swiftly and effectively investigated and punished.

Microsoft Vulnerability A Reminder to Update and Patch

Microsoft recently announced a major vulnerability to Windows XP, Windows 7 and several older Windows server versions. According to Simon Pope, the company’s director of incident response, “[A]ny future malware that exploits this vulnerability could propagate from vulnerable computer to vulnerable computer in a similar way as the WannaCry malware spread across the globe in 2017.” This announcement reinforces the importance of companies patching security vulnerabilities to mitigate the risk, especially on older machines that still serve essential functions.

This news follows a TechCrunch article reporting that at least a million computers worldwide, mostly in the United States, remain vulnerable to the WannaCry and NotPetya malware because users have not installed the necessary patches. Cybercriminals continue to use this malware, based on hacking tools originally developed by the NSA, to deliver all sorts of malicious software to unsuspecting victims online.

WannaCry is ransomware—malicious software that hijacks a computer and demands payment to regain control—that quickly spreads and has affected businesses, government and individuals in over 150 countries since 2017. Around the same time, a malicious software disguised as ransomware called NotPetya spread worldwide, affecting global business operations, and effectively paralyzing multiple companies in what has been called “the most devastating cyberattack in history.” Both caused massive financial damage worldwide, with WannaCry estimated at $8 billion in damages and NotPetya estimated at $3 billion.

Windows has released patches to protect systems from the newly announced vulnerability, even for Windows XP and Windows Server 2003, despite the company not usually offering support for those older systems.

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However, XP users will have to manually download the patches from Microsoft’s update website. According to a 2017 Spiceworks study, businesses worldwide were still running Windows XP on 11% of their laptops and desktops. While that has likely decreased in the past two years, it would still leave a significant number of machines running exposed systems that require manual updates to patch.

Not patching vulnerabilities has led to serious incidents, like the Equifax breach in 2017, which led to the theft of 143 million Americans’ personal information.

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In that case, the US Department of Homeland Security had issued a warning about the vulnerability, a patch for a web application vulnerability had reportedly been available for 2 months before the breach, and Equifax failed to implement the fix. A US House Oversight Committee report blamed the company entirely, saying that Equifax “failed to implement an adequate security program to protect this sensitive data,” and that “such a breach was entirely preventable.”

Companies use numerous different types of software in their daily operations, and software providers issue many patches for their products, which leaves companies overwhelmed. According to an April 2018 Ponemon Institute study, 68% of companies “find it difficult to prioritize what needs to be patched first.” IT staffing limitations and competing priorities within organizations can hinder these efforts, since patching requires heavy time investment and sometimes taking important aspects of the business offline to implement fixes. Companies with third-party partners and supply chains face even more complex risks, since their systems are often integrated or dependent, and companies likely do not have direct control over partners’ systems to ensure patching. Mitigating outside risk by including in contracts stipulations that third-party partners meet certain security requirements can also help.

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Japanese Companies Look to Cut Costs by Curbing Smoking

Concerned about lost productivity and higher employee healthcare costs, many employers are taking serious steps to eliminate smoking among employees. In Japan, a number of companies and educational institutions are now even basing hiring decisions on whether an applicant smokes.

Some scientific evidence suggests that employers’ concerns about the added costs costs are valid. A 2018 study conducted by Ohio State University found that smokers in the U.S. cost private sector employers an average of $5,816 extra per year, excluding additional costs that the employees themselves may pay. These employer costs include “excess absenteeism,” “presenteeism” (lower productivity on the job), “smoking breaks,” “excess healthcare costs” and “pension benefits,” with time devoted to smoking breaks making up the majority of costs. Stopping smoking eliminates lost time for smoke breaks entirely, unlike other high-cost factors like healthcare and absenteeism, which could continue after an employee stops smoking.

Smoking is more prevalent in Japan than in the United States, especially for men.

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Although the rate has been falling steadily, a 2018 national study showed that 28.2% of men and 9% of women in Japan smoke, compared to 15.8% of men and 12.2% of women in the United States, according to the Centers for Disease Control and Prevention.

In April, more than 20 Japanese companies signed onto a corporate partnership to promote anti-smoking steps. Starting in spring 2020, for example, insurance company Sompo Japan Nipponkoa Himawari will not hire any new employee who smokes, and will require its high-level officials to sign a document pledging not to smoke during work hours. The private sector in Japan is not alone in pushing for less employee smoking—Nagasaki University announced last month that it would stop hiring faculty who smoke and banned smoking on campus, and Oita University has “put priority on nonsmokers” when hiring.

Part of this effort is incentivizing quitting.

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Employees who quit smoking at Japanese company Rohto Pharmaceutical Co., for example, get tokens they can use at the company cafeteria or for other benefits. Marketing firm Piala Inc. is also offering an extra 6 paid days off to non-smoking employees, and 4 of its 42 smokers have reportedly quit smoking thus far.

While programs to incentivize quitting may seem intuitive, according to Ohio State’s Micah Berman, lead author of the school’s study, these efforts may also be pricey for employers. “Employers should be understanding about how difficult it is to quit smoking and how much support is needed,” he said.
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“It’s definitely not just a cost issue, but employers should be informed about what the costs are when they are considering these policies.” These can include the costs of direct incentives like the ones noted above, or the additional healthcare cost of prescription drugs or counseling to help quit. However, in the long-term, companies that implement cessation programs—especially those that have a large number of smoking employees to start—are likely to see the benefits outweigh initial investment costs within 4 years.

Companies may save money by encouraging employees to quit smoking, especially in lost time and healthcare spending, but they should examine the costs and benefits of instituting formal or informal policies to change their employees’ habits. Running afoul of legal protections, as well as making workplaces unfriendly to employees who smoke, being perceived as interfering with employees’ activities outside of work and other considerations may outweigh employers’ concerns for their workers’ health and excess spending.

Japanese companies have stated that they believe these steps are legal, and some U.

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S.-based companies, including Scotts Miracle-Gro and Weyco, Inc., have reportedly made similar efforts to discourage their workforces from smoking. Some companies in the U.S. may be unable to explore such potential programs, however. According to legal experts, “around half of [U.S.] states currently legally protect employees from being denied positions, or having employment contracts terminated, due to tobacco use.”

The Economic Costs of Government Internet Interruptions

At the end of April, global internet access monitor group NetBlocks reported that Venezuela’s state-run internet provider ABA CANTV was restricting the country’s access to various social media platforms amid continuing demonstrations and political turmoil. In May, NetBlocks reports this has continued, in addition to similar internet limitations in Benin and Sri Lanka. While increased global internet connectivity has led to international economic growth, it has also often led to increased government control over methods of communication and commerce, and government shutdowns pose a serious risk to businesses and economic activity in these countries.

Businesses face a variety of challenges and risks when operating abroad, but internet shutdowns and limitations may present a unique impediment, especially for companies that operate largely online and rely on consistent internet access. With more countries shutting down or limiting access more frequently, companies that conduct business in countries with regular interruptions may need to plan accordingly, or reevaluate whether their operations can accommodate these disruptions. Companies that have internet-dependent supply chains may be particularly susceptible and should ensure they have comprehensive mitigation strategies in place to avoid business interruptions.

Many nations increasingly use internet and social media disruptions as a way to quell political dissent. Some countries have shut down social media after violent incidents, purportedly to curb people’s ability to incite further violence, such as in Sri Lanka after the Easter suicide bombing there. Ethiopia also limited internet access in 2017 after activists leaked copies of the national school exams online. Whatever a country’s motivation, the frequency of shutdowns worldwide is rising dramatically, according to Stastista, which notes a 6,000% increase between 2011 and 2018.

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The Indian government routinely implements shutdowns in various parts of the country, and has in turn suffered serious economic consequences. The Indian Council for Research on International Economic Relations recently reported that, between 2012 and 2017, internet shutdowns in India climbed from 3 to 70 per year, and the shutdowns’ total duration rose from 9 hours in 2012 to 8,141 hours in 2017. According to the report, titled The Anatomy of an Internet Blackout, these disruptions cost the Indian economy approximately $3.04 billion in total. This includes approximately $2.37 billion from mobile internet loss and $678.4 from fixed line internet shutdown.

The Brookings Institution released a study in October 2016 examining 81 short-term shutdowns in 19 countries and their impact on GDP. Between July 1, 2015, and June 30, 2016, the study found that the economic consequences of internet shutdowns cost at least $2.4 billion in GDP globally. The report notes that this is a conservative figure and does not account for tax losses or drops in investor, business, and consumer confidence.

Deloitte also examined the issue in 2016, estimating that the economic consequences of a temporary shutdown “grow larger as the level of connectivity and GDP increase.” For highly connected countries, a temporary shutdown could cut 1.9% of daily GDP—an estimated $141 million per day. Medium-connectivity countries lose an estimated 1% ($20 million) of daily GDP and low-connectivity countries could lose an estimated 0.4% ($3 million) of daily GDP.

A study released in October by Strathmore University’s Center forIntellectual Property and Information Technology Law (CIPIT) showed that shutdowns can also severely impact countries’ shadow economies, often uncounted in formal studies like those from Brookings and Deloitte. According to the report, titled Intentional Internet Disruptions in Africa, unreported economic activity in 49 African countries made up an average of 37.65% of all economic activity. Because this activity is not counted in previous formal studies (like the Brookings study), CIPIT estimates that including these shadow economies increases the total cost of shutdowns by 19% to 29%.

Another Statista study from August 2018 shows that certain countries are shutting down their internet more often than others, most notably India, Pakistan and Iraq. Risk managers should consider these figures and cost estimates when assessing their companies’ existing or potential operations in the countries noted below, or when looking at where to invest overseas.