Category Archives: Employee Benefits

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Sixth Circuit Affirms EEOC Credit-Check Case Dismissal

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Less than three weeks after oral argument, the Sixth Circuit affirmed a lower court order granting summary judgment in favor of Kaplan in one of the EEOC’s most high profile cases – EEOC v. Kaplan Higher Education Corp.

The EEOC brought suit against Kaplan for using credit-checks in its hiring process – “the same type of background check that the EEOC itself uses” the Sixth Circuit pointed out – claiming that the practice had a disparate impact on African Americans.

On Jan. 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment in favor of Kaplan, finding that the EEOC’s statistical evidence of disparate impact was not reliable and not representative of Kaplan’s applicant pool as a whole. (Read more about that ruling here.)

The Sixth Circuit found no abuse of discretion. The EEOC’s “homemade” methodology for determining race – by asking its “race raters” to label photographs – was, in the Sixth Circuit’s words, “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

Background

The EEOC filed suit against Kaplan alleging that Kaplan’s use of credit-checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII.

In support of its allegations, the EEOC relied on statistical data compiled by Kevin Murphy.  Because Kaplan’s credit check process was race-blind, the EEOC subpoenaed records regarding Kaplan’s applicants from state departments of motor vehicles. Thirty-six states and the District of Columbia provided color copies of approximately 900 drivers’ license photos.

Murphy assembled a team of five “race raters” and directed them to review the photos and classify them as “African-American,” “Asian,” “Hispanic,” “White,” or “Other.” Murphy also provided the raters with applicant names.

Based on the results of this “race rating,” Murphy opined that, in a sample of 1,090 (out of 4,670 applicants), the percentage of black applicants who were flagged for review based upon their credit histories was higher than the percentage of white applicants who were flagged.

The district court excluded Murphy’s testimony as unreliable for two reasons. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court granted summary judgment in favor of Kaplan, and the EEOC appealed.

The Sixth Circuit’s Opinion

The Sixth Circuit affirmed. The Sixth Circuit noted that, as the proponent of expert testimony, the EEOC bears the burden of proving its admissibility. It determined that the district court did not abuse its discretion in finding that the EEOC failed to make such a showing.

The EEOC argued that the district court erred in finding that it had “wholly fail[ed]” to provide evidence that its technique had been tested or had any “known or potential rate of error.” The EEOC contended that it provided such support in the form of “anecdotal corroboration.” That is, as to 57 applicants, Murphy cross-checked his raters’ classifications with racial identifications provided by a DMV or Kaplan.

The Sixth Circuit noted that the EEOC’s cross-check yielded an 80% match – “an unimpressive correlation in case where a few percentage points (in credit-check fail rates for blacks and whites) might make the difference between significant liability and none.” In any event, as Murphy himself conceded, a mere 57 instances of anecdotal corroboration is “not enough” to establish the reliability of his photo rating methodology.

As the Sixth Circuit found, “[t]he EEOC’s case goes downhill from there.” The EEOC failed to present evidence that its technique was subjected to peer-review or publication, failed to show that Murphy employed standards to control “the technique’s operation,” and presented no evidence that Murphy’s race-rating methodology was “generally accepted in the scientific community.” The raters themselves “had no particular standard in classifying each applicant; instead, they just eyeballed the DMV photos.”

Finally, as an independent ground for excluding Murphy’s testimony, the district court found “no indication” that Murphy’s group of 1,090 applicants was representative of the applicant pool as a whole. The Sixth Circuit noted that, “[i]nstead there is a strong indication to the contrary: Murphy’s group had a fail rate of 23.8%, whereas the GIS applicant pool had a fail rate of only 13.3%.” It held that an unrepresentative sample “by definition” might skew the respective fail rates of black and white applicants in the larger pool – “and thus is not a reliable means to demonstrate disparate impact.”

Implications

In its opinion, the Sixth Circuit staunchly critiqued the EEOC’s “do as I say, not as I do” litigation tactics. It noted (in the first line of its opinion) that the EEOC “sued the defendants for using the same type of background check that the EEOC itself uses.” It also noted, as the district court observed, that “the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate ‘only if an employee refuses to self-identify.’”

This blog was previously published by Seyfarth Shaw LLP.

Why Employees Quit—And How to Keep Them

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Why Employees Quit

Employee turnover creates tremendous risk—resources are lost in recruitment and training, productivity lags with insufficient staffing, intellectual property can be exposed, and no company wants to get a reputation as a place where no one can stay very long. Further, the implications for workers comp, lawsuits and insurance extended to employees can cause headaches long after a desk has been cleared out.

A few recent studies highlight some of the biggest factors contributing to employee turnover resultant human resources risk, and what managers can do to keep staff and avoid risk.

Why Employees Leave

A new “exit survey” conducted by LinkedIn among members from five countries found that top reason workers left their jobs was because they wanted greater opportunities for advancement. In a related study from the social network, the number one reason employees who were not actively seeking a new job would be willing to leave was for better compensation or benefits. Regular performance reviews and assessments that open up opportunity for advancement in both responsibilities and salary can help keep employees engaged—and prevent feeling they have to stray to stay on top.

Room to Improve

Another recent study from LinkedIn found that 69% of human resources managers thought that employees were well aware of internal advancement programs. Yet only 25% of departing employees said they knew about these opportunities. In fact, of those who stayed within the company and found a new position internally, two thirds found out about the opportunity through informal interaction with coworkers. Strengthening formal retention and advancement programs and improving awareness of these initiatives may go a long way toward getting employees to use them.

Why New Hires Quit

One in six employees quits a new job within six months — and 15% either make plans to do so or quit outright within that time frame, according to Time. HR software company BambooHR found that the primary factor was “onboarding problems”—in other words, HR or managers are failing to properly orient new hires and integrate them into the workplace. This may seem silly, but they could have reason to feel this is a fatal flaw: research from John Kammeyer-Mueller, associate professor at the University of Minnesota’s Carlson School of Management, found that there is only a 90-day window for settling in. If your new employee is not caught up to speed by then, you may see them walk out the door.

Getting Employees to Stay

CareerBuilder surveyed thousands of workers recently to gain insight into why they decide to stay or go. Of those who plan to stay at their jobs, the top reasons they did not want to leave included: liking the people they work with (54%), having a good work/life balance (50%), being satisfied with the benefits package (49%), and feeling happy with their salary (43%). Of those who are unhappy, however, 58% said they plan to leave in the next year. Making sure these bases are covered is a strong step to keeping your top talent at their desks.

Check out the infographic below for more of LinkedIn’s insights into why employees leave, and what you lose when they go:

CVS Announces Plan to Stop Selling Cigarettes

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CVS to Stop Selling Cigarettes

On Feb. 5, CVS Caremark Chief Executive Larry Merlo said, “We’ve come to the decision that cigarettes have no place in an environment where healthcare is being delivered.” The company, he announced, will remove all cigarette and tobacco products from its 7,600 pharmacies nationwide by Oct. 1. The move is expensive, with up to billion in projected lost sales.

But CVS is betting on the long-run gains from doubling down on brand reputation and helping customers to live—and shop—far longer.

President Barack Obama personally took the time out to praise CVS, saying in a statement that the move will help wider efforts to “reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs.”

“CVS is now one of a small group of companies that have realized that their reputation is the most valuable asset they have and that building a stronger reputation by avoiding risks to that reputation can create a significant competitive advantage,” said Paul Argenti, professor of corporate communications at Dartmouth’s Tuck School of Business, in a column for the Harvard Business Review. “From the White House to the American Lung Association, CVS has received kudos for what seems to be a focus on shared value with society rather than the reckless pursuit of revenue at any cost.”

While CVS stock initially dropped the day of the announcement, shares have since risen 2.3%, success further bolstered when the country’s largest drugstore chain reported 2013 revenue of $126.8 billion—up 3% on healthy growth for drug plans and in-store pharmacies offset by weak growth in front-of-store sales.

“Its profit comes increasingly from health plans, which aren’t keen on carcinogens,” Jack Hough wrote in Barron’s. “Consider: CVS’ tobacco decision is expected to subtract six to nine cents from its yearly earnings per share. But a prescription deal with the Federal Employee Health Program, which expires at year’s end, is worth 16 cents to 21 cents a share, estimates investment bank Mizuho Securities. For CVS, a good chance at renewal just became better, and there’s plenty more business to be won.”

In Forbes’ CMO Shift blog, brand consultant Scott Davis wrote:

The $2 billion decision to boldly dump tobacco sends CVS’ boldest signal of commitment to the brand and to where it sees its future growth; it’s an unprecedented move and one that is wickedly smart. CVS is putting its money where its brand is, betting that this first mover advantage will pay off. I say “first mover” because no one truly owns health and wellness. Sixteen thousand health and wellness apps were downloaded last year.

Over $1.4 billion was spent by people trying to learn more about the topic. The overall category is heading to $1 trillion in the next 3-5 years and the timing is right for someone to step in and lead the dialog and become the Amazon of health and wellness. Why not CVS?

Indeed, CVS has spent considerable time and money extending the legacy of pharmacists as community health experts by adding over 800 MinuteClinic walk-in facilities. In doing so, the company has become the largest U.S. pharmacy healthcare provider.

The chain’s competitors are also branching into anti-smoking efforts as they expand their role in the wellness market. Walgreens recently unveiled a partnership with GlaxoSmithKline Consumer Healthcare to launch a free, Internet-based smoking cessation program called Sponsorship to Quit.

Overall U.S. cigarette sales fell 31.3% from 2003 to 2013, according to Euromonitor International. Many health officials hope that the move will help continue to decrease the number of smokers and smoking-related deaths in the U.S. “I think CVS recognized that it was just paradoxical to be both a seller of deadly products and a healthcare provider,” U.S. Centers for Disease Control and Prevention Director Thomas Frieden told Reuters.

Working to build and maintain a strong reputation also boosts the bottom line. Studies from Argenti and a range of other researchers suggest that companies with a strong reputation enjoy price advantages, being able to negotiate lower prices with suppliers and higher charges to customers. They can also recruit better employees, have more stable revenues and, “when something bad happens, they are given the benefit of the doubt by their stakeholders.” Further, “highly reputed companies are more stable, which means they have higher market valuation and stock price over the long term and greater loyalty of their investors, which leads to less volatility,” according to Argenti.

Convenience stores account for 75% of cigarette sales nationwide, so the tobacco industry has yet to express concern about prospective losses from drugstore sales. But Dr. Richard Wender of the American Cancer Society said CVS’s move would have an effect. “Every time we make it more difficult to purchase a pack of cigarettes, someone quits,” he told Reuters. So far, CVS is betting on that for patients’ health, and its own.

The 10 Most and Least Expensive Health Insurance Markets in the U.S.

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Health Insurance

Under Obamacare’s new insurance marketplaces, people in Minnesota, northwestern Pennsylvania, and Tucson, Ariz., are getting the best bargains for health care coverage. Premiums in these areas are half the price of policies in the most expensive regions, based on the lowest cost of a “silver” plan – the mid-range plan most consumers are choosing.

“The cheapest cost regions tend to have robust competition between hospitals and doctors, allowing insurers to wrangle lower rates,” according to a report from Kaiser Health News and NPR. “Many doctors work on salary in these regions rather than being paid by procedure, weakening the financial incentive to perform more procedures.”

The 10 regions with the lowest premiums are:

$154: Minneapolis-St. Paul – Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, Sherburne and Washington counties.

$164: Pittsburgh and Northwestern Pennsylvania – Allegheny, Armstrong, Beaver, Butler, Crawford, Erie, Fayette, Greene, Indiana, Lawrence, McKean, Mercer, Warren, Washington and Westmoreland counties.

$166: Middle Minnesota – Benton, Stearns and Wright counties.

$167: Tucson, Ariz. – Pima County.

$171: Northwestern Minnesota – Clearwater, Kittson, Mahnomen, Marshall, Norman, Pennington, Polk and Red Lake counties.

$173: Salt Lake City – Davis and Salt Lake counties.

$176: Hawaii

$180: Knoxville, Tenn. – Anderson, Blount, Campbell, Claiborne, Cocke, Grainger, Hamblen, Jefferson, Knox, Loudon, Monroe, Morgan, Roane, Scott, Sevier & Union.

$180: Western and North Central Minnesota – Aitkin, Becker, Beltrami, Big Stone, Cass, Chippewa, Clay, Crow Wing, Douglas, Grant, Hubbard, Isanti, Kanabec, Kandiyohi, Lac qui Parle, Lyon, McLeod, Meeker, Mille Lacs, Morrison, Otter Tail, Pine, Pope, Renville, Roseau, Sibley, Stevens, Swift, Todd, Traverse, Wadena Wilkin and Yellow Medicine counties. In Chisago County, the lowest premium is $162.

$181: Chattanooga, Tenn. – Bledsoe, Bradley, Franklin, Grundy, Hamilton, Marion, McMinn, Meigs, Polk, Rhea and Sequatchie counties.

 

The 10 most expensive regions are:

$483: Colorado Mountain Resort Region – Eagle, Garfield and Pitkin counties, home of Aspen and Vail ski resorts. Summit County premiums are $462.

$461: Southwest Georgia – Baker, Calhoun, Clay, Crisp, Dougherty, Lee, Mitchell, Randolph, Schley, Sumter, Terrell and Worth counties.

$456: Rural Nevada – Esmeralda, Eureka, Humboldt, Lander, Lincoln, Elko, Mineral, Pershing, White Pine and Churchill counties.

$445: Far western Wisconsin – Pierce, Polk and St. Croix counties, across the border from St. Paul, Minn.

$423: Southern Georgia – A swath of counties adjacent to the even more expensive region. Ben Hill, Berrien, Brooks, Clinch, Colquitt, Cook, Decatur, Early, Echols, Grady, Irwin, Lanier, Lowndes, Miller, Seminole, Thomas, Tift and Turner counties.

$405: Most of Wyoming – All counties except Natrona and Laramie.

$399: Southeast Mississippi – George, Harrison, Jackson & Stone counties. In Hancock County, the lowest price plan is $447.

$395: Vermont*

$383: Fairfield, Conn. – The southwestern-most county, which includes many affluent commuter towns for New York City.

$381: Alaska.

*Unlike other states, Vermont does not let insurers charge more to older people and less to younger ones. Its ranking therefore will differ depending on the ages of the consumers.