© 2009 Business & Legal Reports, Inc. 31506810 (#754) 1

Maximize the Impact of YourEmployeeAssistance Program

CONTENTS

June 2009 www.blr.com Issue 754

Employee Assistance Programs (EAPs)have been around for decades, and yourcompany likely has one. You may notpay much attention to it, but if youdon’t, you may be missing an opportu-nity to really reap its maximum value.Recently, the National Business Groupon Health (NBGH) created a work groupcharged with a close examination ofEAPs: what they are, what they shouldbe, and how organizations can ensurethey’re getting the maximum value fromthem. The work group was made up ofmental and behavioral health profession-als and professionals in EAP manage-ment. As a group, they learned howmuch EAP services are needed in theworkplace, and how well these programsare actually performing. In producingtheir Employer’s Guide to EmployeeAssistance Programs, the group makesa number of recommendations that youcan use to ensure you’re getting the mostbang for your EAP buck.Employee stress levels are at an all-timehigh, says Helen Darling, NBGH’spresident. And while employer surveysidentify workplace stress as their numberone issue, most don’t know how to miti-gate it. “Employers recognize that theysometimes contribute to the stress, butthey don’t always know how to act on it,”she reports. Increased stress has increasedthe demand for mental health services.Darling says that reports from across thecountry indicate more people are seek-ing help for depression and financialpressures. “A Chicago-based EAPreceived 21% more calls seeking helpwith stress from finances in July (2008)than they received a year earlier. Onevery large EAP reports that calls for

assistance with home foreclosures,bankruptcies, and other financial hard-ships grew 89% in 2008, compared tothe previous year. Hospital admissionsfor psychiatric services were up 10%in 2008 over 2007.”Mental Disorders More CostlyThan Any OtherDarling points out that the numbers arelikely to worsen as the dust settles fromthe current financial situation. Yet evenin so-called “normal” times, she says,mental health issues are costing compa-nies a lot of money. “In a just-publishedstudy of the 15 most costly medicalconditions in the United States, thesingle most costly condition was amental disorder. It was considerablymore costly, by about 10% to 15%,than heart conditions.“Depression is associated with a 2.5-foldincrease in the probability of missingwork and a 50% increase in lost worktime. In a 3-month period, individualswith depression miss an average of 4.8workdays, and suffer 11.5 workdays ofreduced productivity. It is estimated thatdepression causes 200,000,000 lostworkdays each year, with the cost toemployers ranging between $17 and$44 billion. Those are just the directcosts—the indirect costs are even higher.”How Does Your EAP Stack Up?“An EAP is the front-line opportunity toidentify and appropriately refer peoplewho have problems,” Darling says.However, if your EAP is something ofan afterthought, it is likely that you’remissing opportunities to help employeesand save some money.

(continued on page 2)

Case Study............................3Parental Leave for Lawyers PromotesWork-Life Balance, Retention

Washington Alert ..............4Paid Family Leave Proposedin HouseTax on Bonuses MulledReduced Hours Affect StatusCard-Check Bill IntroducedCOBRA Subsidy Info Released

Experts’ Forum................5Don’t Be Afraid of Social Media:Smart and Simple Ways toUse These Tools forBenefits Communication

From the Courthouse......6Court Orders 6-Figure Attorney’sFee Award in Suit for DisabilityBenefits

Benefits Corner................7You Can Save More onPrescription Drugs

Case Study........................8Be Up-Front When CommunicatingPay-Cutting Strategies

Q&A....................................9Industry Trends................10Hard Times Don’t NecessarilyEquate to Pessimism About EarningsMerchandise Could Be Greatas Employee BenefitWhat’s Your Biggest Issue This Year?

USERRA Alert....................11Employer Ordered to Pay Nearly$1M to Former Air Force Member

By the Numbers................12

B E S T P R A C T I C E S I N

2 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

Robert L. Brady, J.D., Publisher;Margaret A. Carter-Ward, Editor in Chief; Chris Ceplenski, Managing Editor; Elaine Quayle, Editor; Lisa Higgins, Karen Barretta,Martin Simon, J.D., Peter Knopp, J.D, Contributing Editors; Sandra Fisher, Corinne Weber, Proofreaders; Agnes D. Franks,Marketing Manager; Rebecca MacLach-lan, Graphic Designer; Sherry Newcomb, Layout Production. Contact Customer Service for reprints at 800-727-5257, ext. 2301. Best Practices in Compensation &Benefits is issued by BUSINESS & LEGALREPORTS, INC. Editorial and business offices are located at 141 Mill Rock Road East, P.O. Box 6001, Old Saybrook, CT06475-6001. © 2009 Business & Legal Reports, Inc.Issued monthly. Subscription price: $298.00 annually for complete service. Periodicals postage paid at Old Saybrook, CT 06475-9998, Standard Mail enclosed.Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by Business & Legal Reports, Inc., provided that thebase fee of U.S. $0.50 per copy plus U.S. $0.50 per page is paid directly to Copyright Clearance Center, Customer Service, 978-750-8400, or check CCC Online at:http://www.copyright.com. For those organizations that have been granted a photocopy license by CCC, a separate system of payment has been arranged. ISSN #1097-511X.

“We found that employers do notnecessarily subject their EAPs to thesame rigorous evaluation or cost im-pact assessment as they do for theirother programs. Only 34% of employ-ers view analyzing and reporting dataon the affects the EAP has on theorganization as a core service theyshould receive from their provider.That’s really surprising, because mostemployers, especially these days,have rigorously assessed every pro-gram they offer.”So what are some of the criticalservices your EAP should offer, andhow can you make sure yours does?According to the Guide, how yourcompany uses its EAP has a directbearing on productivity and morale.One study cited in the Guide showedthat work loss was avoided 60% ofthe time when EAP services wereprovided, saving an average of 17hours per incident.It also revealed that 72% of theindividuals involved in these caseswere more productive when theEAP intervened. In order to maxi-mize the value of an EAP, theGuide recommends that employersshould make sure the programfocuses on seven specific strategicand operational tasks. Three of thecritical tasks are training, assess-ment, and evaluation.Consult withCompany LeadershipEmployers need to understandwhen intervention is required,how to handle certain “hot button”situations, and how to react whenthere is a crisis. The Guide details acase where a company went throughdifficulties because of a productrecall. Corporate leadership reliedon EAP staff for guiding employeesthrough this very difficult time,with employees barraged dailywith negative media coverage andangry phone calls.

The EAP encouraged corporate leadersto communicate with employees onan ongoing basis. Leaders reacted byworking with their EAP to provide24/7 live-answer services for thework/life and mental health support ofthe employees, and also added a toll-free call center where employees couldhear an up-to-date message from cor-porate leadership about the latest de-velopments. These were recorded bythe president and CEO of the com-pany, offering information, encourage-ment, and support for employees.Employees were also offered anoption to immediately speak witha counselor through the toll-freeline. When the smoke cleared, thecompany lost fewer employees thananticipated, and received positivefeedback from employees about howthey handled the crisis.Confidential AssessmentServicesEmployees who seek help should bequickly assessed to make sure theyhave the tools to get them throughtheir situation with a minimal impacton their life and their productivity.This includes helping employees andfamilies during a workplace incidentor even a crisis that impacts an entirefacility, as well as problems peoplesuffer in their personal lives. The EAPcan offer critical incident response,evaluate employee fitness for duty,and assess any threats of violence.These personal services are a part ofany well-designed EAP. However, atruly effective program also includesmethodology for companies to use inevaluating the business impact of theprogram that should coordinate effec-tively, without wasteful overlap, withthe company’s health plans, disabilityplans, wellness programs, employeerelations, risk management, work/lifeprograms, and others the companyuses to maintain optimal employeehealth and productivity.The Guide recommends that employersrequire their EAP to utilize technologies

that enable the program to be efficientand to quantify the direct effect of theEAP on the company’s performance.Also critically important is communi-cating that the EAP is a positive, openresource that the company supports.“The key is to get senior leadership toacknowledge that it is important tothem, from the CEO on down,” saysPaul Heck, manager of Global Em-ployee Assistance &Worklife Serv-ices for the DuPont Company and amember of the NBGH work group.“They should be talking openly thatthe EAP is available, that they wantpeople to use it, and that it’s a pro-gram that is out in the open.”Time spent on a thorough examinationof your EAP would be time well-spent. To get started, you can take alook at the NBGH’s Guide at www.businessgrouphealth.org/pdfs/FINAL%20EAP_report_2008highres.pdf.Dr. Anna Marsh, deputy director of theCenter for Mental Health Services, be-lieves that addressing the mentalhealth concerns of employees, ratherthan hiding from them, has a positivebusiness impact. “Effective behavioralhealth treatment produces tangibleresults that offset both the cost of careand a loss of productivity should theseconditions remain untreated,” she says.

continued from page 1

The Benefits Forum & Expo (September13-15, 2009, Atlanta) is the largest con-ference and exhibition in the nation solelydeveloped for benefits professionals.Don’t miss the 2009 Keynote Speakers:Personal money management expertDave Ramsey and former Secretary ofHealth and Human Services GovernorMichael Leavitt.Visit www.benefits-forum.com for moreinformation.

© 2009 Business & Legal Reports, Inc. 31506810 (#754) 3

Without 6-month parental leavesafter the births of her two children,as well as a flexible work arrange-ment, attorney Lisa J. Pirozzolo saysshe wouldn’t have been able toachieve as much as she has in hercareer at WilmerHale. “From mypersonal experience, I wouldn’t behere as a partner with the firm, if Ihad not had two parental leaves” andbeen able to work at home 2 days aweek, she says.Gender-Neutral BenefitsWilmerHale (www.wilmerhale.com),a global law firm, has had a parentalleave policy covering lawyers foryears. Last year, it expanded the gen-der-neutral benefits for both primaryand “secondary” caregivers forlawyers who work in WilmerHale’sU.S. offices.Lawyers who are the primary care-giver for their newborn or newlyadopted child may take up to 1 yearof childcare leave with benefits—18 weeks at full pay and an addi-tional 34 weeks of unpaid leavewithin 12 consecutive months.Previously, the firm provided 12weeks of paid leave instead of 18,according to Pirozzolo.Secondary caregivers used to beentitled to 3 consecutive weeks ofpaid leave after the birth or adoptionof a child, but that was increased to4 weeks last year, she says.As co-chair of the firm’s Work-LifeBalance Committee, Pirozzolo saysshe personally is proud that thepolicies apply to both working moth-ers and fathers. She notes that “wehave a fair number of dads who havetaken leave.” Last year, 39 malelawyers and 62 female lawyers tookparental leave.Upon their return to work, lawyershave access to a work-life advisor,many of whom have taken parental

leave themselves, she says. The advi-sors help smooth the transition backto work by providing guidance andmaking sure that returning lawyersare aware of available resources andoptions, such as emergency childcare, lactation rooms, and flexibleschedules (e.g., part-time, flex-time,or telecommuting arrangements).“What we try to do is offer an arrayof programs that really let peoplecome up with a program that worksfor them individually,” Pirozzolosays. “It’s hard to have a ‘one-size-fits-all’ given the diversity of ourpractices.”WilmerHale works hard to create asupportive environment for workingparents, says Pirozzolo. In addition toproviding advisors to lawyers whenthey return from leave, the firm postswork-life information on its intranet,sponsors brown bag lunches on re-lated topics, and keeps partners in-formed about work-life initiatives,she says. “We want people to talkabout these issues and be aware ofthese issues.”“Part of our success in this area hasbeen the strong support from man-agement in the firm,” says Pirozzolo,adding that management supports thecommittee’s policy recommendationsand the promotion of work-life bal-ance. “We’ve always been supportiveof lawyers looking to balance theirfamily and professional responsibili-ties,” she adds.Why is that such an important thingto do? “It’s the right thing to do forpeople who you hope are going tobe working for you for a long time,”she says.Of course, work-life balance is alsoa recruiting and retention issue.“We are retaining people who other-wise wouldn’t progress at the firmor stay at the firm as long as theydo,” Pirozzolo says.

In addition, “Law students pay a lot ofattention in terms of what law firmsare offering in work-life balance.”WilmerHale was honored as one ofthe 2008 Top Ten Family FriendlyFirms by Yale LawWomen and, forthe second consecutive year, as a2008Working Mother & Flex TimeLawyers’ Best Law Firms for Women.Secrets to SuccessBefore establishing a parental leavepolicy, Pirozzolo recommends seek-ing input from employees. “I wouldadvise people to get input from em-ployees on what they want and need,and work a lot on communicating thepolicies effectively once you putthem in place.”Here are two other tips to consider:1. Make policies gender-neutral.This not only helps with recruitingand retention efforts but also helpsensure that work-life balance isnot viewed solely as an issue af-fecting women, according toPirozzolo.

2. Create an acceptance of work-life initiatives. If employees seethat management embraces thepolicies and benefits, they willfeel comfortable taking leave ortapping into other benefits.

Who: WilmerHale

What: Provides 18 weeks of paidchildcare leave and up toan additional 34 weeks ofunpaid leave to the primarycaregiver of a newborn ornewly adopted child

Results: Helps with recruiting andretention efforts

CASE Study Study Study StudyParental Leave for Lawyers PromotesWork-Life Balance, Retention

Leave Questions?You need hr.blr.com.Call 800-727-5257.

Paid Family LeaveProposed in HouseWorkers who need to take time off tocare for a sick family member, a newchild, or because of their own illnesswould receive 12 weeks of paid leave,under the Family Leave Insurance Actof 2009 (HR 1723), according to Rep.Pete Stark (D-California), one of thebill’s sponsors. Other covered reasonsare caring for a wounded veteran ordealing with a family member’s mili-tary deployment.Under the bill, workers earning under$30,000 would receive full or nearlyfull salary replacement; those makingbetween $30,000 and $60,000 wouldreceive 55% wage replacement; andthose making more than $60,000would receive 40% to 45%—up to$800 per week, according to Stark’sstatement.HR 1723 was referred to three Housecommittees. Both the House and Sen-ate are also considering the FederalEmployees Paid Parental Leave Act of2009 (HR 626, SB 354), which wouldprovide that 4 of the 12 weeks ofparental leave provided to federalworkers be paid.

Tax on Bonuses MulledIn a 328-93 vote, the House of Repre-sentatives recently approved legisla-tion that would impose a 90% tax onbonuses given to highly paid employ-ees at companies that receive morethan $5 billion in funds from theTroubled Assets Relief Program(TARP).Under HR 1586, employees who ir-revocably waive or return a bonuspayment before the end of the taxableyear would be exempt from the tax, aslong as they do not receive any bene-fit from their employer as a result.Meanwhile, the Senate is consideringSB 651, which would require certainemployers receiving TARP funds, aswell as their employees, to pay a 35%excise tax on bonuses.

Reduced HoursAffect StatusThe U.S. Department of Labor’s(DOL) Wage and Hour Division statesthat reducing the hours of exemptemployees may change their status(FLSA 2009-14, 1/15/09).Under the circumstances explained inthe opinion letter, “… salary deduc-tions due to MTO [mandatory timeoff] lasting less than a workweek vio-late the salary basis requirement andmay cause the loss of exempt status,”the letter states.For more information, visit www.dol.gov/esa/whd/opinion/opinion.htm,and click on “Fair Labor StandardsAct” under “Opinion Letters from theAdministrator.”

Card-Check BillIntroducedThe Employee Free Choice Act,which was recently introduced in boththe House and Senate (HR 1409, SB560), would make it easier for unionsto organize because the secret ballotelection for union certification wouldno longer be required. Instead, aunion would be certified if a majorityof affected employees sign authoriza-tion cards in support of the union.Referred to as the “card-check” bill,the legislation calls for a 30-daymediation period if an employer anda newly formed union cannot reachagreement on a first contract within90 days. If an agreement cannot bereached through that process, arbitra-tion would follow.

COBRA SubsidyInfo ReleasedDOL has published four model no-tices to help employers comply withrequirements of the 65% subsidy forCOBRA continuation premiums forworkers who have been involuntarilyterminated. The model notices areavailable at Compensation.BLR.comand www.dol.gov/cobra.

In related news, the IRS has issuedguidance on COBRA provisions ofthe American Recovery and Reinvest-ment Act of 2009. Notice 2009-27provides an overview of the provi-sions, as well as Q&As on a varietyof topics, including what constitutesinvoluntary termination, eligibilityrequirements, how to calculate thepremium reduction, and the extendedelection period.

4 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

WASHINGTON ALERT

Regulatory GuidanceIssued on Pension Plans

American Benefits CouncilPresident James A. Kleinhas commended the InternalRevenue Service (IRS) for itsrecent regulatory guidance onpension plans, calling it “wel-come news for many employerdefined benefit plan sponsorsthat are facing unprecedentedfunding obligations as a resultof the economic downturn.”Under the guidance, companiesare allowed to use the spotyield curve, which is used formeasuring pension assets andliabilities, for 2009, regardlessof what they used in prioryears, according to the Council.In addition, the Council said theguidance clarifies that the spotyield curve can be used for any“applicable month”—not themonth preceding the plan year,as originally proposed.“In the short run, this guidancewill allow many employer-plan sponsors to more reason-ably measure the value of theirpension plan liabilities into thefuture while continuing toensure that these plans will befully funded and provide allpromised benefits,” Klein said,noting that additional guidanceand legislation are needed inthe future.

IRS Update

© 2009 Business & Legal Reports, Inc. 31506810 (#754) 5

Social media is the buzz at everycorporate communications or HRconference, and the tools are growingmore quickly than anything elseonline. Yet few companies areeffectively integrating these toolsinto their benefits or strategic HRcommunications.Many companies are paralyzedbecause they don’t understand thetools, or they assume social mediarequires reworking their wholecommunication strategy. The truthis, social media tools are easy tounderstand and easy to use. And,they are most effective when inte-grated into existing strategies. Herewe walk through the tools mostrelevant for HR communication andthe four key questions you should askbefore making any investments.Understanding the LandscapeThe social media landscape can beoverwhelming, but not if you onlyfocus on the tools most relevant toemployee communication.Blogs are a simple and easy way toself-publish Web content and cancommunicate almost anything. Theygive readers the opportunity to re-spond with comments and have adialog with the author. Considerhaving your benefits team start ablog about tips on getting the mostvalue from your programs, or getyour leadership to include benefitsinformation in their existing blogs.Podcasts and Videocasts are simplyonline audio and video clips. Theycan be played on a computer or iPodand they have endless uses: post ashort video of CEO or leadershipspeaking about a new program, createpodcasts of enrollment meetings ornew-hire orientation, review the ba-sics of your plan through a 401(k)101 podcast series (even better if youteam it with an online forum forquestions), or create a contest for

the best 2-minute video about a keytopic—health care, wellness, 401(k)investing—and let your employees’creativity go to work.Social networks, such as Facebook,LinkedIn®, and thousands of others,connect individuals around commoninterests and activities. Whether per-sonal or professional, they are incredi-bly powerful tools for distributinginformation and ideas. You can helpnetwork employees hired in the samemonth; let them go through orientationtogether, even virtually, and sharetheir experiences. Or, you could createa Facebook group for wellness eventsto promote online and in-person pro-grams. Invite families to join, too.Awiki, just like the most famous one,Wikipedia, lets multiple users edit thesame Web page or content. They areideal for internal collaboration such assharing tips and reminders.Making Wise InvestmentsUse these four questions to help setyour social media plan and integratethese tools into your communicationstrategy.1. What are your objectives?

Don’t roll out a new communica-tion method or technology justfor the sake of doing so; makesure it is tied to your overall strat-egy or it will be money wasted.Are you trying to save costs long-term by getting employees moreengaged in their health care? Ordo you want to improve engage-ment by making sure employeesknow what their whole packageis worth? Start with your coreobjectives and then decide if asocial media tool will help youget there.

2. Who are your employees? Howdo they want to receive informa-tion? What is practical, and whatmakes sense given the needsof your workforce (and their

families)? Make sure your com-munication—no matter whatform—is making it easier andfaster for your audience to get anduse the information they need,when and where they need it.

3. What is going to have a long-term ROI? Think about invest-ing in infrastructure first, as itwill have the most benefit long-term. Upgrading your intranet toprovide blog, profile, and wikiplatforms will have unlimiteduses down the road and enableyou to start working with thosemedia. Investing in a series ofone-off podcasts or videos willhave a shorter lifespan, but maymake sense if part of a high-valuecampaign.

4. What is efficient to monitor andmaintain? Keep in mind that whatyou produce must still be profes-sional and high quality, whichrequires an investment of time andmoney. Likewise, you must readand respond to feedback—bothto keep informed of what youremployees are saying, but also tomake sure information is accurateand complete. In some organiza-tions, monitoring blog contentalone has required creating a newfull-time position. However, if thatallows you to have an effectivetwo-way dialog with your employ-ees that furthers your objectives,the position will certainly beworth the investment.

� Jennifer Benz is an award-winningcommunication consultant andwriter based in San Francisco.Her firm, Benz Communications,provides full-service employeecommunication services to100 Best Companies to WorkFor and Fortune 500 leaders.She can be reached at jen@benzcommunications.com.

Experts’ ForumDon’t BeAfraid of Social Media: Smart and SimpleWaysTo Use These Tools for Benefits Communicationby Jennifer Benz

A federal district court has orderedthe CIGNA Life Insurance Companyto pay $105,840 in attorney’s feesto a long-term disability plan benefi-ciary whose benefits were wrongfullyterminated. The court’s ruling illus-trates how the five-factor test fordetermining whether to award attor-ney’s fees operates in practice andcan result in a large assessmentagainst an ERISA benefit plan.Facts. “Alfred” worked for theCornell’s Weill Medical College asa wage and salary manager and wascovered by Weill’s long-term disabil-ity insurance plan, which was insuredand administered by the CIGNALife Insurance Company. After beinginvolved in a car accident in 1996,Alfred suffered from back pain andleft-leg weakness and began receiv-ing medical treatment. In 2000, hiscondition worsened, and his doctorconcluded that his back pain left himunable to work, so he left his jobat Weill.Alfred applied for and was awardedSocial Security disability benefits aswell as benefits under the CIGNAplan. In 2006, however, following aseries of exams, CIGNA determinedthat he was no longer disabled andterminated his benefits.Alfred appealed the termination andeventually sued for the restorationof his benefits. The district courtconcluded that Alfred provided com-pelling evidence that he sufferedfrom a back condition that precludedhim from sitting for 6 or more hoursper day, thus rendering him disabledwithin the meaning of the CIGNAplan. In addition, the court deter-mined that none of the medical orvocational evidence cited by CIGNAwas sufficient to overcome Alfred’sevidence.The court ruled that Alfred wasclearly entitled to long-term disabilitybenefits and ordered that his benefits

be retroactively restored. Alfred alsosought attorney’s fees, costs, andprejudgment interest which could beawarded at the discretion of the court.Ruling. The court reviewed the fivefactors set by the 2nd Circuit Courtof Appeals to determine whether toaward attorney’s fees in a suit forbenefits.The court first noted that bad faith,the first factor, is not a prerequisitefor an award of attorney’s fees be-cause a defendant may be culpablewithout necessarily having actedin bad faith. The court ruled that abenefit plan is at fault where it hasviolated ERISA in a way that de-prives the plaintiff of his or herrights under the plan.Thus, while CIGNAmay not haveacted outrageously or in subjectivebad faith, it was culpable based onthe determination that Alfred wasclearly entitled to long-term disabilitybenefits, and that there was no soundbasis for CIGNA’s termination of thebenefits. While this factor wouldweigh more heavily in Alfred’s favorhad CIGNA acted in bad faith, itnevertheless provides support for anaward of attorney’s fees.CIGNA, with a net income of $292million and revenues of $19.1 billionin 2008, clearly was able to satisfy anaward of attorney’s fees. However, adefendant’s ability to withstand pay-ment, the second factor, does notweigh heavily in favor of such anaward. While a defendant’s inabilityto pay weighs against an award, itsability to pay generally has no effect.The court next ruled that the thirdfactor, whether an award of attorney’sfees would deter others like CIGNAfrom engaging in similar conduct,weighed heavily in favor of Alfred.While the costs of litigating a denialof benefits under ERISA can be high,the benefits that may be awarded

may not be generous. Not only mustlosing plaintiffs pay their own fees,but all plaintiffs assume the risk of anaward of fees against them. Forcingplaintiffs to pay their own fees whenthey win would likely deter manyfrom pursuing their rights.Moreover, a “grudging approachto fee awards” would provide anincentive for potential defendantsto deny even meritorious claims.Thus, an award of attorney’s feesserves to level the playing field,deter unscrupulous or careless planadministrators, and, at a minimum,reduce any incentives insurancecompanies may have to wrongfullydeny claimants benefits, the courtexplained.An assessment of the relative meritsof the parties’ positions, the fourthfactor, weighed in favor of Alfred,said the court. Because Alfred estab-lished a clear entitlement to long-term disability benefits under theplan, the fact that CIGNA tooklegally correct positions on peripheral

Employee RetirementIncome Security Act (ERISA)ERISA Sec. 502(g)(1) providesthat a court, in its discretion, mayallow reasonable attorney’s feesand costs in lawsuits brought byparticipant or beneficiaries torecover benefits that were wrong-fully denied. In Chambless v.Masters, Mates & Pilots PensionPlan (1987), the 2nd Circuit setforth the factors that should beconsidered in exercising thatdiscretion. These factors include:(1) defendant’s culpability or badfaith, (2) defendant’s ability towithstand payment, (3) the extentto which an award would deterothers from similar conduct,(4) the relative merits of the par-ties’ positions, and (5) whetherthe action confers a commonbenefit on a class.

6 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

From the Courthouse TheLAW

Court Orders 6-FigureAttorney’s FeeAward in Suit for Disability Benefits

(continued on page 9)

© 2009 Business & Legal Reports, Inc. 31506810 (#754) 7

You Can Save More onPrescription DrugsIn the last few years, the market has seen a shift toward the useof generic drugs. Your prescription drug plan probably encour-ages it, and so does the local drug store; you can get a 30-daysupply of many generic drugs for just $4 at several of the bigname pharmacies.Most benefits professionals can state off the top of their heads thenames of the highest-cost prescriptions covered by their plan. Youknow the ones: Nexium®, Lipitor®, Prevacid®, or some of the otherbrand-name drugs commonly prescribed for your employees.Because these drugs remain subject to a patent, they are not yetavailable as generics, and they may not be for many years.However, there is a secret about them that even most physiciansmay not know—there are equally effective drugs available atmuch lower costs. If physicians did know, and if they understoodthe true cost of the brand-name drugs, many would be willingto have their patients try an alternative, says David Smith ofEquivaMeds (www.equivameds.com).His company offers a way to find those drug alternatives andinform physicians about them. Patients can then have a conver-sation with their doctor about whether the alternatives should beprescribed. Savings on Lipitor, for example, could be in the $500to $700 per year range, according to Smith.The company started when one frustrated physician realizedthat his patient, a young woman for whom he had prescribeda commonly accepted medication, returned to him 3 monthsafter he wrote her a prescription. Her symptoms were thesame. She tearfully confessed that the medication cost $100for a 30-day supply, and she couldn’t afford it. As the doctorresearched alternatives, he realized that this scenario playsout over and over in the United States.“There are other drugs that a doctor would consider as anoption to these very expensive, brand-name drugs,” says Smith.“Why don’t they prescribe those in the first place? Because theydon’t know. We often find that there is an ‘Aha!’ moment forthe doctor, when he or she finds out the cost of the drugs they’represcribing, and that there are good alternatives.“There are too many drugs out there, too many drug plans, andtoo many formularies, for the doctor to know how much a pa-tient will end up paying for their prescription. But if at the pointof care, the doctors knew the cost, they might make differentprescription decisions. When they see that someone could save$70 a month just on the co-pay, for example, they often say,‘Sure, let’s try this other drug.’”

Benefits Corner“When patients have an easiertime paying for their medication,their adherence rates go up,”says David Smith of EquivaMeds.That can have a positive impacton your company’s health plans,because patients who adhere totheir physician’s recommenda-tions generally experience betteroutcomes. “They end up healthierbecause they fill their prescriptioneach month and take their medica-tions,” he explains.Even though a “drug shopping”service like EquivaMeds doesn’tdirectly save money for the pre-scribing physicians, it does impacttheir costs in other ways, saysSmith. Doctors sometimes spenda significant amount of time tryingto work out treatment options fortheir patients.“I met with a fellow who says hisown doctor was on the phone withan HMO for 5 hours trying to workout which drug to prescribe forhim. The doctor told the patient hewas going to have to start chargingfor that time,” Smith says. Whenresearch is made easier for thephysicians, they can spend moreof their time seeing patients, thussaving them money. “We talkedto a doctor who is part of a100-person physician practice, andhe says they could save $500,000per year in operating costs with thiskind of tool.”

Use of MedicationCuts Costs

ABOUT THIS NEWSLETTER

This newsletter is devoted to shar-ing compensation and benefits ideasthat have worked for HR profession-als striving to make a strategic differ-ence in their companies. If you have astory you’d like to share, send us a fax

at 860-510-7224.

If you have a question aboutone of the newsletter stories or

want more information, call800-727-5257, ext. 2194, or

e-mail equayle@blr.com.

8 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

There was a popular song in the 1970s telling lis-teners that the hardest word to say is “sorry.” Youmay agree with that, generally speaking. But forthose who are less musically inclined, and thosewhose companies are suffering in the current bleakeconomy, different words likely come to mind:Words like “layoff,” “furlough,” or how about atwo-word phrase, like “pay cut”?Certainly these are among the most difficult thingsanyone, from employees through management,has heard lately. Saying them isn’t much easier.Jennifer Benz of Benz Communications is all toofamiliar with these terms and has helped some ofher clients weather the storm. We spoke with herrecently about the best ways to tell your employeesthey’re facing such difficult news.Open, Honest, FrequentCommunication“I think the first thing companies need to do is tobe very honest with their employees about what’sgoing on,” Benz says. “Employees understand.They are smart, and they know what’s going on inthe economy. More than anything else right now,people appreciate open, honest, frequent communi-cation. The worst thing a company can do is towait to talk about things until they think they knowall the answers and have every detail buttoneddown. That creates an atmosphere where “some-thing” is going on, and everybody knows it, butnobody is saying what’s going to happen. It createsa lot of tension and anxiety.”What if you don’t really know how everything willplay out? Shivani Ganguly, an HR leader in a high-tech company in San Francisco with 75 employees,has taken Benz’s advice. “In February 2009 we putmost of the company, with the exception of about12 people, on furlough,” she says. “It has turnedout to be much longer-term than we anticipated.We originally announced that it would be only acouple of weeks, but we didn’t really know exactlywhat was going to happen.”However, what they did know, they told employ-ees. “The biggest thing is to be as clear as youcan,” Ganguly says. “People didn’t know what“furlough” meant, so we were as clear as we couldbe about what it really means and how it would

impact people. We let them know how it would af-fect their compensation, their benefits, whether ornot they could come in to the office. There weremany questions we hadn’t really anticipated, but intalking it through with Jen, we were able to thinkthrough some of those questions before we actuallygot them.”Enlist Help If You Need ItOf course, in a cost-cutting situation paying foradvice may seem like a bad investment. But thecompany’s goal, says Ganguly, is to return strongerin the long run. Preserving relationships withvalued employees is a huge part of that, she says.“We’ve only had three people out of the 75 whohave found new jobs and are working at differentplaces. I think that’s a testament both to the factthat we have a very tight-knit group and commu-nity here and also that the job market is not movingvery quickly right now.”Ganguly recommends that before you communi-cate a difficult message, you understand the admin-istrative details. Do your benefit plans allow you tokeep employees covered? Are employees eligiblefor unemployment benefits in your state? These arethe kinds of questions employees will need to haveanswered, and if you know the answers in advance,you will be in a position to be much more helpfulto them and to your remaining staff.Keeping employees in the loop is much more diffi-cult when they are not at work, but Ganguly says itis worth the effort. “You have to communicate withpeople regularly and give them as much informa-tion as you can, even if there isn’t a big changefrom week to week. We’ve been sending outemails. You could have managers call people. Justtouching base with them once a week, letting themknow the status—when we might be able to bringpeople back, what we’re doing to bring them back,that kind of thing.“When people are in the office, that kind of thingpercolates more naturally. But when nobody’s inthe office, people don’t know what’s going on, andthey feel very disconnected.”‘Cascade of Communication’Benz emphasizes that the messaging should comefrom the highest level of the company. “The firstcommunication should come from the CEO. Itneeds to be very personal, very real. Then makesure that managers and supervisors have thetools to have one-on-one conversations with theiremployees. We call it a “cascade of communica-tion”—it should go from the CEO to the leaders,then from the leaders to the managers, then themanagers to the employees. You just have to makesure the leaders are saying the same things as themanagers are in their one-on-one conversations.”

CASE

Stu

dy

Stu

dy

Stu

dy

Stu

dy Be Up-FrontWhen Communicating Pay-Cutting Strategies

Who: A 75-employee high-tech firm

What: Announced furloughs for the majority ofemployees.

Result: Maintains positive relationships withvirtually all of its employees because ofappropriate, clear, and open communicationpractices. Just three employees have movedon to other jobs.

© 2009 Business & Legal Reports, Inc. 31506810 (#754) 9

The authenticity of the message isimportant, and you can credityounger workers for demanding it,says Benz. “Social media and theways the Millenials interact havebeen kind of pushing the envelopeto make things much more personaland more authentic,” she says.“People expect really clear, opencommunication, and they expect itto come from a person and not afaceless corporation. If you’re acompany, and you’re making harddecisions, your employees are goingto expect that the leaders are holdingthemselves accountable for that andare talking from their personal per-spective about what’s going on, notin some distant, third-person way.”Common mistakes in communicatingthe hard message range from beingclumsy to having a poor strategy,Benz says: “On the clumsy side, a lotof companies communicating salaryreductions or furloughs don’t gothrough that extra step of reallybreaking down exactly what thingsmean and exactly how the employeewill be impacted. You shouldn’tmake any assumptions that they un-derstand the benefit programs or howyour current salary structure works.You have to be very clear and verythorough in how you communicate.If you don’t, the impact will be that

people are frustrated. It hurts produc-tivity because they are spendingmore time trying to figure out what’sgoing on.”Take the Long ViewA big strategic error is taking ashort-sighted view, Benz says. Harshor inconsiderate treatment of em-ployees could mean you’ll have abigger hill to climb when the econ-omy improves, and you want to goback to full capacity.“Companies that treat their employ-ees badly will have a harder timekeeping and attracting the right tal-ent,” Benz says. “I believe that thecompanies who do a good job takingcare of their people and who reallyshine during the tough times are theones who are going to keep the tal-ent and keep the best people whenthe economy turns around. You don’twant to be the employer that every-one is dying to get away from assoon as there is a job offer. A lot ofcompanies are putting themselves inthat position.“There is a huge distinction betweenthe actions of companies who are re-ally mindful of their employees andthe ones who are really only lookingat the short-term bottom line. Peoplewon’t forget that,” Benz concludes.

Q: We read your recent arti-cle on the Lilly Ledbetter Act(Issue #752).

Our practice has been todestroy payroll records after3 years, but based on thisinformation, it seems weshould hold them indefi-nitely. Should we keepthem longer?

A: You’ll need to decidefor yourself how long to

retain your payroll records. Asyou make the decision, though,you’re right to consider the LillyLedbetter Act and the situationfrom which it arose.“The Lilly Ledbetter Act does notrequire any changes to recordsretention policies,” says BLRLegal Editor Patricia Trainor, J.D.“However, given the extendedtime period in which employeesmay now bring discriminationclaims based on compensation,some experts recommend thatemployers retain payroll recordsfor an indefinite period.Others recommend simply ex-tending the retention period

beyond the generally accepted2 to 3 years,” she explains.

Trainor says you should weighthe possible consequences ofbeing without the documents inthe event of a claim against thecost and logistics of retainingthe records.

“The most prudent course wouldbe to consult with your localemployment counsel for adviceon the best payroll record reten-tion policy for your organization,”she says.

QA&

continued from page 6

issues was not relevant. The courtemphasized that the bottom-linedetermination in this case wasCIGNA’s attempt to defend a denialof benefits that, in the end, simplywas not justified.The fifth factor, however, weighedin favor of CIGNA, because thiscase did not challenge or alter anyacross-the-board plan rule or prac-tice, but instead dealt only with theparticular facts of Alfred’s situation.Thus, other than the general deter-rent effect already counted inAlfred’s favor in connection withthe third factor, the case conferredno common benefit.Viewed as a whole, only the fifth fac-tor favored CIGNA, and thefailure to satisfy this factor doesnot preclude an award of attorney’sfees. While all of the other factors didnot overwhelmingly favorAlfred, the court concluded that themerits of his claims and the need fordeterrence made an award of$105,840 in fees appropriate based on235.20 hours worked at a rate of $450per hour (Alfano v. CIGNA Life Insur-ance Company of New York, U.S. Dis-trict Court for the Southern District ofNew York, 07 Civ. 9661 (4/2/09)).

In spite of the tough times currentlybeing experienced by many Ameri-cans, as a group we are looking atthe big picture with optimism, saysa recent public opinion poll by Pew’sEconomic Mobility Project. Nearly8 out of 10 Americans believe itis still possible to improve theireconomic standing, and remain opti-mistic that their family’s economiccircumstances will improve withintheir lifetime and across generations.“Although the current economiccrisis seems to be deepening eachday and many families are feelingthe pinch—either through companylayoffs, decreasing home values,or loss of retirement savings—Americans are taking a longer-termview,” said John E. Morton, managingdirector of Economic Policy at

The Pew Charitable Trusts. “We maybe struggling in our daily lives, butAmericans are confident in them-selves and their ability to get aheadin the future.”More than two-thirds of the survey’srespondents believe that their per-sonal economic circumstances willbe better in the next 10 years. Mostparents (62%) believe that theirchildren will have a higher standardof living than they had. As a group,African Americans are the mostoptimistic about these prospects,with 85% saying they believe theireconomic circumstances will bebetter in 10 years.By comparison, 71% of whites and77% of Hispanics felt the same way.In terms of income, 54% of whitessay their children will have a harder

time moving up the income ladderthan they have experienced, com-pared to 34% of African Americansand 41% of Hispanics.“This research shows that Americansthroughout our diverse society havean abiding faith in their ability toget ahead,” said Ianna Kachoris,project manager of Pew’s EconomicMobility Project.“However, our economic analysishas previously reported there areconsiderable racial gaps in mobility,as well as significant immobilityfor many Americans at the bottomof the income ladder. People’sperception of their ability to getahead may not necessarily coincidewith reality, and special attentionshould be paid to improving mobil-ity for all Americans.”You can read an analysis of the reportat www.economicmobility.org.

10 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

INDUSTRY TRENDSHard Times Don’t NecessarilyEquate to PessimismAbout Earnings

Given the option, many workerswould be inclined to purchase mer-chandise such as computers and ap-pliances through payroll deduction,according to a Harris Interactive®opinion poll.According to the survey, sponsoredby Purchasing Power (www.purchasingpower.com), 76% offull-time workers whose companiesprovide them with employee benefitssaid they would purchase a desktopor laptop computer, high-definitiontelevision, home appliance (such

as a washer, dryer, or refrigerator),power tools, and/or a lawnmower inthe next year if credit or financingwere not issues for them.Not surprisingly given the economy,many consumers are delaying suchpurchases. But when asked howlikely they would be to make sucha purchase that could be paid forthrough payroll deduction, 45% saidthey would be “somewhat likely”to purchase a computer; 38%, ahigh-definition TV; and 37%, a largehome appliance.

“Providing nontraditional voluntarybenefits as part of the benefit packageis a logical service that employers canoffer their employees, especially intoday’s economic climate, to help themacquire life-enhancing products shouldthey choose to do so,” said RichardCarrano, Purchasing Power’s presidentand chief financial officer. “Althoughit’s a benefit fully paid for by the em-ployee, offering this type of employeebenefit helps employers show theycare about their employees and wantto help. Adding a benefit like this alsohelps raise employee morale in today’seconomic environment.”

Merchandise Could BeGreat as Employee Benefit

The good news is that increasinghealth insurance costs have finallytaken a back seat to other concernsfor the HR department.The bad news—as you are alreadyaware—is that you’re struggling withhow to spread a much thinner amountof salary increases to your staff thanyou probably were in years past.

WorldatWork asked its members thisquestion: “What do you think willbe the biggest total rewards issue foryour organization in 2009?” Thelargest percentage of respondents, or47.6%, answered “low or no salarybudget increases.”Roughly half of that number, or24.5%, said “downsizing or rightsizing

the workforce” was their top concern,followed by “retention of a produc-tive workforce,” with 10.4% of votes.Rising healthcare costs, which hasbeen a top concern for a very longtime, was chosen as the biggest issueby just 5.8% of survey respondents.

What’s Your Biggest Issue This Year?

Under the Uniformed ServicesEmployment and ReemploymentRights Act of 1994 (USERRA) andfinal regulations issued by the U.S.Department of Labor (DOL) in2006, employers have numerousobligations with respect to employeesreturning to the workplace aftermilitary service. Among other things,employers must:• Promptly reemploy such an em-ployee provided he or she appliedfor reemployment in a mannerrequired by USERRA, and• Reinstate the employee to a jobequal to, or comparable to, or thenearest approximation to, the oneheld before entering the armedforces and which entitles theemployee to the pay, benefits,seniority, and other job perquisitesthat the employee would haveattained if not for the period ofmilitary service (the so-called“escalator principle”).

In a civil action brought pursuant toUSERRA, a court may require theemployer, among other things, tocompensate the employee for lossof back pay or benefits suffered asa result of the employer’s failure tocomply with USERRA. If the courtdetermines that the employer’s fail-ure to comply was willful, i.e., theemployer showed reckless disregardfor USERRA’s requirements, the em-ployee is entitled to a doubling of theback-pay award.A recent decision by a federal districtcourt in Connecticut illustrateswhat can happen when an employerignores its requirements underUSERRA.What Happened“Matthew,” a stockbroker, beganworking for Prudential Securitiesin Stamford, Connecticut, in 2000.When he joined Prudential, hebrought his accounts with him from aprior stockbroker job. He was also a

member of the U.S. Air Force reserve.Following the events of September11, 2001, he was called to activeduty. He notified his employer onSeptember 29, 2001, and reportedfor duty the next day. At that time,he had been handling about 237accounts with assets totaling$4.1 million. His take-home payfrom commissions was about$80,000 per year.After 2 years on active duty, Matthewwas honorably discharged fromthe Air Force in October 2003.During Matthew’s 2 years of activeduty, Prudential, without notifyingMatthew, settled a legal claimbrought by a client that allegedMatthew had forged the client’ssignature on a document and exe-cuted unauthorized trades. Prudentialamended Matthew’s broker’s licenseto reflect the settlement and theclient’s allegations.Then Prudential sold its brokeragebusiness to Wachovia Corp., whichformed a new subsidiary, WachoviaSecurities, LLC (Wachovia).Wachovia moved the Stamford opera-tions to Westport, Connecticut, andbegan to deal with “less-wealthy andlower-volume clients via a nationaltelephone customer service centerrather than through individual bro-kers.” As a result, many of Matthew’sformer clients had either been as-signed to the national call center orhad ceased to be clients of Wachovia.On December 1, 2003, Matthew,through counsel, dispatched a letter toWachovia requesting that he bereinstated in accordance withUSERRA. Following negotiations,Matthew met with branch officials atWachovia’s Westport office, and wasoffered reinstatement to a financialadvisor position that included the re-turn of any of his remaining accounts,a $2,000 a month advance against hiscommissions, and the opportunity tocold-call for new client accounts—all

in all, a job with a smaller salaryand less responsibility than theone he had before being called toactive duty.After receiving this offer, Matthewleft Wachovia’s office and did notreturn. Subsequently, Wachoviaterminated Matthew for job abandon-ment. Matthew brought suit againstWachovia seeking reinstatement anddamages for lost pay in accordancewith USERRA. While the lawsuitwas going on, he opened, and withhis wife’s help, operated tanningsalons in three different states.What the Court SaidThe employer asked the court tothrow out Matthew’s claims at anearly stage of the legal proceedings.The court denied this request withrespect to almost all of Matthew’sclaims and determined there werefactual issues that needed to beresolved by a jury. A subsequentjury trial found that Wachovia failedto reinstate Matthew, as required byUSERRA, and had constructivelydischarged him by intentionallymaking him an offer that it knewhe would not accept.The next step was a trial on the issueof damages. Matthew asked for com-pensation in the amount of what hewould have earned during the 5 yearsfrom 2004 to 2008 had he beenworking for Wachovia at his old jobrather than running tanning salons.The court, taking a middle groundbetween employer and Matthew,came up with a total of $680,312.The court then looked at how muchMatthew had earned in the tanningbusiness. It rejected the employer’sargument that Matthew failed tomitigate his damages by starting hisown tanning business rather thanaccepting a lower-paying positionat Wachovia or seeking other

© 2009 Business & Legal Reports, Inc. 31506810 (#754) 11

Employer Ordered to Pay Nearly$1M to FormerAir Force Member

(continued on page 12)

USERRA ALERT

employment elsewhere in the finan-cial sector. (Matthew claimed hedidn’t want to try the latter course be-cause of the cloud on his record as aresult of the employer’s settlementwith the client who alleged forgery.)The court determined that Matthew’stanning business had earned $290,859and so reduced the amount owed tohim as back pay by that amount, thusentitling him to $389,453.Matthew also asked for liquidateddamages. USERRA provides that ifthe employer’s failure to comply waswillful, the plaintiff is entitled to a

doubling of the back-pay award, sothe court determined that Matthewwas entitled to $778,906 in back pay.Wachovia was also ordered to rein-state Matthew to a financial adviserposition with the full package of nor-mal employment benefits (Serricchiov. Wachovia Securities, LLC, U.S.District Court for the District of Con-necticut, No. 3:05cv1761 (3/19/09)).Point to RememberAs a general rule, an employee is en-titled to reemployment in the job orposition that he or she would haveattained with reasonable certainty ifnot for the absence due to uniformedservice.

12 © 2009 Business & Legal Reports, Inc. 31506810 (#754)

continued from page 11

Latest Current Prior A Year 12-MonthPeriod Report Ago % Change

CPI-U Mar/09 212.7 212.2 213.5 -0.4%CPI-W Mar/09 207.2 206.7 209.1 -0.9%

ECI EMPLOYMENT COST INDEXTotal Compensation 4Q/08 108.9 108.7 106.3 2.4%Wages and Salaries—Private Industry 4Q/08 109.4 109.1 106.6 2.6%Wages and Salaries—Civilian Workers 4Q/08 109.6 109.3 106.7 2.7%Benefits 4Q/08 107.7 107.5 105.6 2.0%

Average Weekly Gross Wages* Mar/09 $614.20 $615.05 $605.02 1.5%Average Hourly WagesAll* Mar/09 $18.50 $18.47 $17.90 3.4%Construction Mar/09 $22.48 $22.26 $21.44 4.8%Manufacturing Mar/09 $18.07 $18.07 $17.62 2.6%Trade/Transp./Utilities Mar/09 $16.43 $16.47 $16.14 1.8%Wholesale Trade Mar/09 $20.63 $20.64 $20.08 2.7%Retail Mar/09 $13.02 $12.98 $12.88 1.1%Financial Activities Mar/09 $20.69 $20.67 $20.17 2.6%Other Services Mar/09 $16.37 $16.33 $16.11 1.6%Unemployment Rate* Mar/09 8.5% 8.1% 5.1% 3.4%

*seasonally adjusted(Source: Bureau of Labor Statistics, Washington, D.C.)All figures are national.

CPI-U: Consumer Price Index for all urban consumers; the newer index representative of the buying habits of about87% of the total U.S. population. (1982–84=100)CPI-W: Consumer Price Index for urban wage earners and clerical workers; the older index covering only about 32%of the U.S. urban population.ECI: Measures change in compensation per hour worked, including wages, salaries, and employer costs of benefits.(6/89=100)Average Weekly Gross Wages and Average Hourly Wages: Data related to production workers in manufacturingand mining; construction workers; nonsupervisory workers in transportation, public utilities, and wholesale/retail trade;also finance, insurance, real estate, and other services. Accounts for approximately 80% of the total employees on pri-vate, nonfarm payrolls.

By the numbers…

Free 2010 Pay BudgetSurvey Report!

Each year, BLR surveys employers ontheir plans for merit increases in thecoming year as well as actual increasesthey gave in the current year. Employersthat participate in the online survey bycompleting it at www.blr.com/budget_survey/index.cfm/source/MQP/effort/7993 will receive a free copy of the report.

The deadline for responses is June 26,2009. Take BLR’s confidential 2010 PayBudget Survey today!