The Senate came out of conference with its version of health reform. The 2,074-page bill contains two key differences from the House version that affect employers and employees.

1. Employer contribution

• Senate: Would not require employers to offer coverage, but employers with 50 or more full-time workers would pay a penalty — $750 for each worker in the firm — if any of their workers receive federal subsidies to buy insurance through the exchange.
• House: Would require most employers to provide insurance to workers or pay a tax equal to 8%  of payroll.

2. Employee payments

• Senate: Would impose an excise tax on high-cost insurance plans provided by employers — so-called “Cadillac plans.” The Senate proposal would levy a 40% tax on the premium amounts that exceed $8,500 for individuals and $23,000 for families. And the Medicare payroll tax rate would increase 0.5% for individuals with annual incomes over $200,000 and couples over $250,000. A person without insurance would be required to pay a financial penalty, starting at $95 in 2014 and rising to $750 in 2016, up to a maximum of $2,250 for a family.
• House: Would impose a 5.4% surtax on high-income people.

The two bills contain some other differences on controversial topics:

Subsidies

• Senate: Individuals and families making up to 400% of the federal poverty level — $88,200 for a family of four — would receive a subsidy.
• House: Essentially the same as the Senate version, but the subsidies would be offered on a sliding scale.

Abortion

• Senate: Would allow people who receive insurance subsidies to choose a plan that covers elective abortions, but insurers must use premium money or co-payments contributed by consumers, and not subsidy money, to cover the cost of the abortions. Would also require that every state offer at least one insurance plan that covers abortion and one that doesn’t.
• House: Would bar low- and middle-income people who receive federal subsidies to buy insurance from choosing a plan that covers elective abortions.

Coverage for illegal immigrants

• Senate: Would bar illegal immigrants from buying insurance from a national exchange, even if they could pay the full cost and didn’t receive subsidies.
• House: Would allow illegal immigrants to buy coverage from a national insurance exchange, but they wouldn’t be eligible for federal subsidies.

If you don’t know what “free cash flow” means, maybe you should –  if you want to get ahead in your organization.

What if someone told you he had a key piece of knowledge that would give you an edge on most of the other managers in your company? You’d probably jump at it, right?

Well, consider that business owners and CEOs routinely expect their managers and supervisors to have an understanding of the basics of business, especially money and finances. A survey by the Harvard Business Review shows that owners’ expectation might be too high.

Asked to take a basic financial-literacy exam, a representative sample of 300 managers — from all company sectors, including HR — scored an average of only 38%. Get this: Over half didn’t know the difference between “profit” and “cash.” Many didn’t know the difference between an income statement and a balance sheet. Nearly two-thirds thought that discounts offered by sales reps had no effect on gross margin.

Does it matter? When delivering the results of the test, Harvard presented scenarios in which that lack of knowledge could cripple a business. For instance, imagine you’re hiring an inventory manager who doesn’t understand the relationship between inventory on hand and cash flow. Worse, imagine you don’t know what the applicant doesn’t know.

Here are three sample questions from the test (answers at the bottom):

1. You should be pleased about your company’s financial results if –

a. There is a negative trend in operating margin.

b. There is an increasing trend in COGS.

c. Cash flow is coming from company investing.

d. Cash flow is coming from company operations.

2. A company has more cash today when –

a. All customers pay their bills sooner.

b. Accounts receivable increases.

c. Profit increases.

d. Retained earnings increases.

3. To investors and analysts, free cash flow is a key number because –

a. It reflects the cash that is “free” — that is, your company doesn’t have to pay interest on it.

b. It is the cash that can be used to pay shareholders their dividends.

c. It reflects the operating cash that has flowed into the business that year.

d. It is the cash that investors put into the business.

Answers:

1. d.

2. a.

3. b.

An arbitration agreement is supposed to be designed to keep everyone out of court. Then why is it that so many end up being settled in a messy and expensive lawsuit?

The answer comes in examining a series of court cases that explain:

• Why a supposedly buttoned-up agreement ended up in court in the first place, and
• Why the employer lost.

Looking at those cases reveals the main flaws in some arbitration agreements, according to the law firm of Baker Donelson:

1. The agreement was part of a general handbook. When companies try to blend an agreement with other policies, some courts see that as an attempt to camouflage the terms of the agreement from employees. The lesson: Arbitration agreements should be free-standing documents.
2. The agreement didn’t clearly compel both parties to waive their right to sue. So a faulty agreement might say the employee is waiving the right to go to court, but places no such stipulation on the employer. That’s one-sided and a legal no-no.
3. The agreement stipulated that employees will have to pay excessive costs  as a condition of arbitrating their claims. An agreement that places a heavy financial burden on an employee is often seen as coercion to keep the employee from actually filing for arbitration. Courts have ruled that employees are expected to pay some reasonable costs or fee. But the key word is reasonable.

For a full review of the relevant court cases and rulings, go to Baker Donelson’s Web site.

The practice of “friending” on social-networking sites can be a legally dangerous one when it involves a supervisor and a subordinate. Plus, a lot of subordinates think it’s creepy.

The seemingly innocent practice of  sending friend requests to staff via Facebook, Twitter and other sites can trigger a slew of legal claims, including harassment, discrimination or wrongful termination, as well as touch off complaints of favoritism if the boss friends only a select person or persons.

That’s the warning from attorney Michael Schmidt on law.com.

Here’s the source of the problem: Social-networking sites typically are packed with personal information. So, what happens if a friending boss learns TMI — too much info — about a subordinate? That opens the door for an employee complaint that the boss made work decisions, such as promotions, based on the personal information.

The example given by Schmidt:

• Suppose an employee is a member of a gay-rights group.
• Then suppose the friending boss fires the employee because of performance issues.
• The employee then could argue that the boss used the personal information as a basis for the termination.

That’s just one example of many: religious affiliation, age,  political affiliation, health problems. All could serve as a basis for a lawsuit should the supervisor take an adverse action against the employee.

If that’s not enough, consider that in a survey by staffing firm Office Team, 47% of respondents said they don’t want to be friended by their bosses.

The message to supervisors: Don’t do it.

In the wake of the Great Economic Meltdown of ‘08 — and the cheating that preceded it — business schools are considering an ethics test before sending grads into the real world. Would you pass it?

The test — based on real-life situations — has been developed by Babson College, Yale and the Aspen Institute, and is being considered for use by 80 colleges nationwide. Ready for it? Here goes (answers at the bottom):

Scenario #1

You’re a rising executive just promoted to corporate controller. Shortly after you land the new job, several senior executives pressure you to distort the company’s restructuring charges in a way that would be misleading but not criminal.

What do you do?

1. Politely explain to the senior execs that you won’t stand for fudging the numbers.
2. Modify the charges. Since it’s not illegal, you can draw the line later when you have more experience in the job.
3. Research what the company has done in similar situations in the past and follow suit.
4. Go over the senior execs’ heads right to the CEO.

Scenario #2

You join a nonprofit firm in a junior accounting role. As you review the year’s corporate donations, you quickly realize that no standard procedure exists to determine the value of in-kind donations (gifts in the form of goods or services rather than cash). Some of your most prolific donors inflate valuations to deceive the IRS. Your overworked executive director makes a point of emphasizing relationships above data.

What do you do?

1. Nothing. What the donors tell the IRS is their business and your organization can’t afford to alienate them.
2. Bring up the problem at the next staff meeting. Since you’re in a junior role, you can only do so much.
3. Find an ally in a senior position and keep pushing for a solution.
4. Develop your own system to value each major in-kind donation in time for next tax season, and present what you’ve done to the senior executives.

Scenario #3

You’re a junior employee at a large investment bank. Hours before a client meeting, a portfolio manager tells you to review the portfolio of one of the bank’s smallest customers and find a new benchmark that will make it look like the portfolio had performed better than it really had. You know that the client remains with the bank as a favor to a friend who works there.

What do you do?

1. Point out that misleading the client risks getting the manager in trouble, and the client isn’t going anywhere. Be frank: underperformance happens in uncertain markets.
2. Don’t take a chance with a manager who asks you to lie. Immediately take your concerns to another manager.
3. Find the new benchmark. As long as you footnote it, you haven’t done anything illegal.
4. Duck the request to mislead the client and prepare a presentation that encourages the client to focus on the future.

Answers

Scenario #1. Correct choice: 4.

Several arguments could justify inaction: You’re too new; you need to wait until you’re more settled into the role and have the trust and confidence of the senior execs. Plus, raving about ethics to the team is a sure way to establish antagonistic relationships only a few days into the job.

On the other hand, if you wait to speak up until you’re fully entrenched, it could be much more difficult to reverse course. In the real-life situation that inspired the case study, the comptroller used his newness in the position as a way to break with the status quo. He went directly to the CEO with a new guiding vision for the finance department emphasizing its commitment to integrity. He focused on wanting to ensure the long-term survival of the company and rather than ask, the comptroller simply assumed that he and the CEO would be on the same side. It worked; the CEO supported his plan and in the process the comptroller successfully established his authority in the new role.

Scenario #2 Correct choice: 3.

In this kind of a scenario, junior employees typically can’t get past the feeling of powerlessness, says Mary Gentile, a Babson College researcher who helped develop the ethics curriculum. They’re low on the totem pole, so they “question their standing, their judgment, and their legitimacy” in taking a stand against unethical behavior that has become part of the company culture, she says.

In this case, the new hire decided to use his naïveté to his advantage. He approached the executive director and simply asked, “How do we standardize our donation valuations here?” The director never did act on his concerns, and soon left the nonprofit. The junior employee finally took his questions to the lead accountant and an outside auditor. He worked with them to establish an “average cost per box” formula the company would use if donors didn’t submit a written audit. Since it was a formal policy change, donors did not see it as a personal affront.

Scenario #3 Correct choice: 4.

You could justify not saying anything because the bank creates the benchmark and as long as you footnote it, you’ve done nothing illegal. Plus, given the size and relative importance of the portfolio, in all likelihood the manager simply overlooked it. If you refuse to lie on moral grounds, you’ll offend the manager and he will just ask another associate to take care of it anyway.

The woman in the case tried a different approach. She explained to the portfolio manager that she wouldn’t have time to provide an analysis for the new set of numbers before the meeting. Instead, she offered to provide data explaining the portfolio’s underperformance, which the manager could use to suggest a more suitable investment plan for the client. To her surprise, he agreed.

Healthcare reform inched  closer to reality when the Senate Finance Committee approved its version of the bill. Here’s what they OK’d and what to expect next.

Sure, there’s a lot more haggling to be done (more on that later), but the we’re starting to get a clearer picture of what final legislation will look like.

Who’s covered: An estimated 94 percent of Americans. Illegal immigrants would not receive government benefits.

Cost: $829 billion over 10 years.

How it would be funded:

• A fee on employers whose workers receive government subsidies to help them pay premiums.
• Fees on insurance companies, drugmakers, medical-device manufacturers.
• A tax on insurance companies amounting to 40% of total premiums paid on plans costing more than $8,000 annually for individuals and $21,000 for families.
• Cuts in Medicare and Medicaid.
• Fines on people who don’t purchase coverage.

Requirements and costs for individuals: Except for a few hardship exemptions, everyone would have to get coverage through an employer, individually or some type of subsidized plan. Individuals and families would pay no more than 8% of their income in premiums.

Mandates on the insurance industry:

• No denials or higher premiums based on preexisting conditions or gender, but some increases in premiums will be allowed based on age and family size.
• Limits on allowable copays and deductibles.

The Senate plan drops the so-called public option — the government-run alternative to private insurance.

The chronology of where it’s headed

• Members of the Finance Committee will meet with the Health, Education, Labor and Pensions Committee, which also presented a bill earlier. The two sides will hash out a compromise.
• A floor debate will take place in the Senate probably the week of Oct. 26, when amendments will be proposed.
• The Congressional Budget Office will report on the finance effects of the bill.
• If the bill passes in the full Senate, there will be a conference committee with members of the House, who have their own bill and likely will seek a compromise.
• The Senate and House would then vote on the final bill and send it to the White House.
• Expected deadline: Congressional leaders say Thanksgiving — meaning probably early December.

Ever since the ADA Amendments Act got passed in January, employers and HR managers have been asking, “So, what does all this mean?” The Equal Employment Opportunity Commission has finally gotten around to giving some answers.

Last week, the EEOC laid out an explanation of employer responsibilities for following the act (knows as “ADAAA”).

• First, in a key passage, the agency summarized the intent of the act:

“The definition of disability … shall be construed broadly, to the maximum extent permitted by the terms of the ADA. The focus of an ADA case should be on whether discrimination occurred, not on whether an individual meets the definition of ‘disability.’”

Meaning: Besides broadening the circumstances under which a worker is considered disabled, the act also broadens the circumstances under which a worker can sue for disability discrimination. In other words, if a worker can show that an employer discriminated because of perceived disability — even if the worker wasn’t disabled — the worker has a case against the employer.

• The agency also put into focus some of the broader circumstances that make up a disability:

“An impairment need not prevent, or significantly or severely restrict, the individual from performing a major life activity in order to be considered a disability.”

Here’s how that differs from earlier rules: Previously, an inability to do the physical requirements of a job wasn’t enough to qualify a worker as disabled. The individual also had to show some limitation in performing “major life activities,” such as walking, eating, etc. The EEOC’s interpretation of the new rules turns all that around to a point that a limitation in doing the specific tasks of a job could be enough to categorize someone as disabled.

The EEOC provides an example:

“Someone with a 20-pound lifting restriction that is not of short-term duration is substantially limited in lifting, and need not also show that he is unable to perform activities of daily living that require lifting in order to be considered substantially limited in lifting.”

Meaning: A long-term limitation on doing a work function is a disability.

• Short-term limits on major life activities now also fall under the definition:

“An impairment may substantially limit a major life activity even if it lasts, or is expected to last, for fewer than six months.”

Meaning: What was considered a “temporary condition” can now be considered a “disability.”

Any good news?
It’s not all bad. The regulations maintain the existing requirement that a worker must be a “qualified individual with a disability.” That means the individual “satisfies the requisite skill, experience, education and other job-related requirements … and who, with or without reasonable accommodation, can perform the essential functions of such position.”

So you still can require applicants and employees to meet essential job requirements, which, for most jobs, include regular and predictable attendance and conformance to the basic standards of performance and behavior.

And even in the case of the employee with a 20-pound lifting restriction, yes, that person may be disabled, but you still can disqualify the person because lifting is an essential part of the job and no reasonable accommodation is available.

As for the temporary part (”fewer than six months”) of the regs,  the EEOC recognizes that not all temporary conditions are disabilities:

“Temporary, non-chronic impairments of short duration . . . such as the common cold, seasonal or common influenza, a sprained joint, minor or non-chronic gastrointestinal disorders, or a broken bone that is expected to heal completely” generally are not disabilities.

The more you think about the potential “disasters” that could strike your company — ranging from a broken water pipe to a terrorist attack — the more you realize a recovery plan is a good idea, especially since it doesn’t have to be complicated or expensive.

A new book, “The Wall Street Journal Complete Small Business Guidebook,” lays out the three essentials every company should cover to be prepared for — and to recover from — a disaster:

Review insurance policies. Your company probably already has property insurance to cover the cost of replacing damaged or destroyed equipment or buildings. How about business-interruption insurance, which covers lost income in the event the business is forced to shut down temporarily?

Develop a contingency plan, including one in case disaster strikes a vendor. Come up with a list of backup vendors or suppliers. Consider alternative work sites so that you can keep operating if disaster strikes your company. Keep a list of 24-hour emergency numbers for all your employees, and develop a quick and efficient way of keeping employees informed.

Back up data. Make backup copies of all critical records, such as accounting and employee data, customer lists, production formulas and inventory. Keep that information in a separate location — the farther away, the better –  or subscribe to a online data backup service provider.

Take a look at the Small Business Administration disaster-recovery Web page, which offers more links and assistance in putting together a plan.

It’s likely some version of the newest healthcare reform proposal to come out of Washington will not only become law, but also change the way you do your job — as early as Jan. 1 — particularly in five areas.

The Senate Finance Committee just released its 10-year, $856-billion proposal, which would extend health coverage to 29 million uninsured Americans.

The package, authored by Chair Max Baucus (D-MT) and referred to as a “Chairman’s Mark” because there’s no legislative language drafted yet, is considered a compilation of the most popular (i.e., effective, but conservative and least expensive) ideas presented thus far. It’s likely that some version of this plan will pass after the typical party revisions and compromises.

Here are some key stipulations and  proposed effective dates where appropriate:

1. Additional information reporting duties. Under current law, Payroll isn’t required to report the value of employer-provided health insurance benefits to IRS on the Form W-2. However, some employers voluntarily report in Box 14 the salary reduction amount under a cafeteria plan resulting in tax-free employee benefits.

The Mark proposes requiring companies to report on the W-2 the value of the employer-provided benefit for each person’s health insurance

If someone received coverage under multiple plans (e.g., medical, dental, vision), Payroll would report the aggregate value. Generally, use the same value for all similarly situated employees with the same category of coverage (e.g., single or family health insurance).

Effective: first taxable year after 12/31/09.

2. More payroll deductions. The proposal creates a refundable tax credit for eligible individuals and families who purchase health insurance through proposed new state cooperatives (i.e., “exchanges”). Those opting for this coverage would pay premiums through payroll deductions.

There’d be a fall enrollment period, during which applicants would have to provide info from their previous year’s tax return to qualify for coverage during the next calendar year.

Employers who don’t offer such coverage will have to repay the credit amounts. The assessment may be capped at $400 per worker (all workers, not just those who qualify for tax credits). Note that employees who are offered affordable coverage through their employer can’t get the tax credit – so in those cases, the employer assessment shouldn’t apply.

Illegal immigrants wouldn’t be eligible for the credit. To prevent them from participating, personal data (i.e., name, Social Security Number and date of birth) would have to be verified against SSA’s database. Those in the U.S. legally but whose status is expected to expire in less than a year aren’t allowed to take the credit.

Effective: not specified.

3. Stricter reimbursement rules for qualified medical expenses. The Mark proposes no longer allowing the cost of over-the-counter (OTC) medicines (except those prescribed by a doctor) to be reimbursed through a health flexible spending account or health reimbursement account. In addition, the cost of these medicines couldn’t be reimbursed on a tax-free basis through a health spending account or an Archer medical spending account.

Effective: taxable years beginning after 12/31/09.

4. Creation of a Simple Cafeteria Plan. This change eases the participation restrictions, allowing more small businesses to offer tax-free benefits to employees. The proposal exempts employers who make contributions for employees under a simple cafeteria plan from pension plan nondiscrimination requirements applicable to highly compensated and key employees.

The safe harbor also applies to the nondiscrimination requirements for specific qualified benefits offered under the cafeteria plan, including group term life insurance, coverage under a self-insured group health plan and benefits under a dependent care assistance program.

This provision would apply to employers with an average of 100 or fewer employees during either of the two preceding years.

Effective: taxable years beginning after 12/31/10.

5. Loosening of long-term care insurance restrictions. Under current law, employees participating in a cafeteria plan can’t pay premiums for long-term care insurance not otherwise paid for by their employers on a pre-tax basis through salary reduction. That’s because any product advertised, marketed and offered as long-term care is a nonqualified benefit specifically not permitted under a cafeteria plan.

The Chairman’s Mark, however, would allow reimbursement for employee-paid premiums for a qualified long-term care insurance contract through a flexible spending arrangement (whether or not under a cafeteria plan) and therefore be excluded from gross income.

Effective: taxable years beginning after 12/31/10.

The U.S. Department of Labor just announced it’s hiring 250 investigators to look into wage-and-hour violations. Why now? And what are they looking for?

First, the answer to the “why now?” question:

It starts with a recent report titled “Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities.”

The report was based on face-to-face interviews with about 4,000 workers in New York, Los Angeles and Chicago. It was published by the Center for Urban Economic Development at the University of Illinois at Chicago, the National Employment Law Project and the UCLA Institute for Research on Labor and Employment.

A sample of the study’s findings:

• 76% who had worked overtime the previous week claimed they were not paid time-and-a-half for it.
• 26% said they were being paid less than the minimum wage.
• 75% of those interviewed earned less than $10 an hour.
• 69% of workers who were entitled to a meal break said they received no break at all, had their break shortened, were interrupted by their employer or worked during the break.
• 20% said they had made a complaint to their employer or attempted to form a union in the last year; of those, 43% said they’d experienced some form of retaliation — such as getting fired or being threatened with a pay cut.

So the violations that jumped out at DOL involve OT pay, minimum-wage violations, denied breaks mandated by law and illegal retaliation.

The study found that minimum-wage violation rates were most common in apparel and textile manufacturing, personal and repair services, and private households. Violation rates were substantially lower in residential construction, social assistance and education, and home health care.

Women were significantly more likely than men to experience minimum wage violations, and foreign-born workers were nearly twice as likely as U.S.-born workers to suffer a minimum-wage violation, according to the report.

Click here to see the full report in PDF format.