Top 5 Workforce News Headlines of 2007

December 21, 2007
The writing had been on the wall for a generation, even if the specter of bankruptcy had only begun to haunt the once mighty General Motors in recent years. When the United Auto Workers union ratified its contract with GM in October, absolving the automaker of its future obligation to provide retiree health care in exchange for a lump-sum payment, the relationship between blue-collar worker and employer changed irrevocably.

    Now that's news.

    And so, by our lights, the end of the Detroit Three's financial commitment to UAW retirees was the biggest workforce management story of the year. By opting to create a health care trust known as a voluntary employees' beneficiary association, or VEBA, the Detroit Three basically said to workers: You can't count on us for a comfortable retirement anymore.

    So who can workers count on ? The answer is becoming increasingly clear. Individuals, not corporations or even unions or governments, are responsible for securing enough money to pay for health care in retirement. Time, and several more year-end issues, will tell how this shift of the health care burden will play out.

    For now, though, in this final issue of the magazine for the year, we make the case for our top five biggest workforce management news stories of 2007. VEBAs were just one facet of health care, which dominated workforce management news. Some employers preferred the stick to the carrot when it came to improving the way employees eat, live and work. Others bridged divides in efforts to legislate an end to our uniquely American employer-based health care system.

    Apart from health care, there was Congress, which couldn't seem to get much of anything done this year in areas of importance to workers and employers. Meanwhile, the rise of social networking Web sites increasingly dictates new ways to recruit and work in the 21st century.

    These are our top stories, followed by some others that burned bright, tricking us for a moment into thinking they might have an impact on workforce management issues beyond the first day's headlines. But then they fizzled just as fast.

    If you feel we missed important events or trends in this review of 2007 workforce management news, let us know. Send a note to editors@

Viva Las VEBAs!
Elvis Presley never sang it, but Detroit sure is. The health care trusts that made a big splash in 2007 will likely live on in increasing numbers in 2008.

    Voluntary employees' beneficiary associations have been around since the 1920s, but it was not until the United Auto Workers ratified a deal with General Motors this fall that VEBAs became a household word. The Detroit automaker committed $35 billion to an independent trust to pay for retiree health care in exchange for being able to say goodbye to about $47 billion in health care liabilities. The union ratified a similar deal with Chrysler and Ford. Observers say the VEBAs are a great mechanism for old-line industries to offload huge retiree health care costs as a lump sum rather than deal with the uncertainty that health care costs will continue to rise. Don't be surprised if other labor contracts follow a similar pattern.

    Yet while many industrial employers with large retiree health care costs may look to VEBAs to get them out of health care benefits, it's in the public sector that VEBAs may have their biggest impact. For that, thank GASB 45.

    GASB 45 is the rule set forth by the independent, nonprofit Governmental Accounting Standards Board that requires state and local governments to account for and report their financial obligations toward retiree health care. By the end of the financial year on December 15, the largest of local governments will begin detailing exactly how much they owe, followed by smaller municipalities in subsequent years. VEBA experts agree that making these huge debts public will worsen governments' bond ratings and put pressure on them to increase revenue—by raising taxes, for example. The other option is to create a VEBA. This allows governments to offload the liability from their books. How they finance the VEBA will depend on the deal they make with employees. Past VEBAs have used creative funding mechanisms, like exchanging the money owed for paid time off and putting it toward the VEBA.

    "The new accounting standards are going to drive tremendous use of VEBAs so that governments can continue to hide these obligations," says Lance Wallach, a VEBA expert.

    Goodbye, liability; hello, good bond rating. See you again next year, VEBA.

Virtually Everywhere
    In March, when staffing company Semper International began offering real jobs in a virtual employment office located in an imaginary Web-based world, it became clear that the folks in recruiting had entered into the new territory of Web 2.0: social networking. Semper International built its virtual employment center in Second Life, a 3-D online Web world that has become a powerful social networking tool for participants. 2007 was the year when employers embraced the power of social networking sites like MySpace, LinkedIn, Second Life and Facebook to recruit and develop new talent.

    While Semper was off building avatars to staff the Second Life employment office, other companies developed their own plans. Dow Chemical this year announced its intention to build a corporate social network that would bring together employees with company alumni and retirees.

    Of course the Web—in particular, listservs—has often been used by communities, corporate and otherwise, to communicate, chatter, rant and rave.

    But not to be left out, HR application developers came forward with plans to include these tools for clients. Recruiting software firm Taleo announced in August plans to sell an application that would allow its small and midsize customers to share jobs on Facebook. HR software vendors SAP and Oracle quietly tested their own products. In the spring, SAP tested a site it called Harmony to see how the company's North American employees would respond. In August, Oracle released a social networking site that attracted 10,000 users in less than three days.

Target: Fat Smokers
    If you're overweight and you smoke, run! If you can. Unhealthy employees became a bigger target in 2007 for employers unhappy with the toll they believe such workers take on productivity and the bottom line.

    Some employers have embarked on a tough-love approach that other employers have only contemplated in secret. One, Indianapolis-based hospital system Clarian Health, said it would fine employees who smoke as well as those who do not meet minimum standards for body mass index, cholesterol, blood glucose and blood pressure. But in the face of negative publicity and employee resistance, Clarian later said it would instead offer employees incentives. So much for sticks at Clarian.

    While employers have long focused on helping smokers quit—using both incentives and penalties—the mood from the boardroom to the mail room is changing.

    In a May survey by PricewaterhouseCoopers, 62 percent of 135 top executives said companies should require employees who exhibit unhealthy behaviors such as smoking or obesity to pay a greater share of their health benefit costs.

    Employees tend to agree. In a survey this year by the National Business Group on Health, 65 percent of 1,619 employees at large companies said they believe smokers should be charged more for health care than nonsmokers. About 49 percent surveyed said they would support higher premiums for obese workers.

    These developments, though still rare, concern health experts. Ron Finch, vice president of the Washington-based National Business Group on Health, says penalizing workers for unhealthy behaviors is a short-term strategy that will have a long-term cost. Employers are facing a generation of unhealthy workers who are expected to have to work well past normal retirement years. Finch says employers should be careful about taking a punitive approach.

    "It's an interesting conflict," Finch says, "using the stick while at the same time saying, `Please stay with us, please stay with us.' "

    Fining workers for the way they behave outside the office raises other questions employers may want to ponder in the coming year.

    "Does that mean someone who rides a motorcycle or who goes skydiving [should face penalties]?" Finch says. "Where do you start and stop this?"

Ending Employer-Based Health Care
    2007 marked the year of unholy alliances in the debate over how to address health care in America as Democrats and Republicans and employers and unions came together to support efforts to end employment-based health benefits.

    At the center of this was Sen. Ron Wyden, D-Oregon, who kicked off the year in January by introducing the Healthy Americans Act, which sought to eliminate employer coverage while requiring individuals to buy health insurance through regional markets. Ten other senators, including six Republicans, signed onto the bill.

    The idea of ending employer-sponsored health care captured the imaginations of those responsible for the health and welfare of employees. Safeway CEO Steve Burd and Service Employees International Union president Andy Stern publicly supported the measure.

    Burd told Workforce Management this year that ending employment-based health care was fine if it meant insuring all Americans and using market forces to bring down costs. He said that unions like the idea because it makes health care "portable."

    "I think it's a unique solution and one that, if you do it correctly, can in fact work," Burd said of Wyden's plan.

    "If you are in control of health care, you do not have to stay stuck in a job you hate," Sen. Bob Bennett, R-Utah, said while in New York in October to talk up the Wyden bill, which he co-sponsored.

    Though traditional adversaries became unlikely allies in their attempt to alter employer-based health care, the bill fared no better than most in a year marked by political gridlock. Prospects for the bill's passage look even worse next year, when election fever surely will shift the candidates' proposals to center stage. And, so far, none has exhibited the political will needed to end the employer's role in providing health insurance to Americans.

Girded for Gridlock
    Last year, Workforce Management gave Rep. John Boehner, R-Ohio, top newsmaker honors for persuading 76 Democrats to help him pass a pension reform bill. This year, with the Democrats in control of Congress, we pay dubious tribute to congressional gridlock.

    Three bills that would have significantly altered the employer landscape failed to garner enough bipartisan support to pass into law. Two of the measures would have made it easier for employees to file discrimination lawsuits and to unionize, while the other was a hotly debated immigration reform bill.

    No sooner had Congress contemplated the Ledbetter Fair Pay Act of 2007 this summer than President Bush vowed to veto it. The act would have allowed victims of pay discrimination to file a claim charging that they were being paid less than similar workers within 180 days of receiving any paycheck from their employer—even if the discriminatory pay occurred decades ago. The bill was introduced to overturn a 5-4 Supreme Court decision in May in favor of upholding a statute of limitations on when an employee could file a pay discrimination claim.

    While a veto threat helped paralyze the Ledbetter bill in its current form, it was a Republican filibuster in the Senate that sucked the life out of Democratic efforts to make it easier for workers to unionize. The Employee Free Choice Act would have allowed a union to form if a majority of workers signed cards authorizing a bargaining unit. Under current law favored by employers, a company can insist on a secret-ballot election conducted by the National Labor Relations Board.

    Comprehensive immigration reform that would have forced all 7 million U.S. employers to sign up for a government-run electronic verification system now called E-Verify also failed. The program would have forced employers to verify a new worker's immigration status within 18 months and all employees within three years. But opponents called the program inefficient and susceptible to fraud.

    Only time—and politics—will tell if Democrats can find the majority they need to implement these far-reaching employment bills next year. wƒm

Workforce Management, December 10, 2007, p.1, 22-30 -- Subscribe Now!