This article published in the Association of Corporate Counsel's South Carolina newsletter.
The Great Resignation. The Big Quit. However you want to characterize the ongoing phenomenon of employees leaving their jobs amid the COVID-19 pandemic, a few things are clear—its impact will be lasting and it will revolutionize the workplace.
According to data released by the U.S. Bureau of Labor Statistics, a record 4.4 million Americans quit their jobs in September alone. After enduring increased workloads, hiring freezes and other pressures caused by the pandemic, many workers began to reconsider their work and life goals. An in-depth analysis in the Harvard Business Review revealed that resignation rates are highest among mid-career employees.
The “quits” (a term used by the Bureau of Labor Statistics) are impacting nearly every industry. Employers of all sizes are now faced with the challenge of retaining employees in an environment where employees’ expectations are higher than ever before. Simply put, employees are not returning to workplaces where they feel they are not valued. Additionally, employees have a heightened awareness of what employers are and are not doing.
Now is the time for employers to develop a strategy to address this challenge so that they do not see their business suffer in the months and years to come. Here are five ways that in-house counsel can aid in this process:
1. Focus on diversity, equity and inclusion.
Many employees feel more valued, and likely more loyal to, employers who can articulate and execute a meaningful diversity, equity and inclusion strategy. Diversity, equity and inclusion require a different approach than pure legal compliance. Done well, it goes beyond what the law requires and seeks to add value to an organization. It also contributes to employee well-being and engagement. Research suggests that diversity and inclusion efforts correlate with better financial performance, better problem-solving, and better customer service.
In-house counsel can play a meaningful role in a company’s diversity, equity and inclusion initiatives. Both internal and external messaging should be evaluated to ensure that a clear and consistent message is being communicated about the company’s culture, value and goals. Counsel can also assist with analyzing and making changes to the company’s approach to advancement opportunities and compensation to determine whether current practices have a disparate impact on individuals in protected categories. There are few things that squash employee engagement faster than unfair pay combined with unequal opportunities. Additionally, counsel can encourage accountability for leaders who have an exodus of diverse employees from their departments.
2. Establish flexibility around working arrangements.
Telecommuting and flexible work schedules are not a new concept, but many employees had not had significant exposure to remote working until the COVID-19 pandemic. Many employees have not been eager to return to the office. The 2021 State of Remote Work report found that 35% of employees would quit if they were unable to continue to work remotely. In light of these numbers, employers should establish flexible work policies for individuals in positions who can perform work remotely without disruption to or negatively impacting business.
When creating policies regarding flexible and teleworking arrangements, in-house counsel should help address wage and hour issues that might arise for remote workers. In-house counsel can shield against “off the clock” and potential failure to pay overtime claims by including expectations for recording hours worked and training managers on red flags.
Additionally, many states have overtime laws that are different than the Fair Labor Standards Act. This means that remote workers who are relocating to a new state may subject employers to new overtime requirements for nonexempt employees or meal and break requirements for exempt employees.
Finally, employee relocations can raise tax issues for employers. It is possible for the presence of an employee working from home to create a taxable nexus for the employer in a different state. In addition, the employer must navigate which state is owed income tax for employees who are telecommuting from an out-of-state location. It is possible that states could have contradictory rules, creating a double tax situation for employees. In-house counsel can help guide businesses through this tricky process.
3. Consider the impact of vaccination policies.
Vaccine mandates have led to protests and resignations. However, mandates also help to keep the workplace safe for employees. As long as the state of government-mandated vaccination policies remains in flux for many private employers, companies are forced to walk the fine line between workplace safety and employee retention.
In-house counsel must play a key role in keeping up with the changing landscape with respect to vaccine requirements and employee retention. The results from a study by Qualtrics, a software company, showed that about 44% of workers said they would consider leaving their jobs if they were forced to get vaccinated. On the other hand, the study also showed that about 40% of employees would consider leaving their current employer if it did not make vaccinations mandatory.
The Qualtrics study underscores the importance of giving thoughtful consideration to any company’s approach to vaccination policy. Additionally, there is no “one-size-fits-all” solution. Although companies must follow applicable law and offer accommodations pursuant to Equal Employment Opportunity Commission guidelines, employers should consider taking a flexible approach to vaccinations. If certain employees refuse to get vaccinated or if certain employees refuse to work with employees who are not vaccinated, employers should determine whether their job duties can be performed remotely. To address safety concerns of employees who must work on-site, employers should establish clear and obvious safety measures that comply with current Occupational Safety and Health Administration and Centers for Disease Control and Prevention guidelines. In addition, in-house counsel should make sure that any vaccination policy or safety protocol is being implemented in a consistent manner that does not have a disparate impact on any subset of employees.
4. Consider additional ways to increase retention.
Although data suggests that pay and benefits are not the sole motivation for employees who are considering making a move, they certainly play a role.
Compensation. Counsel can assist companies in evaluating actual market rates for compensation and salary. Companies should not limit such comparisons to solely their competitors. Rather, employers should also look at the pay offered by companies that use the same type of employees. Employees who have a set of transferrable skills can easily move to a completely different company or industry. For example, nearly every business needs employees with IT, accounting and HR skills.
Benefits. Counsel can also play a role in evaluating the company’s benefits. In addition to looking at the market standard, consider implementing long-term incentives if they are not currently in place. These are the types of incentives that give employees a reason to stay for years—and they can better align employees with the company’s long-term strategy too. For example, rather than or in addition to offering an annual bonus, companies should consider compensation and benefits that take time to vest such as 401(k) matches or stock options. The key is to make the incentives meaningful for employees.
Counsel should also help to evaluate their company’s leave policies. Specifically, counsel should consider whether the current parental leave policy is aligned with the company’s stated culture and values. Many employees are looking at their employer’s parental leave policies as a barometer for assessing the organization’s culture. For a company that touts a family-friendly culture, for example, offering minimal to no parental leave will adversely impact the way current or potential employees perceive the actual culture of the company.
5. Guard against employee raiding.
Many employers are acting on the opportunity that has been presented by the Great Resignation to acquire new talent. In particular, some businesses view this as a prime time to pluck talent away from competitors. For that reason, it is imperative that companies evaluate whether they have the appropriate measures in place to discourage other businesses from raiding their talent pool and potentially obtaining confidential, proprietary information.
Depending on the jurisdiction, the best way to shield against employee raiding and theft of trade secrets is to have strong policies and agreements in place with current employees and new hires. That is certainly the case in South Carolina. All companies should have strong policies regarding the return of company equipment and information prior to separation of employment. Additionally, businesses should consider requiring high level employees to sign agreements with non-disclosure, non-compete and non-solicitation provisions. Enforceability of such agreements is highly specific to the jurisdiction and should be prepared in consultation with an experienced employment attorney who practices in the state where the employee is located.
On the other hand, employers should require their potential hires to confirm that acceptance of the position would not violate any non-compete that they may have with their current or past employers. Failing to do so may result in contractual interference claims.
The Great Resignation is top of mind for many business leaders today, and in-house counsel are in a strong position to provide solutions. They can analyze pay equity, advancement opportunities and long-term incentives to help employees feel valued and stay motivated. They can guide companies through the tricky process of creating flexible working arrangements. They can offer legal insight and practical perspective on COVID-19 vaccination policies. And they can build structures to defend their companies’ top talent and trade secrets. By taking those steps and others, in-house counsel can help their companies adapt to the rapid changes playing out in the workplace.
For more information, please contact me or your regular Parker Poe contact.