Is Your M & A Due Diligent Analysis Really that Diligent?

Due to employers’ understandable aversion to paying legal fees, they often wait until something goes wrong to avail themselves of counsel. That’s regrettable because guys like me with over 30 years of specialized experience prefer to assist clients in avoiding problems and using human capital to succeed. Despite the huge sums paid to lawyers in M& A transactions, many due diligence efforts are rote and ineffective with regard to labor, employment, and especially safety concerns. There are recognizable standards and guides to environmental due diligence but safety due diligence efforts seem to flummox even solid law firms and consultants.

The safety due diligence efforts focus on injury and illness data, OSHA citation history and EMR or other workers comp numbers. These are lagging indicators and tell you almost nothing about the compliance and safety culture of the target company. Even worse, focus on these items and supposed benchmarking with other companies can distract the purchaser from the real meat. Not only may the purchaser miss costly items, they hinder the crucial post purchase integration efforts.

So it was with pleasure that I agreed to participate in Environmental Resource Management’s (ERM) balanced seminar at Georgia Tech next Tuesday (March 31) to discuss the safety issues along with ERM’s professionals’ explanation of environmental issues.

Information on this timely session can be found at ERM’s site. http://www.erm.com/M-A-workshop-Atlanta-March2015

Topics include:

  • Hidden Risks – Understanding ESG (environmental social and governance) matters as part of an acquisition.
  • Safety Due Diligence – Know what systems, culture, and risks you are acquiring. How to develop the right scope to strike a balance.
  • ASTM Phase I ESA Data versus Early Diligence and Critical Analysis of Possible Risks and Liabilities – How to gather the right data so that leadership can make good decisions in a timely manner.
  • Post Merger Integration – Addressing identified EHS risks and making the most of the EHS opportunities following a merger or acquisition.

If you do a proper due diligence into not just safety programs, but also into culture, history, and integration, you’ll not only gain a better picture of the costs ahead, but lay the foundation for later integration efforts. Many integration efforts are haphazard and driven only by efforts to achieve cost savings. Is that really how you want to integrate acquired companies? What happened to using the best of both companies? Is safety just one more item to check off or due to want to incorporate it into Lean manufacturing efforts and as a way to assimilate and engage employees?

I’ll write more on this topic in the future, but in the interim, attend the conference if opportunity presents.

Howard

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Unions and Third Party Groups Use Safety to Attack Fast Food Restaurants

 

Yesterday was one of those occasions when I wish that my predictions had been inaccurate. I have speculated that the SEIU and other unions harassing fast food restaurants would eventually add mass OSHA complaints to their joint employer, discrimination, living wage, and other attacks. Yesterday, you probably saw the articles about “Fight for $5’s” coordinated effort to file OSHA Complaints in 19 cities.

Now, don’t get me wrong. Restaurants, just like every other employer, must remain vigilant to protect their workers and to ensure compliance with OSHA standards. However, I question the sincerity of those OSHA complaints. I am sure that many restaurants need to improve compliance and safety, but I do not like third parties using OSHA’s limited resources to advance other agendas. OSHA deserves a larger budget, but until that exalted day, they have to employ their resources where they are most effective.

The SEIU and other groups readily admit that the OSHA complaints are the latest part of their “Fight For $15 Campaign” which allegedly seeks to hold restaurants accountable for working conditions at franchise locations. The unions’ obvious goal is to eventually organize the huge number of fast food workers, but the transitory nature of such workers has traditionally made them unreceptive to joining a union. The strategy is to make employers so miserable that they give up and simply agree to a card check or other reorganization effort instead of an NLRB-supervised election.

The Complaints are against Franchisees, but is the union trying to involve the Corporation?

Under existing OSHA law, and OSHA’s Multi-employer Citation policy, absent corporate employees on site, it’s difficult to see how the Corporation would be citable based on requiring adherence to corporate standards. Thus, individual franchise restaurants should not be treated as part of the McDonald’s corporation for purposes of determining repeat violations of the same standards for McDonalds Corporation. Company stores would be different. If a franchisee owns more than one unit, other units could be exposed to Repeat violations if the same violations occur in a five year period. Repeat citations of routine items account for most of the six figure citations against companies with multiple locations. I do not see how the corporation would be subject to OSHA citations for individual franchisee’s stores. However, given the NLRB’s recent efforts to allege joint employment between restaurants such as McDonald’s and their franchisee, it will be interesting to see OSHA’s approach.

Use this concern to “Check” OSHA Compliance.

In the interim, restaurants should treat these complaints as a wake-up call to ensure that they are in compliance with OSHA’s standards. Keep in mind that you may maintain a safe work environment but still miss certain OSHA requirements. Likewise, OSHA standards are just part of a good employer’s safety efforts.

Common restaurant OSHA violations include:

  • allowing materials to occasionally block exits, fire extinguishers and electric panels, such as during deliveries;
  • inadequately marked exits; unacceptable accumulation of water on the floor and trip hazards
  • failure to maintain Safety Data Sheets (SDS) for hazardous chemicals used
  • failure to document training employees who wash dishes, clean and perform other duties which require such chemicals
  • adequate eye protection and other PPE for the use of chemicals

The Press Releases and posted “Fight For $15” video emphasizes exposure to grease burns; especially associated with cleaning and emptying grease. Restaurants should carefully check for proper procedures, PPE, and disposal practices.

Do Restaurant Managers know how to handle an OSHA Inspection, as well as handbiling and protesters?

Most restaurant managers never meet OSHA and have no idea how to manage an OSHA inspection. The way in which they manage the inspection may be the difference between a good result and thousands of dollars in citations. Is a corporate, private consultant, trade association or law firm ready to advise such managers?

It is questionable whether the unions’ latest efforts will in anyway assist in organizing restaurant franchisee employees, but review my past article about UNITE-HERE’s multi-year safety attacks on the Hyatt Corporation if you want to see the extraordinary expense and hardship such corporate-wide attacks can cause. You might also review these past posts on third party attacks on Retailers, Restaurants and on Distribution.

Howard A Mavity

Fisher & Phillips LLP

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The Pragmatic Lawyer’s View of Building a Safety Culture

From SAFETY OUTLOOK


After 30 years of practicing labor law and managing more than 500 fatality cases, I am a pragmatic guy and I don’t like jargon. I look for practical solutions. And yet, I absolutely agree that we must do more than “comply,” we must build a safety “culture.” One can achieve decent compliance by diligence and discipline. Of course, “compliance” with OSHA standards will not alone prevent injuries. Even more tellingly, a practical focus on preventing injuries will not guarantee that you’ve crossed all the “t’s” and dotted the “i’s” to comply with OSHA standards. One has to expressly focus efforts on both goals. The only way to have a decent shot at achieving both of these goals is to build a “culture” in which employees and management automatically and continuously stop, consider the hazards, then address them. We can’t force this mindset. Management has to visibly embrace it and then convince employees that they are as serious about maintaining a safety culture as they are about other business goals. Sure, safety is a “core value,” but that term may be a bit too theoretical for a chief financial officer or plant manager. I prefer to treat it like any other business goal with plans, mile markers and accountability.

Marketing Safety

Our first challenge is thus to market the “culture” concept to management, and that involves disabusing them of some erroneous assumptions. First . . . every CEO genuinely believes that “safety is number one.” It’s not. Few executives have a realistic grasp of their safety culture, and many assume that they are just fine, thank you. In fact, a safety culture always is improving, otherwise it’s going backwards. I’m wary of the executive who blithely assumes that safety is number one. The CEOs that I trust will wince and candidly admit that they’re taking concrete steps to build a safety culture, “but they’re not there yet.” That’s the desirable mindset; then you can work on even building “passion.”

The second erroneous executive assumption is “I’ve got good people who take care of safety.” If executives silo safety as a task that only the safety professionals handle, compliance won’t occur and the culture will be one that is, at best, ambivalent. No number of safety professionals can build a safety culture without leaders pushing concrete steps to engage employees and managers.

This problem leads to our next “marketing challenge” . . . the safety professional’s attitude. Some safety professionals seem to view themselves as lone crusaders in an “us against them” battle. Granted, some companies’ safety atmosphere can contribute to such attitudes, but that’s irrelevant. The safety professional’s job is to protect workers and one does whatever it ethically requires to achieve this goal. Accordingly, I enjoy working with safety professionals that have so immersed themselves in the business process that managers view them as their partners in manufacturing or distributing goods, except that the safety professional also keeps them straight about safety. We can’t become “internal affairs cops.” Master the business. Focus on making it better … and using safety to do so.

(CONTINUE READING AT SAFETY OUTLOOK).

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Talk versus Email: When Electronic Communications Gets You Sued

 

Electronic communications are a mixed blessing. Business is more efficient and new ways of commerce continue to open. However, ubiquitous electronic communications have eroded our personal time and presented near-addicting distractions. From a legal standpoint, electronic communications, and especially e-mails, not only create damaging evidence but may even contribute to legal claims.

The Role of E-mails in Business

E-mails and increasingly text messaging allow us to quickly send detailed responses in a fraction of the time it may take to talk. It allows one to send messages in the wee hours of the morning when one could not call the other party. On occasion, a complex topic requires a written explanation or the recipient may be a visual learner who needs to read the instructions. Or perhaps you want to set the tone or provide essential background before engaging in the serious discussion and analysis with others. As a lawyer, I readily admit to crafting my clients’ e-mail communications to build a paper trail or to establish a necessary legal framework. Perhaps the issue is a sensitive legal point and you want no misunderstanding. All valid ways to use e-mail.

Of course, we may use e-mails when we simply do not want to talk to a person. Perhaps the person drones on and you simply don’t have the time to chat. Perhaps you consider yourself a cut-to-the chase kind of manager and don’t believe that you have the time for pleasantries. Perhaps the person has a difficult personality and you are trying to avoid conflict. Maybe you’re just swamped. And … sigh … how many of us foolishly multitask by sending emails while in a meeting or on the phone. I confess my guilt and my increasing acceptance of the fact that one often doesn’t multi task, but rather only does a half … er … halfway job on both tasks.

So e-mail is not “bad.” E-mail is a tool and can be used properly or improperly.

Properly Using the Tool

The proper use of e-mail in communications has been on my mind this week because I have seen situations where the e-mail process exacerbated a situation because of the lack of real time back and forth or because an employee responding was not acting in good faith and was using the e-mail to prevent amicable resolution. Therefore, I will provide some rules and guidance on the proper use of this tool.

    • In a perfect world, I’d tell you to draft every e-mail communication as if it will later be an exhibit in a trial … because it may in fact end up as evidence.  I’ll settle for you stopping and thinking in this manner about emails which deal with discipline, counselling, accommodation, complaints and investigation, serious safety matters, and similar HR and Safety topics.
  • Always ask yourself, “should I be making this communication in person or over the phone?” “Do I have a specific reason to use E-mail?”

 

  • If you have more than one reason for using e-mail, determine the main reason because your purposes may conflict with one another.  As an example, are you trying to build evidence or document your response?  Or is the principal goal to defuse a situation or to genuinely show employer interest and respond to a concern.  These two goals may conflict with one another.
  • These questions become more important when the recipient is a complaining employee.
  • E-mail is tone deaf. If the matter is sensitive or inflammatory, think through how a reasonable person will receive the message.  Does the message unintentionally come across as brusque or dismissive? 
  • What about perception? As another example, does the e-mail read as if you were attempting to engage in the interactive process to discover a possible reasonable accommodation, or does it look as if your mind is already made up?  Does the e-mail suggest the employer’s good faith or due diligence, or does it appear disinterested?  Does a discussion of the costs of abatement of a hazard appear to be a reasonable determination of feasibility and the most prudent way to expend capital, or does it appear that the employer is callous and putting money ahead of safety.  Remember, we are not talking about your intent, we are talking about PERCEPTION and how the communication may be spun.
  • Also consider how an unreasonable person might respond to an email.  Sometimes, no matter what you type, the person will find something objectionable and the communication will throw fuel on the fire or be misused as evidence against you.  A very short e-mail response or the use of other communication method may be wise.
  • Admittedly, sometimes e-mail is the only way to respond for any number of reasons, but when the other person is in any way reasonable, a face-to-face meeting allows you to read their expressions and revise your approach.

My conclusion? Think about your e-mails, especially in the HR setting, and use the tool properly.

Howard

 

Posted in ADA, attitude/culture, discipline and discharge, discrimination, employer policies, generational differences, internal investigations, performance improvement, social media, training, whistleblower/retaliation | Leave a comment

Why Am I Still Getting Sued By Employees?

(From Industrial Distribution Magazine).

After covering union challenges and safety compliance concerns in previous articles, we’ll conclude the series by discussing those common employment law claims that continue to vex distribution employers. I will deviate from the usual format and first provide some big picture suggestions on how to minimize all types of employment law claims.
 
Take a long and serious look at how you select and train frontline supervisors, and you may determine why many employment law claims occur. Frontline supervisors are often ignorant of the more challenging aspects of the Americans with Disabilities Act, the Family and Medical Leave Act and workers’ compensation retaliation protections. A related issue is that many frontline supervisors have not been trained in communication and in consistently applying workplace requirements. Advertisers long ago figured out that “perception is as powerful as reality.”  If employees feel that their supervisor was a “jerk” to them or treated them differently than their co-workers, the normal response is to believe that a sinister motive guided the supervisor’s actions. If one is over 40, Latino, African American, has a disability condition or recently complained about safety or discrimination, that person might suspect that he was treated differently because of one of those factors.

Some surveys show that more than 80 percent of employers are dissatisfied with their frontline supervisory development. When pressed, many employers cannot define what constitutes a “good” supervisor” or provide detailed examples of how they develop supervisors to manage employees. Not surprisingly, frontline supervisors say that the number one reason they are reluctant to discipline or discharge an employee is that they fear that they will get the company (or themselves) sued. As a result, supervisors allow performance problems to linger and fester.
 
Claims De Jour
Although claims of race discrimination have increased more slowly than other types of discrimination charges, they remain the most common claim. We have seen an increase in claims of national origin discrimination, but that also is a reflection of a changing workplace more than of negative attitudes toward new citizens or those of Islamic persuasion. One of the fastest growing areas involves allegations of same sex discrimination by male employees. In most cases, horseplay and teasing got out of control until an employee alleged that the treatment created a hostile environment or was based on his sex or other factor. And don’t forget about the rise in claims of harassment based on a mental or physical disability condition under the ADA.  However, any plaintiff lawyer will tell you that the three boom areas are:  the ADA, retaliation claims and wage-hour actions. We won’t talk about wage-hour claims in this article, but suffice it to say, few employers have classified all employees properly or maintained adequate records.  (CONTINUE READING AT INDUSTRIAL DISTRIBUTION MAGAZINE)

Posted in ADA, aging workforce, attitude/culture, discipline and discharge, discrimination, EEOC, employer policies, generational differences, harassment, managing legal matters, supervisor development, whistleblower/retaliation | Leave a comment

Warren Bennis, Safety, Labor Relations and Leadership

 

I love reading the Economist and they justified my appreciation with an August 9 Obituary on Warren Bennis, who they rightly described as “the world’s most important thinker on the subject that business leaders care about more than any other: themselves.”

I cannot do a better job than this article in describing this thoughtful and ethical man’s contributions to business theory, to leadership and to the question of “what matters the most?”

I’m also a fan of Peter Drucker, and the Economist contrasts their focuses:

If Peter Drucker was the man who invented management (as a book about him claimed), then Warren Bennis was the man who invented leadership as a business idea.

Central to his thinking was a distinction between managers and leaders. Managers are people who like to do things right, he argued. Leaders are people who do the right thing. Managers have their eye on the bottom line. Leaders have their eye on the horizon. Managers help you to get to where you want to go. Leaders tell you what it is you want. He chastised business schools for focusing on the first at the expense of the second. People took MBAs, he said, not because they wanted to be middle managers but because they wanted to be chief executives. He argued that “failing organizations are usually over-managed and under-led”.

Mr Bennis believed leaders are made, not born. He taught that leadership was a set of skills—that can be learned through hard work. Bennis’ autobiography was so appropriately titled: “Still Surprised.” Yep. Never stopped learning and evolving.

As the Economist explained, Bennis believed that “what constitutes good leadership changes over time:”

Mr Bennis was convinced that an egalitarian age required a new style. Leaders could no longer crack the whip and expect people to jump through hoops. They needed to be more like mentors and coaches than old-fashioned sergeant-majors. Top-down leadership not only risked alienating employees. It threatened to squander the organization’s most important resource: knowledge. There is no point in employing knowledge workers if you are not going to allow them to use their knowledge creatively.

A Management Labor Lawyer should love Bennis’ approach to so called business leaders over the last 25 years.  If business leaders heeded his advice, there would be few employee lawsuits, even lower union activity, and a safer workplace culture.  The Economist explains:

The last quarter of the 20th century often saw Mr Bennis in despair. He loathed the Masters of the Universe who boasted about how many jobs they had nuked and how much money they had made. “On Becoming a Leader” is full of prophetic warnings about corporate corruption, extravagant executive rewards and short-termism. He also lamented the quality of leadership in Washington, DC.

But he became more optimistic in his last few years, at least about the corporate world. The Enron, WorldCom and Lehman disasters taught businesses the danger of hubris. And a new generation of CEOs, whom he dubbed “the crucible generation” and compared to his own second-world-war generation, were more impressive than their immediate predecessors, characterized not merely by tolerance of other people, but respect for them.

I’ll conclude my post with the Economist’s fine ending:

When Drucker came to a party at Mr Bennis’ post-modern house on Santa Monica beach in California, in the late 1990s, the two men were a study in contrasts: Mr Bennis, thin, tanned and dressed in a light suit; Drucker paunchy, pale and encased in black. Mr Bennis talked animatedly about leadership. Drucker growled that what mattered was followership. But in fact the men were brothers under the skin and worthy counterweights to each other: big thinkers who took subjects too often synonymous with platitudes and gobbledygook, and, by dint of a lot of hard twisting, wrung some sense out of them.

I’ll leave it to the reader to ponder the implications of Bennis’ teachings to an employer’s role in workplace safety and HR.  For more information on Warren Bennis.

 

Posted in attitude/culture, management and leadership, supervisor development | 1 Comment

Safety Concerns When Buying or Leasing Office Space

What Should Be Your Safety Concerns When Buying or Leasing Office Space?

What is in this article?:

Are you counting on landlords or contractors to ensure that your office space meets OSHA and NFPA standards? That might not be the right move.

Use office safety as a way to engage employees. Find an employee who would enjoy involvement and give him or her the opportunity to assist you with safety.

Location and price generally control office-space decisions. Even if you construct a new building or do extensive build-out, you probably have not devoted much consideration to whether your new space meets OSHA requirements. 

It’s an office, after all – not a manufacturing plant or refinery. So you rely on your builder or landlord for that. You figure that they’re well-regarded contractors and developers, so presumably they adhered to OSHA requirements along with local ordinances and electrical codes. 

Unfortunately, OSHA standards mainly focus on employees working safely, and contractors don’t view the standards as dictating the final structure. Thus, contractors follow OSHA construction standards to protect workers building the structure, but they don’t really think about OSHA standards applicable to the finished structure in the same way that they faithfully adhere to National Fire Protection Association (NFPA) standards such as 70E or state or local building codes. Your building might be structurally sound and safely wired, but don’t be surprised if you discover a missing mid rail on a stairway or missing knock-outs in electric cabinets and fixtures.

CONTINUE READING AT EHS

Posted in safety programs, Uncategorized | Leave a comment
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