Hartford Business Journal

20 Hartford Business Journal • August 17, 2015 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Insurance commish should sit out Cigna-Anthem deal oversight R ecently appointed Insurance Commissioner Katharine Wade faces a major test with her oversight role in Anthem's proposed $48 million acquisition of Bloom- field insurer Cigna Corp. Rather than showcase her skills, however, we believe Wade should sit this decision out. Wade, who was appointed commissioner in March by Gov. Dannel P. Malloy, was previously a Cigna public policy vice president. Her husband is currently Cigna's associ- ate counsel. With such close ties to the company, Wade must recuse herself from any oversight role in the Anthem-Cigna merger. To do otherwise would create appearances of a conflict of interest. In 2010, the Connecticut Insurance Department came under fire as consumer advo- cates and other critics accused the agency of being a rubber stamp for health insurers, particularly in approving significant annual rate increases. In more recent years, the insurance department has been more aggressive in pruning insurers' proposed rate hikes, establishing itself — at least in the eyes of the public — as a tougher overseer. Wade has a duty to continue to uphold the integrity of her agency by distancing her- self from any regulatory role in the merger, much like Attorney General George Jepsen (whose wife works at Cigna) has done. In recent public statements, Wade has told various media outlets she has no financial interest in Cigna and stopped working there two years ago. She also said she is prepared to recuse herself from any Cigna matter in which she had active involvement in but added she was not involved in the merger. A big issue with government regulatory bodies is that they often employ individuals who have past industry ties. It makes sense in a lot of ways because you want regula- tors who understand an industry before they make important decisions regarding its financial safety and soundness. That revolving door mentality, however, often makes regulatory agencies vulnerable to accusations of bias. Succession planning conundrum As if Connecticut's economy doesn't have enough to worry about, HBJ Managing Editor Brad Kane in this week's issue reports on yet another threat to the state's future wellbeing: Lack of succession planning by small and midsized employers, which is leaving many companies vulnerable to dissolution or poaching by out-of-state buyers. Recent studies that show up to 85 percent of small and midsize employers don't have a succession plan is a major cause for concern, particularly as Connecticut's population ages faster than most U.S. states. That means a wave of Connecticut Baby Boomers likely will try to sell their business in the next 10 to 15 years, which could lead to busi- ness closures, relocations and/or significant layoffs if proper plans aren't put in place. We don't like to preach to company executives, but if you're thinking about retirement in the next five to 10 years it's time to develop an exit strategy. All businesses should consider grooming a next-generation leader or getting the company ready for a sale. We understand the day-to-day grind leaves few hours in a week to consider long-term plans, but lack of a succession strategy jeopardizes a company's future. That reality should hit home to many business owners, particularly those who are relying on their companies' equity as a retirement nest egg. n OTHER VOICES New federal regulations could force employee job reclassifications By Robert D. Noonan C onnecticut employers should brace themselves for challenges to the practice of paying employees on salary with no overtime. Last month, the U.S. Department of Labor (DOL) issued proposed regulations likely to require the reclassification of some employ- ees now paid on salary to hourly, overtime- required positions. Under the pro- posed regs, the mini- mum annual salary for the exempt-from overtime positions (exempt) would increase from the current $23,660 to $50,440 ($970 per week). Anything less will result in the employee being entitled to overtime (i.e. non-exempt). The proposed regulations will undergo a public comment period and then be released in final form with a likely effective date of Jan. 1, 2016. The proposed regulations call for automatic increases in the salary threshold as well. Salary and duties test Connecticut employers should recognize that this increase in the salary level is only half the problem in determining whether a position may be exempt from receiv- ing overtime. To be exempt, the position must pass the salary test, the subject of the proposed regs, and a duties test. In addition, the federal law that gov- erns the pay issue, the Fair Labor Standards Act (FLSA), requires that most employees in the United States be paid at least the federal minimum wage for all hours worked, and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Connecti- cut has its own wage laws that are similar, but not identical to the federal standard. However, the FLSA provides an exemp- tion from both minimum wage and overtime pay for employees who are employed in one of three exemption groups: executive, adminis- trative and professional. In addition, outside sales positions and certain computer employ- ees may be exempt professionals under the federal law. Note, the computer exemption is not recognized under Connecticut law. The legal standards for these so-called white-collar total exemptions are contained in current DOL regulations. Unless the position meets the salary threshold and passes the duties test, the employee must receive overtime for the hours worked beyond 40 in that workweek. The stakes in misclassifying employees can be high. Wage and hour violations are among the most costly employment-related cases. In fiscal year 2014, the DOL's Wage and Hour Division collected $240 million in back wages for more than 270,000 workers. Among the most commonly found violations are misclassifying employees as exempt sal- ary followed closely by classifying individu- als as independent contractors rather than employees. "Working supervisors" and other mid-level salary positions are likely sources of violations and targets for reclassification. Payless ShoeSource Inc. recently agreed to settle such a class action in New Haven federal court for just under $3 million. In that case, shoe store managers claimed that they spent more than half their time in stores alone and primarily performed non-manage- rial duties such as operating cash registers, cleaning, greeting customers and answering phones — activities that did not qualify them as executives under the exemption. Employers should expect that these pay issues will intensify and enforcement will become far more vigorous with the promulgation of these proposed regs in final form, particu- larly amid a national debate on pay equity and minimum wage and a national presi- dential election about to take center stage. And, on the hori- zon may be a more difficult problem as a result of a court case unfolding in Illinois: Non-exempt employ- ees who claim that they are entitled to addi- tional pay because they respond to emails or voicemails in their off-hours. Connecticut employers should anticipate that some of their employees currently on sala- ry must be transferred to the hourly ranks either because of the new salary threshold or because they have been misclassified under the current regulations. Re-examining the workforce's exempt/non-exempt and independent contrac- tor/employee status is advisable and far better before the notice of violation arrives. n Robert D. Noonan is the founder of Middle- field boutique law firm Robert Noonan & Associates. HARTFORDBUSINESS.COM POLL Does your company have a succession plan? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: What's the most logical way to pay for Malloy's $100B transportation overhaul? 64.2% Tolls 11.1% Congestion pricing 6.2% Mileage tax 18.5% Other tax hike Robert D. Noonan ▶ ▶ Unless the position meets the salary threshold and passes the duties test, the employee must receive overtime for the hours worked beyond 40 in that workweek. Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com. Or you may fax submissions to Editor, Hartford Business Journal, at (860) 570-2493.

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