The Whispers Blog
Arkansas' breaking business news blog, with news and commentary from the Arkansas Business staff.
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A local company — it really doesn’t matter which one — broke the bad news to a bunch of its employees a few weeks back: We can’t keep paying you when most of our clients are closed because of the pandemic. Go home.
I got a tip about this, so I emailed to ask what was going on. It took a couple of days, but eventually the company confirmed that it had furloughed a sizable minority of its employees. I wrote up a short article, just one of a depressing number of similar stories, and we posted it on ArkansasBusiness.com.
In the story, I used the word “layoff” interchangeably with “furlough.” And — believe me on this — the company’s spokesperson was not happy. Not at all. Because their employees were not laid off; they were furloughed.
I changed the language online because it seemed very important to the company. But I struck out when I asked for a clarification on the specific distinction between a layoff and a furlough. Are these employees retaining any income? Benefits? Are they guaranteed a date at which they will be able to return? Are they eligible for unemployment benefits?
I had always considered a layoff to be a temporary response to a decrease in demand for a particular company’s goods or services — exactly the situation that the company in question called a furlough. A furlough, in my mind, was involuntary, unpaid time off work — sometimes just a reduction in hours — for a specific period. And if you look up furlough in your choice of dictionaries, you are likely to find layoff is often used in any definition that refers to idling employees (as opposed to a leave of absence from the military or a prisoner’s temporary release).
So, after hearing nothing back for a few days, I again asked the company to help me understand the distinction between their furloughs and a layoff. “We are following the labor laws so our furlough is no different from how [the] Department of Labor defines it,” the spokesperson responded.
I never suspected any violation of the law. Unfortunately, the Department of Labor does not actually have a definition for a furlough. Neither does the state of Arkansas.
“There is no legal definition for layoff or for furlough in the Employment Security Law…,” Zoe Calkins, communications director for the Arkansas Division of Workforce Services, told me when I turned to her for help in understanding the distinction.
What’s more, she said in an email, “An employer is free to call a separation from work what it chooses, but DWS will consider the actual terms of the separation in deciding eligibility for unemployment insurance benefits. Generally speaking for UI purposes, a layoff of ten weeks or less is considered a temporary layoff and a layoff of more than ten weeks is considered a discharge — regardless what the employer chooses to call it.”
At that point, I sent out a distress call to Bruce Cross of the Cross Gunter Witherspoon & Galchus law firm, which specializes in employment law (and does some work for Arkansas Business Publishing Group). “Are there standard or legal definitions of layoff vs. furlough?” I pleaded.
“I don’t know how many times we’ve had this question,” Cross said. Maybe I imagined a little bit of a sigh. While some states have laws that define furloughs, “in Arkansas, we are really just talking about layoffs.”
He confirmed what Calkins at DWS told me: The language is a matter of employer preference. “We have some clients that like to use the word furlough because, I don’t know, it sounds softer. But how do you put lipstick on a pig?”
Some employers are certain that they will be able to bring everyone back, so “we’ll just call it furlough and it sounds better.” Other companies, Cross said, “call it a temporary layoff due to the pandemic, and the hope is that people can come back and reapply for positions.” Either way, they are “eliminating people from the payroll for some period of time unknown, during which they can go down and attempt to collect unemployment.”
Ultimately, he said, “This is just such an unprecedented scenario that, call it layoff or call it furlough, it doesn’t really matter what you call it.”
I’m slightly relieved to learn that my original article was not as factually inaccurate as the spokesperson insisted. It’s my job to defend against flackery and spin, and it’s my own fault for not being as well-armed as I should have been.
Bruce Cross and I lapsed into nostalgia for downtown Little Rock restaurants that we haven’t been able to visit in recent weeks. I’m jonesing for the special Tuesday burrito at Samantha’s Tap Room & Wood Grill on Main Street, and I suspect I’m not alone.
Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.
I was expecting a recession this year since the sugar high of the 2017 federal tax cuts was already wearing off. Even with recession-level deficit spending as far as the eye could see, economic growth slowed in 2019 and never achieved anything like the “4, 5, and maybe even 6%” growth rate that President Trump predicted after the tax law was adopted.
Being the longest economic expansion since World War II is sort of like being the oldest living person, isn’t it? The end has to come sooner rather than later.
The last recession, the one called the “Great Recession,” ended in the third quarter of 2009, although its effects dragged on for several more years. Part of the political fallout of an unemployment rate that touched 10% was the Affordable Care Act — Obamacare — which expanded Medicaid to the working poor and offered government subsidies so that middle-income families could afford the kind of health insurance the law required everyone to buy.
It was that “individual mandate” to have insurance that ideological conservatives objected to most vociferously, even though it was originally proposed by the conservative Heritage Foundation in 1989 as a form of personal responsibility. The part about the ACA that bothered me, as I have expressed in this space repeatedly over the years, is that it cemented in place the completely artificial connection between where one works and what kind of health insurance one gets.
If the lesson from 2008 was that people can’t pay their mortgages if they are laid off because of a housing bust caused by foolhardy mortgage lending, what’s the lesson of 2020? People can’t pay their medical bills if they lost their health insurance because they were laid off because of a pandemic.
Exactly how this thing will play out is anyone’s guess, but the thing I would most like to see is a serious discussion of decoupling where one works from the type and cost of health insurance. “Medicare for All” was not politically feasible and didn’t even survive the Democratic presidential primary, but I still think there could be broad acceptance of the concept known as Universal Catastrophic Coverage. I’ll probably keep talking about it until someone shows me a better idea.
My interest in some kind of government-sponsored catastrophic health insurance dates back more than a decade, but it was Ed Dolan of the libertarian think tank Niskanen Center who called my attention to the wonkery of Kip Hagopian, a California venture capitalist, and Dana Goldman, an expert in health care economics from the University of Southern California. Hagopian and Goldman offered up a detailed proposal in 2017 that continues to spark my imagination.
Here’s how it could work: Standard catastrophic coverage would be paid for by taxpayers, and it would probably be government-run, although it might be sold by private insurers. It would not replace Medicaid for the poorest, but it would protect the rest of us from what Dolan described as “those relatively rare but ruinous healthcare expenses that are truly unaffordable.”
But the definition of ruinous depends on resources. Hagopian and Goldman proposed a scalable deductible depending on household income. One suggestion was 10% of household income above the level eligible for expanded Medicaid; for simplification, let’s say that’s $40,000 for a family of four.
Under this formula, a family earning $100,000 would have a deductible of $6,000 per person, perhaps with a cap of twice that much for the entire family. After reaching that deductible, the UCC policy would pay 100%. For a household with $1 million in annual income, the deductible would be $96,000. Ouch.
But that’s the beauty of UCC: Families that could afford it — as a household earning seven figures certainly could — would be able to buy supplemental private insurance to hedge against that enormous deductible. With the upper level of the private carrier’s exposure being limited, it is easy to imagine a robust, competitive private market of highly personalized “gap” insurance — sort of like “name your price” auto insurance with variable copayments and deductibles.
Another beautiful thing: Employers could get out of the health insurance business without fear that employees would be uninsured. Or they could offer gap insurance — perhaps group plans — as an attractive benefit.
And when the business cycle churns, as it does even without pandemic shocks, losing one’s job would no longer mean losing one’s health insurance entirely.
Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.
“Never let a good crisis go to waste” is time-honored advice, whether it originated with Niccolò Machiavelli or Winston Churchill before being popularized by Rahm Emanuel.
Politicians aren’t the only ones who recognize the opportunities presented by the current crisis. Fraudsters are also looking for ways to capitalize on COVID-19. Arkansas Attorney General Leslie Rutledge has warned about price gouging, while the U.S. Department of Justice has logged reports of fake cures, phishing emails from entities spoofing the WHO or the CDC, malware disguised as virus-related information and the ever-popular requests for donations to illegitimate or nonexistent charities.
I got an email allegedly from Amazon warning me that my Prime account had been suspended because I hadn’t paid my monthly fee. It didn’t work — first clue: I don’t pay Amazon monthly — but I can see how people more dependent than ever on online shopping and streaming entertainment could panic at the thought of a suspended account.
I hate fraud. I hate it whether it’s perpetrated by criminals who send phishing emails during pandemics or by Nigerian princes or by self-proclaimed billionaires who run scam universities and rip off charities. So it is with a heavy heart that I call your attention to this warning from Bruce Dorris, president and CEO of the Association of Certified Fraud Examiners: Like crises before it, from Hurricane Katrina to the financial crisis of 2008, the coronavirus pandemic is likely to be a breeding ground for workplace fraud.
“There are a number of reasons fraud proliferates during recessions and times of economic instability,” Dorris wrote in an open letter posted on the ACFE website on March 31. “A large factor is the increased pressure companies and their employees feel as they struggle to meet the challenges of a down economy.”
The most costly kind of workplace fraud is financial statement fraud, averaging $8.7 million. When market conditions deteriorate, Dorris wrote, executives “can face pressure to falsify their financials in order to meet earnings targets or secure financing.”
The current situation, negatively impacting every industry (except perhaps package liquor stores), may make such fraud less tempting than during normal, cyclical downturns.
But this would be a great time to be on the lookout for the most common type of workplace fraud: embezzlement, which fraud examiners call “asset misappropriation.”
In his letter, Dorris described the “fraud triangle,” which is “the most commonly accepted model for explaining fraud in the workplace.” The three factors that are generally present when an employee decides to start committing fraud are pressure, opportunity and rationalization.
Rationalization is fundamental to human nature, and anyone who has ever sold anything not essential to survival counts on it. But it can be a very expensive catalyst when the other factors are also in place — which they often were even be-fore the pandemic led to 17 million unemployment claims in just three weeks.
Previewing 2019 survey results that will be released on Thursday, Dorris said “42% of occupational fraudsters are living beyond their means at the time they commit fraud, and 26% are experiencing financial difficulties.” These are red flags that an employee is under pressure, the first factor in the triangle, and the pandemic will undoubtedly create additional desperation for many people.
The pandemic may also create greater opportunity for fraud, the second factor in the triangle. “Companies seeking to cut costs often target non-revenue-generating departments like compliance and internal audit. This is a mistake,” Dorris wrote. “... As organizations make cuts in the attempt to operate with a leaner staff, they can find themselves caught in a perfect storm for fraud: pressures motivating employee fraud are high at the same time that defenses intended to safeguard against fraud have been weakened.”
Quoting Warren Buffett — “You only find out who is swimming naked when the tide goes out.” — Dorris also predicted that the recession caused by the pandemic will reveal pre-existing frauds, just as the 2008 crisis uncovered Bernie Madoff’s Ponzi scheme.
The ACFE’s 2019 data shows that more than half of workplace frauds take advantage of deficient internal controls.
“[A]lthough business practices may not be top of the mind right now while we face these difficult changes,” Dorris concluded, “I encourage organizations to look towards the future to protect themselves, and their employees, against fraud. Because it’s not a question of if we see more fraud, it’s a question now of how much we will see.”
Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz.
Everyone seems to be talking about how the world is going to be different after the coronavirus pandemic. The Boston Globe last week published predictions from a number of “futurists” and science fiction writers that ranged from obvious (“government intervention on a scale that neoliberalism hasn’t seen since the 1930s”) to horrific (“violent uprisings, internment camps for immigrants and other ‘suspicious’ groups, and off-the-grid cults that promise sanctuary from death”).
I’m notoriously bad at predictions, but some things seem like sure bets. Having so many people working from home will undoubtedly make businesses ask whether they could get by with less office space when it’s time to renew the lease. Ditto some of the business travel.
Retailers who were struggling in the first place may soon become part of American nostalgia. Retailers with significant online presence — Amazon, of course, and Walmart — will gain market share, even as their capacity has been pushed to the limit. Transportation companies that prove able to scale up will probably keep some of those new customers.
Some restaurants will reopen. Some banks will find that they can do without quite so many branches. (See Simmons First Shrinks Branch Operations for more on that.) Telemedicine is here to stay. So is grocery pickup and delivery.
But what about you personally? What are you learning about yourself and your habits that you will carry forward?
I’ve learned that I’m not as cool as I thought I was. My first attempt at conducting the weekly planning meeting of the Arkansas Business editorial staff online was a fiasco because 1) I’m not as techno-savvy as I thought I was and 2) my frustration made me (to be generous) snappish. My co-workers showed remarkable grace and forgiveness, and the second attempt was significantly better. We can do this.
We can do this might as well become our national motto, right?
I also learned that my mental health has benefited from keeping my normal routine. I don’t mean being slavishly devoted to a calendar or to-do list — I’ve never lived that way, as much as I wish I could. But I feel less agitated because I continue to get up at the same time, dress for work in the same clothes I normally wear, and go to the newsroom — where hardly anyone else is working, so I have plenty of social distance.
Seeing on social media the collapse of personal routines, from hygiene to productivity, reminded me of a lesson my brother’s wife learned two decades ago, when she was a pioneer in telecommuting. SunTrust Bank ran a T-1 line to her home near Nashville, Tennessee, and she handled customer service calls from a spare bedroom. “I’ll be able to work in my pajamas!” she crowed.
After a few weeks, she changed her tune. She started showering, putting on makeup and getting dressed — albeit usually in jeans and a t-shirt — before starting her shift on the phone line. The novelty of not going to the office wore off quickly, and she just started to feel like a slob. She feared that feeling unprofessional might actually be affecting her telephone demeanor.
There’s anecdotal evidence that the same spills over into teleconferencing. “We’re seeing increased sales in tops, but not bottoms,” Dan Bartlett, Walmart’s EVP of corporate affairs, recently told Yahoo Finance. People seem to be concerned about their appearance “from the waist up,” he said.
There’s a reason guilty pleasures — like not showering or wearing makeup on Saturday — are guilty pleasures. They never make for a good way of life.
On the other hand, it seems like a lot of people’s meal routines have changed for the better. We have picked up some meals, but I’m actually cooking more — like I used to when we had kids at home. My husband seems to like this part of the pandemic response.
Another thing that has been driven home is how much I need my friends and relatives — live and in person. I’ve always enjoyed entertaining, and I suspect I’ll insist on doing more of it when this crisis is over.
Believe it or not, I actually remember the first time I ever used hand sanitizer. It was in 1986 at the home of a co-worker whose wife had just delivered the baby they had long hoped for. He made everyone use some kind of magic germ-killing foam before we were allowed to touch his little darling.
John Venn. Remember him? Can’t say I do, but I recognize what he created.
John Venn was an English mathematician who, in 1866, published a book on what he described as the frequency of probability, providing an alternative to informed assumptions. Venn also discussed logic in another late-1880’s work proposing what would come to be known as the Venn diagram. You’ve seen them. They are multiple circles of different sets that intersect, and where they do, they reveal commonality or logical probability.
I guess you could say a Venn diagram discovers relationships among two or more ideas. And where those ideas can come together or work together to produce a more powerful thought. Pretty heady stuff for simple circles.
Now, I have read and been told that difficult times and tough situations don’t necessarily build character, they reveal it. That may be true of the current health crisis. When it comes to consumers, and consumer brands, many are now hard pressed to find what they need — or what some are wont to hoard — to try and achieve what one 1920 candidate for president called “a return to normalcy.” It will be a while.
In a March 16 Adweek article titled “3 Elements of Your Brand That Can Shine Through in These Harrowing Times,” authors Elina Tang and Lei Wang posit how a brand’s choices may reveal its true character, thus attracting a consumer’s choice or disdain. As we have previously droned on in this space, brands — particularly big brands — can have a distinct advantage when discriminating decisions are forced on consumers, if the brands strategically work to achieve those advantages. It’s called “brand behavior.”
Brands have a responsibility to consumers. The accompanying Venn diagram illustrates the point.
The dynamic needs of the community are where brands — pervasive, well-known, preferred — come into play. Think about Ford partnering with another company to make medical ventilators. Ford didn’t partner with XYZ Inc.; it partnered with GE, General Electric, one of the best-known brands in the country.
In order for brands to perform in times like these, and to come out on the other side stronger and more resilient, three brand behaviors are suggested.
First is authenticity. We have noted before, the true self of a brand reflects who the brand is, what it stands for and how it goes about its creation, promise, promotion and treatment of the people who support it. Authentic brands are genuine, from the boardroom to the retail shelf to the customer experience.
The second behavior is agility. Possessing a bias for action, particularly when needed most. The authors cite Southwest Airlines. Although travel has been greatly curtailed, Southwest was the first to communicate the steps they are immediately taking to ensure their planes are clean because they are cleaned and disinfected before and after every flight.
Ingenuity is the third behavioral trait for successful and relevant brands. Coming up with new ways to respond to perceived consumer needs help a brand stand out. Take Google. Understanding truthful and credible information about the virus is critical for individuals to understand personal responsibility, Google established itself as a “curator of the latest and most accurate information” regarding the virus.
Smart brands adapt, just as we as consumers have to adapt — if we’re smart.
Our own Venn diagram during this critical period in our national and personal lives could bring together three circles titled, “Truth,” “Knowledge” and “Action.” The intersecting circles would reveal “Responsibility.” It could very well be a diagram for our survival.
Craig Douglass serves as executive director of the Regional Recycling & Waste Reduction District in Pulaski County.
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