Polarizing, Precarious, and Perplexing

The dignity of each employee at a Catholic college should influence decisions about allocating resources and determining policies.

By Rev. Craig B. Mousin, university ombudsperson, DePaul University

Precarious work is a worldwide phenomenon,”1 concludes sociologist Arne Kalleberg, who defines precarious as work that is “uncertain, unpredictable, and risky from the point of view of the worker.”2

Kalleberg subsequently wrote in Good Jobs, Bad Jobs that not only do we face a worldwide tragedy of precarious employment, but that work itself has become polarized with an expanding gap dividing those who have good jobs from those who have bad jobs.3  Kalleberg explains that good jobs offer more than simply adequate compensation, but also job security and a place where one can develop a “life narrative” from work.

Today, precarious work has spread to many occupations within all sectors of the economy.4 The threat to the very existence of one’s job negates many of the benefits that work typically provides. Simultaneously, as the majority of the workforce has seen little increase in wages over the last several decades, the middle class has diminished and income inequality has grown, further polarizing the workforce.

Although few might doubt that globalization, economic recession, and structural changes have made work more precarious in recent years, Kalleberg’s review leaves one with a perplexing question: Where is the voice of Catholic Social Teaching (CST) in the contemporary workplace?

A Notable History 

Although Kalleberg echoes ideas found deep within CST regarding human fulfillment through work and the importance of work for an individual’s self-esteem, the contemporary public discussion surrounding precarious work finds little recognition of CST’s historical contribution to the reduction of precarious work in the early 20th century through the Great Compression of the mid-20th century, when employment in the United States led to periods of reduced inequality.

In the 1940s, after many of the New Deal’s labor reforms had been enacted, President Franklin Roosevelt praised Msgr. John A. Ryan’s service in raising the goals of CST in support of those reforms: “With voice and pen, you have pleaded the cause of social justice and the right of the individual to happiness through economic security, a living wage, and an opportunity to share in the things that enrich and ennoble human life.”5

But Ryan did not advocate his religious perspective alone. Ryan credited the Catholics who, as early as 1500, had begun to argue for the role of government to regulate employment and relief for the workers.He celebrated the work of Frederic Ozanam, one of the principal founders of the Society of St. Vincent DePaul in the early 1800s, who had argued for a living wage and government encouragement of workers’ associations to negotiate on behalf of workers.

The poverty of France and the lack of respect for the dignity of workers and their families caused much of the precarious nature of employment under such an economic system. Ozanam joined with other French Catholics who sought to navigate between the unprotected employment of workers nder laissez-faire economics and complete regulation by socialism and communism. Subsequently, Pope Leo XIII’s Encyclical Rerum Novarum, influenced in part by those French Catholics, developed CST’s distinct path to recognize the role of capital while upholding the dignity and rights of workers and provided a strong foundation for Ryan’s advocacy.  

In Policy and Practice

It may be that scholars talk within their spheres of influence and business leaders speak within their language of the workplace, and never the twain should meet. Yet, Catholic colleges and universities would seem the best place to breach the barriers by providing a workplace that is an effective laboratory of CST in action. CST’s foundation in the dignity of each person—who is not a commodity, but a member of the human community created in the image of God—provides one starting point. Above all considerations, the dignity of each person—each student, staff, and faculty member—should influence daily decisions about allocating resources and determining employment policies.

For example, the government’s attempt to discourage undocumented immigrants from working led Congress to establish the employer’s duty to collect and file I-9 forms documenting employment authorization, with risk of substantial fines for noncompliance. The legislation enacting I-9s was highly contentious and also challenged CST’s nuanced understanding of welcoming the sojourner and care of the immigrant. Although most Catholic institutions have not quarreled with their duty to comply, the implementation of the I-9 process and the fear of noncompliance may negatively affect lawful immigrants or persons who may be perceived as foreign-born, while also causing undue stress to employees charged with ensuring compliance. Engaging CST through implementation of the process would honor the dignity of all involved while still ensuring legal compliance.

CST not only assists in determining the effect of the process on human dignity, but also raises the question of how religious institutions operate in a secular society. As Martin Marty and James Serritella warn, “Primarily, religious bodies should not put aside their theology and doctrine when entering the secular area, but should instead make sure that their religious polity is internally clear and in the forefront of consideration when adopting legal structure or drawing up legal documents.”6

Although Marty and Serritella were speaking specifically about how religious institutions might organize themselves under U.S. law, their advice bears following in formulating policies and practices. How do our attorneys, compliance officers, financial experts, and managers interpret their respective professions in light of CST? Do we ask prospective trustees if they understand how to reconcile CST and their fiduciary duty to our institutions? Have we developed a vocabulary that gives voice to CST within the workplace?

For example, laws initiated in the New Deal era legislating the normal work-week permit exempt employees to work extra hours without the necessity of overtime pay. Recently, the federal government raised the question whether some employers have abused the intent of these laws by classifying too many employees as exempt. In addition, even properly classified exempt employees face the challenge of working too many hours beyond what the legislation may have intended. Engaging CST in a conversation about the purpose of work and the flourishing of each employee, along with the appropriate balance with home and community commitments, would start to address concerns about abuse of the system.

Going Beyond Business

A recent Wall Street Journal article suggests that the business world is catching on: “Lately, . . . some CST evolved from extremely challenging times. Today, the great disruption caused by precarious work in a polarized society necessitates a new response.

A recent Wall Street Journal article suggests that the business world is catching on: “Lately, . . . some big investors have worried [that] increasing income and wealth gaps threaten the economy’s ability to expand.  For their part, Catholic colleges and universities could provide an additional example of how inequality and precarious work diminishes the effectiveness and success of our workplaces. CST has consistently stressed that inequality has costs, not just to economics, but to the realization of human dignity in the workplace. Will our practice merge with our vision in earning an invitation to the discussion?

The opinions expressed in this column are the author’s alone and do not represent those of DePaul University or the Association of Catholic Colleges and Universities.

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1 Arne L. Kalleberg, “Precarious Work, Insecure Workers: Employment Relations in Transition,” American Sociological Review 2009 74:1, 14, http://asr.sagepub.com/content/74/1/1.

2 Id. at 2.

3 Kalleberg, Good Jobs, Bad Jobs: The Rise of Polarized and Precarious Employment Systems in the United States, 1970s to 2000 (NY: Russell Sage Foundation, 2011) 3.

4 Id. at 86.

5 Rt. Rev. Msgr. John A. Ryan, Social Doctrine in Action, A Personal History (NY: Harper & Brothers Publishers, 1941) 281.

6 James A. Serritella, Thomas C. Berg, W. Cole Durham, Jr., Edward McGlynn Gaffney, Jr., and Craig B. Mousin, eds., “Religious Polity,” in Religious Organizations in the United States, A Study of Identity, Liberty, and the Law, (Durham, NC: Carolina Academic Press, 2006) 104.

7 Justin Lahart, “Worry Over Inequality Occupies Wall Street; Gulf Between Haves and Have-Nots May Hurt Economy,” Wall 

Street Journal (online), 10 November 2013.

Employee Harassment Poses Challenges - Vance v Ball State

A case before the Supreme Court offers some mission-related considerations for Catholic colleges and universities

By Gary L. Miller

Which job duties and degrees of authority constitute a supervisory position? This question is expected to be addressed in a case currently before the U.S. Supreme Court, Vance v. Ball State University. While the decision will have significant practical consequences for employers, the case itself provides some best practices in Human Resources (HR), as well as an important reminder to executives. Additionally, it offers an opportunity for reflection on HR and management priorities in mission-driven Catholic organizations.

In 2006, Maetta Vance sued Ball State University claiming, among other things, racial harassment resulting in a hostile work environment, which Title VII of the Civil Rights Act of 1964 prohibits. Further, she claimed that one of the harassers had supervisory authority over her. The outcome of the case will largely center around whether the harasser in question was a co-worker or a supervisor. If the harasser is found to have been a co-worker, then the university only has to demonstrate that there were legitimate channels for employees to report harassment, that the reported complaints were promptly investigated, and that appropriate corrective actions were taken.

On the other hand, if the offender is found to have been a supervisor, Ball State could be liable for the harassment, because the applicable law stipulates that supervisors are considered agents of the employer. As such, their actions are imputed to the employer, in this case, the university. So, if a supervisor illegally harasses a subordinate, the employer is liable.

Lessons for Human Resources

The Seventh Circuit Court of Appeals decided that the alleged harasser was not a supervisor and that Ball State had taken the proper steps to address co-worker liability. Ball State’s practices in responding to Vance’s complaints provide several lessons for other university HR offices pertaining to co-worker harassment.

First, the university had an employee complaint process and employees evidently knew how to use it. In addition, the university investigated each complaint promptly and took legally appropriate actions to address the situation and prevent its recurrence. Finally—a particularly important lesson for higher education given the number of credit hours taught by part-time faculty—Ball State did not discount Vance’s complaints, even though she was a part-time employee when she began filing complaints with the university. The university accurately viewed and treated her as having the same legal rights and protections as a full-time employee.

A Reminder for Executives

While the appeals court found that the university was not negligent regarding co-worker harassment, Vance may ultimately prevail if the U.S. Supreme Court agrees with her that one of her harassers was, in fact, a supervisor. Again, the central question centers around the responsibilities and level of authority an employee must have in order to be considered a supervisor. The Seventh Circuit, in addition to other circuit courts, has historically held that in order to be considered a supervisor, an employee must have the authority to affect the “terms and conditions” of a subordinate’s employment, meaning the power to hire, fire, promote, and discipline. Other circuit courts and the Equal Employment Opportunity Commission have maintained that supervisors also include those who merely direct the work activities of others.

If the U.S. Supreme Court goes with the broader definition, the possibility for an employer to be found liable for harassment increases because more employees will be considered supervisors. When a supervisor illegally harasses a subordinate, the employer cannot escape liability by having a complaint procedure in place or by promptly investigating complaints.

Herein lies the important reminder: Your supervisors and managers represent the university. Why does this seemingly obvious fact deserve a reminder? Because employers who fail to recognize the importance of soft skills and mission-aligned values when hiring managers—skills and values such as knowing how to convey respect for others or recognizing that people have important needs and sensitivities different from their own—can get an employer into legal trouble. While managers can and should be trained and developed, is it worth the legal risk to hire a manager deficient in these values and soft skills and then try to change them?

In addition to potential compliance and financial liabilities, managers who run roughshod over their staffs have been shown to adversely affect their subordinates’ work behaviors and, in turn, the treatment of customers. Particularly relevant research for universities suggests that students’ perceived treatment by instructors in a classroom correlates with instructors’ perceptions of how they are treated by their management. So not only do supervisors and managers represent the university in a direct and legal sense, their actions affect the performance of their subordinates and, indirectly, can influence the service levels provided to students and others.

Integrating a New Standard

The outcome of the Vance case may have serious implications for many employers, including Catholic colleges and universities. If the U.S. Supreme Court clarifies that employees who are authorized to direct the daily work activities of others, even though they do not have the authority to hire, fire, promote, and discipline, must now be treated as management, policies that are specific only to managers would have to be clarified and communicated to a much broader audience. Also, employers would need to significantly expand management compliance training and, of course, implement a method for tracking and flagging these individuals as managers in organizations’ HR/payroll systems.

Beyond this, internal HR/diversity standards pertaining to remedial measures in discrimination and harassment cases would need to be reconsidered. Because supervisor/management harassment create a greater likelihood of liability for employers than does co-worker harassment, disciplinary measures for offending management employees are often more stringent. These tougher measures also would need be expanded to the team leader level.

Elevating Policies and Practices

In a brief survey of Catholic college and university HR websites, I found that the values of Catholic Social Teaching are often directly expressed in HR mission statements and convey an expectation that employees will be treated with dignity. Phrases such as “developing the well-being of employees,” “respect, compassion, and love,” and “treating employees with the respect of those created in the image and likeness of God” clearly suggest an expectation that employees will not be discriminated against or harassed for any reason.

Given that finding, why not tie HR policies and practices directly to these values? After all, if the management standard indicates that all employees are to be treated with dignity, doesn’t that already convey the minimum expectation that managers and supervisors will not engage in illegal discrimination and harassment? Additionally, a policy with “dignified treatment of employees” as a guiding principle would also cover forms of harassment and discrimination resulting from attributes that are not universally protected, such as lifestyle and weight. This approach would seem consistent with Catholic mission values, protecting faculty and staff from all forms of improper discrimination and harassment, not just those attributes protected under current law.

Integrating HR policies and practices under mission values could apply to almost all HR policies. Consider the legal obligation employers have to provide reasonable accommodation for disabled employees. Yes, it’s the law, but isn’t providing reasonable accommodation also consistent with treating employees with dignity? Further, isn’t it also a best practice to accommodate an employee’s disability when doing so would help retain a skilled and talented employee?

While some employers may be preparing to make changes if the U.S. Supreme Court sides with Vance, perhaps Catholic colleges and universities will resolve to make changes regardless of the outcome, not only because of the lessons this case provides, but also because of the importance of placing mission values at the forefront of their policies and practices, calling all employees to a higher standard.

The opinions expressed in this column are the author’s alone and do not represent those of DePaul University or the Association of Catholic Colleges and Universities.

For More Information

Ruling of the United States Court of Appeals for the Seventh Circuit, Maetta Vance v. Ball State University, decided June 3, 2011   

The Management of Organizational Justice, by Russell Cropanzano, David E. Bowen, and Stephen W. Gilliland

Supreme Court to Look at Who Is a 'Supervisor' in Harassment Cases, by Nina Totenberg, NPR, November 26, 2012

Where Does One Stand on a Slippery Slope?

By Rev. Craig B. Mousin

“Wyatt Earp birthplace, turn right.” The sign intrigued me when I recently entered Monmouth, IL. Earp’s exploits in Dodge City, KS, helped shape the national narrative of the lone law officer with a fast gun securing the streets while the citizens cowered on the sidelines. Given recent gun tragedies in various cities and even on some college campuses, the sign ignited my wonder of what Wyatt Earp might have to say about our current national debate on gun control. 

Surprisingly, the history of many of the towns we recall as home to unending western shootouts does not coincide with the myth. Many had exceedingly strict gun control laws. When Dodge City incorporated, its first municipal ordinance prohibited guns within the city confines and required anyone possessing a gun to check it at the town border.[1]

            In contrast to the fear that gun controls will initiate the slide down the slippery slope eviscerating the Second Amendment, most U.S. states had enacted prohibitions against concealed weapons when the 20^th century opened.  Most court cases upholding those statutes in the 1800s noted the presumption that anyone carrying a concealed weapon was either vile or up to criminal or nefarious ends. In commenting on that conjecture, one West Virginia court called it a “perfectly just and proper presumption, and one which ought to prevail in every community which aspires to be called civilized.”[2]

In Hopkins v. Commonwealth, Judge Robertson echoed the prevailing sentiment in describing what would happen if the court struck down the concealed weapon law:

…the salutary law against the pestilent and alarmingly prevalent habit among all classes, and especially among young men, and even boys, of wearing concealed arms, through false and cowardly pride, and for mock chivalry, might soon become practically a dead letter. A statute so beneficent and so often and so easily evaded, should be vigilantly upheld, and stringently enforced by the judiciary for repressing a dishonorable and mischievous practice, which, licensed or unlicensed, leads, almost daily, to causeless homicides and disturbances, which would otherwise never be perpetrated.[3]

Simply stated, society needed concealed weapons laws for public safety and the states responded with concealed carry prohibitions.

            Today, if state statutes are any guide, national sentiment has completely reversed course. All but one state permit concealed carry of firearms. In upholding the Second Amendment right to private ownership of guns, the Supreme Court’s Heller decision stressed the law-abiding citizen’s right to possess a gun for self-defense.[4]  Our nation has explored the full spectrum, from requiring guns in churches to banning guns in churches.  Recently, Arkansas enacted a law permitting concealed guns in churches, with the church’s permission.[5] All sides of the gun possession slope appear to be quite slippery.

Bringing a Moral Voice to the Dialogue

           The United States faces a crisis of death, disability, and loss of community caused by gun violence. The Centers for Disease Control and Prevention report that 31,000 persons die from gun violence each year.[6] While the classic notion of men dueling over honor seems outdated, Judge Robertson’s 19th century language eerily describes contemporary events. In light of the carnage, the legal debate over the extent of Second Amendment rights echoes with the same arguments that have been made for two centuries: first, whether the amendment protects an individual right or the group right to assemble as a militia and, second, whether guns increase homicides or act as a guard against such tragedies. While the courts have countenanced both strict prohibition and open-carry laws, changes in the laws have stemmed not only from constitutional legal arguments, but also from moral outrage and concern for the common good.  One commentator critiqued concealed carry of guns in 1832, saying,  “This cowardly and disgraceful practice, if it is really unconstitutional to restrain by law, ought to be discountenanced by all persons who are actuated by proper feelings of humanity or a just regard for the dictates of religion.”[7]  Subsequent scholarship affirms that religious voices contributed to the outlawing of both dueling and concealed weapons.[8]

Today, law school faculties continue to contribute to the legal arguments on the parameters of Second Amendment protection. But the current crisis calls for a renewed moral voice to stem the loss of life. Catholic colleges and universities steeped in a heritage influenced by Catholic social teaching (CST) are well poised to engage in the national debate beyond the simple fear of the slippery slope. Mission statements posted by some Catholic university and college human resource departments describe workplaces that “embody the Catholic principles of social justice” and enjoy the “benefits of working as a community of service toward a shared aim.”[9] These human resources offices aim to establish “a work environment that respects the dignity, value, and worth of each individual”[10] with values that include “integrity, honesty, diversity, community, justice, service, [and] leadership.”[11]

Consistent with those values, many Catholic colleges and universities have formal student and employee policies prohibiting unauthorized firearms and weapons on campus. Similarly, many post policies stating that unauthorized possession of firearms can result in immediate dismissal from employment. Some human resources offices also offer integrated conflict resolution systems, mediation, and Ombudspersons offices, all providing multiple models for staff, students, and faculty to pursue relief from conflict.  Juxtaposed to that vision, Arkansas has recently enacted a law permitting concealed weapons on college campuses under certain circumstances.[12] 

Finding New Solutions to Violence

Academics duel with ideas and scholarship and challenge through questioning and rebuttal. Unlike the Earp narrative of the rugged individual with the fastest gun, CST envisions a community that builds an environment by educating students to resolve conflict through words and engagement rather than the power of a firearm. But those values focus not just inward. As they also inspire service and leadership, they serve as a catalyst for “transformational education.”[13]

Transformational education calls for transforming society. Catholic colleges and universities, steeped in CST, should be part of that catalyst that brings an end to the violence. Although our model for gun-free campuses may be based in part on the suggestion in the  Heller decision that the Second Amendment permits regulation of guns in sensitive areas such as schools and churches,[14] CST suggests more about community than an accommodation provided by the Court.  Given the violence in our streets, can we morally claim that our universities are more sensitive than our streets when our young children die in public parks or sitting on the  steps of their porches?

Programs such as one at DePaul University’s Center for Conflict Resolution educate students on the power of mediation and negotiation while offering the public mediation training. DePaul’s Center for International Weapons Control is applying the lessons learned from international weapons control to shed new light on the legal debates concerning gun violence and trafficking.  This is not just a mission for Catholic colleges and universities. The Johns Hopkins Center for Gun Policy and Research links the public health ramifications of the national tragedy of gun violence to proposed reforms. Monmouth College President Mauri Ditzler recently raised the need to become engaged in seeking new solutions when he joined with other college presidents inviting all concerned citizens to accept “personal responsibility for making our children safer.”[15]

            Our nation has slipped down one side and climbed up the other throughout the history of gun regulation. CST provides a place to stand on that slope and give voice to the moral outrage of too many deaths, injuries, and broken communities. As in the 19th century, today’s young men—whether incited by visions of anti-heroes, violent video games, mental illness, or as Judge Robertson said, “false and cowardly pride”—challenge us to find new solutions to the violence. The good citizens of places like Dodge City saw the economic and moral good of limiting access to weapons. Academic communities, immersed in robust but peaceful debate, possess the historical foundation to contest the myth of the solitary gunfighter as a source of peace. Instead, inspired by the common good, Catholic college and universities should engage the public sphere with the values of Catholic social teaching and the legacy of building communities where humans flourish without the needless loss of life.

We invite you to respond to this column through the Human Resources and Mission blog. We also invite you to post links to your mission statements, as well as HR and compensation philosophy documents if you would like to share them with our readers. This will permit a fuller discussion of how mission and CST influence the employment process.

The opinions expressed in this column are the author’s alone and do not represent those of DePaul University or the Association of Catholic Colleges and Universities.

This column was originally published in the Spring 2013 edition of Update, the newsletter of the Association of Catholic Colleges and Universities (ACCU).   The published article can be found at http://www.accunet.org/files/public/Update/Update-Spring2013-final.pdf

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[1] Winkler, A. (2011). Gunfight: The Battle over the Right to Bear Arms in America, W.W. Norton & Company, 66.  Winkler addresses the Wild West myth on pp. 149-169.

[2] State v. Workman, 14 S.E. 9, 11 (1891).

[3] Hopkins v. Commonwealth, 66 Ky. 480, 482 (1868).

[4] District of Columbia v. Heller, 554 U.S. 570, 636 (2008); see also, McDonald v. City of Chicago, 130 S.Ct. 3020, 3050 (2010).

[5] Winkler, supra, 287; Church Protection Act of 2013, Arkansas Code §5-73-306(16), enacted February 11, 2013.

[6] Centers for Disease Control and Prevention. Web-based Injury Statistics Query and Reporting System (WISQARS). National Center for Injury Control and Prevention. (2012, March 15). Quoted in Johns Hopkins Center for Gun Policy and Research, “White Paper: The Case for Gun Policy Reforms in America.”

[7] Oliver, B. (1832). The Rights of an American Citizen with a Commentary on State Rights, and on the Constitution and Policy of the United States, Boston: Marsh, Capen & Lyon, 177, as quoted in DeConde, A. (2001). Gun Violence in America: The Struggle for Control, Boston: Northeastern University Press, 51.

[8] Cramer, C. (1999). Concealed Weapon Law of the Early Republic: Dueling, Southern Violence, and Moral Reform, Westport, CT: Praeger Publishers, 57–60.

[9] The Catholic University of America, human resources web pages.

[10] Quincy University, human resources web pages.

[11] Loyola University Maryland, Office of Human Resources, HR’s Vision, Mission, and Values.

[12] See: http://www.arkleg.state.ar.us/assembly/2013/2013R/Acts/Act226.pdf

[13]Marquette University, Department of Human Resources, Mission and Vision, at http://www.marquette.edu/hr/HumanResourcesMissionVision.shtml

[14] Heller, supra, 626.

[15]Ditzler, M. “Personal Responsibility and Gun Violence.” Breakfast with Mauri blog.

The Price of Liberty: An HR Perspective

By Gary L. Miller  

A recent statement issued by the U.S. Conference of Catholic Bishops sounds the alarm that various government entities are passing laws and rules that are eroding our religious liberty.¹ One of the threats cited in the document pertains to the U.S. Department of Health and Human Services (HHS) contraceptive coverage mandate that many faith-based employers find morally objectionable and that may cause some Catholic colleges and universities to discontinue their group medical plans. This column explores cost and HR issues that could be experienced by employers choosing to go down this path.

A Brief Background

To counter the generally unsustainable trend of rapidly rising healthcare costs, as well as curb the growth in the number of citizens without medical insurance, the Patient Protection and Affordable Care Act (PPACA) was signed into law in March 2010. Buried within this incredibly complex law is a provision that group health plans provide coverage for preventive care without cost-sharing by employees if the health plan is not grandfathered.

This seemingly innocuous requirement has become a source of serious controversy for many faith-based employers. The commotion does not stem from the likely effect that the preventive care requirement will increase health plan premiums or from the administrative burden it creates by forcing employers to amend their group plan documents and clearly communicate these changes. Rather, the contention comes from the guidelines that require group medical plans to cover contraceptive services, which include certain abortifacient drugs and sterilization.²

Another twist is that HHS allows an exemption from the contraceptive mandate for religious employers but uses a very rigorous standard for qualification as a “religious employer.” As a result, most Catholic employers, such as Catholic hospitals and universities, do not qualify for the exemption and will therefore have to comply with the mandate. For these organizations, mandate enforcement will start when their plan years begin following August 1, 2013.

Instead of expanding the definition of a religious employer, HHS proposed an alternative method of funding the contraceptive coverage. The alternative—that insurers and third-party administrators, rather than employers, pay for the objectionable provisions—still requires the contraceptive provision to be included in faith-based organizations’ group medical plans, and also fails to make accommodations for self-insured entities.

Barring a change to the contraception requirement or an expansion of the exemption, the HHS mandate will force Catholic colleges and universities to subsidize, or at least facilitate access to, products and services many consider morally objectionable. The broader concern of religious liberty comes into play because such a mandate inhibits the free exercise of religion: Many religiously affiliated organizations serving the common good as an expression of their beliefs and values will be forced to support activities they consider morally reprehensible just to be able to fulfill their mission.

An HR Perspective

Because the PPACA does not require employers to offer health plans, faith-based employers with a moral objection to the mandate have the liberty not to offer medical benefits at all, thus avoiding having to provide contraceptive coverage. Those that drop their plans won’t be alone. Surveys have generally found that between 2 percent and 20 percent of employers plan to drop coverage beginning in 2014.³

The adverse consequences of dropping a group medical plan would be huge. The 2011 Kaiser Family Foundation (KFF) Employer Health Benefits Survey reported that the value of this benefit to employees is substantial: $10,944 for those with family coverage and $4,508 for those with single coverage.⁴  The government makes this benefit even more valuable because employees receive the employer-paid portion of the group plan premiums tax free. Further, the portion of the premiums that faculty and staff pay can reduce, dollar for dollar, their taxable compensation.

So, out of concerns for fairness combined with the need to be able to attract and retain valuable employees, Catholic colleges and universities that proceed with dropping their plans may want to make faculty and staff “whole.” Making employees whole entails adjusting total compensation so that other benefits and cash compensation are increased enough to offset the loss of the value of the group medical plan. However, executives who are considering dropping these benefits should face one uncomfortable truth from the onset: It won’t be possible to make all employees whole because any attempt to do so would be extremely expensive with inequitable and possibly discriminatory results. Further, an employer that drops its group health plan before 2014 would impose substantial non-monetary costs on certain employees.

The Cost of Making Employees Whole

Truven Health Analytics analyzed the cost-effect of dropping medical coverage for 33 large employers with a total of 933,000 employees.⁵ Truven found that the average cost to these employers to make their employees whole—after factoring in the savings from no longer subsidizing premiums in the group plans—would be an additional $8,786 per employee per year.  What constitutes this cost?

First, there is the cost of the insurance itself. Ideally, the cost of providing faculty and staff additional pay to help with exchange-purchased medical insurance would be essentially the same as the cost of the premium subsidies provided in the group plan; however, the Truven study found that the exchange-purchased insurance would actually cost more than the group insurance.

Beyond the cost of the exchange insurance itself, the Truven study discovered additional expenses. First, faculty and staff would need additional cash compensation to offset the extra taxes associated with their increased pay. Using the KFF healthcare reform calculator to estimate the cost of insurance purchased through the exchange for a 45-year-old single employee in the 25 percent tax bracket, the additional compensation to cover these taxes would need to be roughly $4,000. This figure would rise for employees purchasing family coverage, for employees in higher tax brackets, and for older people because the exchanges will be allowed to vary premiums with age.

Also, beginning in 2014, the PPACA imposes a penalty of $2,000 per full-time employee (not counting the first 30) on any employer that does not offer medical coverage and has 50 or more full-time equivalent employees. The penalty will be assessed only if at least one employee purchases insurance on an exchange and receives a government premium subsidy, which is entirely likely.

For employees whose earnings are under the Social Security wage cap, the employer would also have to pay additional payroll taxes of 7.65 percent on the make-whole cash payments to their employees. Further, employer benefit and insurance costs could increase for benefits that are salary-based, such as defined contribution retirement plans, group life insurance premiums, workers compensation, and disability insurance. The Truven analysis also factored in other costs, making it easy to see how an employer’s expenses related to dropping a group health plan and making employees whole could add up to $8,000 or more.

Additional Considerations

The high price of dropping coverage and making employees whole by increasing their cash compensation may be cost-prohibitive for many colleges and universities. But even if a college or university could afford this additional expense, it would likely not be possible to make employees whole without discriminatory results. Title VII of the Civil Rights Act and the Equal Pay Act both require equal pay for the same work. To make employees whole, different amounts of increased compensation would be necessary for different employees. For instance, higher-paid employees with family coverage would have to receive more make-whole compensation than lower-paid employees with individual coverage. Family coverage is more expensive than single coverage and lower-paid employees would be more likely to be eligible for exchange-purchased medical insurance government subsidies. The end result would potentially be having individuals in the same job with similar performance and seniority levels being paid at significantly different rates. These disparities could expose the employer to the possibility of unacceptable discriminatory gender or racial pay differences.

Therefore, faith-based employers that drop their medical plans are not likely to be able to make their employees whole, given both the expense and the legal restrictions prohibiting discriminatory pay. The best that a college or university could do may be to take the value of the employer premium subsidy formerly provided to employees and distribute that amount equally to all employees as a percentage of pay. Faculty and staff could then use this additional pay to help them purchase exchange-based insurance. Some employees would come out ahead (such as those who obtain coverage through a spouse’s plan and those who receive a government subsidy for exchange-purchased insurance) and some would be worse off. But this would be the most fair, affordable, and legal approach for a college or university that opts to discontinue its group medical plan.

End Note: What Happens in 2014?

The importance of access to affordable comprehensive medical insurance for employees cannot be overstated. Given the ability of individual market insurers to deny coverage or charge higher premiums to people with pre-existing conditions, employer-based healthcare provides a lifeline for many. As of 2014, however, the value of a group medical plan as a key component of total compensation dramatically decreases for one primary reason: Employer group coverage will no longer be the only way for employees to secure access to high-quality, affordable healthcare. The PPACA requires the establishment of state-based insurance exchanges through which people can purchase individual policies. As of January 1, 2014, all medical plans—including those on the state exchanges—will not be able to impose pre-existing condition restrictions or vary premiums on the basis of the purchasers’ health conditions. Additionally, exchanges will offer a wide array of quality choices to healthcare consumers, with clear descriptions of benefits. For those who cannot afford coverage, their exchange-purchased plans will be subsidized by the government.

While the healthcare law may be weak in provisions that control costs and improve quality, it does an outstanding job in guaranteeing access to high-quality affordable coverage (except for Medicaid-eligible individuals). Thus, beginning in 2014, an employer that chooses to drop its group medical benefits will not greatly diminish the value of its total compensation because of insurance access issues.

The opinions expressed in this column are the author’s alone and do not represent those of DePaul University or the Association of Catholic Colleges and Universities. This article does not provide legal or tax advice on the matters discussed above. Any issues involving employment, group benefit plans, or taxation should be discussed with appropriately qualified counsel.

References

1        United States Conference of Catholic Bishops Ad Hoc Committee for Religious Liberty. (May 17, 2012). Our First, Most Cherished Liberty, A Statement on Religious Liberty.

2        Salganicoff, A. & Ranji, U. (February 21, 2012). Insurance Coverage of Contraceptives. The Henry J. Kaiser Family Foundation Health Reform Source. Retrieved on August 25, 2012.

3        U.S. Government Accountability Office. (July 13, 2012). Patient Protection and Affordable Care Act: Estimates of the Effect on the Prevalence of Employer-Sponsored Health Coverage. Retrieved on August 27, 2012.

4        All plan contribution and premium information was taken from the Kaiser Family Foundation and the Health Research & Educational Trust. (2011). Employer Health Benefits 2011 Annual Survey.

5        Justice, C. (July 2012). Modeling the Impact of “Pay or Play” Strategies on Employer Health Costs. Truven Health Analytics.