Labor in the News

LABOR IN THE NEWS

Oct. 13, 2004, 8:57PM

AFL-CIO seeks El Paso details

Letter requests added information about finances

By TOM FOWLER

The AFL-CIO is pressuring El Paso Corp. to release more details of its investigation into internal control issues that led to a massive financial restatement.

In a letter issued Wednesday, the collection of labor unions said the company's Sept. 30 release of its long overdue annual report didn't go far enough in assigning blame for the $1.9 billion loss in 2003 or billions of dollars in write-downs.

In the annual report, El Paso said that an internal investigation determined certain employees used "aggressive and, at times, unsupportable methods to book proved reserves," and "provided proved reserve estimates that they knew or should have known were incorrect."

The report also said the company did not properly account for hedges of certain natural gas transactions.

"They have yet to demand accountability from those who allowed the deficiencies to go undetected for so long," said Bill Patterson, president of the AFL-CIO Office of Investment.

The group is asking the company's audit committee to answer a series of questions, such as whether accounting firm PricewaterhouseCoopers reported problems to the committee prior to the reserve and accounting announcements, and whether current or former executives received bonuses based on earnings figures that have since been adjusted down-ward.

The union is asking for a response before the Nov. 18 shareholder meeting, when shareholders are expected to vote on the board of directors.

El Paso officials say they believe the company acted "decisively and in the best interest of shareholders" in dealing with the many issues that were raised in the past year. The internal investigation by outside law firm Haynes & Boone reviewed thousands of documents and conducted more than 200 interviews.

"We regret that the AFL-CIO wishes to look backwards, and we hope that they will focus on the progress that we have made on asset sales, debt reduction and the other goals established in the company's long-range plan," the company said in a prepared statement.

The letter shouldn't come as a surprise given the AFL-CIO's role as an activist investor.

The organization regularly speaks out against corporations where its members' pension plans have investments, particularly when there are accusations of accounting irregularities.

The AFL-CIO backed a group of dissident shareholders who ran a competing slate of directors in last year's meeting.

In February, El Paso announced it reduced its reserve base by 41 percent, saying it would take a pretax charge of about $1 billion against fourth quarter 2003 earnings. It later said it would have to restate its earnings back to 1999 and that it discovered a hedge accounting issue that would lead to a net $1 billion in charges and $1 billion reduction in shareholder equity.

The U.S. Attorney's Office in Houston is investigating the hedge issue, as well as allegations that a number of former natural gas traders reported false data to industry publications in the past. Four former traders indicated in court last week that they would plead guilty in relation to that ongoing investigation.

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Oct. 20, 2004, 9:02PM

WORKING

Rates for workers' comp not only problem in system

By L.M. SIXEL

Rewind to 1989. Houston was recovering from the energy crash. Real estate prices were bouncing back. And workers' compensation insurance rates were skyrocketing.

Business leaders blamed the rates, which were among the nation's highest, for stifling job growth and pushing companies out of Texas.

It was a crisis, and the Legislature ended up passing a massive revision limiting jury awards, adding oversight on medical fees and focusing more on preventing injuries.

Fast-forward to 2005. Workers' compensation is still in trouble in Texas.

Insurance rates are still among the most expensive in the nation (sound familiar?). It's so pricey that nearly 40 percent of Texas employers don't buy workers' compensation coverage.

Companies say it's a drain

Workers' compensation is a financial drain for Hyatt Hotels in Texas, according to J'Don Bollom, the occupational health manager for the chain in Texas. The time lost and the cost of care was higher when she compared the chain's exper-
ience in three states where it has about the same number of employees with similar jobs: Texas, Georgia and Virginia.

When comparing the time lost for similar injuries, Texas employees were out an average of 32 days, compared with 24 days in Virginia and nine days in Georgia, Bollom said.

The cost per claim in Texas is also 58 percent higher than in Georgia. Bollom, who works in Houston, blamed the disparity on the wide range of caregivers Texans can turn to, including osteopaths and chiropractors. In other states, treatment is handled only by physicians who are part of an approved network.

The Texas AFL-CIO isn't happy either and is looking for improvements.

Ed Sills, a spokesman for the group, said many injured workers aren't getting the care they need, especially since the Texas Supreme Court gave employers an "engraved invitation" to let companies opt out of the system.

The Texas Supreme Court ruled in 2001 that companies can ask their employees to sign a liability waiver before they are injured. The Legislature later prohibited those pre-injury waivers because of concern it would encourage an exodus from the workers' compensation system by companies whose workers had waived claims for on-the-job injuries. But some employers now require their employees to sign promises not to sue after they've been injured in exchange for some medical care and wage replacement.

Part of the solution would be to make the system mandatory, Sills said. Texas is the only state that doesn't require companies to carry workers' compensation insurance.

Nor are injured workers getting back to work quickly, he said.

"The theory back in 1989 that lawyers were the problem has clearly been proven wrong — at least the lawyers representing the injured workers," Sills said. "Half of the lawyers are still in the system — those are the lawyers representing the insurance companies."

Available providers an issue

Anne Culver, senior vice president of government relations at the Greater Houston Partnership, hopes the Texas Legislature will create a network of health care providers much like the preferred provider networks in employer-sponsored health insurance plans.

Hammond, too, would like to see an established network. And he'd like to see an end to chiropractors acting as treating doctors. Injured workers can go to chiropractors if they're referred by their treating physicians, he said. But they shouldn't start with chiropractors, who can't write prescriptions or perform surgery.

Chiropractors have been seeing patients as their primary care doctors for decades in Texas, said Franz Klein, president of the Texas Chiropractic Association and a chiropractor in private practice in Texas City.

"We're treating them well and getting them back to work," he said.

Klein suggested that business groups such as the Texas Association of Business should examine the impact of the billions of dollars spent on promotional drug advertising instead of blaming chiropractors.

"I'm at a loss to explain why any group would want to take away a patient's ability to choose a chiropractor," he said.

With so many people who say it's time to change and so little agreement on how to fix it, look for protracted wrangling. Don't say I didn't warn you.

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Nov. 3, 2004, 9:39PM

WORKING

Labor experts see changes during second Bush term

By L.M. SIXEL

It's still too early to sort out the workplace implications of a second Bush term, but it looks as if health care savings accounts and comp time are in.

What's out? Forget a big increase in the minimum wage, and drop any notion of a reversal of the new overtime regulations.

"Those regs are as good as gold," said Ellen Kearns, an employment lawyer who specializes in wage-and-hour issues with Epstein Becker & Green in Boston.

In August, the Labor Department's hotly contested new regulations on overtime pay went into effect, which the AFL-CIO estimated could mean 6 million U.S. workers would no longer be eligible for overtime pay.

Then in the fall, both the Democrats and the Republicans facing tight re-election bids attached amendments to spending bills to prevent anyone from losing overtime eligibility.

But with the election Tuesday, President Bush isn't going to back off and neither will the Republican-controlled Senate and House, said Kearns, the author of a 1,675-page book on the Fair Labor Standards Act.

But that's not the end of the struggle over overtime.

With a new Bush term, look for a renewed congressional push that would allow workers to bank compensatory time.

Now, a worker is supposed to take the comp time in the week it's earned or get overtime pay.

It's been a hot-button issue for Republicans, who contend that many of today's time-starved workers prefer the flexibility.

In the past, Democrats and unions have fought hard against any erosion of overtime pay. Look for another fight, but this time the Republicans may win.

On another front, the minimum wage will probably go up during the second Bush term, Kearns predicted.

But look for something more "moderate" than the $7 an hour the Democrats were proposing, she said. The current minimum wage has been at $5.15 an hour since 1996.

Richard Shaw, secretary-treasurer of the Harris County AFL-CIO, isn't as optimistic.

"Without the president showing leadership on that, it won't come out of Congress," he said.

Employer-friendly

Labor unions will continue to have a rough time up against an employer-friendly National Labor Relations Board.

When the labor board is dominated by Democratic appointees, it's more union-friendly because they tend to be lawyers who come from union backgrounds, said Richard Brann, an employment lawyer with Baker Botts.

When the board is predominantly Republican, it's more employer-friendly because its members come out of management.

Tax-free accounts

With Bush's re-election, health savings accounts are likely to get a boost, according to Frank McArdle, who heads Hewitt Associates' Washington office.

The Bush administration and Republicans support the consumer-driven health care plans, McArdle said.

He expects them to catch on especially well with smaller employers if attractive tax incentives are added.

The accounts, which started this year, are tied to high-deductible health insurance.

Both companies and individuals can set aside money for health care expenses on a tax-free basis that can be rolled over year to year.

'Whole world is angry'

In the 1990s, the dot-com boom propelled much of the job growth.

But in this decade, John Challenger expects the growing global economy will end up being the main driver.

That growth internationally is crucial to the United States, but it's contingent on good relations with other nations, said Challenger, CEO of the outplacement firm Challenger Gray & Christmas in Chicago.

The big question is whether the United States can improve its relationships around the world to create more alliances and sell more of its products, from oil to toothbrushes, he said.

"But we can't do that when the whole world is angry with us," he said, ticking off the war with Iraq, the U.S. withdrawal from environmental accords and perceived unilateralism. "And that's what it is right now."

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