Reference no: EM13806812

Peter had been a human resource (HR) manager for 18 years and vice president for two more years at Zyedego Corporation, a small company in New Orleans. In the last decade, there have been many changes to what potential/actual employees can be asked and what constitutes fair and equitable treatment. As a result, Peter was having trouble reconciling his individual values with what could be best for the company. Some of the human resource problems that Peter was facing also had legal implications that he would have to consider.

The first issue began with Hurricane Katrina. In its wake, Zyedego employees worked around the clock to get the company up and running again. The company called all employees (if they could locate them) to get them to return to work. Gwyn, one of Peter's HR managers, was planning on asking Dana Gonzales to return to work but found out that Dana was pregnant. Because of the rough condition of the workplace, Gwyn was concerned for Dana's safety. Due to the extreme cutbacks the company was facing after the hurricane, Gwyn felt that the company could not afford to pay Dana for maternity leave or handle any interruptions in productivity that Dana's pregnancy could impose. In addition, Gwyn had some concerns over Dana's citizenship because her passport appeared to be questionable. The flooding had destroyed the original documents, and although Gwyn requested new documents, Dana was slow in providing them. Gwyn asked some difficult questions about Dana's citizenship, and Dana stated that if she did not return to work soon, she would go to a competitor and expected the company to pay severance of two weeks' wages for the time she was out of work during the hurricane.

Another human resource issue involved the hiring of truck drivers. Zyedego hired many truck drivers and routinely requested driving records as part of the preemployment process. Several of the potential new hires had past DWI records. All stated that they would never do it again, had maintained a clean record for at least five years, and understood the consequences of another infraction. Gwyn hired some drivers with infractions to secure the necessary number of drivers needed for the company. However, Gwyn had some concerns over whether she was exposing the company to unnecessary risk because of the increased potential for accidents or repeat DWI violations. Gwyn needed guidance from Peter on the wisdom of continuing these hiring practices.

However, Zyedego had even deeper problems, which was what primarily concerned Peter. The problem really started when Peter was still an HR manager, and involves one family. Guy Martin started working for Zyedego 20 years ago. At the time he was married with two children and had a mortgage. A little over a year ago, Guy separated from his wife, and they eventually divorced, only to remarry six months later. When Guy was hired, Peter had made sure that Guy's son, who has asthma, would be covered by health insurance. Peter also helped out the family several times when money was tight, and provided Guy with overtime work. But tragedy struck the Martins when Guy was killed in the hurricane. Police and rescue workers hunted for his body, but it was never found. Because Martha, Guy's wife, was a stay-at-home mother, their only income had been from Zyedego. The company's death benefits would provide only 50 percent of the deceased's pension for a surviving spouse. Also, because the body had not been found, there was the legal question of death. Usually it takes seven years before one can claim any type of insurance or death-benefit payments, as well as medical insurance, for the family. Even with Social Security benefits, Martha would probably lose the house and could be forced to seek employment.

Zyedego had sustained substantial losses since the hurricane. Insurance companies were extremely slow concerning payments to all the small businesses, arguing about wind versus water damage. Impeding the process of obtaining benefits was the lack of many documents that had been destroyed in the storm.

The trouble really began for Peter when he met with the insurance company about medical reimbursements, death benefits, and pension plans. Darrell Lambert was the chief adjuster for Zyedego's insurance and pension provider.

"Here's another case that we will not cover," said Darrell as he flipped the file to Peter. "We can't help the Martins for a variety of reasons. There is no body, which means no payment until after a judge declares him legally dead. That will take at least a year. While that is being settled, Mrs. Martin and her family will not be eligible for medical coverage unless Zyedego is going to pay their full amount. Finally, and I know this may sound heartless, but Mrs. Martin will only get a maximum of half of Mr. Martin's pension."

"But he was killed on the job!" exclaimed Peter.

"Did you require him to work that day? Did he punch in or out? Is there any record that he was called in from Zyedego to help? The answer is no to all of the above. He helped because he felt obligated to Zyedego. But I am not Zyedego, and I do not have any obligation to the Martins," Darrell said with a smile.

"Peter," continued Darrell, "I know that Zyedego is under intense financial pressure, but we are too. You have approximately 100 families that we will have to pay something to. You and I can spend the next 12 months going over every case, bit by bit, item by item, but if that's what you want, Zyedego will go into bankruptcy. We don't want that to happen. But we also are not going to pay for everything that you claim you are due. Our lawyers will stall the system until you go broke, and your 100 families will get nothing. Well, maybe something in five to seven years. What I am proposing is a way for you to stay in business and for my company to reduce its financial payouts. Remember, we have hundreds of small businesses like you to deal with."

Darrell then calmly said, "My proposal is that you look over these files and reduce your total reimbursements to us by 40 percent. To help you out, I'll start with this case [Martin's]. You decide whether we pay out 40 percent or nothing. Tomorrow at 9:00 a.m., I want you to have 25 cases, including this one, pared down by 40 percent. If not, well, I'm sure my superiors have informed your superiors about this arrangement by now. You should be getting a call within the hour. So, I'll see you here at 9:00," and Darrell walked out the door.

Several hours later, Peter received a phone call from upper management about the deal he was to implement to save the company.

QUESTIONS

1. What are the legal and ethical risks associated with the decision about hiring truck drivers at Zyedego?

2. What should Peter recommend to Gwyn about Dana's case?

3. Do you think Peter is too emotionally attached to the Martin case to make an objective decision?