April 30th, 2010
The Intersection of Company Ethics and Employee Choice
Best Buy Ethics, by Kathleen Edmond.One of our employees recently asked Best Buy to decrease his hourly rate of pay from $10 to $9. When asked why, the employee explained that he had previously qualified for government assistance in securing health insurance. However, at a pay rate of $10 per hour, he now makes too much money to qualify for government assistance and has been dropped from the program.
On the surface, it appears to be a win/win situation; Best Buy can reduce the employee’s pay by 10% and the employee enjoys an improved standard of living. However, what are the ethical implications of this situation?
1) Is it ethical for Best Buy to alter its pay standards upon request to enable individual employees to qualify for outside assistance? Are the employees’ motives any of our concern? If so, how?
2) Does it matter that the employee asked Best Buy to decrease his pay? How is this different from an employee asking for a pay raise in recognition of their on-the-job performance?
3) Does Best Buy have an obligation to help employees achieve financial independence? If so, where does that obligation begin and end?
4) Consider an alternate scenario: What if the employee’s primary objective was to decrease the amount of money paid out in spousal or child support? Would your point of view change on any of the above? If so, why?
The outcome
After careful consideration, we declined to decrease the employee’s pay for a number of reasons:
· Best Buy pays employees for the job they perform and the value they add to our shareholders. We do not increase or decrease pay for any reason unless it is clearly and directly related to the market value of the work performed by the individual.
· Though we seek to act in the best interests of our employees at all times, Best Buy will not participate in any scheme that is intended to assist an employee in obtaining goods or services under less-than-truthful circumstances. Far more appropriate options may exist. For example, employees who are eligible for Best Buy’s company-sponsored health plans but unable to afford the premiums may qualify for premium assistance through Medicaid or Children’s Health Insurance Program (CHIP). Best Buy regularly offers “special enrollment opportunities” under Medicaid/CHIP for employees who fit this criteria.
· As a company, Best Buy is committed to helping employees make wise decisions regarding their overall financial well-being. Our shift toward automatic enrollment in the 401(k) plan for all employees hired after January 1, 2010, is one example of this commitment. However, intentionally enabling an individual employee to remain on a form of outside financial assistance actually contradicts this goal. Though we understand there are “break points” at which an employee may lose some form of government assistance as their pay (and standard of living) increases, we want to help employees accept these challenges, continue grow both personally and professionally, and celebrate their ability to live independently.
http://www.kathleenedmond.com/2010/04/30/the-intersection-of-company-ethics-and-employee-choice/
The Intersection of Company Ethics and Employee Choice
My take on this issue is quite different.
An employee’s worth is frequently subjective. Some employees are worth more and paid less; others are worth less and paid more.
Every individual has a right to reduce the amount of tax that is payable by means that are within the law. The United States Supreme Court has stated that “The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted.” Please see Tax avoidance at http://en.wikipedia.org/wiki/Tax_avoidance_and_tax_evasion or Gregory v. Helvering at http://en.wikipedia.org/wiki/Gregory_v._Helvering .
Negotiating a salary adjustment is not the same as constructive receipt of earnings. For example, if Jane was scheduled to receive a bonus on Dec 31, 2010, it’s not appropriate for her to request that the bonus payment to be transacted one day later, on Jan 1, 2011, on which date she might believe she would be in a lower tax bracket. She had constructive receipt in Dec 2010. Taxes must be paid in 2010. But negotiating a salary change (reduction) for future employment is not constructive receipt.
Your response attempts to impute meaning into administrative regulations that is different than the explicit, stated law. For example, the Social Security Disability Insurance (SSDI) regulations allow the earning of up to $725 per month without impacting an individual’s SSDI payment. Suppose Jane (who receives SSDI) is hired in a part-time (twenty hours per week) position for $10/hour. Her monthly earnings would total about $800, which may cause her disability to be terminated. However, a wage of $9/hour for twenty hours per week would total about $720, which is below that threshold.
Jane has the right (as does every American) to use best efforts, within the law, to avoid taxes or to optimize benefits. Intervening into an employee’s personal financial management is out-of-scope for Best Buy. Best Buy’s primary responsibility is to increase earnings per share for its shareholders.
Hopefully, Best Buy isn’t seeking to eviscerate an employee’s external support system so that the employee would have more undue dependence on the company.
It’s understandable that Best Buy might want to stay away from the slippery slope of an ethical gray area. However, this issue is black-and-white.