The Warshawsky Law Firm Blog

Saturday, December 4, 2010

Ten Common Employment Law Mistakes Made By Businesses.

The contemporary American workplace is subject to numerous federal, state, and local laws that impose strict obligations on businesses (e.g., wage and hour laws, nondiscrimination laws, etc.).  Many companies, especially smaller companies, do not fully understand the scope of these obligations and, as a result, frequently (albeit inadvertently) violate the law.  These violations can lead to costly lawsuits, as well as civil and criminal penalties.  In my experience as a defense attorney and as a plaintiff's lawyer, the most common employment law mistakes made by businesses are the following (in no particular order):     

1.  Misclassifying employees as independent contractors.  In general, only workers who operate their own separate businesses are "independent contractors."  Few workers meet this test; in fact, most workers are considered "employees" under the law, which means they are entitled to the full range of workplace protections.

2.  Misclassifying non-exempt employees as exempt.  In general, all employees are entitled to minimum wage and overtime pay, unless they are "exempt" under federal and state law.  The exemption rules (e.g., for executive, administrative, and professional employees) only apply in limited circumstances, however; as a result, many employees who are claimed by businesses to be "exempt" in fact are entitled to minimum wage and/or overtime pay.

3.  Not complying with state wage payment laws.  New York imposes several specific rules regarding how businesses must pay their employees.  These rules include providing new employees with written notice of their rate of pay and regular pay date; prohibiting deductions from wages unless for the employee's benefit and authorized in writing; requiring written contracts for commissioned salespersons; and providing terminated employees with written notice of their last day of work, their last day of benefits, and their right to apply for unemployment benefits.

4.  Not having an employee handbook.  An employee handbook is an important tool for effective employer-employee relations.  It notifies employees of the company's values, policies, and procedures; promotes compliance with labor and employment laws; and helps create an orderly, efficient, and transparent workplace.

5.  Not documenting employee job performance.  A well-managed company clearly communicates its employees' duties and responsibilities (e.g., through written position descriptions), trains and supervises employees to ensure they are meeting these requirements, and provides regular, objective, consistent feedback (e.g., through written evaluations and, where necessary, disciplinary actions).  A lack of accurate, complete, contemporaneous documentation can lead to liability in the event of a lawsuit by an employee.

6.  Not training supervisors regarding EEO laws.  Federal, state, and local equal employment opportunity (EEO) laws prohibit businesses from taking adverse actions against employees (e.g., demotion, termination) for reasons not related to an employee's job performance, including based on an employee's race, color, sex, age, disability, religion, national origin, sexual orientation, and marital status (to name the most common "protected characteristics"), as well as in retaliation for an employee's good faith complaints of discrimination.  It is imperative that supervisors be trained on how to manage employees without violating (or appearing to violate) these laws.

7.  Not providing reasonable accommodations for disabled employees.  Most EEO laws prohibit businesses from taking adverse actions against employees based on certain protected characteristics, but disability discrimination laws also impose an affirmative obligation on businesses to "reasonably accommodate" disabled employees so as to enable them to perform the essential functions of their jobs.  Such accommodations may include restructuring job duties, modifying work schedules, or providing assistive devices.  Businesses are required to provide a disabled employee with needed accommodations unless doing so would cause an "undue hardship" to the company (e.g., too expensive, too disruptive). 

8.  Not obtaining releases from terminated employees.  When terminating an employee, businesses should try to obtain a release that waives the employee's potential legal claims against the company.  The best way to obtain a release is in exchange for an offer of severance (where appropriate).  In general, businesses are not required to pay severance to employees (unless required by an employment contract or a collective bargaining agreement).  If they decide to do so (e.g., in connection with layoffs), they should require employees to sign a release in exchange for the payment.

9.  Not protecting confidential business information.  Every company depends on certain vital, often confidential, information about its business operations, including trade secrets, sales and marketing practices, and customer and client lists.  Access to this information should be limited to employees with a "need to know" and should be protected by appropriate nondisclosure, noncompete, and/or nonsolicitation agreements (depending on the nature of the information and the employee's position).

10.  Not consulting a qualified employment law attorney.  Perhaps the single most important point to take away from this discussion is that businesses need to consult a qualified employment lawyer to ensure they are in compliance with the increasingly numerous and complex laws that carpet the workplace like a minefield.  Large companies usually have attorneys and human resources professionals on staff to assist them in this area.  Small- and medium-size companies often do not.  Their biggest mistake is trying to navigate this minefield on their own.   

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