12 Employment Practice Tips For Employers

Key Point: As an employer, you will be faced at one point or another with difficult questions and decisions about an employee. Because of this eventuality, you should make it a priority to be aware of the (in many cases, easily avoided) most common employment practices mistakes. To avoid most mistakes, your employment practices goal must be to assess your business’ legal and economic circumstances and boost your own experience in these matters through information and training. While funding and empowering your HR function is key, the simple fact is that you best manage risk by proactively instituting the right policies and procedures that you consistently, objectively and fairly apply (and all of which you rigorously document).

Note: This Top 12 Primer is designed as a general overview; it does not entertain all federal laws or any specific state’s labor laws (which can vary dramatically). Moreover, it does not address specific industry compliance matters and regulations nor special circumstances; e.g., among many, business affiliate matters or inter-state employees. Because specifics matter, we recommend that you consult with your attorney for best employment practices advice and for documentation that is narrowly tailored for your business and its circumstances.

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Dr. Nick Oberheiden

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Lynette S. Byrd

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Roger Bach

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Chris Quick

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Ray Yuen

Former Supervisory Special Agent (FBI)

Hire The Best Candidate For the Job – Don’t Hesitate to “Hire for Fit, Train For Skills”

While some employers still tend to conflate “best-qualified” with “on-paper” when choosing the candidate for a job, the modern trend places the focus on “cultural fit.” Most employers now understand that a “poor fit” presents with problems including personnel conflicts and high turnover rates which result in lost time, effort and money. For these reasons — and with some caveats — employers should not hesitate to focus on the candidate’s cultural fit and their potential and not necessarily on their education or on what they have done in the past. Embrace the mantra “hire for fit, train for skills.” By focusing on fit and potential, employers fill positions with better-adjusted candidates that they can reasonably foresee will thrive in their culture. Of course, where this employment practice trend may be of concern for employers is where a rejected candidate concludes (after-the-fact) that their rejection was coupled with an illegal intent on the part of the employer.

Consider that employers are not generally required to explain to a potential employee why they were rejected (note: this may differ depending on whether the rejection is due to an adverse background check covered by the “Fair Credit Reporting Act” and/or pursuant to various states statutes). Nonetheless, what employers should do is to proactively document a hiring decision with a specific goal in mind — that is, to demonstrate how it is that the successful candidate was (in the employer’s estimation) the best fit for the position. While many times this will be that the successful candidate had the best qualifications based on legitimate job-related factors, employers should not fear that hiring for “culture fit” is illegal, even if it was the primary reason for the hire. The reason this matters, and why employers should be versed in these concepts, is because any hiring standard that results in the exclusion of an applicant, for example, on the basis of age, race, color, religion, age, gender, national origin, disability, or genetic information will be suspect and present with risk of a lawsuit by a rejected candidate (unless, in the rare case there is a “bona fide occupational qualification” — noting that the burden of proof regarding any BFOQ rests with the employer to establish why one individual was favored over others for a position).

In short, to effectively counter allegations of wrongdoing in after-the-fact government interventions or lawsuits, the best employment practice is to carefully assess all information you have about your applicants coupled with a diligent consideration of all factors that your conclude are relevant to the job — minimum qualifications, prior experience, availability, work ethic and, of course, culture fit. When you make your decision, document the reasons for choosing the candidate but minimize any memorialization of why others are rejected. Indeed, before you communicate any rejections, document the totality of your decision-making process regarding the successful candidate. Think proactively to avert an after-the-fact assertion by a plaintiff’s lawyer that your decision violated the law. As long as you plainly document the actual (and non-discriminatory) basis for your decision, most EEOC complaints and potential lawsuits will wither on the vine.

Promote, Transfer, Discipline, Or Fire For Documented Cause

The best practice of “documentation for cause” can make or break your ability to defend your promotion, transfer, discipline or termination decisions. In short, you must make a concerted effort to record all events in the employee’s work history — whether neutral, positive or negative. Everything you document will be evidence (in the legal sense) that will serve to stave off the EEOC proceeding or plaintiff’s lawsuit that virtually every employer will have to eventually defend. Understand that copious and contemporaneous documentation is key. For example, documentation is evidence that you discussed performance failings with your employee in a timely fashion and consistent with your policies. Documentation is evidence that the employee failed to improve their performance pursuant to a reasonable corrective action plan — precisely showing a timeline of the employer’s and employee’s actions or inactions as they occurred. Documentation is evidence that supports your decisions to discipline or terminate. Documentation is evidence that supports your decision to promote or reward one employee over similarly-situated employees — e.g., salary freeze, increase or decrease. Complete and contemporaneous documentation protects your overall interests in difficult matters, for example, against allegations of termination for legal vs. illegal reasons.

Know The Difference Between A “W-2” And A “1099” — Never Classify A Temporary Worker As “Contract Labor”

A business may engage and pay an “independent contractor” or an “employee” for the same or similar work, but from a legal and tax perspective, the distinction between the two types of relationships is crucial. Most employers realize that “hiring” a worker as a 1099 comes with a steep reduction on the cost of employing the individual; however, do not rely on your “working knowledge” of the distinction. Refuse the temptation to save money by circumventing the strictures of payroll taxes, not securing and maintaining employment files, or dealing with potential unemployment claims. If the services provided by the individual are those provided by an “employee,” the tax audit in waiting will not go in your favor. Unfortunately, there is no simple test or answer to establish a worker as an employee or independent contractor (all of which is further complicated because there are two other types of employment relationships to consider: the statutory employee and non-employee).

To sort out the W-2/1099 classification puzzle, begin by understanding that there are various applicable tests and lists of criteria developed under the Internal Revenue Code (for revenue purposes), under other federal laws (for other regulatory purposes) and under state laws (for even other purposes). For its part, the IRS generally looks at the “level of authority” the employer retains to “direct and control” the worker’s activities (for more information, see IRS Pub. 15-A (2020)). Separately, the IRS has historically applied the “20 Factor” test to determine whether an individual is an “employee” for tax and other legal purposes. Additionally, effective January 1, 2020, the IRS will “group” factors and focus on three areas. These three areas are: “Behavior Control,” “Financial Control,” and the type of relationship between the parties. As an example of how these standards are after-the-fact applied by the IRS, if you provide instructions to a worker about when and how to provide services, and such worker provides the services at your business, during business hours only, for 40 hours per week, under your supervision, this worker is likely to be (but not invariably) deemed to be an “employee.” The takeaway is that each W-2 or 1099 relationship is analyzed by the government on a case-by-case basis. As such, these tests and factors serve only as guidelines. Moreover, each factor’s degree of importance varies depending on the worker’s occupation and the factual context in which the services are performed.

HR Documents – Don’t Rely on the Internet; Secure Professionally Drafted and Narrowly Tailored HR Documents and Get Your Employee’s Signature on them the First Day of Work

Federal and State laws and regulations may vary, but before you enter into an employer-employee relationship, understand which documents you are required to secure and which ones are really important that you secure. First, and while obvious, you need to get your employee to fill out the I-9 and W-4 forms and give the employee required federal notices, including regarding workers compensation. Second, other documents to get signed may include, a consent for drug testing, consent to search, consent for video surveillance; agreements regarding pay, wage deductions, benefits, schedule, and work locations among many others. Finally (and advisedly) you should secure your employee’s signature to your tailored Code of Business Conduct, Employee Manual and all stand-alone policies and procedures. Of course, these documents should provide for crucial instruction to you and your employee in matters regarding discipline and harassment, complaint procedures, safety, confidentiality and compensation standards. Nonetheless, the best time to get the employee to fill out, acknowledge and agree to all of the preceding is at the very start of employment, at onboarding (noting that some matters, like consent for background check should be done before making a hiring decision; e.g., as required under the Fair Credit Reporting Act).

Maintain a Safe and Healthy Workplace in Compliance with OSHA Rules

Safety in the workplace means keeping your employees from harm. It includes much more than employee injury or illness. It also includes protecting your employees from, among many others, sexual or verbal abuse or intimidation/harassment from other employees. You should consistently enforce your safety policies, investigate and remediate deviations from them, and regularly train your employees (including procedures for reporting any safety concern). By doing this, you go a long way to protect your business from lawsuits and government interventions. Importantly, you also protect against accidents and actual damage to your employees, which independently impacts your bottom line. Regarding the OHSA (Occupational Safety and Health Act), all employers are required to continually display a poster prepared by the Department of Labor that informs employees of its protections. The poster must be displayed in a conspicuous place where employees can view it.

Have Specific, Written Wage Agreements With Each Employee

Under federal and state law employers and employees are generally free to formulate the specifics of their compensation relationship. Nonetheless, employers should not deviate from what they promise the employee; specifically, the pay rate and method of pay. Generally, it is the employer who is liable for the wage agreement in effect when the work was performed. This concept is mirrored in the Fair Labor Standards Act and almost every state wage payment statute. If you do not have a wage agreement and a dispute arises after you terminate, government agencies and courts will determine what you and your employee agreed to (by using extraneous evidence) when the employment relationship was formed. As an example of what can result in the absence of a wage agreement, the employer may be presumed to have agreed to pay a “reasonable rate of pay for the type of work performed” with what “reasonable” means being up to the court to decide.

Note that a wage agreement can be after-the-fact established by verbal or written evidence. For this reason, any employer’s verbal or written pay communication to their employee should be carefully memorialized — noting that state payday law enforcement against employers looks to the terms of the wage agreement. Accordingly, memorialize what you mean carefully because ambiguous wage agreements may be construed against the employer. That is, enforcement agencies may place the burden on employers for properly expressing the intent of any wage agreement. As a side note, do not be concerned that a wage agreement modifies the “At-Will” relationship with your employee because — unless the wage agreement shows clear intent to create a definite term of employment — the presumption will be that the employment is terminable at the will of either party. If you are concerned about modifying the at-will presumption, consult with your attorney for enforceable disclaimers that you can include in your wage agreements.

Unless an Employee is Without Question in an Overtime Exemption Category, Do Not Pay on a Salary Basis; Pay an Hourly or Performance-Based Rate

Employers understand that most employee compensation matters are governed by the Fair Labor Standards Act which categorizes the employee as “exempt” or “nonexempt.” The distinction being generally that nonexempt workers are owed overtime wages for any hours worked beyond 40 hours during a single week; exempt workers are not granted this right. Understanding whether an employee is exempt or non-exempt requires much more than just looking at a title and a salary. Various specific legal tests are involved. Generally, an employee has to make at least $455 per week, be paid on a salary basis and perform “exempt duties” that require discretion and independent judgment at least 50% of the time (for example, managerial duties).

Nonetheless, the Department of Labor is clear that employers should not assume that any particular job title or position will automatically be exempt. Also, employers can’t negotiate whether a job is exempt or non-exempt. As such, the answer depends upon the facts behind the work relationship, not on what the employer and the employee may choose to call it. Regardless of the job title, it is duties performed that generally determines “exemption.” While the regulations indicate that that certain employees are generally considered exempt (e.g., executive, company or department heads, personnel directors, physicians, and company attorneys) and others are non-exempt (e.g., secretaries, bookkeepers, inspectors, and on-the-job trainees), err on the side of non-exempt unless your attorney advises otherwise.

Never Loan or Advance Money to an Employee Without Getting a Signed, Written Receipt and Repayment Agreement From the Employee

There are many real-world reasons why loaning or advancing money to an employee is a bad idea; like subsequent loan requests from other employees, making you say yes to some and no others. In any case, ask yourself, what if the employee quits, fails to pay on time, needs more money or asks for different terms? These are all demonstrations of why you should stay away from the business of doing favors. If you must however be the “good boss,” obviously avoid off the book loans, do it pursuant to a written agreement, pursuant to a business policy, and charge market rates for the interest. Salary advances also come with pitfalls. If the employee is hourly, account for the potential that they may have worked overtime hours that they didn’t work during the following pay period — in all cases, you must remember that an employee’s pay cannot dip below minimum wage. Also, if you charge interest on a payroll advance, you may come across a state law violation. Loans and Payroll advances can cost employers plenty if not done appropriately. The best advice is to avoid becoming a creditor. If you absolutely want to afford this benefit to your employees, secure solid policies, agreements, documentation and legal and tax advice before proceeding.

Give as Much Advance Written Notice as Possible of Pay and Benefit Changes

There are many legitimate business reasons why you may need to change your employees’ pay or benefits. Common reasons include a change in your company’s financial circumstances or changing the employee’s duties/hours to meet the needs of the business. While most of the time it is legal to reduce an employee’s pay, there are several general circumstances where it is not. First, steer clear of surprise pay cuts and note that state statutes may require your adherence to before-the-fact notice periods and require that the notice be given in the employee’s primary language (among other requirements). If you have followed the relevant laws and notice periods, you can then ask the employee if they want to agree to the change. If they do not agree, the employee is free to separate from their employment. Of course, you cannot retroactively apply a change. Any change will be subject to the employee’s agreement and be applicable only to the work performed subsequent to the notice and agreement. Second, never change pay or benefits in retaliation for any reason — retaliation in any form will run afoul of numerous federal and state laws. Third, never change pay or benefits, among others, based on gender.

Whether Hiring, Evaluating, Promoting, Transferring, Disciplining, or Discharging an Employee, Keep Everything as Fair, Job-Related, and Consistent as Possible, and Never Retaliate Against an Employee for Reporting Safety Hazards or Other Potential Employment Law Compliance Issue

Promote your company’s success by engaging, training, mentoring, and inspiring your employees to feel safe, appreciated, and supported. To do this, communicate with your employees and document everything as you objectively, transparently, and consistently apply your written policies and procedures. Doing this brings about two results. First, your reputation for fairness reinforces your employee’s belief and trust in you. Second, your employees will respond in kind. Most people want to be a part of something bigger than themselves. It is you who must lead by example and this is automatic when you simply reinforce and apply your company’s values, policies and procedures in a fair, consistent and objective way.

In Order to Mitigate Employee Knee-Jerk Reactions that Often Lead to Unfounded Claims and Lawsuits, Treat Your Employees Fairly, Follow Your Policies as Closely as Possible and Avoid Deviations From and Exceptions to Policies Whenever Possible

To win (or at worse mitigate the effect of) most types of employment claims or lawsuits, you must be able to point to clear written policies and to establish that your employee was notified of the standards to which he or she was held. Policies that are unknown to the employee are useless. The same goes for policies that the employee has not acknowledged in writing (with their signature). In either case, you miss the opportunity to rely on your policies as the bedrock of your defense. Similarly, having policies that are not consistently followed also enfeebles what can otherwise also be a pillar of a robust defense. Make no mistake, judiciously investing the time and resources to publish your policies, and consistently, fairly and transparently applying them, and having your employees acknowledge them, all will pay hefty dividends when you are faced with a weakly-evidenced accusation.

For the best chance to stave off claims and lawsuits, avoid a history of exceptions to your policies and do not deviate from your procedures — that is, respond and resolve similar issues similarly. If you do otherwise, you will become a target for favoritism allegations. For example, if you do favors for employees by loaning money to some but not to others all contrary to a no-advance of salary policy. Or, if you deviate from a disciplinary procedure, for example, you punish one employee more than another in an arguably similar situation.

When Faced With an Unemployment Claim, Carefully Collect Your Evidence, Including First-Hand Witnesses and Documentation, and Timely File Your Responses And Appeals

Responding to unemployment claims when you have terminated an employee for misconduct can be overwhelming and complex. Moreover, depending on the relevant state jurisdiction — and even whether there is a pandemic going on, among other circumstances — you can count on the fact that rules and regulations change. Nonetheless, in all cases and all states, the key to successfully defending a claim for unemployment benefits following a misconduct termination is that you proactively adhered to your policies, advised your employee of the infractions, took appropriate corrective steps, kept rigorous documentation and present the evidence to the government in a timely and well-ordered fashion.

Generally, the unemployment compensation system is claim-driven. Nothing will happen until the ex-employee files an initial claim for unemployment benefits. Also, each claim can involve various types of claim notices, rulings, and appeals. Although the different types of notices, rulings, and appeals are governed by various rules that you have to keep in mind, you must remember that the deadlines for responding and appealing are very short. Failing to respond or appeal on time can lead to loss of the right to appeal further. Figure out and calendar all deadlines the moment you receive any relevant notice.

In any case, understand that an employee’s mere “inability” to satisfy expected performance standards does not generally equal “misconduct” connected with the work. A claimant will invariably argue that he was “doing his best” and his failure to do even better was “beyond his control.” This is where specifics and testimonial and documentary evidence are the keys to your defense. When countering such “doing his best” allegations, you must present evidence that the misconduct was “under the claimant’s control.” Did the employee fail to meet sales quotas because of a failed marketplace or actually because they failed to make a minimum number of sales calls, did not follow established sales procedures, made mistakes in documenting sales contacts, was the subject of customer complaints and so on. It is specific evidence that will make or break your defense of an unemployment benefits claim, but only if you have rigorously collected and documented your evidence before you end the employment relationship.

Oberheiden P.C. — Employment Litigation and HR Compliance Counsel

If you would like more information about our firm’s employment litigation and compliance practice, we encourage you to get in touch. Our lawyers and consultants have significant experience in helping clients develop and implement comprehensive employment policies and procedures and can instruct on best practices to avoid or mitigate employee lawsuits or government scrutiny.

When it comes to avoiding or mitigating your company’s potential exposure as a result of employment practices mistakes, acting quickly can be essential to maintaining a position of strength in the matter at hand. We provide complimentary initial case assessments, and our federal employment defense lawyers can take action immediately as necessary to protect you or your company. Contact us today.

• Drafting, application and interpretation of Employee Handbooks, Codes of Business Conduct and employment and industry-specific compliance policies and procedures
• Harassment, and Retaliation Claims
• Wrongful Termination and Wage and Hour Claims
• Severance Agreements and Post Employment Covenants/Covenants not to Compete
• Breaches of Contract and Fiduciary Duty
• Hiring, Promotion, Termination, Discipline and Reductions in Force
• Compliance and Employee Misconduct Investigations
• Pandemic Employment Issues

Nick Oberheiden

Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.