Termination? Do you have the correct policies?

The most lawsuits occur when employers terminate an employee.  Your termination policy is critical!

Types of Termination:

Voluntary:  written resignations, job abandonment, extended absences without proper notification, retirement, refusal of a transfer after job elimination, failure to report for light duty, failure to report status during a leave of absence, and failure to return after leave of absence.

Involuntary:  Permanent layoffs, discharge for cause, death, disability

Policies:

Severance Pay: What are your guidelines (how many years of service to obtain certain levels of severance)? Are there any situations where severance will not be granted?

Unemployment compensation: Do you have required procedures or paperwork?

Sick Leave/Vacation Pay/PTO: Does a terminating employee receive pay in lieu of unused time?

Health/Life Insurance:  When does insurance terminate? What opportunities exist to continue coverage? How about COBRA coverage?

Compensation: What rules govern final paychecks? What will be the status of bonus payments and commissions? Stock options, etc.?

Repayment of Debt: What provisions will cover repayment of loans or advances or other outstanding debts?

Perqs: What policies govern the return or purchase of company cars? What will happen with club or gym memberships?

Dismissal Procedures and Responsibilities: Who makes the final decisions about terminations? Who must approve? Who must be notified, when and how?

Company Property: Whose responsibility will it be to ensure that the employee returns all company property, drawings, tools, reference data, uniforms, ID cards, credit cards, keys, etc? Computers, BlackBerry, and other electronic equipment?

Reference Letters: What will the policy be with respect to letters of reference?

Exit/Termination Interview: Will you require exit interviews? Who will conduct them? 

MORE REASONS EMPLOYERS GET SUED

In our last blog, we looked at five of the TOP TEN reason employers gets sued.  Here are the next 5:

6.  Uninformed Supervisors. You must train your supervisors and update them on your policies and relevant workplace laws and do that before you distribute new policies to employees.

7.  Uninformed Managers. The same goes for your managers, only more so!  If managers resist HR Training, Janus says a powerful motivator is telling them that, in some cases, a court may find them individually responsible if a lawsuit ensues.  And in every case, causing enormous liability for the company is not usually a good career move.

8. Incorrect Exempt/Non-Exempt Decisions. It is imperative that everyone with compensation responsibilities be trained in the requirements of the FLSA – Fair Labor Standards Act on this issue.  And, warns Janus, “The longer unlawful overtime exemption situations exist, the more expensive they become.”

9. Docking Employees Illegally. Legal ways of reducing employees’ pay for disciplinary reasons are very limited, so managers are advised to consult with HR before taking this step.  Janus notes that “substantial penalties apply” for illegal docking.

10.  Illegal Reduction in Overtime Rate. Some workers “make deals” with their employers to work overtime at less than the required rate.  This is illegal, warns Janus.  “Employees cannot waive their right to overtime.”

 

– HR Daily Advisor

 

 

 

WHY DO SO MANY EMPLOYERS GET SUED?

According to attorney Peter Janus, there is a “TOP TEN” list of why employers get sued.  In this TIP, we’ll deal with 5 of them:

1.       Unlawful Pre-Employment Questions. It is imperative that you only ask questions you are allowed to ask during an interview and that you treat all applicants equally.  Janus suggests: “Standardize the application and interview process, keep questions objective and focused on job requirements and on the skill sets needed to perform those requirements.  Laws such as the federal Americans with Disabilities Act make it imperative that you do just that

2.       Dishonest Evaluations. Sometimes, managers just want to be liked or to be nice and so they “sugarcoat” base performances on reviews.  Then, when the inevitable happens and a termination occurs, the ex-employee uses that paper trail in court to press a wrongful termination suit.  Janus suggests relying on objective criteria, noting plainly when standards are not met, and avoiding personal comments.

3.       Rash Disciplinary Decisions. Employers sometimes react out of emotion in taking disciplinary measures…a recipe for trouble.  Janus says do a thorough investigation. Review employees’ file, gather proof that they received a copy of the policy violated, and provide a chance to tell their side of the story.

4.       Termination Errors. Firing an employee is something most employers just want to get over with, but Janus calls for a careful review process, including making sure there were no written or oral promises of continued employment.  He recommends a structured termination meeting from prepared notes. Clarify the logistics of termination” he says, “and don’t apologize or talk about other people.”

5.       Uninformed Medical Request Decisions. Because medical leave falls into what he calls the “Bermuda Triangle” of FMLA, ADA, and Worker’s Compensation, Janus tells managers to thoroughly consult with HR before replying to leave requests.

 

– HR Daily Advisor

 

 

 

 

 

STRAY REMARKS THAT HURT WORSE THAN DIRECT COMMENTS

Think comments made even indirectly to an employee can’t harm you?  Think again.  And it applies to your employees as well.

A couple of recent court rulings show that comments made about or to an employee under a protected class can be used in discrimination suits even if they weren’t made directly to the employee.

In Reid v Google, Inc. the plaintiff, Reid, age 52 sued for age discrimination based on comments made about him.

His supervisor was overheard referring to him as “fuzzy, obsolete, too old to matter, slow, sluggish and lacked energy”.

His co-workers referred to him as “the old guy, an old fuddy-duddy,” and joked that his name plate, in the shape of a CD should be changed to an LP.

Reid sued.  Google claimed protection under the “stray remarks rule” basically stating the comments were taken out of context and said amongst other employees, not directly to Reid.

The California Supreme Court rejected the defense that would have excluded certain comments under the rule.

This decision now makes it potentially more difficult for cases to be dismissed on summary judgment.

So, seemingly harmless remarks must be taken seriously especially if a potential protected class is involved.  Employees needs to be aware that anything they say about another employee, either directly or indirectly that comments on their age, sex, race, religion, pregnancy, sexual orientation, etc, can be used against the company in discrimination law suits.  No longer is it just what is said by management directly to an employee that could get you in trouble, but anything said about an employee by anyone in the company even in a joking manner.

 

Source:  Employer Resource Institute

 

EMPLOYMENT LAW UPDATES FOR 2011 No More “Catch Me If You Can”

No More “Catch Me If You Can”

The U.S. Department of Labor (“DOL”) recently announced dramatic changes it will implement during 2011 to ensure employers are in compliance with Federal laws covering Wage and Hour, Safety and Anti-Discrimination.

The regulations are in the final stages of being written, but are expected to be implemented Spring 2011

One of the most important areas that these new regulations will affect is Wage and Hour compliance.  In an effort to eliminate what the DOL has termed “The Underground Economy”, new legislation will target employers who misclassify employees as “exempt” when they do not meet the standards set by the DLSE, thereby denying employees overtime  pay and “Independent Contractors” or “1099’s” as a way of avoiding payroll taxes and taxes on wages paid by the “employee”.

“Plan, Prevent, Protect”, or P3, will require all employers to create plans and processes that assess and demonstrate compliance with federal laws.

Plan: The development of the plans will require employers to work with employees in setting up plans and processes to determine proper classification of employees.  Most important in this new legislation is that the employees will monitor the employers’ compliance.

Prevent: This will require employers to implement the plans and demonstrate to the employees that the plans are actually in use.

Protect: Employers will be required to designate certain employees to be in charge of implementing the plans and evaluating their effectiveness.

Exempt employees:  The new regulations require each employee classified as exempt to work with management to analyze their own classification and determine, using the Secretary of the Treasury’s standards, that they in fact meet the exemption status requirements.

Independent Contractors:  The regulations require each worker classified as an Independent Contractor to work with management to analyze their classification and determine, using the Secretary of the Treasury’s standards, that they in fact meet the requirements of an Independent Contractor, (e.g.:  do they hold a business license, do they carry their own Workers’ Comp. insurance?).  The employer will face additional penalties when workers are misclassified as Independent Contractors since not only does this status deny the government revenue from payroll taxes, it denies workers employment law protections to which they are entitled to.

Each analysis must be documented to support or not the classification.  If a worker’s classification is determined to not meet the standards, it is the responsibility of the employer to make the appropriate changes.  The results of each analysis must be compiled as an audit of Employee Classifications and distributed to all employees.  Workers must then advise management if they agree with the classifications.  Each case of disagreement on the classifications must be reviewed and documented again with exact reasoning for the determination.  The results must also be provided to the Wage and Hour enforcement division upon request.

The designated employees will continue to monitor and assess classification practices and must document anytime an employer knowingly misclassifies a worker.

There can be no retaliation to a worker who disputes their classification, the findings of the audits or participates in documentation of violations.

Further, the Secretary of the Treasury will be the only government agency allowed to provide the guidelines of exempt and Independent Contractor.  No longer will information provided by the IRS be allowed as a measure.  It is not known yet how the DOJ’s guidelines will differ from the current IRS standards, but you can still use the IRS standards to take the first step in protecting your company from violations.

The DOL is taking the stand that employers have ignored repeated warnings about worker classification and are now allowing for the employees to determine if they in fact meet the qualifications of their classification.  It further requires that the employees monitor the employer’s practices and document all violations.

Employers should be aware that it’s not a matter of if, but when the Wage and Hour division will request these audits.  Millions of dollars have been earmarked specifically for the enforcement of this new legislation and a large workforce of attorneys has been hired to review each audit.  The amount of revenue they expect to receive in penalties and fines they will be assessing employers far exceeds the cost to implement this program.

 

EEOC – IRS – COURTS TAKE ON OUR MISCLASSIFICATIONS

Misclassification is high on the DOL and IRS agenda!

Attorneys Gray & Joseph warns of the coming crackdown on misclassification of independent contractors. Unfortunately, there is no single test for classification that fits all circumstances.  We need to be aware of TWO tests plus court questions to make a determination.

1. The EEOC’s Nonexhaustive Factors for Title VII and Other Federal Antidiscrimination Laws – 16 Factor Test:  Indicators of an employment relationship:

·         The employer has the right to control when, where, and how the worker performs the job

·         The work does not require a high level of skill or expertise

·         The employer furnishes the tools, materials, and equipment

·         The work is performed on the employer’s premises

·         There is a continuing relationship between the worker and the employer

·         The employer has the right to assign additional projects to the worker

·         The employer sets the hours of work and the duration of the job

·         The worker is paid by the hour, week, or month rather than the agreed cost of performing a particular job

·         The worker does not hire and pay assistants

·         The work performed by the worker is part of the regular business of the employer

·         The employer is in business

·         The worker is not engaged in his/her own distinct occupation or business

·         The employer provides the worker with benefits such as insurance, leave, or workers’ compensation

·         The worker is considered an employee of the employer for tax purposes (withholding federal, state, and Social Security taxes)

·         The employer can discharge the worker

·         The worker and the employer believe that they are creating an employer-employee relationship

 

2.        The IRS Factor Test

Behavioral Control:

·         Instructions the business gives the worker

·         Training the business gives the worker.

Financial Control:

·         The extent to which the worker has unreimbursed business expenses

·         The extent of the worker’s investment

·         The extent to which the worker makes services available to the relevant market

·         How the business pays the worker

·         The extent to which the worker can realize a profit or loss.

Type of Relationship:

·         Written contracts describing the relationship the parties intended to create

·         Whether the business provides the worker with employee-type benefits

·         The permanency of the relationship

·         The extent to which services performed by the worker are a key aspect of the regular business of the company.

 

Questions Courts Can Ask:

·         What degree of control does the employer have over work, and who exercises that control?

·         What is each party’s level of loss in the relationship?

·         Who has paid for materials, supplies, and/or equipment?

·         What type of skill is required for work?

·         Is there a degree of permanence?

·         Is the worker an integral part of the business?

 

EMPLOYEE OR INDEPENDENT CONTRACTOR?

Do Not just take a stab in the dark as to whether a worker is an employee or an independent contractor – it could be the most expensive guess you ever make!

According to the California Employer Daily Newsletter, “to employ” means to “engage, suffer or permit” someone to work for you.  Sound confusing? It certainly can be.  Wage and Hour laws can be complicated – particularly in California.

Erring on the side of treating workers as employees is a good way to guard against costly lawsuits.  Keep in mind that simply labeling someone an Independent Contractor will not help you nor will having workers sign documents agreeing to be treated as independent contractors.  Also, if you feel that just paying someone on the IRS form 1099 will determine if that person is an employee or not will also not help you.

The IRS and the California Franchise Tax Board have their own tests for determining who is an employee for purposes of payroll taxes.  With respect to wage and hour requirements, California uses the “Borello Test” – which strongly favors a conclusion that workers are employees.

The Borello Test examines the total circumstances of the relationship between the business and the person performing the work in light of 11 factors:

1. Is the work the person is performing for your company in an occupation or business that is distinct from that of the company?

2. Is the work part of the company’s regular business?

3. Does the company supply the equipment, tools, and a place for the person doing the work?

4. Does the worker have a financial investment in the equipment or materials required to perform the work?

5. Does the worker have the skills required in the particular occupation?

6. Is the type of occupation work that is usually done under the company’s direction or by a specialist without supervision?

7. Does the worker’s opportunity for profit or loss depend on his or her own managerial skill?

8. How long will the services be performed?

9. What is the degree of permanence of the working relationship?

10. Is the payment method by time or by the job?

11. Do the parties believe they are creating an employer-employee relationship?

Although no single factor in the Borello test is determinative, the first one – whether the individual’s work is the service or product that is the company’s primary business – is given the most weight.

FEDS ARE KNOCKING – ARE YOU READY?

The Wage and Hour sharks are circling – don’t be the next victim.  According to attorney, Marc L. Jacuzzi, wage and hour lawsuits are surging and so here are tips for preventive self-audits:

For Non-Exempt Employees: (Remember – you must comply with the proper classifications and not just make a decision based on what your organization has been doing).

Time Worked:

Are all hours worked recorded?  Make certain that employees are recording start times, time out for meals, time in from meals, and time out at the end of the day.  Review your procedures for maintaining time records.

Breaks and Lunch:

Are meal and break periods carefully observed and recorded? These are not required by the FLSA, but California does have requirements in this area.  (Be wary of timekeeping systems that automatically calculate lunch hours).

Overtime:

Is overtime being recorded and properly paid? Remember that overtime is calculated using the “regular rate” of pay, which includes non-discretionary bonuses.

Other Wage and Hour Checks:

Are you properly accruing vacation? Generally, vacation accrual can be capped, but not forfeited – no use it or lose it policy! Usually, accrued vacation or PTO is considered wages.

Final Payment:

Are you observing all final payment rules? California has strict rules about final pay and deductions from pay. Jacuzzi suggests some proactive steps employers can take to improve and/or ensure compliance with wage and hour laws:

·         Appoint a Compliance Manager 

·         Train associates on proper timekeeping

·         Require non-exempt employees to sign a statement on their timesheets verifying that they have worked only the hours recorded and taken their breaks and lunches.

·         Revise your handbooks and policies

·         Adopt a system for auditing violations and showing overtime payments.

MOST HR FAILURES COME FROM IGNORING THE BASICS

HR POLICIES AND PROCEDURES

There are dozens of picky technical ways to run afoul of employment laws, but more often than not it is the most fundamental failures that get employers in trouble.

According to attorneys John Skousen and Christopher Boman of Fisher & Phillips LLP in Irvine, here are tips for staying out of the courtroom and creating fair work environments in these basic areas:

Employee Handbooks

Without an employee handbook, it is difficult to prove a policy was in place and understood by the staff.  Some items MUST be included – such as meal and rest periods, to ensure employees are aware of the rules and expectations.

Job Applications

Many companies do not require applications, but that is a mistake say Skousen and Boman.  With a well-drafted application, employers elicit only the “facts” and applications allow employers to obtain approval to conduct various background checks. It is also important that employers obtain a signature and affirmation from the applicant confirming that the information is accurate and complete.  Doing so may provide grounds for termination if applicants misrepresent themselves.

Employers should also ensure that the information submitted by the applicant is verified and consistently conducting background checks for every applicant to ensure discrimination claims are avoided.

Your application must be up-to-date! Asking questions that could trigger liability for employers such as the date of the high school diploma could trigger an age discrimination claim.  You may ask whether the candidate graduated from high school instead of asking when they graduated.

Performance Evaluations

Not conducting performance reviews or conducting them late can create problems. It will be difficult to terminate problem employees when there is a lack of notice regarding issues that need to be improved or if there are inconsistent patterns of providing performance evaluations (which could be perceived as a bias).

Termination

One of the biggest mistakes employers make is waiting to involve HR Advisors or legal counsel until after an employee has already been terminated.  Sometimes it may just be a five-minute phone call that saves the company from a lawsuit.

Employers should document the reasons for the employee’s termination. If the employer simply states “at will employment” employees can state whatever unlawful reason they want to.

TOP FIVE EMPLOYER MISTAKES UNDER THE FLSA

Whether you have 5 or 5000 employees, here are five mistakes you need to avoid!

Since the Fair Labor Standards Act’s revised regulations became effective August 23, 2004, overtime has become a hot-button topic for employers and employees alike.  Worse, it has also become a prime target area for plaintiffs’ attorneys, because even with the revisions the FLSA is an extraordinarily difficult statute to comprehend and comply with.

Fortunately, some of the most common mistakes made by employers are easily identified and remedied. Whether you have 5 or 5000 employees, here are five mistakes you should try to avoid:

1)  Believing salaried employees are automatically exempt from overtime – Just because you are paying an employee a salary, no matter how large, does not mean that he or she is exempt from overtime.  Each employee must qualify for one of the specific exemptions provided by the statute.  Other less common exemptions include the executive exemption, administrative exemption, professional exemption, computer-employee exemption and outside sales exemption.

Each exemption has specific tests and each employee to whom you pay a salary must be evaluated to see whether the exemption applies.  Don’t forget:  The job title doesn’t determine classification any more than paying a salary does – just because you call someone a manager or an assistant manager and pay them a salary does not mean they qualify for the exemption! The burden of proof always remains with the employer.

2)  Misclassifying Assistant Managers – Many businesses pay a salary to their assistant-manager-level employee without paying them overtime and without considering whether they truly qualify for the executive exemption. In order to qualify for the executive exemption, an assistant manager must be paid on a salary basis at a rate of at least $455 per week.

In addition, the employee must meet each of the following three tests: 1. Primary duty is management of the enterprise, department or subdivision; 2. They customarily and regularly direct the work of two or more other full-time employees or the equivalent; and 3 have the authority to hire or fire, or make suggestions and recommendations as to hiring, firing, advancing, promotions or other status changes that are given particular weight.

3)  Automatic Deductions for Meal Breaks – If you are sued by an employee or audited by the Department of Labor (DOL), it is your burden to prove the hours actually worked by your hourly employees.  If employees later claim that they worked through lunch most days, it will be extremely difficult for you to prove that each of your employees actually took a full lunch break every day for which an automatic meal break deduction is made. In order to discourage workers from working through this meal break in order to get extra pay each day, make it mandatory that the meal breaks are taken and discipline those who refuse to take the meal break.

4)  Not Paying for Overtime that has not been Approved in Advance – Most companies have a policy requiring employees to seek approval in advance before working overtime.  The FLSA does not distinguish between approved and non-approved overtime, so if an employer refuses to pay for non-approved overtime, the company must pay.  However, if an employee violates that company policy by working non-approved overtime, they can be disciplined or terminated for the violation of their company policy.

5)  Allowing employees to “waive” their rights to overtime – Another common mistake, particularly among small businesses, is believing that an employee can waive his or her right to time and a half pay for all overtime hours.  What frequently happens is that the employer only pays regular pay for those overtime hours citing that the employee agreed to it. Despite your good intentions, any type of deal with an employee that results in the non-payment of overtime is void and will not be a defense if the employee later files a suit.  Also, in California, using “comp” time instead of paying for overtime is illegal.

The Bottom Line
Compliance with the FLSA is a task you must take seriously.  The number of lawsuits involving these claims is growing at an alarming rate and the effects can be devastating for businesses of all sizes.  The FLSA has a penalty provision allowing plaintiffs in some circumstances to recover twice their actual back wages plus penalties and attorney fees in other cases, even a minor violation can wind up being very expensive.

Adapted from Workforce Management