Friend Hudak Harris

This article focuses on several areas that every employer should know to avoid unintentional non-compliance and potentially-significant liability and expense.  If you need more information or details regarding any of these topics, please contact us.

1.  WAGE AND HOUR LAW

The Plaintiffs’ Attorneys Favorite. Recently, there have been a large number of claims and settlements involving alleged violations of the federal wage and hour law, known as the Fair Labor Standards Act (“FLSA”).  Most of these claims involve either:

• worker misclassification—classifying a worker as an independent contractor instead of an employee); or
• failure to pay for time worked and overtime.

Considerations.  Plaintiffs’ attorneys actively seek out current and former employees willing to assert FLSA claims against employers.  This is because the employer is required to pay their attorneys’ fees as part of a settlement or judgment—if it comes to that. Naturally, this makes FLSA claims a plaintiff attorney’s favorite.  Here are a few things to keep in mind.

• Bias Toward Finding “Employee” Status. Both the FLSA and tax law are biased toward finding a worker to be an employee and not an independent contractor.  Be very careful if you elect to categorize a person as an independent contractor.  When in doubt, unless you consult legal counsel, it is often legally advisable to categorize a worker as an “employee”.
• 100% Burden of Proof. You, the employer, have 100% of the burden to prove you comply with the wage and hour law.  If an employee merely alleges that he worked more time than he was paid, or worked unpaid overtime, and you don’t have the records to prove him wrong, YOU LOSE.  If your records are not well organized, you may have to engage an attorney to go through them to pull your rebuttal together.
• Very Costly. If you don’t comply or are unable to prove you have complied, then, in addition to paying the plaintiff’s attorneys’ fees, the plaintiff can go back up to three years to get back-pay damages.  Finally, those damages are generally doubled to calculate “liquidated damages”.

2. EMPLOYMENT DISCRIMINATION

Equal Employment Opportunity Commission (“EEOC”) Activity.  Recently, the EEOC sued and/or settled with numerous employers of all sizes after finding illegal discrimination in the workforce, mostly based on race, sex, or disability.

Preventative Measures.  Employers can inadvertently commit costly violations by employing supervisors, managers, and officers who behave inappropriately or simply don’t know enough to recognize the legal risk involved.  Here are a few observations based on experience.

• Make Your Policy Clear and Follow It. Be sure you have a comprehensive anti-discrimination policy and abide by it.  It should name the people within the company to whom an employee can report any perceived instance of discrimination, either involving themselves or something they observed happen to another employee. These people need to be instructed to immediately notify the appropriate officer in the event of any complaint.
• Consult Your Attorney. Contact your legal counsel for advice as soon as you sense any trouble.  The earlier the better.   Don’t “bury” or wait for things to resolve themselves.

3. EMPLOYEE HANDBOOKS

 A Trap for the Unwary.  An employee handbook has two basic legal purposes: to protect the employer from liability and to impose certain requirements on employees.  Employee handbooks can also serve a third purpose: to educate employees regarding the employer’s practices and policies.  Employee handbooks should NEVER include language that could create liability for the employer.

Common Mistakes.  Below are a few common, and potentially very costly, mistakes.

• The employee handbook states that the employer will not pay overtime. This is prima facie evidence of an FLSA violation.
• The employee handbook includes policies that the employer does not actually follow.
• The employee handbook contains language that can be interpreted to change the “at-will” status of the employment relationship.

Considerations.

• Provisions to Consider. The employee handbook can be used to impose a number of obligations on employees including, for example, restrictive covenants (confidentiality, non-solicitation, etc.), alternative dispute resolution terms, and cyber security obligations.  Note the employee’s agreement to some of the foregoing must be specifically indicated by his/her signature.
• Get the Employee to Acknowledge Receipt. All the good defensive measures in an employee handbook become worthless if the plaintiff employee alleges he never received a copy of it and the employer cannot prove otherwise. Employees must be required to acknowledge in writing their receipt of the employee handbook.  As noted above, if the employee handbook contains terms for which the employee’s agreement must be specifically indicated by his/her signature, the signed acknowledgement should also specifically indicate the employees agreement to those terms.
• Attorney Review. Your attorney should review your employee handbook periodically.

4. TERMINATION OF EMPLOYMENT

Waiver and Release of Claims.  Every employer needs to be prepared to handle terminations in a way that minimizes its potential liability.  There are certain things that an employer can do to minimize the risk that a terminated employee will end up as a plaintiff in a lawsuit against the employer.

In most cases, if terminated employee signs a properly-worded, enforceable waiver and release of claims, the employer should be largely protected from future claims by the terminated employee.  However, keep in mind the following.

• Enforceability. Have legal counsel review your form of waiver and release or provide you with an appropriate form.  If you are terminating more than one employee during a 60-day period, special rules may apply to ensure full enforceability.  Also, some states impose additional requirements.
• Consideration. You must provide some benefit to the employee in exchange for agreeing to the waiver and release of claims.  That can be in the form of severance or any other benefit or perquisite that the employee would not otherwise be entitled to receive.
• Prerequisite for Severance. An employer should NEVER give or pay a former employee anything he is not otherwise entitled to receive without getting a properly-worded and properly-executed waiver and release of claims (including complying with any potential waiting periods for the former employee to review and consider signing the document).  Always, check with your attorney first.

5. CERTAIN LAWS APPLY BASED ON THE TOTAL NUMBER OF YOUR EMPLOYEES—KNOW THEM

This is a brief summary of the thresholds for the most-commonly-violated federal employment laws.  (State laws are not included.)

CONCLUSION

Because U.S. laws applicable to employers and employees are very complex and not always clear and because they cover a broad range of diverse areas (including: compensation, contract, tax, worker’s compensation, restrictive covenants, ERISA, HIPAA, privacy, etc.), every employer should have a competent and responsive attorney who can provide practical advice on the wide range of employment-related laws affecting employers.  It is far easier and cheaper to avoid problems than to endure them.

If you need help or have any questions regarding the topics discussed in this article or other employment law matters, please contact Suzanne Arpin at sarpin@fh2.com or (770) 399-9500.