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Labor, Employment and Human Resources Concerns Affecting Small to Mid-Sized Companies Doing Business in the USA

Posted July 8, 2016 in Lawrence J. Sherman Articles

Given the complex nature of these requirements, the owners and/or high-level managers of the business stand to benefit greatly from advice of experienced legal, accounting and human resources professionals. For a variety of reasons, it is more efficient and usually far cheaper to hire professionals as consultants or advisers until the business grows large enough to consider hiring professionals as part-time or full-time staff members.

Legal concerns most frequently come into play in the following areas of business activity:

  • Wages & hours of employees: Compliance with federal and state overtime and minimum wage requirements is mandatory, but determining which employees are covered and which are exempted from applicable legislation is very important because erroneous determinations can create significant financial exposure.
    • Underscoring this point, the headline in the cover story in Business Week (October 1, 2007), Wage Wars, reads "WORKERS - FROM TRUCK DRIVERS TO STOCKBROKERS -ARE WINNING HUGE OVERTIME LAWSUITS" [1]

    • "There are two basic categories of overtime claims. One arises because a company has misclassified employees as exempt from the wage and hour laws, and thus improperly failed to pay overtime. In some of these cases the workers have been classified as independent contractors, meaning the company doesn't pay them benefits, either. The second is a so-called off-the-clock claim, in which employees allege that some of the work they do is not recorded by the company, sometimes as an intentional way to keep them from accruing overtime." Business Week, Wage Wars at 54.

  • Employee benefits: Federal legislation governs retirement plans, health insurance and other benefits provided to employees, but these laws do not generally come into play until the employer decides to offer various benefits to its employees.

  • Workplace health and safety: Compliance with requirements imposed by state and federal occupational and health legislation is mandatory, but the legislation primarily applies to industrial settings and not commercial enterprises.

  • Employee rights of self-organization and union representation: The National Labor Relations Act and parallel state legislation afford workers the right to organize and to form a union as well as legal standing for the union to act on behalf of the workers that it represents.

  • Legislation affecting the day-to-day business practices: Federal, state and local legislation may impact on and/or govern the day-to-day activities of a business. These laws and regulations include, but are not limited to, the Americans with Disabilities Act, the Family and Medical Leave Act, and the Occupational Health and Safety Act.

  • Discrimination: Federal, state and local legislation prohibit discrimination based on age, race, religion, pregnancy, sexual orientation and national origin. These laws also forbid sexual, racial and other types of harassment in the workplace and retaliation directed against employees who exercise rights protected by such legislation.

  • Termination and layoffs: Federal, state and local legislation, as well as judicial precedent known as the common law, may limit the employer's right to terminate or lay off employees as well as govern severance obligations. To make matters even more challenging, many of these business activities bring into play overlapping federal, state, and local legislation, along with the common law based upon hundreds of years of judicial precedent. In many instances, potential legal and/or HR problems are interrelated and must be addressed together.

This syllabus has been prepared to acquaint business executives with the nature and magnitude of the legal, human resources (HR), and business management issues that arise in the day-to-day planning and operation of a business. In the interest of brevity, I will focus on the issues that are most likely to arise in the operation of a small to mid size business.

Checklist of Legal, Human Resources and Management Issues

Preserving the legal protections provided by the "At Will" employment doctrine

  • Under the common law that applies to the employment relationship in every state in the United States, employees of a business are "at will" employees.

    • This means that employees are free to quit at any time, and the employer is free to terminate their employment at any time and for any reason.

    • The "At Will" doctrine" applies so long as the employer does not take any action that negates its applicability by, for example, affording the employees legally enforceable rights in a personnel manual or entering into individual employment contracts with key employees.

  • To avoid this problem, the employer should adopt an "At Will Policy" and put this policy in its personnel manual, handbook or basic personnel document that is routinely provided at the outset of employment.

    • Federal, state and local legislation has eroded the employer's at will rights in many areas and most notably with respect to the imposition of a broad duty to provide equal employment opportunity (EEO) for all employees.

      • Key federal EEO statutes include, but are not limited to, the following: The Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq. (race, sex, national origin, and religious discrimination and retaliation to punish exercises of protected rights); Age Discrimination Act of 1967, 29 U.S.C. §621 et seq. (age discrimination and retaliation for the exercise of exercise of protected rights); Equal Pay Act of 1963, 29 U.S.C. § 201 (discrimination based on any failure to provide equal pay for substantially equal work); The Older Worker Benefit Protection Act, 29 U.S.C. §621 (Protection against coerced waiver of legal protections and notification requirements for multiple employee layoffs); Americans with Disabilities Act of 1990, 42 U.S.C. §12101 et seq. (obligation to provide reasonable accommodation to handicapped employees able to perform the essential duties of the job; prohibitions against discrimination based on disabled status and retaliation for the exercise of protected rights under the Act); Pregnancy Discrimination Act of 1978, 42 U.S.C. §2000e(k) (special protections afforded on the basis of pregnancy and child birth).

    • As discussed separately below, other statutory protections may apply to health and safety, employee benefits, etc., and likewise erode the continuing force of the At Will doctrine.

      • These statutory requirements, and particularly the non-discrimination prohibitions, come into play with the following areas of business activity:

        • Recruitment and hiring of employees

        • Day-to-day management and supervision of employees by supervisors and relationships of employees to coworkers and customers of the employer

        • Promotion, demotion and transfer of employees

        • Terminating and/or laying off employees.

      • The employer must be aware of the potential applicability of these laws even when performing more routine business functions such as writing job descriptions, conducting employment interviews, and supervising, promoting and terminating employees.

  • Work eligibility for hiring and continued employment: Immigration laws and regulations apply to the hiring of temporary and contract employees as well as permanent employees.

  • Employee Classifications: These classifications are critical under wage and hour and employee benefits legislation that govern the operation of a business, but may be defined differently by tax, social security and other laws that also apply to the workforce.

    • Contract and Temporary Employees, including the use of "Independent Contractors"

    • Part-Time and Full-Time Employees

      • Exempt and nonexempt employees under the Fair Labor Standards Act (FLSA), as amended, 29 U.S.C. §201, and parallel state and local legislation that require the payment of overtime to covered workers for all hours worked in excess of 40 hours in any given workweek.

      • Hours of work and various other terms and conditions of employment are also governed by state or federal law and sometimes by collective bargaining agreements. These matters include, but are not limited to, the following:

        • Regular and recurring scheduling of work - i.e., a set or pre-established work week

        • Flexible scheduling ("Flextime")

        • Meal and rest breaks

        • Overtime and premium pay, including the performance of work-related duties before or after the standard 8-hour regular work day or work shift

    • Paid and unpaid time off of work

      • Vacation

      • Holidays

      • Sick Leave

      • Family and Medical Leave

      • Bereavement Leave

      • Military Leave

    • Employee benefits provided by the employer to recruit and retain employees and protected by the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 42 U.S.C. §1001 et seq. These protections include, but are not limited to, the following:

      • Retirement benefits, including defined contribution and defined benefit retirement plans as well as severance pay plans

      • Health Care Benefits

      • Workers' Compensation

      • Unemployment Insurance

      • Life Insurance

  • Employee Records: Federal and state law requires the employer to maintain basic records, including wages paid to employees, hours of work, federal and state tax and social security withholdings, etc.

    • An employer should always keep regular and systematic business, pay and tax records as a matter of sound business practice and update these records to include all changes in personnel and other pertinent information.

    • If medical records are kept, their confidentiality must be protected in the manner required by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), 42 U.S.C. 42 U.S.C. §242k(k).

  • Employee Performance and Workplace Conduct: These matters are governed primarily by employer policy, but may also be governed by a variety of laws and regulations.

    • Employee Job Performance

      • Defining employee job performance expectations.

      • Determining employee job performance through periodic reviews or other means.

      • Progressive discipline or other means to enforce employee performance and conduct standards.

      • Promotion, demotion or firing based on performance reviews or less formal evaluations by supervisors and/or misconduct.

    • Workplace Conduct and Behavior

      • Employee Standards

      • Professional Conduct

      • Punctuality and Attendance

      • Dress, Grooming, and Personal Hygiene

      • Pranks and Practical Jokes

      • Threatening, Abusive, or Vulgar Language

      • Horseplay, Fighting, Sleeping and Socializing on the Job

      • Disrespectful Treatment of Customers, Vendors and Third Parties doing Business with company

      • Insubordination

    • Employee job references: Legal requirements under the common law come into play if the employer or someone acting on its behalf provides a malicious or grossly inaccurate employment reference. Because this type of situation involves considerable potential legal and financial exposure, employers commonly provide limited references that only confirm basic employment information.

    • Employer business interests that are subject to being compromised by employees

      • Trade Secrets and Conflicts of Interest

      • Confidentiality and Trade Secret

      • Conflicts of Interest

  • Health and Safety

    • Worker Health and Safety: These requirements are imposed by the Occupational Health and Safety Act of 1970 ("OSHA"), 29 USC §651 et seq. and by parallel state legislation.

    • Workplace Security and Related Issues

      • Emergency circumstances created by external events

      • Smoking

      • Violence

      • Cell Phones

      • Racial, religious, sexual and age based harassment

    • Employee and Workplace Privacy

      • Telephone Monitoring

      • Video Cameras or Recorders and Camera Phones

      • Computers, Email, and the Internet

      • Email - personal and employer email accounts

      • Using the Internet - shopping, betting, pornography, dating, etc.

      • Personal Weblogs (Blogs)

    • Drugs and Alcohol

      • Prohibition Against Drug and Alcohol Use at Work

      • Inspections to Enforce Policy Against Drugs and Alcohol

      • Drug Testing

      • Rehabilitation and Employee Assistance Programs (EAP)

    • Discrimination and Harassment: Legal requirements and sound business practice strongly favor the adoption and strict adherence to established policies in the areas discussed below. However, there is no absolute requirement to adopt formal policies, and the problems can be actually handled on a case by case basis if necessary or desired.

      • Anti-discrimination and harassment policies

      • Employee complaint policies and procedures, such as an "Open-Door Policy" or "dispute resolution policy" that allow for the resolution of an employment dispute without any need for the employee to go to court for redress. These procedures have to preserve employee rights to seek external redress as provided by law.

  • Ending the Employment Relationship: While there are a variety of legal requirements that may apply to the ending of the employment relationship, sound business practice strongly favors the adoption and adherence to established policies to govern the following:

    • Notification of termination or severance provided to employees: Federal and state legislation come into play only in rare instances. This matter is generally governed by employer policy when a small to mid-sized business is involved.

    • Final paychecks and/or severance pay: State payment of wages laws and employer policy govern these matters.

    • Continuation of health insurance coverage: COBRA, known officially as the Consolidated Omnibus Budget Consolidation Act of 1985, 29 U.S.C. § 1161 et seq. requires the employer to continue to make available health insurance coverage to former employees, who lose coverage under a company ERISA-governed health plan. This coverage must be extended for up to 18 months in order to bridge the time needed to find suitable replacement coverage. The employee must pay the pro rata share cost of coverage, plus a modest administrative fee, usually 102% of the cost of the premium.

Conducting Depositions

July 22, 2016

There are no express ethical rules that govern preparing for, taking or defending depositions. While many rules touch upon these matters, they often give conflicting signals. For example, Rule 1.3, comment 3 of the Code of Professional Responsibility requires that a "lawyer should represent a client zealously within the bounds of the law. In contrast, Rules 3.3 and 3.4 respectively caution that a lawyer should exhibit candor towards the tribunal and fairness to the opposing party and counsel. Ethical concerns commonly arise in the context of fulfilling client expectations that prize zealous representation as well as by a need to counter equally zealous or even outrageous conduct by opposing counsel who is ostensibly acting in his or her client's interest. In these situations, therefore, it may be necessary for the employment to take into account applicable ethical and judicial standards and tailor his or her conduct accordingly.

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