Management concerned with employment law liability should be focused on prevention: preventing lawsuits, preventing employee morale problems, and preventing the day-to-day hassles personnel issues can create. The road to success in this area is not paved with good intentions, however. Employers must understand basic human resources principles to avoid the employment law pitfalls that await.
Ensure someone in the organization is familiar with human resources. While small employers may be unable to justify hiring a full-time Human Resources Manager, for example, every organization must ensure someone internally is familiar with basic human resources principles. Often, management does not view this as a priority area, and assigns human resources functions to a staff person who is unfamiliar with key concepts. This can result in liability that could have been avoided with an initial investment in hiring and training someone to handle human resources.
Communicate. Appropriate communication is the most important thing an employer can do to prevent human resources problems. Employees must understand what is expected of them, and how to resolve issues internally, should they ever have workplace concerns. Through effective communication with employees, employers will be far less likely to become involved in costly legal battles. Good communication starts from the top. Implement an open-door policy, and encourage human resources and line managers to talk with employees informally.
Implement legally sound employment documents. Employees often claim in lawsuits that managers made promises that misled them into accepting employment,or that they were promised job security. Properly drafted applications, employee handbooks, and offer letters can minimize the likelihood employees will succeed with these arguments.
Employment applications must be drafted to ensure they do not contain illegal provisions. Typical mistakes include background check waivers (which must be on a separate document) and overly broad pre-employment inquiries about matters such as criminal background history, immigration status, marital status, and medical conditions.
Many employers have valuable trade secrets it does not want disclosed to anyone, much less its competitors, and almost every employer has confidential information it wants to protect. In California, employers almost never can stop employees from going to work for competitors. Therefore, in these days of high employee turnover, employers must take effective and lawful steps to ensure confidential information remains confidential. A well-drafted confidentiality agreement is often an effective method to achieve this goal.
Require employment candidates to pass a background check. In a market where good employees are hard to find, employers often act hastily and extend offers to candidates without conducting a thorough pre-employment screening. This can result in bad hiring decisions.
The best way to prevent this from happening is to require each candidate to sign an agreement conditioning his or her employment upon completion of references or a successful background check. Employers implementing background checks must be careful to comply with the federal Fair Credit Reporting Act and California law. Several companies in California conduct lawful background checks and provided related services at a reasonable cost. However, because this area of the law can be tricky, employers should obtain references before retaining the services of these consumer reporting agencies, and have counsel review the agency’s forms for compliance.
Provide discrimination, harassment, and retaliation prevention training to all employees. With the passage of Assembly Bill 1825 (“AB 1825”) in 2005, employers with 50 or more employees are now required to provide training to “supervisors” on discrimination, harassment, and retaliation prevention. Compliance with AB 1825 isn’t necessarily enough, however, to protect an organization from EEO claims. Even smaller employers not covered by AB 1825 at minimum should provide managers with basic anti-discrimination and harassment training.
No organization wants to end up in costly litigation with an employee claiming he or she was harassed or discriminated against during his or her employment. However, if this happens, one of the best defenses available to an employer is that it took all action reasonably possible to prevent and correct any harassing or discriminatory behavior. The first factor relevant to this defense is whether the employer properly trained its employees (not just supervisors) on the appropriate standards for workplace conduct and how to utilize the internal complaint process. Prevention-minded employers should provide such training to all employees on a consistent basis and obtain signed acknowledgments verifying the employees’ attendance.
Conduct a wage-hour audit. In the past several years, California employers have found themselves facing class actions and other lawsuits for violations of the California Labor Code and other wage-hour regulations.
Common claims in this area related to rest break and meal periods violations, failure to properly reimburse employees for work-related expenses, misclassification of employees for overtime purposes, and failure to comply with the final paycheck rules. Ommission and bonus plans are another area where proper drafting can reduce disputes and potential liability. The number number of posters, notices, and records that must be kept have increased or changed over the years as well.
Employers can help prevent or reduce exposure by conducting a wage-hour audit to identify potential vulnerabilities before a claim is filed. If an employer conducts the audit with the assistance of counsel, the results may be privileged, and cannot be used against the employer in future lawsuits.
Manage employees’ leaves of absence and disabilities. Laws granting employees protected leaves of absence have increased in recent years. Employees increasingly are claiming that employers denied protected leaves. In addition, the obligation to provide “reasonable accommodation” to employees with disabilities has evolved. This is a difficult area of the law, even for experienced lawyers and human resources professionals. Taking the time to effectively manage leave and accommodation issues can pay enormous dividends, however.
Consider requiring employees to sign a mandatory arbitration agreement. Because the cost of employment litigation keeps increasing, many employers require all employees, as a condition of hire or continued employment, to sign mandatory arbitration agreements. Over the past several years, there have been various legal developments in this area. While there are still some unresolved questions, the California Supreme Court in Armendariz v. Foundation Health Psychcare Services, Inc. ruled that mandatory pre-employment arbitration agreements are valid, as long as certain conditions are met to ensure the fairness of the agreement.
Of course, there are advantages and disadvantages to utilizing arbitration agreements. In recent years, for example, the cost of arbitration also has steadily increased, and some employers have found themselves mired in litigation about whether their arbitration agreements comply with the requirements set forth by the California Supreme Court in Armendariz. Employers should seek the advice of counsel in determining whether such an agreement may be appropriate and, if so, in preparing an arbitration agreement.
Ensure all employee benefit plans comply with ERISA. Most benefits provided by employers, such as medical and retirement benefits, are governed by the federal Employment Retirement Income Security Act (“ERISA”). Failure to comply with ERISA’s provisions can result in the imposition of penalties and a monetary award in favor of the employee for the amount of the benefits at issue. ERISA is an acronym that strikes fear in the hearts of lawyers and human resources professionals alike. Accordingly, employers should seek advice from specially-trained benefits managers and benefits law experts to ensure their benefits policies comply with ERISA.
Communicate. Yes, it bears repeating. Employers that maintain open and constructive lines of communication with employees are more likely to preserve employees’ dignity and respect for management. Any experienced employment lawyer will tell you that positive and open communication can prevent many workplace problems, including union organizing and lawsuits.
Employers that comply with basic human resources principles reap the benefits of happier employees and fewer lawsuits. For more information about how to implement any of practices described in this article, employers should contact the employment law attorney with whom they regularly work.