Employment Law Basics: Mitigating Risk in Managing Your Employees

Michael B. Kass, Armstrong Teasdale LLP
Jeremy M. Brenner, Armstrong Teasdale LLP

Employers, both large and small, face many legal challenges in managing their employees. Through this introductory article, the upcoming EDA webinar (entitled, “Employment Law Basics for Dealers,” scheduled for February 22, 2017) and the soon-to-be-released EDA Compensation & Benefits Report, we hope to help EDA members identify critical employee management legal issues and, in turn, help you mitigate your risks as employers.

Employment law claims of various types against employers never seem to go away and companies are constantly dealing with competitive threats from former employees. Whether during good economic times or bad, and whether during Republican or Democratic administrations in Washington, employment law attorneys always seem to stay busy. Fortunately for employers, there are steps you can take to greatly reduce your risk and exposure to employment-related claims and to protect your business.

A. Anti-Discrimination Laws: Processes and Procedures to Avoid Claims

1. Interviewing Job Applicants – The Basics

As surprising as it may be to some, the job interview is a potential minefield for the unprepared interviewer and his or her employer. The primary goal is to gain as much information as you can about the candidate as it relates to their abilities to perform successfully in the job for which they are applying. A basic rule of thumb is that you cannot effectively fulfill your role if you do not understand the position requirements or fail to ask specific, job-related questions.

At the same time, did you know that there are many questions that, by law, you cannot ask? While a thorough interview will usually include a variety of questions, all data gathered in the interview process should be related to job performance. Avoiding those wrong questions will help protect you from claims of discrimination based on age, race, sex, familial status, national origin, citizenship and disability.

By way of example, did you know that by simply asking a woman her maiden name, asking the name of the church he or she attends, where the candidate was born or even asking if they are a U.S. citizen, could each land you in hot water (particularly if you end up not hiring the candidate)? At the webinar on February 22, we will cover these and a longer list of other “don’t ask” questions, explain the rationale for them, and actually provide you examples of lawful questions to ask where relevant.

2. Performance Reviews

While many employers view performance reviews as unnecessary or a mere formality, in reality formal evaluations of an employee’s job performance are an important aspect of employee relations. Performance reviews create transparency between both the employee’s and employer’s view of the relationship. Moreover, performance reviews are the best way to assist an underperforming employee with meeting expectations. When done correctly, performance reviews are an important tool, as opposed to a time-consuming hassle. However, a performance review done incorrectly, or not at all, can also cause significant problems for employers defending employment discrimination claims by terminated employees.

Consider the situation of a lawsuit brought by a former employee who was terminated from his employment. He’s suing you for discrimination of some kind. The truth may be that he was a poor performer. The problem, however, may be that his performance reviews all state that he “meets expectations” or possibly even “exceeds expectations.” Not surprisingly, juries tend to believe your opinion about an employee that was given when you were not defending yourself in a lawsuit (i.e. the opinion you gave in the performance review). A properly-prepared performance review is thus not only a tool to effectively manage your business, but also to protect you from liability.

B. Wage & Hour Basics & the FLSA

A favorite statute of plaintiffs’ employment lawyers is the Fair Labor Standards Act (“FLSA”). The FLSA is a federal law that:

  • ​defines an employment (vs. independent contractor) relationship,
  • establishes the federal minimum wage,
  • requires overtime compensation for all hours worked over 40 in a week,
  • defines the workweek,
  • establishes time recordkeeping requirements for employers, and
  • establishes child labor standards.

Employees who are not exempt from the FLSA requirements are entitled to minimum wage and one and one half times their regular hourly rate of pay for all hours worked over 40 per week. Exempt employees are not entitled to these things under the law. Being paid a salary in and of itself does not make an employee exempt. In fact, an employee can be paid a salary for ease of administration and still be entitled to overtime compensation.

Compliance with the FLSA overtime requirements (and correctly designating your employees as exempt or non-exempt, as well as ensuring your hourly employees are paid for all hours worked) is critically important because of the ramifications of non-compliance. A favorite type of lawsuit brought by plaintiffs’ lawyers nationwide is one seeking base wages or overtime pay covering two to three years of work. In short, it definitely pays to periodically review your payroll practices and procedures, as well as the designation of any of your employees as exempt from the FLSA.

C. Protecting Your Company Assets

Every company in every industry has employees who learn about their employer’s valuable confidential information, and who may also develop close relationships with company clients and customers. Indeed, one recent study concluded that up to 59% of employees who leave take some form of confidential business information with them. So, how can employers prevent such unfair competition by departing employees? They key is implementing policies and procedures, and potentially agreements, that can lawfully protect your company from unfair competition.

What policies and procedures should you implement? Can you (and should you) use non-compete agreements or other restrictive agreements to protect your business? Tune-in for the webinar on February 22 and find out.