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Eight Common Mistakes Employers Make

Every business has employment practices liability exposures. Following are eight common employer mistakes that, when addressed, can help reduce risk.

1. Conducting background checks in violation of EEOC Rules

An increasing number of employment law cases contain allegations of negligent hiring. Because of this, an employer must be diligent in its background checks to avoid hiring an employee who could pose a threat to other employees or third parties, because the employer could then be liable for actions of this employee if there was reasonable information to suggest the employee could be dangerous.

However, the EEOC is advising employers to use restraint in requiring background checks and is emphasizing an increased focus on “individual assessment” before disqualifying applicants based on a prior criminal conviction record.

In light of the EEOC guidelines and applicable case law:

  • employers should never use arrests as a disqualification for employment;
  • convictions should not be an automatic exclusion; and
  • exclusions should be limited to convictions that are “job-related to the position in question” and “consistent with business necessity.”

Use the EEOC three-factor test in evaluating prior convictions. Under this test, employers evaluating a prior conviction in terms of business necessity consider the:

  • nature of the crime;
  • time elapsed since conviction/release; and
  • nature of the job.

The three-factor test stresses individualized assessment of prior convictions and not automatic exclusions from employment based on prior convictions.

2. Not properly documenting employees’ files/grade inflation

Not properly documenting employees’ performance problems in their personnel file can cost an employer dearly during litigation. While it’s true that evidence of employee problems not in written form can still be used by the employer during litigation, time and money spent on locating and securing testimony from witnesses who may or may not still be employed, and may or may not still be loyal to the employer, are not insignificant.

Further, juries are less likely to accept criticism of an employee if it wasn’t originally documented. Also, in many companies, its common practice to keep both a human resources and a manager file on employees. The content of these desk files is discoverable and may be inconsistent. Whenever an employer is asked to respond to a lawsuit or charge of discrimination, such separate files could lead to inconsistent or incomplete responses as to why the employee was terminated. Employers should make sure that all responses made to the various agencies are consistent. Review the file, or files, for consistency and speak with one voice.

Issuing employee evaluations such that every employee receives an “above average” evaluation may be easier than giving critical evaluation, but this practice can be harmful if an employee receiving such an evaluation actually has performance problems not referenced or de-emphasized in the evaluation. If such an employee is eventually terminated, and brings suit related to that termination, those “above average” evaluations will be used against the employer in litigation. Juries don’t want to hear conflicting evidence of poor work performance followed by a positive review or raise, even if the entire company received one. Always evaluate employees accurately.

3. Old, unused handbooks

An updated handbook is a valuable tool for an employer to set out guidelines and expectations. However, if a handbook is out of date and unused, it can cause problems for the issuing employer. For example, old handbooks, will not comply with required changes in discrimination laws and FMLA protection. Further, supervisors likely will not follow an old, outdated handbook leading to disparate treatment of staff, as well as treatment of staff that varies from the procedure set out in the handbook. Such variations can become fodder for a plaintiff’s attorney and can be used to support cases for discrimination (even if the difference in treatment was not actually based on an employer’s motive to discriminate based upon race, sex or another protected class).

4. Classifying employees as independent contractors

It is very common for employers to improperly categorize some (or all) employees as independent contractors. But there are significant dangers in classifying employees as independent contractors:

  • back payroll taxes and penalties; and
  • overtime liability and penalties.

Workers are generally employees and not independent contractors, and should be classified as such, if they:

  • work at the same place every day;
  • do not have specialization skills they “sell” to other customers;
  • do not have potential for profit and loss;
  • do not bring their own equipment;
  • are told what to do and how to do it by you; and
  • provide the service that you provide to the outside world.

5. Permitting too many ‘stray comments’ in the workplace

Employers have been on the winning side of court holdings that “stray comments” in the workplace do not constitute evidence of discrimination. For example, one sexist or sexual comment made by a rank-in-file employee to a female coworker will not support a sexual harassment claim. However, employers should at the very least attempt to prohibit comments that may be viewed as disparaging (especially those that may appear to be based on a protected category such as race, sex, national origin, disability, etc.). After a while, “stray comments” appear to be less and less “stray” and more commonplace. Be careful to note that these comments include emails, shared/viewed websites, etc.

6. Overtime mistakes

Frequently, employers mistakenly classify all workers paid a salary as exempt (not entitled) to overtime. This is a mistake. To be exempt from overtime, an employee must fall squarely within an exemption set out by the Fair Labor Standards Act (FLSA). An employee must be paid on a salaried basis and perform an executive, professional or administrative function outlined within FLSA regulations to fit within those specific exemptions. So, thoroughly review job descriptions against the criteria specified.

Further, if a non-exempt employee tracks time worked over and above 40 hours in a given workweek, then that time must be paid as overtime. As desirable as it may seem, two or more workweeks cannot be averaged in order to avoid stepping over that 40-hour line. A company may not give paid time off, or comp time, in lieu of paying overtime–even if that paid time off is equal to that of overtime (1.5 time the amount worked over 40 hours in a given work week).

7. Not complying with various record-keeping requirements

Although each federal employment statute has different record retention requirements, employers should generally retain employment records for three years. Employers must retain the I-9 Forms in their files as long as the person is employed and for a certain length of time after the person leaves their employment. The retention date of the I-9 can only be determined once an employee has been terminated. It is determined by adding three years to the hire date or adding one year to the termination date, whichever date is later is the retention date.

8. Not notifying OSHA in a timely manner

OSHA announced new, more stringent incident reporting requirements on Sept. 11, 2014. Under those new requirements, employers will still have to notify OSHA of any work-related fatalities within eight hours but will now also have to report any in-patient hospitalizations, amputations or losses of an eye affecting any one employee within 24 hours. Previously, OSHA only required reporting of fatalities and in-patient hospitalizations involving three or more employees. Employers were not required to report incidents resulting in a single hospitalization, amputation or loss of an eye.

Avoiding these common mistakes will go a long way in assisting an employer in reducing employment lawsuit exposure and the risk of adverse findings by government agencies.

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