"TOP 10" Employer Mistakes

Employer Mistake #1 – Not Following the Employee Handbook 

Employee handbooks are not legally mandated.  However, a good employee handbook sets the tone for a workplace.  It should set forth company policies and other information employees need to know. Likewise, it should include the consequences for violations of the handbook provisions.

A company’s employment policies frequently become an issue of interest in employment-related legal disputes.  While it may not be “unlawful” for a company to ignore its own policies, a departure from the rules could indicate unlawful conduct.  Typically, the allegations will involve claims of discrimination or retaliation based on the different application of a policy or rule to particular employees. To avoid such allegations, employers should set out clear policies and adhere to them consistently with everyone.  

Employer Mistake #2 – Failing to Document 

When a legal issue arises, employers often regret not documenting conduct and/or performance issues with employees.   Whether the company faces an unemployment claim, EEOC Charge, lawsuit, or any other legal challenge, it is difficult to defend against an accusation when there is no evidence of the employee’s bad behavior or poor work performance. 

In addition, employment claims that escalate to an administrative agency or court can take years to resolve.  In the interim, key witnesses can disappear. If that happens, documentation may be the main (or only) evidence upon which a company has to rely to defend against liability.

Employer Mistake #3 – Misclassifying Employees

Federal law places specific requirements on the way employers classify employees for purposes of pay.  Only certain types of jobs are “exempt” from overtime, based on criteria set out under federal law.  For this reason, an employer cannot simply label a position as “salaried” to avoid paying overtime or make an employee work unlimited hours a week for a set amount of money.  Instead, the job duties must be analyzed to see whether the position falls within an exemption category. 

Likewise, an employer cannot simply label someone as an “independent contractor” and issue them an IRS Form 1099 (versus a W-2 employee).  There are specific legal criteria to meet before making that designation.

Employer Mistake #4 – Denying Overtime Pay

An employer must pay overtime to non-exempt employees (hourly or salaried) for any hours exceeding 40 that were worked in a particular workweek. 

TIP – Do NOT confuse this requirement by thinking that overtime is only paid if an employee works more than 80 hours in a 2-week pay period!  You must look at the hours for each workweek.

Similarly, an employer cannot avoid paying overtime by asking employees to work “off the clock” or shifting already worked hours into a different workweek. 

Additionally, employers must keep track of the work hours for all non-exempt employees (including salaried). If a pay claim arises and there are no records, it will be extremely difficult to defeat the allegations. In fact, the company could face liability for the unpaid overtime, plus liquidated damages, as well as the employee’s attorneys’ fees (i.e., in addition to paying attorneys to defend the company!)

Employer Mistake #5 – Ignoring Employee Complaints

It is important to investigate employee complaints to determine whether they are legitimate.  While many issues may not implicate legal exposure, you never know. 

• Example:  A company fires an employee for making a false complaint about her supervisor.  The nature of the complaints may later surface as part of an unemployment claim.  In addition, they could also become the basis for an allegation of unlawful discrimination, harassment or retaliation.  Even if the allegations have no legal merit, it can be extremely expensive to defend against such accusations.   But, if a company can demonstrate that it investigated the employee’s complaint and show that there was no evidence to support it, that information can help diffuse any alleged legal claims.

Employer Mistake #6 – Treating Similarly Situated Employees Differently

Employment discrimination claims involve accusations that an employer unlawfully subjected an employee to adverse treatment based on one or more of their legally protected characteristics (race, age, gender, disability, pregnancy, national origin, religion, sexual orientation, etc.). Typically, these types of claims allege that the employer treated another employee more favorably under similar circumstances.

• Example:  A 50-year-old and a 20-year-old employee report to the same supervisor. The 50-year-old employee was late one day. As a result, the supervisor fired that employee. A few weeks prior, the 20-year-old employee was late, but the same supervisor only issued a warning. The company now has exposure for an age discrimination claim by the 50-year-old ex-employee. If such a claim is made the company will have to provide a legitimate non-discrimination basis for the difference in treatment to avoid liability.

Employer Mistake #7 – Failing to Address Safety Issues

Companies should take a proactive approach to safety issues. A company must maintain vehicles and equipment. Likewise, if there are any chemicals or other potential hazards in the workplace or used at job locations, make sure items are properly secured and stored. It is also critical to have necessary personal protective equipment (“PPE”) and safety equipment for all employees who need it.  Additionally, make sure that employees hold valid licenses, if required.  Not addressing safety matters exposes your company to workers compensation claims, OSHA investigations, and third-party liability.

Employer Mistake #8 – Ignoring Employee Health Issues

Multiple laws can be implicated when an employee identifies a health issue: 

• The Americans with Disabilities Act (“ADA”) – affects companies with 15 or more employees and prohibits:
  • Discrimination against people with “disabilities” (as defined by law), as well as people who are deemed “regarded as” disabled.
  • Discrimination against someone who is associated with a disabled person (such as a spouse or parent).

Additionally, the ADA requires employers to make “reasonable accommodations” for individuals with disabilities, which may include medical leave.

This law also provides rules dictating when an employer can request medical information or require an employee to undergo a medical exam or inquiry.

• The Pregnancy Discrimination Act (“PDA”) and Pregnant Workers Fairness Act provide protections for pregnant women and conditions related to pregnancy.

• The Rehabilitation Act – smaller businesses that do not fall within the ADA’s reach may still be subject to this law if they receive federal funding.

• Family and Medical Leave Act (“FMLA”). Companies with 50 or more employees have additional responsibilities under the FMLA to provide up to 12 weeks of medical leave for qualifying health conditions and/or to care for someone else. 

• Workers’ compensation – most states require employers to have workers compensation insurance to cover for on-the-job injuries or illnesses.

• Short and/or long-term disability – if a company offers these benefits, it will be important to understand what events will trigger coverage.

Employer Mistake #9 – Allowing Human Resources to Handle Legal Matters

Certainly, the HR department should be able to adequately handle certain “routine” matters (separation paperwork, investigating complaints, responding to unemployment claims where an employee quit, etc.). However, it is not advisable to have HR address any contested legal issues with a current or former employee.

• Example 1:  Someone handling HR issues sends a response to a demand letter or EEOC Charge.  Any erroneous statements in that response could create potential liability and leave a company stuck in an unwanted factual or legal position.

• Example 2:  A former employee appeals a denial of unemployment and HR handles the Department of Labor hearing.  The transcript of that hearing could be used against the company in a subsequent proceeding (such as an EEOC Charge or lawsuit). 

To avoid these unintended consequences, it is wise to retain an experienced employment attorney early in the process, as it can save time and money in the long run!

Employer Mistake #10 – Not Seeking Legal Advice

Not many people “want” to call a lawyer.  But spending a little upfront to get some advice could save you from a legal claim that could lead to your business going into financial jeopardy.  It is essential to have someone to call when you are not sure how to handle a situation. Call an experienced employment attorney with your questions – whether it’s a contract issue, drafting company policies, what documents are needed when hiring employees, how to pay certain employees, or uncertainty about handling employee complaints, discipline, or termination.

More importantly, if you receive a demand letter, lawsuit, EEOC charge or other notice of a claim, you should immediately have a lawyer evaluate the situation to assess the potential exposure and to avoid missing any deadlines. Likewise, unemployment claims should not be ignored, as successful claims will increase your business expenses and can be used against the company in other legal proceedings.