Four Common Mistakes That Could Put Your Business at Risk

by Jennifer Roman

The internet is a great resource for finding information related to employment law. Many employers use various internet resources to assist them with education regarding wage and hour laws, terminations and various other issues that they encounter while managing day-to-day issues at their business. While there are many credible sources online to find information, the interpretation of the materials and the knowledge of the laws are key to putting in place proper practice when it comes to legal compliance. There are several common mistakes employers make when interpreting the law that can lead to potential legal action, penalties and damage the reputation of a business.

1. At-Will Employment
The first common misconception is frequently encountered in states where employment is “at-will”. Most employers understand the concept of at-will employment, which means that an employer can terminate any employee at any time for any reason or conversely, the employee can terminate the employment relationship for any reason at any time. The misconception with at-will employment is that even though an employer has the right to terminate an employment relationship, a reason should always be identified and documented. In cases where any type of discrimination is alleged by the former employee, the employer must be able to prove that the reason for termination was not discriminatory. Properly documenting events leading up to a termination is critical when defending a business against a discrimination claim. It is important to have a process in place, whether the issue is regarding poor performance, a policy violation and even company downsizing.

2. Management Discretion
Policies that are applied at the discretion of the manager or business can become a huge legal liability to businesses. Many employers believe that if a policy is written and specifically says that the policy will be subject to the discretion of the business or the manager, this will protect their practice. Discretion can be a precarious practice if it is not applied consistently throughout the business over time. When a complaint is being investigated with the Equal Employment Opportunity Commission or the Human Relations Commission, it is common for an agency not only to ask for information regarding the complainant, but also any employees who were in a similar situation. When a policy is practiced at the discretion of one or more people, over time, it can inadvertently be applied in a different manner. The result of this could be the appearance that the business treated two employees differently in the same situation. This could cause the perception of discrimination rather than simply losing track of past practice.

3. Classification
The classification of certain employees also tends to be problematic for employers when they are making the decision as to whether an employee should be exempt or non-exempt. Many employers are familiar with some of the federal guidelines and tend to generally classify employees based on job title rather than the actual responsibilities involved in the position. Information technology professionals and administrative employees are those that are most frequently misclassified. This is especially problematic when an employee who is actually non-exempt is misclassified as exempt. This mistake can result in the requirement to pay back-wages to your non-exempt employee. In addition to this, it is important to know and apply the criteria used to distinguish the difference between a W-2 employee and an independent contractor. The Department of Labor, Internal Revenue Service and other state agencies have combined efforts in recent years to provide a more aggressive approach to addressing misclassifications.

4. Family Medical Leave Act (FMLA) Administration
One of the more complex human resources issues that some companies must deal with is the administration of FMLA. It is not enough to know that an employee is entitled to certain benefits or how much time they are entitled to when it comes to FMLA. There is a multi-faceted process involved from paperwork to tracking to recertification. Knowing how to administer FMLA and when to look at ADA and ADAAA compliance in connection with FMLA is critical to avoiding legal liability. Intermittent FMLA presents a host of areas that a business may need to pull in to the process, which includes how the business’ paid time off, attendance and light duty policies interact with their FMLA administration. Beyond all of this, a point person must properly monitor each leave without improperly disclosing information which could violate FMLA regulations.

Due to the complexity and overlap of regulations that govern employment law, it is paramount for a business to use professionals who are properly trained and educated in such areas to avoid potential liability. Regardless of an organization’s intent, if there is a violation in any of these areas, it is likely the cost will be high to remedy the situation. It is best to take a proactive approach to legal compliance rather than waiting for an issue to arise.

If you are an employer with questions about compliance issues, you can contact our HR professionals at hrhelpline@eastcoastrm.com. Please note, the HR helpline is for employers only. Employees with HR-related questions should consult their company’s HR department or an attorney.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

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