Full Description

Employees are still your greatest asset. However, the days when employee matters were simple are gone. To keep your business running successfully, you need a guide through the many issues facing employers today.
Charles Fleischer, successful attorney, lecturer and author, makes this
complex area of the law easy to understand. His practical advice answers the questions you have, such as:
-What steps do I take in the hiring process?
-How can I use performance evaluations as a productive tool?
-How can I cut overtime expenses?
-How can I control costs and still offer attractive retirement and health insurance benefits?
-How do I make a clean termination?
-How do I protect myself against discrimination claims I know nothing about?
-What types of insurance must I carry?
-How long must I hold a position for someone on maternity, military or other leave?

Table of Contents

Introduction

CHAPTER 1: The Employment Relationship
Employees, Independent Contractors, and Agents
Statutory Employees and Nonemployees
The Employment At-Will Doctrine
Employment Contracts
Arbitration Agreements
Business Owners’ Employment Status

CHAPTER 2: The Hiring Process
Steps in the Hiring Process
New Employee Regulations
Employee Handbooks
Personnel Files

CHAPTER 3: Evaluating Performance
Good Reasons for Evaluation
Legal Considerations
Disciplinary Actions

CHAPTER 4: Termination
Exit Interviews
Termination for Cause
Constructive Discharge
Retaliation
Whistleblower Regulations
Abusive Discharge
Defamation Liability
Intentional Infliction of Emotional Distress Liability
Corporate Ethics and the Sarbanes-Oxley Act
Employee Due Process
Downsizing and Mass Layoffs

CHAPTER 5: Wage-and-Hour Requirements
Minimum Wages
Overtime
Alternatives to Overtime
Exemptions from Overtime Requirements
Settling FLSA Wage Disputes
Other Wage Regulations
Child Labor
Priority of Wages and Benefits in Bankruptcy
Antitrust Considerations

CHAPTER 6: Wage Attachments and Assignments
Garnishments
Withholding Orders
Tax Levies
Debtors in Bankruptcy
Department of Education Garnishments
Wage Assignments

CHAPTER 7: Tax Considerations
Deductibility of Wages and Benefits
Limitations on Deductibility
Independent Contractors
Federal Withholding Requirements
Tips
Other Taxable Payments
State Withholding Requirements
Earned Income Credit
Deposit and Reporting Requirements

CHAPTER 8: Leave Policies
Vacation and Sick Leave
FMLA Coverage and Eligibility
FMLA Benefits
Military Leave
Other Types of Leave
Paid Time Off

CHAPTER 9: Deferred Compensation and ERISA
Deferred Compensation
ERISA
Spousal Rights to Pension Benefits
Top Hat and Excess Benefit Plans
Rabbi Trusts

CHAPTER 10: Group Health and Other Voluntary Plans
COBRA
HIPPA
Mandated Benefits
Qualified Medical Child Support Orders
Claims Administration
Gender-Specific Coverage
Stock Options
Employee Stock Ownership Plans
Other Plans
Domestic Partners

CHAPTER 11: Workers’ Compensation
Coverage
Course and Scope of Employment
Claim Procedure
Benefits
Second Injury Fund
Rights against Third Parties

CHAPTER 12: Unemployment Insurance
Employer Contributions
Coverage and Eligibility
Misconduct and Quitting for Cause
Claim Procedure
Benefits

CHAPTER 13: Discrimination in General
Title VII of the Civil Rights Act
Covered Employees
Religious Discrimination under Title VII
Other Antidiscrimination Laws
State and Local Prohibitions
Professional Codes of Ethics
Discrimination Based on Genetics
Contingent Workers
Record Keeping
Foreign Workers
Employment Practices Liability Insurance

CHAPTER 14: Gender Discrimination
Equal Pay Act
Pregnancy
Harassment, in General
Employer Liability for Harassment
Sexual Orientation
Other Issues

CHAPTER 15: Age Discrimination
Exceptions
Benefit Plans
Proving Age Discrimination
Release of ADEA Claims

CHAPTER 16: Persons with Disabilities
ADA in Employment
Medical Examinations
Duty of Reasonable Accommodation
Reasonableness of Requested Accommodation
Effect of Remedial Measures
Accommodation and Seniority
Other Prohibited Conduct
Direct-Threat Defense

CHAPTER 17: Employee Privacy
Private Places
Sensitive Records
Surveillance
Electronic Monitoring
Lie Detector Tests
Drug Testing and Drug-Free Workplaces
Employee Mail
Consumer Reports
Criminal Records
Driving Records
Identity Theft

CHAPTER 18: Employee Loyalty
Competing with an Employer
Trade Secrets
Computer Fraud
Loyalty by Contract
Work-for-Hire
Remedies for Breach of Agreement
Employee Dishonesty

CHAPTER 19: Alternative Work Arrangements
Telecommuting
Flextime
Contingent Workers
Conclusion

GLOSSARY

APPENDIX: Internet Resources

INDEX

Excerpt

Employee Privacy in the Workplace

Excerpted from HR for Small Business by Charles H. Fleischer © 2005

Privacy is the right to be left alone. When someone’s privacy has been wrongfully invaded, he or she may have a claim for damages. The types of invasions that can give rise to a claim for damages are:

• unreasonable intrusion upon the seclusion of another;
• appropriation of another’s name or likeness;
• unreasonable publicity given to another’s private life; and,
• publicity which places another in a false light before the public.

Invasions of privacy do not usually arise in the employment context. After all, the workplace and the equipment in it belong to the employer. Those assets are there to promote the employer’s business, not the employee’s. When an employee is at the workplace using the employer’s equipment, he or she is supposed to be acting for the employer’s exclusive benefit. His or her performance is constantly being evaluated, and normally there is no expectation that his or her activities are personal and private. However, there are exceptions.

Private Places
Most employees would expect their bodies, pockets, purses, wallets, and briefcases to be private and not open to inspection by their employer. If an employer intends to inspect those private places, a compelling business reason must exist and a clear written statement of this intention should be established and disseminated to all employers. In the diamond mining industry, for example, body cavity searches might be justified. Technicians working with lethal viruses might reasonably be put through decontamination at day’s end. Perhaps retail workers should expect to have their packages inspected as they leave the store premises.

Less clear are places such as an employee’s desk. An employer’s right to go through an employee’s desk without the employee’s permission depends on the circumstances. If the employer has an announced policy of doing so, or if the employee shares the desk with others and could have no reasonable expectation of privacy, then the employer probably has the right. But if there is no announced policy, if the employer does not make it a practice of inspecting desk drawers, and if employees routinely lock their desks without
objection from the employer, then the employer probably does not have the right.

Sensitive Records
Employers frequently acquire highly sensitive, personal information about their employees, such as:

• drug test reports;
• results of medical exams;
• information about physical or mental disabilities that need to be accommodated under the Americans with Disabilities Act;
• medical information about the employee or employee’s family in support of leave requests under the Family and Medical Leave Act;
• workers’ compensation records;
• health insurance utilization records;
• substance abuse treatment records in connection with employee assistance programs;
• tax and financial information; and,
• information about family problems, divorces, separations, and so on.

The confidentiality of some of this information is guaranteed by law. Even if no specific law applies, employees expect such information to be kept confidential and to be used strictly for its intended purpose. Employers should live up to those expectations. ensitive records should be kept in a secure area and access should be limited to those with a legitimate need to know. Where sensitive information is stored electronically, appropriate computer security systems should be installed to prevent unauthorized access.

ADA
The Americans with Disabilities Act prohibits pre-employment medical examinations (except drug tests) and prohibits inquiries as to disabilities. The ADA permits an employer to conduct posthiring medical exams so long as certain requirements are met, including the requirement that information obtained regarding medical condition or history be collected, be maintained on separate forms and in separate medical files, and be treated as a confidential medical record. (See Chapter 17 for a more detailed discussion of medical examinations under the ADA.)

Drug and Alcohol Abuse Treatment
Substance abuse records may only be disclosed with the patient’s consent, in cases of medical emergency, or when authorized by court order based on a showing of good cause for disclosure. This means that, in the absence of consent by the patient, even a subpoena issued to an employer is insufficient to justify disclosure. Instead, the party desiring the records must obtain a specific court order for disclosure.

HIPAA
There are extensive regulations implementing the privacy requirements of the Health Insurance Portability and Accountability Act. The regulations are expressly applicable only to health plans (except for plans with fewer than fifty participants that are self-administered solely by the sponsoring employer), health care clearing houses, and health care providers that electronically transmit health information. However, employers are affected by the regulations in important ways.

Health insurers and HMOs are prohibited from disclosing protected health information (PHI) to employers who sponsor health plans, except to enable plan sponsors to carry out plan administration functions that the plan sponsor performs, and then only upon certification that the plan documents have been amended as required by the regulations.

Employers in turn must:

• amend their plan documents to set out the permitted and required use of protected health information;
• require others who gain access, such as agents and subcontractors, to comply with use and disclosure restrictions;
• provide for return or destruction of information that is no longer needed;
• provide for separation between the group plan itself and the plan sponsor; and,
• describe those employees or classes of employees who have access to the information.

Surveillance
An employer may install surveillance cameras around the workplace, as long as the cameras are located in places where there is no reasonable expectation of privacy. Having a stated legitimate business reason for installing cameras—safety in garage areas or to stop employee theft—is a good idea. Cameras installed in private areas, such as restrooms, would be difficult to justify. Surveillance outside the workplace is slightly different. Take, for example, an injured employee who is on leave and collecting workers’ compensation benefits. If the employer has a reasonable suspicion that the employee is malingering and hires an investigator to videotape the employee surreptitiously outside the workplace, there is no invasion. The employer had a legitimate
business purpose in conducting the surveillance and did so in an unobtrusive manner. However, if the employer instructs the investigator to interview all the employee’s neighbors, golfing buddies, and bowling team, as well as take the video, the employer may have invaded the employee’s privacy. Some companies take surveillance to a whole new level by inquiring into or investigating an applicant’s or employee’s after-hours, leisure activities, and lifestyle in making employment decisions. Claiming a desire to hold down health insurance costs, absenteeism, or negligent employment suits,
companies have been known to inquire about tobacco and alcohol use, participation
in dangerous sports like motorcycle racing or sky diving, and even sexual activities. Balancing the invasive nature of these inquiries against the questionable value of the information obtained suggests that such practices are ill-conceived. Some states prohibit an employer’s using information about lawful after-hours activities to make employment decisions.

Electronic Monitoring
Under the federal Electronic Communications Privacy Act (ECPA), it is illegal to intentionally intercept a wire, oral, or electronic communication. Intercept means the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device. Telephone conversations, voice mail messages, face-to-face conversations, and email (probably) are all protected by the ECPA. Employers are subject to the ECPA just like any other interceptor.

The ECPA prohibition does not apply when one of the parties to the conversation has consented to an intercept. So at least under federal law, if two persons are engaged in a telephone or face-to-face conversation, one of them may record the conversation without the consent or even the knowledge of the other.

Many states have enacted laws similar to the ECPA. Be warned, however, that unlike the ECPA, which is a one-party consent statute, some states have two-party consent statutes. In a two-party consent state, both parties to the conversation (or all parties if there are more than two) must consent to the intercept. Two-party consent statutes are not preempted by the ECPA and are fully enforceable.

For example, a company that deals with the public must get the consent of both the employee and the customer if it is doing business in a two-party consent state. The employee’s consent will be presumed if the employer notifies the employee of its intentions to record the communication beforehand. (It is a good idea to give the notice in writing and have the employee sign a receipt. A monitoring policy should also be stated in the employee handbook.) As for the customer, the employer should have a recorded
announcement at the beginning of each telephone conversation that the conversation may be monitored. If the customer proceeds with the conversation, his or her consent is also presumed. Even in one-party states, it is a good idea to let both the employee and the customer know in advance that conversations may be monitored.

Stored Communication
The ECPA also prohibits unauthorized access to stored communications (as distinguished from real-time, on-going communications), but it has an exception for the provider of the communications service. This exception probably allows an employer to access employee emails that are backed up on the employer’s own email server, as well as log data showing an employee’s Internet surfing habits.

Word-processing and other data files stored on the employer’s network server or on the employee’s workstation hard drive are not covered by the ECPA since they are not communications. However, even as to materials that are exempt from or not covered by the ECPA or comparable state statutes, employers need to be concerned about common-law privacy rights. As with searches of private places, the test is whether the employee had a reasonable expectation of privacy. To dispel any possible expectations of privacy,
the employer should make clear in the employee handbook that the entire computer network, including individual workstations, belongs to the employer and that the employer may, at any time and without notice, inspect any files stored, processed, or transmitted on company computers.

Personal Use of Equipment
Some companies go so far as to prohibit any personal use of communications equipment. While such a policy is perfectly legal, it is difficult to enforce. Failure to enforce a policy consistently can give rise to employee expectations that the policy is one in name only. It probably makes more sense to recognize that some personal use will inevitably take place and to adopt a policy limiting personal use to no more than a few minutes a day. The policy should also prohibit any improper or illegal use.

If an employer discovers a computer file that appears to be personal and in violation of company policy, the employer should normally not study its contents except to determine that the file is in fact personal. Studying the file’s contents beyond that point serves no legitimate business purpose, since the employer’s interests are normally sufficiently served by instructing the employee to remove the file and imposing appropriate discipline. If the employer reasonably suspects that the employee is using office computers to engage in some illegal activity, such as gambling, theft of trade
secrets, or distribution of pornography, further inspection of the file’s contents may be justified.

Telephone Equipment Exception.
A provision of the ECPA exempts telephone equipment so long as the equipment is being used in the ordinary course of business. Extension telephones and speaker phones, for example, normally qualify under this exemption, even though they can be used to intercept electronic communication.

Lie Detector Tests
With very limited exceptions, a federal law known as the Employee Polygraph Protection Act (EPPA) prohibits use of lie detectors in employment situations. The term lie detector as used in the federal statute includes not only polygraph equipment (which measures pulse, respiration, and perspiration), but also any other device, such as a voice stress analyzer. The EPPA goes so far as to prohibit an employer’s even requesting or suggesting that an employee submit to a lie detector test. Discharging an employee for
refusing to submit to a test is abusive and subjects the employer to civil damages.

Exceptions
Exceptions to the EPPA include tests administered by federal, state, and local government employers and tests administered by the federal government to employees of government contractors in connection with security, counterintelligence, and law enforcement functions. Exceptions for private employers include the following.

• Ongoing investigation. An employer may request its employee to submit to a polygraph test in connection with an ongoing investigation involving economic loss or injury to the employer’s business such as theft, embezzlement, misappropriation, or an act of unlawful industrial espionage or sabotage. The employee had to have access to the property that is the subject of the investigation and the employer must have a reasonable suspicion that
the employee was involved in the incident or activity under investigation.

• Security personnel. Prospective employees may be required to undergo polygraph tests in connection with employment as armored car personnel, personnel engaged in the design, installation, and maintenance of security alarm systems, and security personnel whose functions include protection of facilities that have a significant impact on public health or safety (nuclear power plants, public water supply, etc).

• Controlled substances. Prospective employees who will be involved in the manufacture or distribution of controlled substances may be required to undergo polygraph tests. In addition, an existing employee may be required to undergo a polygraph test in connection with an ongoing investigation involving loss of a controlled substance if the employee had access to the substance.

The EPPA goes on to specify a variety of requirements and procedures that must be met in order for the exemptions to apply. As a practical matter, most private employers will simply rule out lie detectors as a workplace tool.

Drug Testing and Drug-Free Workplaces
More and more employers are requiring job applicants and even existing employees to take and pass a test—usually a urine test or a hair sample—for illegal drugs. In some industries, such as the transportation industry, the need for a drug-free workplace is obvious. In other industries, employers may justify drug testing on grounds of lower accident rates or less absenteeism.

Employers who decide to have a drug testing program should engage an outside consultant to set up the program and perhaps even administer it on an on-going basis. This will help assure that the program is run professionally and in accordance with any applicable law, that drug screens are accurate and reliable, and that medical information obtained in the process is handled appropriately. Using an outside consultant may also help insulate the employer from liability should a breach of confidentiality occur or should an employee be falsely reported as an illegal drug user.

Employers and employees have sharply competing interests over drug and alcohol testing. On the one hand, an employer has a strong, sometimes compelling interest in maintaining a drug- and alcohol-free workplace. The employer is concerned with the safety of employees, customers, and the public generally, and with the effect of drug and alcohol abuse on job performance and absenteeism.

In contrast, employees have privacy rights. They object to employer scrutiny of their off-hours conduct. They question the accuracy of testing procedures. They worry about the confidentiality of unrelated medical information obtained in the testing process. Public sector employees and employees in regulated industries additionally have a constitutional right against unreasonable searches and seizures by the government.

Drug-Free Workplace Act
Lawmakers have attempted to balance these competing interests. At the federal level, the Drug-Free Workplace Act (DFWA) requires federal grant recipients and most federal contractors to:

• adopt and publish a policy prohibiting the unlawful manufacture, distribution, dispensation, possession, or use of a controlled substance in the workplace, and specify the disciplinary action that will be taken for such violations;

• establish a drug-free awareness program to inform employees about the dangers of drug abuse and the availability of any drug counseling, rehabilitation, and employee assistance programs;

• require employees to notify the employer within five days of any criminal convictions relating to drug violations in the workplace;

• notify the federal granting or contracting agency within ten days after receiving notice of the conviction; and,

• either discharge the convicted employee or require him or her to participate satisfactorily in a drug abuse assistance or rehabilitation program.
QUICK Tip
The Americans with Disabilities Act excludes current, illegal drug use from the disabilities that must be reasonably accommodated. Although the ADA prohibits medical
exams prior to an offer of employment, a test for illegal drugs is not considered a medical exam. It may take place before an offer of employment is made.

Department of Transportation
Employers in the various transportation industries regulated by the U.S. Department of Transportation (DOT) (aviation, mass transit, interstate pipelines, railroads, shipping, and trucking) are required to establish drug and alcohol policies for employees performing safety-sensitive jobs. Under these requirements, covered employees are prohibited from using, possessing, being under the influence of, or being impaired by drugs or alcohol
while performing their jobs. Covered employees are subject to drug and alcohol tests:

• as part of their employment application process (drug testing required; alcohol testing permitted);

• when there is a reasonable basis to suspect drug or alcohol abuse;

• on a random basis; and,

• following an accident.

DOT regulations set out in detail the components of a comprehensive drug-testing program with particular emphasis on fairness to the employees, collection and testing procedures, and record-keeping. Employers outside the transportation industry who are contemplating such a program should be guided by these regulations found at www.dot.gov/ost/dapc.

Other federal agencies, including the Department of Defense, the Department of Energy, and the Nuclear Regulatory Commission, have drug and alcohol regulations governing their contractors. DOT regulations have come under constitutional attack as a violation
of the employees’ Fourth Amendment right to be free from unreasonable searches and seizures. The Supreme Court has ruled, however, that while the Fourth Amendment applies to drug and alcohol testing conducted pursuant to government regulation, such testing is not unreasonable even in the absence of a search warrant and even absent any basis to suspect the individual being tested.

Employers need to keep in mind certain federal-level restrictions applicable to their drug and alcohol programs. The Americans with Disabilities Act generally prohibits any pre-employment medical examinations. Although pre-employment tests for illegal drugs are expressly permitted under the ADA, pre-employment tests for alcohol are not.

The ADA also generally prohibits discrimination against, and requires reasonable accommodation of, people with disabilities—including addictions. While people with drug and alcohol addictions fall within these general ADA provisions, an employer:

• may discriminate against current users of illegal drugs;

• may discipline employees for use or possession of drugs or alcohol at the workplace in violation of company policy, even if the use or possession is the result of addiction; and,

• need not tolerate poor work performance, even if the deficiencies are the result of addiction.

Employee Mail
Federal law prohibits obstruction of mail correspondence. If a letter arrives addressed to a former employee that is obviously personal—the envelope is the size and shape of a greeting card, the address is handwritten, it is addressed to the former employee in care of the company, it has a handwritten, nonbusiness return address, and it was stamped rather than metered—then the employer’s clear duty is to forward it unopened to the
former employee.

However, if the envelope has all the earmarks of a business correspondence, including a pre-printed return address of one of the company’s customers, most employers would not hesitate to open the letter, but their right to do so is not so clear.

An appropriate provision in the employee handbook should help resolve the matter. The provision should say:
Mail arriving at the company’s place of business that reasonably appears to be business mail intended for the company may be opened by any authorized company employee, even if it is addressed to some other specific employee or former employee. By accepting employment, an employee grants permission to the company to open mail in accordance with the foregoing, and that the permission continues throughout the employment and
after it ends.

Consumer Reports
Federal law regulates the use by employers of credit and investigative reports prepared by consumer reporting agencies. The federal Fair Credit Reporting Act (FCRA) defines a consumer reporting agency (CRA) as a person or entity which, for a fee, assembles or evaluates credit information or other information on consumers for the purpose of regularly furnishing consumer reports to third parties (such as employers).

In general, employers may obtain consumer reports from CRAs, including investigative reports, to assess the character and general reputation for purposes of evaluating, promoting, reassigning, or retaining an applicant. The law places limits on how far back the credit reporting agency may go for various types of information, but those limits do not apply when highly compensated positions are being filled.

However, when requesting a consumer report, the employer must inform the applicant or employee in writing that such a report is being requested and must obtain the applicant’s or employee’s written authorization to obtain the report. The authorization should be a separate, stand-alone document and not be imbedded in the employment application or some other form. The applicant or employee may in turn make a written request to be
informed of the full nature and scope of the report being requested, and the employer must then furnish that information.

If the employer intends to make an adverse employment decision based wholly or partly on the consumer report, the employer must first inform the applicant or employee of this intention. In addition, the employer must supply the applicant or employee with the name and address of the CRA that made the report, a copy of the report, and a statement explaining the applicant’s or employee’s rights under federal law to challenge the accuracy of the report. The Federal Trade Commission, which enforces the FCRA, has developed a form statement of employee rights under federal law that satisfies the employer’s FCRA obligations. A copy is available from the FTC at www.ftc.gov/os/statutes/2summary.htm.

Criminal Records
In general, employers are free to ask applicants about criminal convictions, assuming there is a reasonable business purpose for doing so. However, the EEOC and some courts take the position that asking about arrests, when no conviction resulted, is discriminatory under Title VII. Court records (except juvenile records) are open to the public and may be inspected at federal and state courthouses. Private companies can be hired to do statewide or county-by-county searches.
Alert!
The FTC recently took the position that if an employer, in responding to a complaint of sexual harassment, turns to an outside organization for assistance in the investigation, the outside organization is a consumer reporting agency and the employer’s obligations under the FCRA are triggered. Additional information about the FCRA is available at
www.ftc.gov/bcp/conline/pubs/buspubs/credempl.htm.

Driving Records
The federal Driver’s Privacy Protection Act of 1994 prohibits state motor vehicle departments from disclosing personal information without the consent of the person involved. Personal information is defined as information that identifies an individual, including an individual’s photograph, Social Security number, driver identification number, name, address, telephone number, and medical or disability information. Excluded from the definition is information on vehicular accidents, driving violations, and driver’s status. When an employer decides to check driving records, the simplest procedure is to require the employee or prospective employee to personally obtain
the record. As always, the decision should be supported by a reasonable business purpose and should be invoked on a nondiscriminatory basis.

Identity Theft
Identity theft is a serious and growing national problem. According to some reports, the top cause of identity fraud is theft of records from employers or other businesses that maintain personal information on individuals. The information that employers necessarily obtain as part of the employment relationship—name, birthdate, address, and Social Security number—is the very information that enables an identity thief to commit crimes. Employers need to safeguard that information. Failure to do so could result in legal liability. The following list has steps that can be taken by employers to protect employee persona

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