EMPLOyER'S PRACTICAL LEGAL GUIDE Plain Language About ...

Employer’sPracticalLegal GuidePlain LanguageAbout CurrentEmployment LawBPLG1401

Contributing AdviserAnniken Davenport, Esq.EditorKathy A. ShippEditorial DirectorPatrick DiDomenicoAssociate PublisherAdam GoldsteinPublisherPhillip A. Ash© 2014, 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002, 2001, BusinessManagement Daily, a division of Capitol Information Group, Inc., 7600A Leesburg Pike,West Building, Suite 300, Falls Church, VA 22043-2004; www.BusinessManagementDaily.com;phone: (800) 543-2055. All rights reserved. No part of this special report may be reproducedin any form or by any means without written permission from the publisher. Printed in U.S.A.ISBN 1-880024-23-3This publication is designed to provide accurate and authoritative information in regard to the subjectmatter covered. It is sold with the understanding that the publisher is not engaged in rendering legalservice. If you require legal advice, please seek the services of an attorney.

ContentsIntroductionSpecial Report OverviewRecent RulingsTest Your ComplianceWhich Rulings Affect You the Most?Circuits of the U.S. Court of Appealsixxxixiixiiixiii1. Screening/Hiring 1.1Job Descriptions 1.3Advertising a Position 1.4Recruiting/Screening Practices 1.5The Job Application 1.7Personnel Practices Audit: Job Applications 1.8New Trend: Video Résumés 1.10Interviews 1.11Personnel Practices Audit: Interviews 1.13EEO-1 Reports 1.14Testing 1.14Reference/Background Checks 1.18‘Protected’ Candidates 1.20IRCA: Hiring Immigrants 1.21Acceptable Documents for I-9 1.22Personnel Practices Audit:Screening Foreign-Born Applicants 1.25Disabled Applicants 1.27Personnel Practices Audit: Disabled Applicants 1.28Negligent Hiring 1.29i

iiEmployer’s Practical Legal GuidePersonnel Practices Audit: Negligent Hiring 1.30Employment Contracts 1.31Personnel Practices Audit: Implied Contracts 1.33English-Only Policies 1.352. Employee Conduct/Performance 2.1Performance Reviews 2.1Personnel Practices Audit:What to Include in Employee Logs 2.4Privacy Issues 2.5Email/Internet Use 2.9Rules on Electronic Record-Keeping 2.15Off-Duty Behavior 2.16Personnel Practices Audit:Regulating Off-Duty Behavior 2.17Anti-Theft Policies 2.19Personnel Practices Audit:Preventing Company Theft 2.20Dress Code 2.21Trade Secrets 2.233. Employee Handbooks 3.1Protect Your At-Will Status 3.2The 10 Most Common Mistakes 3.3A Dangerous Book 3.4What the Courts Consider 3.5Your Handbook and the Union 3.7Employee Handbook Essentials 3.8Audit Your Handbook 3.10Personnel Practices Audit:Your Company Handbook 3.11Alternative Dispute Resolution 3.134. Fair Labor Standards Act 4.1Hours of Work 4.2Travel Time 4.3Sleeping Time 4.4Training Programs and Lectures 4.4Other Work-Related Activities 4.5Civic and Charitable Work 4.6

contents iiiMinimum-Wage Compliance 4.6Difficult Calculations 4.8Payroll Deductions 4.9Computing Overtime 4.10Special Types of Payments 4.11Exclusions From Base-Rate Formulas 4.12Child Labor Rules 4.13Record-Keeping Requirements 4.14Exempt vs. Nonexempt Status 4.15Salary Basis 4.16Nonexempt: Blue-Collar Workers, First Responders 4.17Duties Tests 4.18‘Highly Compensated Worker’ Exemption 4.24‘Fee Basis’ 4.29Classifying Workers 4.29Audit: Test Your Compliance 4.305. Independent Contractors 5.1The IRS Test 5.1Watch State Laws 5.4Audit Blitz: IRS Turning Up the Heat 5.5The IRS’ New Attitude 5.6Section 530 relief 5.6Form SS-8: Inviting a ruling 5.7The IRS on Patrol 5.8Compliance check or audit? 5.8Form 1099: Handle With Care 5.9Preventive Steps 5.11Contracts: Your Most Important Protection 5.12Personnel Practices Audit: Independent Contractors 5.13Contractors Can Sue for Discrimination 5.15Liability for Contractor’s Actions 5.156. Workers’ Safety/Health 6.1Occupational Safety and Health Act 6.2Keep Workers Informed 6.3Personnel Practices Audit: Complying With OSHA 6.4OSHA Penalties 6.6Ergonomics 6.7

ivEmployer’s Practical Legal GuideWhistle-Blower Program 6.9Wellness Programs 6.9AIDS Programs 6.11Workers’ Compensation 6.12Who’s covered 6.12How rates are set 6.13Benefit awards 6.13State administration 6.14Keeping down your costs 6.14Don’t retaliate against employees 6.16No insurance? A cautionary tale 6.167. Terminations/Layoffs 7.1Firing at Will 7.2Personnel Practices Audit: Terminations 7.3Minimize Your Risk 7.5Progressive Discipline 7.6Constructive Discharge 7.6Model for Progressive Discipline 7.8Noncompete Clauses 7.10Personnel Practices Audit: Noncompete Clauses 7.11Severance Pay 7.11Providing References 7.12Personnel Practices Audit: Reference Inquiries 7.13Layoffs: The WARN Act 7.15Your COBRA Obligations 7.17Health Insurance Portability 7.21Unemployment Insurance 7.25Federal tax set by law 7.25How states determine your taxable wage base 7.26Setting your tax rate 7.26Charges against your account 7.28Reporting requirements 7.29Exit Interviews 7.29Documentation: Do’s and don’ts 7.30Prepare for the worst 7.31Ease fear of retaliation 7.32What should you ask? 7.33Using exit interview forms 7.34

contents v8. Alcohol/Drug Testing 8.1Tread Cautiously 8.2Cut Insurance Costs 8.3Protect Employees’ Privacy 8.5Accommodating Legal Pot? 8.69. Gender/Age Discrimination 9.1Gender Issues 9.5Personnel Practices Audit:Complying With the Equal Pay Act 9.6Equal Pay Act 9.7Pregnancy Discrimination Act 9.7Sex Discrimination 9.10Lilly Ledbetter Fair Pay Act 9.12Age Discrimination in Employment Act 9.13Personnel Practices Audit:Complying With the ADEA 9.14Youth-Bias Claims 9.1610. Civil Rights Act 10.1Hostile Environment 10.3Disparate Impact 10.3Mixed-Motive Discrimination 10.4Affirmative Action 10.4Your Burden of Proof 10.6Section 1981: New Avenue for Claims 10.7Screening Tests 10.8Race Norming of Employment Tests 10.9‘Systemic Discrimination’ 10.9Damages and Jury Trials 10.911. Sexual Harassment 11.1Quid Pro Quo and Hostile Environment 11.2Employer Liability Increases 11.2Shielding Your Company 11.4Sample Policy 11.6The EEOC Reporting Process 11.10Sexual Orientation Issues 11.11

viEmployer’s Practical Legal Guide12. Americans with Disabilities Act 12.1ADA Compliance 12.2Who’s Covered 12.3Definition of a Disability 12.4Drug and Alcohol Addiction 12.5AIDS and HIV 12.9Mental Disabilities: EEOC Guidelines 12.10Guidance for Specific Disabilities 12.13Hiring Practices and the ADA 12.14Essential Functions 12.14Interview Do’s and Don’ts 12.15Disability Questions 12.17Reasonable Accommodation 12.18Performance and Conduct Standards 12.20Financial and Technical Assistance 12.21Genetic Information Nondiscrimination Act 12.2413. FMLA Leave, Military Leave 13.1Family and Medical Leave Act 13.1Compliance Regulations 13.2Employee Eligibility 13.2Summary: Revised FMLA Regulations 13.3Leave Time 13.5Who Is Considered Family? 13.6FMLA Now Covers Care by Same-Sex Parents 13.7‘Serious Health Condition’ Defined 13.7Health Care Providers 13.9Notice Requirements 13.10Notifying Employee of FMLA Leave 13.11Key Employees 13.13Undue Disruption 13.13Intermittent Leave 13.14Paid vs. Unpaid Leave 13.14Benefits 13.15When a Worker Returns 13.16Refusing to Reinstate an Employee 13.18Record-Keeping at a Minimum 13.19Other Laws Apply 13.20

contents viiMilitary Family Leave Under the FMLA 13.21Military Leave: USERRA 13.2314. Your Rights in a Union Situation 14.1Scope of Unions Today 14.1NLRA and the Taft-Hartley Act 14.2National Labor Relations Board 14.3If You’re Targeted by a Union 14.3More Information About Unions 14.4Your Rights in a Union-Organizing Campaign 14.5What you can’t do 14.7What you can do 14.8If You’re a Unionized Employer 14.10Why Employees Should Not Want a Union 14.11Court Nixes Pro-Union Poster Requirement 14.1215. ERISA 15.1Application of ERISA 15.2Impact of GINA, MHPA on ERISA-CoveredHealth Plans 15.3Fiduciary Duties 15.4Pension Benefits 15.6Defined benefit plans 15.6Defined contribution plans 15.8Hybrid plans 15.9ERISA requirements 15.10Pension Protection Act 15.11Reporting and Disclosure 15.12Reporting: Form 5500 15.13Paying Claims: Remedies 15.14Appendix A: State Labor Authorities A.1Appendix B: Further Information B.1

IntroductionNowadays, employers and HR professionals mustpay more attention than ever to new laws takingeffect, increased agency enforcement, an activistCongress and more employment lawsuits resulting inrecord settlements.For example, in fiscal 2013, workers filed 93,727 job discriminationcharges with the EEOC. That’s about 6,000 fewer claims thanin 2012, but the total still runs near historic highs. While fewerpeople filed discrimination charges against private-sector employersand ex-employers last year, those who did collected a record$372 million in monetary relief through settlements and mediation.(That trumps 2012’s record-breaking total of $365 million.)One reason for bigger settlements: The EEOC has worked harderat targeting companies with a systemic culture of job bias. Themessage: Employers can expect more aggressive enforcement andquicker resolution of cases.In addition, the U.S. Department of Labor has vowed vigorousenforcement of the nation’s labor laws and has beefed up itsinvestigative force by 33%. The number of Fair Labor StandardsAct case filings involving misclassification and other wage-andhourchallenges has skyrocketed since the 1990s—more than 7,750in 2013 alone. And the IRS says it plans to audit 6,000 businessesto determine whether taxes, fines and penalties may be due. Stateagencies are planning to do the same.The U.S. Immigration and Customs Enforcement (ICE) as wellhas launched a new audit initiative targeting employers that hireundocumented workers.ix

xEmployer’s Practical Legal GuideNot surprisingly, many employers feel like they are navigatinga minefield of federal regulations and potential lawsuitssurrounding every employment action—from hiring and firing topromotions and payroll.The good news: Employers do have rights. As long as you knowyour rights and follow recommended best practices in this specialreport, you can proceed with confidence that you are treatingyour employees fairly under the law. And while you can’t alwaysprevent a complaint or a lawsuit lodged by an employee, you candefend yourself by ensuring you have proper policies and proceduresin place and the documentation to back them up in court.This special report provides the information you need duringevery phase of employment. Each section deals with a specificemployment phase so that you can quickly find answers to allyour questions. Every year, we update this report to keep youinformed of the ever-changing legal and legislative landscape thatemployers must navigate.Special Report OverviewThe Employer’s Practical Legal Guide is organized by topics relevantto the workplace, such as hiring, employee handbooks and terminations.In addition, the report surveys the major federal employmentlaws in simple, straightforward language written expresslyfor you—not in legalese—and emphasizes the practical aspects ofhow these laws affect your workplace.We begin with Title VII of the Civil Rights Act of 1964, whichis the principal federal employment law prohibiting all forms ofdiscrimination on the basis of race, color, sex, national origin andreligion.Then we move on to an in-depth, practical review of otherfederal employment laws:• ADA Amendments Act• Age Discrimination in Employment Act• Americans with Disabilities Act• Civil Rights Act of 1991• COBRA• Employee Retirement Income Security Act

introduction xi• Equal Pay Act• Fair Credit Reporting Act• Fair Labor Standards Act• Family and Medical Leave Act• Genetic Information Nondiscrimination Act• Health Insurance Portability and Accountability Act• Immigration Reform and Control Act• Lilly Ledbetter Fair Pay Act• Occupational Safety and Health Act• Older Workers Benefit Protection Act• Pregnancy Discrimination Act• Uniformed Services Employment and Reemployment Rights Act• Worker Adjustment and Retraining Notification ActRecent RulingsThis special report goes beyond the headlines of major cases tolook at the substance of each major court decision and explainwhat it means to you as an employer.During the past year, the U.S. Supreme Court handed downsome key workplace-related decisions.■ The Supreme Court handed down a long-awaited rulingthat will make it more difficult for employees to file job discriminationlawsuits against employers. The high court ruled that onlysomeone with the power to take “tangible employment action”against a subordinate can be considered a “supervisor” in Title VIIdiscrimination cases.The ruling clarified exactly who is a “supervisor” in suchcases. The court said a supervisor must have the power to takea “tangible employment action,” such as “to hire, fire, demote,promote, transfer or discipline.” Vance v. Ball State University, No.11-556, 2013■ In another victory for employers, the Supreme Court ruledthat employees can only win retaliation lawsuits if they can provethat their employer retaliated solely because the employee engagedin some sort of protected activity, such as complaining about discrimination.The court’s ruling established a “but-for” retaliation standardas the law of the land: But for the employee’s protected status or

xiiEmployer’s Practical Legal Guideactivity, would the employer have retaliated? So-called mixedmotivearguments—that protected status or activity was just one ofseveral possible reasons for the retaliation—will no longer suffice.This ruling should make it easier for employers to defeat retaliationclaims, and may result in fewer claims being filed. Universityof Texas Southwestern Medical Center v. Nassar, No. 12-484, 2013■ The Supreme Court ruled the Defense of Marriage Act(DOMA) unconstitutional, a decision that set in motion a sweepingrewrite of federal rules affecting benefits administration andpayroll operations. The court’s decision overturned Section 3 ofDOMA—which since 1996 has defined marriage under federallaw as the union of a man and a woman—saying it violated theconstitutional right to equal protection under the law. UnitedStates v. Windsor, No. 12–307, 2013The Windsor ruling means that, in states where same-sex marriageis legal, all federal laws that provide benefits to married couplesmust now provide them to same-sex couples, too. Among themore than 1,000 laws affected are the tax code, the FMLA, ERISAand other laws related to employee health and retirement benefits.As these cases show, the employment law landscape is constantlychanging. Employers win some and lose some, and therules are different every day. The purpose of this special report isto help you stay on top of all those changes.Throughout the report, you’ll find tips to help develop companypolicy, write employee handbooks and administer disputeresolution. With the Practical Legal Guide in hand, you can train keypersonnel, ask the right questions of your attorney and establishsound procedures for handling employee requests and disputes.Test Your ComplianceEvery organization, from the smallest mom-and-pop operation tothe largest multinational conglomerate, must be aware of currentdevelopments in employment law to understand which personnelpolicies and practices are appropriate and which could plungethem into legal hot water. They must also know when to imple-(Continued on page xiv)

introduction xiiiWhich Rulings Affect You the Most?In reviewing judicial decisions and their applicability to yourorganization, it’s important to remember that only decisionsrendered by the U.S. Supreme Court and by courts in yourjurisdiction are binding on you. Courts refer to this as “bindingprecedent.”Nevertheless, courts often look to other jurisdictions for guidance(“persuasive precedent”) when addressing issues for thefirst time. Therefore, decisions from other jurisdictions can beinstructive when making employment decisions.Tracking the system: District courts are the trial courts ofthe federal court system. All states have one or more districtcourts, depending on the size and population of the state.The circuit courts of appeal are the federal appellate courts,and their decisions are binding on all states and district courtswithin their circuit. Decisions rendered by the U.S. SupremeCourt, the highest federal court in the country, are binding onall lower federal courts. The map below indicates the 12 areascovered by the circuit courts of appeal.Circuits of the U.S. Court of Appeals1991085761134212D.C.

xivEmployer’s Practical Legal Guide(Continued from page xii)ment or amend policies and practices so as to keep current withchanging laws and regulations.The Employer’s Practical Legal Guide provides you an opportunityto audit your personnel policies via a series of question-andanswersections covering important points in employment law.Your answers will demonstrate whether your personnel practicesare in compliance with current legal requirements. If you seemto be frequently checking the “Don’t Know” boxes in the audits,that should raise a red flag, warning that you need to consultwith your attorney immediately. At a minimum, you shouldhave an employee manual in place, along with a procedure forinvestigating and remedying employee complaints regardingharassment, discrimination and retaliation.Note that the audits in this report are not exhaustive becausethe questions cannot reflect the myriad of state laws on personnelpractices and compliance requirements. As such, HR personnel oryour attorney should check with your state department of labor orhuman rights commission to ensure compliance with all fed eral,state and local laws. In addition, you may want to have your attorneyconduct a comprehensive audit of your company to ensurecompliance with all applicable laws or to suggest new policies andprocedures to further limit your liability.There’s no question that labor and employment laws arecomplicated and confusing, but your company’s long-term survivalcould depend on how well you understand and complywith them. Spending a few hundred dollars consulting with anattorney, drafting new policies and procedures or rewriting youremployee handbook could save you thousands—possibly millions—ofdollars in legal fees and judgments down the road.In addition, keep in mind that our employment laws allare based on the simple concept of fundamental fairness in theworkplace. Employers who treat their employees with respect willhave a better relationship with them, which will, in turn, translateinto increased productivity and profitability.Keeping that concept in mind when using this special reportwill go a long way toward ensuring that you have an amicablerather than an adversarial relationship with your workforce.

Section 1Screening/HiringProtecting yourself and your organization from lawsuitsstarts the minute you decide to hire some one.Potential lawsuit land mines line your path.What’s the best course of action? First, you need a job descriptionthat’s accurate, job related, nondiscriminatory and up to date.Next, you need to advertise the opening in a way that complieswith state, federal and local anti-discrimination laws and attractsqualified candidates. Then you need to arrange and conduct interviewsin a way that accommodates applicants with disabilitiesand shows that you aren’t using the process to screen out qualifiedmembers of protected classes. Finally, you must have a selectionprocess that is blind to a candidate’s race, sex, age (if over 40),national origin and religion and that offers reasonable accommodationsto qualified disabled applicants.Federal laws have created a labyrinth of employee protections,and employers that even unintentionally discriminate will findthemselves tangled in expensive litigation.Best known is Title VII of the Civil Rights Act of 1964, whichprotects workers from discrimination based on race, color, sex,religion or national origin. Employers must also comply withthe Equal Pay Act of 1963, which protects men and women whoperform substantially equal work in the same establishment fromsex-based wage discrimination, and the Pregnancy Dis crimi nationAct of 1978, which makes it illegal to discriminate on the basisof pregnancy, childbirth or related medical conditions. The Age1.1

1.2 Employer’s Practical Legal GuideDiscrimination in Employment Act of 1967 protects individ ualswho are 40 or older. The Americans with Disabilities Act of 1990protects qualified disabled individuals from discrimination andmandates that employers provide reasonable accommodations fortheir disabilities. The Genetic Information Non dis crimi nation Actbars employers from using an employee’s genetic information inany employment decisions.The Family and Medical Leave Act provides up to 12 weeksof unpaid leave for the birth or adoption of a child, the serioushealth condition of an employee or an immediate family member,as well as military-related leave for employees who have familymembers in the armed services or reserves. The UniformedServices Employment and Reemployment Rights Act protectsindividuals who are members of the reserves or National Guardfrom discrimination based on their service status and protectstheir rights to be rehired after they have completed their activedutyservice.If you employ more than 15 full or part-time workers, youare required to comply with Title VII of the Civil Rights Act, thePregnancy Discrimination Act and the Americans with Dis abilitiesAct. You are covered by the Age Discrimination in EmploymentAct if you employ more than 20 workers. The Equal Pay Actapplies to all organizations covered by the Fair Labor StandardsAct, which includes virtually all employers.Most federal employment discrimination laws are enforcedby the Equal Employment Opportunity Commission (EEOC),while most federal wage-and-hour laws are enforced by the LaborDepartment. In addition, most states have their own departmentsof labor and equal employment commissions as well as laws thatparallel federal ones or offer even greater protection for workers.Often, these state laws cover employers with fewer workers thando the federal laws.Clearly, to stay out of court, organizations must make it theirbusiness to understand federal, state and local laws. But everyyear, thousands of employers learn the hard way. In 2013 alone,employers paid out $372 million to settle EEOC claims. And that’sjust the tip of the iceberg. That figure does not include the millionsawarded by juries in cases that went on to trial.

screening/Hiring 1.3Job DescriptionsEven though job descriptions are absolutely essential, too fewemployers use them effectively and some even view them as anuisance. Every employer should maintain a file of up-to-date jobdescriptions for every position in the organization.Because duties change over time, job descriptions must beupdated regularly to ensure they accurately describe what workersdo. Job descriptions are one of the first documents requestedby lawyers representing workers and by the administrative agenciesthat enforce the law. If you don’t have one or if it doesn’tdescribe the job in question, your case is already off to a bad start.Job descriptions took on new importance after passage of theAmeri cans with Disabilities Act. That’s because the ADA statesthat disabled workers and applicants are entitled to reasonableaccommodations for their disabilities if such accommodationsare needed to perform the essential functions of a job. Therefore,every job description must identify which functions are essentialto the job and which are not.➤ Observation: According to the EEOC, your judgment as towhat functions are essential as identified in your job descriptionwill be given greatest consideration if you identified those functionsbefore the slot was advertised and interviewing began. Ifyou don’t provide the EEOC or a court hearing a case with a jobdescription, they may create one for you and hold you to it.Job descriptions are not “decreed from on high.” They arecarefully constructed by obtaining input from the person(s) whoholds the job, supervisors of that position, and those who regularlyinteract with and/or report to the person in that position. You’llwant to know:• The job title.• The job’s essential functions, such as whether it requiresheavy lifting, and if so, how often.• Secondary or infrequent duties.• Job performance standards, such as sales quotas.• Who is responsible for supervision.

1.4 Employer’s Practical Legal Guide• Whom the worker supervises.• Any special training, experience or education required forthe position, including special certifications, degrees or skills.Advertising a PositionOnce you have a good job description, writing the job announcementis simplified. The job listing or advertisement should includethe following:• Job title and number; location of position.• Hours of work and whether travel/overtime is required.• Salary range and brief explanation of benefits.• Description of essential functions of the job and experienceand educational qualifications required.• Instructions and deadline for submitting applications.• An equal employment opportunity statement and a notice todisabled applicants about accommodation requests.Some employers have gone so far as to list known accommodationsfor specific positions. This goes beyond what the lawrequires but shows that employers are genuinely interested in hiringdisabled workers. One caveat: When listing accommodations,make it clear the list is not exclusive or exhaustive. New accommodationscome along all the time.More than likely, the job will be advertised on the Internet.Just as with buildings, websites have accessibility rules. Currently,the rules apply primarily to government websites, but organizationsreceiving government funding usually must comply withstandards in Section 508 of the Rehabilitation Act. Website accessibilityissues include providing alternate text to describe graphicsso that screen-reading programs can read the page to a visuallyimpaired user or the availability of a large-text site. Governmentagencies and contractors should also make sure any outside siteslisting openings are ADA compliant.

screening/Hiring 1.5In addition, employers should provide alternative methodsof contact, such as TTY phone services for hearing-impaired applicants.Job ads should not refer to an applicant’s age, gender, raceor any other protected class. Ads that say “Perfect for collegestudents” may discourage older workers and violate the ADEA.“Ideal for working mothers” may violate Title VII because it discouragesmen from applying. “Person in good health” may violatethe ADA by discouraging disabled workers even though it may bepossible to accommodate their disability.Recruiting/Screening PracticesIn 2007, the EEOC introduced E-RACE, an initiative for “EradicatingRacism And Colorism from Employment.” The initiative’sgoal: to eliminate recruiting and hiring practices that lead to discriminationby limiting an employer’s applicant pool.The EEOC noted that the makeup of an employer’s workforceis “highly dependent on how and where the employer looks forcandidates.” Employers that recruit from homogeneous sources(such as certain neighborhoods, schools, religious institutionsor social networks) may be subject to discrimination charges.For example, if you usually recruit at a college with few blackstudents, the EEOC expects you also to recruit at predominantlyAfrican American colleges to reflect the diversity of the qualifiedlabor force. The agency is also targeting word-of-mouth referrals,which tend to multiply underlying disparities in an employer’sworkforce.As the EEOC further observed, using names, criminal recordsand credit scores during screening can result in racial discrimination:■ Names: The EEOC is on the alert for “name discrimination.”A person’s name often reflects his or her cultural or racialbackground. Studies show that people who submit résumés andapplications with names common among whites are 50% morelikely to land interviews than those with names common amongnon-whites. The EEOC says, ‘‘We’ll be looking at ethnic names and

1.6 Employer’s Practical Legal Guidewhether employers are using them to make the first cut, especiallyin Internet applications.”■ Criminal records: The EEOC has long taken the positionthat, unless consistent with “business necessity,” hiring decisionsbased solely on arrest or conviction records, as opposed to theunderlying offense, are discriminatory.An employment practice is considered consistent with businessnecessity if it’s genuinely related to job performance. So, if theconduct underlying an arrest or conviction record indicates thatthe applicant isn’t suited for a particular job, you may base yourhiring decision on that conduct.But, according to the EEOC, the employer must also considerthe likelihood that the applicant actually engaged in the conduct.That’s where the difference between arrests and convictions comesinto play: Employers may not simply assume that an arrest meansthe applicant committed a crime. Rather, an employer must givethe applicant a chance to explain the circumstances of the arrestbefore making an employment decision.Even in the case of a conviction, an employer must considerthree factors: (1) the nature and gravity of the offense, (2) the amountof time that passed since it was committed and (3) the natureof the job held or sought. This analysis is highly fact-specific.For guidance on using criminal records to screen candidates, go towww.eeoc.gov/laws/guidance/arrest_conviction.cfm.■ Credit scores: The EEOC believes many employers usecredit reports to screen out applicants without justification. It hasflatly stated that, absent business necessity, credit checks excludetoo many black and Hispanic applicants to pass muster underTitle VII. Employers that rely on credit history to screen applicantsfor positions with no financial responsibility must be preparedto demonstrate a specific, objectively reasonable business justificationfor doing so. (See also page 1.10 for details on the Fair CreditReporting Act.)Historically, the EEOC has frowned on the recruiting and hiringpractices targeted under E-RACE. But E-RACE represents adramatic turn in the EEOC’s focus toward rooting out more subtleforms of workplace discrimination.

screening/Hiring 1.7The Job ApplicationBecause résumés aren’t standardized and may not provide allthe information needed to screen applicants fairly and effectively,most companies ask candidates to fill out an application. A standardizedapplication should be easy to understand and providesimple instructions.All application forms should be reviewed by an employmentlaw attorney to make sure they meet federal, state and localrequirements and do not ask for information that could be consideredillegal. Most applications will include:• General personal data, including name, address, phone numberand Social Security number.• Educational and professional experience, including schoolsattended and degrees earned, employment history and namesof supervisors. You may also want to include a blank page toallow applicants to expand on their professional experienceor educational background.• List of professional references.• An area marked “for administrative use only.” This area canbe used to record test scores or interview information forinternal use. Just remember that anything written in this areacan be used in court or at an EEOC hearing.• Equal employment opportunity statement informing applicantsthat all persons are encouraged to apply regardless ofage, sex, religion, national origin, race or disability.• A disability statement indicating that accommodations areavailable to disabled applicants who need and request them.• A statement of accuracy, signed by the applicant, attestingthat the information furnished in the application is correctand accurate, as well as a statement that falsification of informationis grounds for dismissal.• A signed release-of-information statement, authorizing yourcompany to run security and background checks. This can

1.8 Employer’s Practical Legal GuidePersonnel Practices Audit: Job ApplicationsAnswer the following about your job applications:Don’tYes No Know1. Do you require that onlycertain applicants fill out formalapplications? ❏ ❏ ❏2. Do you require any of the followinginformation on your applications?Names of relatives and friends ❏ ❏ ❏Age ❏ ❏ ❏Physical attributes ❏ ❏ ❏Citizenship or national origin ❏ ❏ ❏Military discharge status ❏ ❏ ❏Arrest and conviction records ❏ ❏ ❏Disabilities (physical or mental) ❏ ❏ ❏Pregnancy/childbearing intentions ❏ ❏ ❏Sexual orientation ❏ ❏ ❏Bonding ❏ ❏ ❏Transportation plans ❏ ❏ ❏Garnishment records ❏ ❏ ❏Organization memberships ❏ ❏ ❏Emergency information ❏ ❏ ❏3. Do you treat applications receivedvia email or the Web differentlythan paper applications? ❏ ❏ ❏If you answered “Yes” to any of these questions, your jobapplications may be a legal land mine. If an applicant everbrought a suit against your company, it could be argued thatyou asked questions irrelevant to the applicant-screeningprocess, which suggests that you intended to discriminate.

screening/Hiring 1.9include a statement under the Fair Credit Reporting Act givingpermission to run a credit report on the applicant. (Seepage 1.11 for more details on obtaining credit reports.)• A signed acknowledgment of arbitration provisions if yourcompany uses them. (See arbitration agreements in Section 3.)You may also want to include a statement to the effect thatapplicants understand that if hired, they are at-will employees andhave no guarantees of permanent or long-term employment. Besure to have the statement reviewed by your attorney.Also, make sure you gather only job-related data that will helpyou make an employment decision. You don’t need to know theapplicant’s age, marital status or family size. Asking those typesof questions could be interpreted as a way to screen out applicantsbased on childbearing, religion or age. Always ask yourselfwhether the questions on your application form will help youmake a selection and are job-related. If they aren’t, they should notbe on the application.➤ Observation: Asking a candidate’s age or getting thatinformation in a roundabout way can cause trouble. For example,avoid asking what year someone graduated from high school orcollege; that can be seen as a way to determine the applicant’sage. But what can you do if you need to know how current anapplicant’s skills are or when the date of graduation from aprogram may be relevant? Don’t ask for the date, but ask aboutthe particular skill you’re interested in. Say you are hiring acomputer programmer and require a degree in computer scienceand knowledge of programming languages. Ask about specificexperience in those languages, not the date of graduation.Only in rare instances is someone’s age relevant enough toconstitute a bona fide occupational qualification, or BFOQ—onethat is reasonably necessary to perform the job. For example, ageis a BFOQ for airline pilots because the Federal Aviation Admin ­is tra tion sets the age limit for pilots at 65 years for safety reasons.➤ Recommendation: If you’re filling a job that requires financialdiscretion, you may want to get a picture of the applicant’sfinances. An applicant with a poor credit history may be riskyfor a position that requires handling large sums of money or that

1.10 Employer’s Practical Legal GuideNew Trend: Video RésumésJob applicants have discovered a trendy new way to catchan employer’s eye: slick, professional-looking video résuméson which they tout their accomplishments, education andexperience.Advocates claim video résumés allow applicants to demonstratetheir communication skills and presence. The problem lies inwhat the videos reveal beyond the applicant’s qualifications.Employers can easily discern from a video résumé the answers toquestions they could never legally ask on a job application or inan interview. If that information, rather than the applicant’s qualifications,becomes the basis for hiring decisions, the employermay very well move from video résumés into a courtroom.Employers must ensure the fairness of their hiring practices. Youshould analyze video résumés the same way as you do paper orelectronic ones.Best approach: Rely on paper applications, not on applicants’video résumés, particularly early in the hiring process.comes with a corporate credit card. Before doing a credit check,make sure you have a legitimate business reason.Fair Credit Reporting ActThe FCRA requires employers to notify and receive written consentfrom applicants or employees before obtaining credit reportsor other background information on them from a consumer reportingagency (CRA). The law, as interpreted by the Federal TradeCommission, applies only to third-party background checks, notto an employer’s own investigation of, say, an applicant’s references,educational degree or driving records.If you are requesting an “investigative consumer report”—amore in-depth investigation than just a credit report—you must

screening/Hiring 1.11provide the applicant with a disclosure revealing the applicant’sright to request information about the “nature and scope” of thereport. Should the applicant make such a request, the employerhas five days to provide that information.If the employer chooses not to hire the individual based oninformation obtained in the report, the employer must providea “pre-adverse action” notice to the applicant. This notice mustinclude a copy of the consumer report and the Consumer FinancialProtection Bureau’s (CFPB) Summary of Rights.The applicant may challenge the pending decision by presentingevidence that the information in the report is false or inadequate.If the employer remains unpersuaded by the applicant’sevidence, it should issue an “adverse action notice” that includes:1. The name, address and telephone number of the CRA thatprovided the report2. A statement that the CRA did not make the adverse decisionand therefore will be unable to provide information as to whythe decision was made3. A statement explaining the applicant’s right to obtain a free copyof his or her report from the CRA if requested within 60 days4. A statement explaining the applicant’s right to dispute theaccuracy or completeness of any information in the reportwith the CRA.Failure to follow these procedures can open the employer tocharges it “willfully” or “negligently” violated the FCRA. Appli ­cants can seek actual damages, punitive damages, and attorneys’fees and court costs. For more information, go to www.ftc.gov.InterviewsIt’s difficult to conduct effective interviews. That’s why manycompanies with the resources to support an HR departmentleave initial interviews to the professionals. Because much of thein formation you avoided asking for on the application becomesapparent when you meet someone face-to-face (such as race, age,physical disability and national origin), you must take extra carenot to ask questions or make comments that can be construed asdiscriminatory.

1.12 Employer’s Practical Legal GuideBefore the interview, carefully review the list of questions youhave prepared. Make sure your questions request only job-relatedinformation that will help you in the selection process. Federaland state equal employment opportunity laws prohibit discriminationon the basis of race, color, national origin or citizen ship,religion, sex, age and disability. Some state laws also prohibitdiscrimination based on other factors, including marital status,familial status, sexual orientation and AIDS. You’re in violation ofthose laws if, during the course of an interview, you raise a questionspecifically relating to one of these characteristics.Even if a job applicant reveals personal information, that’s notan excuse to probe further. If a job applicant voluntarily revealsa disability, the interviewer may ask only whether the applicantneeds a reasonable accommodation for his or her disability and, ifso, what it might be. Remember, you may not discriminate againstan applicant simply because he or she requires accommodation.(For more information, see Section 12.)You’re really just asking for trouble if you ask probing questionsthat are clearly gathering information that has nothing to dowith the applicant’s ability to perform the job. When examined inthe harsh light of litigation, these lines of questioning will seemlike the employer was probing for a reason not to hire the applicant.If you’re not sure about a particular question, pause and askyourself: “Would I make the same inquiry with any other jobapplicant?”For example, before you ask a female applicant, “Which ismore important to you, a family or a career?” consider whetheryou would likely ask a man the same question. Remember, however,that just because you would ask a question of all applicantsdoes not make it lawful.➤ Observation: During the course of an interview, most illegalquestions usually stem from ignorance, not from maliciousness.But the courts will determine that inquiries singling outa group may be discriminatory, even if no discrimination wasintended. Educate all staff members involved in the hiring process;let them know what’s legal and illegal to ask.Caution: Federal recordkeeping requirements mandate thatyou keep any interview notes as well as application forms and otherrecords concerning hiring for at least one year. But the Supreme

screening/Hiring 1.13Personnel Practices Audit: InterviewsDo you ask interviewees any of the following questions?Don’tYes No Know1. Are you married? Divorced? ❏ ❏ ❏2. If you’re single, are you livingwith anyone? ❏ ❏ ❏3. Do you have children? If so, howmany and what are their ages? ❏ ❏ ❏4. Do you own or rent your home? ❏ ❏ ❏5. What church do you attend? ❏ ❏ ❏6. How old are you? ❏ ❏ ❏7. Do you have any debts? ❏ ❏ ❏8. Do you belong to any social orpolitical organizations? ❏ ❏ ❏9. How much and what kinds ofinsurance do you have? ❏ ❏ ❏10. Do you suffer from an illness ora disability? ❏ ❏ ❏Many companies ask female applicants questions they don’task male applicants. Do you ask women any of the following?11. Do you plan to get married? ❏ ❏ ❏12. Do you intend to start a family? ❏ ❏ ❏13. What do you plan to do with yourchildren during business hours? ❏ ❏ ❏14. Are you comfortable supervising men? ❏ ❏ ❏15. What would you do if your husbandwere transferred? ❏ ❏ ❏16. Do you think you could perform thejob as well as a man? ❏ ❏ ❏17. Are you likely to take time off underthe Family and Medical Leave Act? ❏ ❏ ❏None of these items should be asked in an interview. Makethat point clear to anyone who interviews job applicants.

1.14 Employer’s Practical Legal GuideCourt ruled in Jones v. R. R. Donnelly & Sons Company (124 S. Ct. 1836,Decided May 3, 2004) that the statute of limitations for 42 USCS§1981 is four years. That means employees can file suits involvinghostile work environment, wrongful termination and failure totransfer as long as four years after the last discriminatory act.Employers would be well advised to keep pertinent records atleast four years.EEO-1 ReportsIn an effort to monitor employment of minorities and females inthe workforce, the EEOC requires certain employers to completeand file an Employer Information Report, commonly called anEEO-1 report, by Sept. 30 each year.That mandate falls on any private employer with 100 or moreemployees, plus federal prime contractors (or first-tier subcontractors)that have 50 or more employees and a contract worth $50,000or more.Employers completing the EEO-1 report must provide a countof employees by job category, ethnicity, race and gender.You can file the report online at www.eeoc.gov/eeo1survey.TestingMany employers use pre-employment tests to screen applicants.Tests that assess ability, personality and medical conditions canlower the incidence of theft and work-related accidents and reducethe likelihood of negligent-hiring suits. They also may reveal certainjob-related skills or abilities that could not be gleaned from anapplication or interview.But pre-employment testing does carry risks: Unless you candemonstrate that you are measuring job-related qualities and thatthe tests fulfill a business necessity, you could be exposing yourcompany to charges of discrimination.Follow the advice in the federal government’s Uniform Guidelineson Employee Selection Procedures (29 C.F.R. §§1607.1 et. seq.), issuedin 1978 and available online at www.uniformguidelines.com.These nonbinding guidelines set standards for employment test

screening/Hiring 1.15design, validation, security and utility. The guidelines suggest thatemployers track test results to determine whether a selection procedureis discriminatory. Tests with a “disproportionate adverseimpact” on certain groups of individuals protected by equalopportunity laws are illegal unless the employer can demonstratea business necessity. In general, a test is considered discriminatoryif the pass rate for applicants from a protected group is less than80% of the pass rate for the group with the highest selection rate.Tests administered by employers include:■ Achievement tests. These measure an applicant’s level ofjob-related skills and knowledge. For example, applicants interviewingfor a position as a legal secretary may be required to takea typing test and get a score of at least 85 words per minute.■ Aptitude tests. These measure broad levels of knowledgeand learning potential. For example, you may require the legalsecretary applicants to take a test on their general knowledge oflegal principles.■ Physical tests. These assess a candidate’s strength, coordinationand other physical attributes. Physical tests can be potentiallytroublesome for employers because these are often used toavoid hiring female applicants for physically demanding jobs. Tocombat charges of discrimination, be sure that all tests are administeredto both male and female applicants and are related to thejob’s essential functions. For example, a woman who failed a testthat realistically reflected the demands of the job, and who wouldtherefore pose a safety hazard to co-workers, would find it difficultto prove charges of discrimination.■ Personality tests. These tests claim to measure personalitytraits such as honesty, motivations and emotional stability.Usually, they’re vocational adaptations of psychological tests,which can expose employers using them to liability.Case in point: The 7th Circuit Court of Appeals ruled thatan employer violated the ADA in the way it used the MinnesotaMultiphasic Personality Inventory (MMPI). The court ruled thateven though the employer used the vocational application ofthe test, the result was to discriminate against those who sufferfrom depression and other mood disorders. Karraker, Karraker, andKarraker v. Rent-A-Center, Inc. 411 F.3d 831 (7th Cir.)

1.16 Employer’s Practical Legal GuideIf you use personality tests, ask yourself:• Is the test scientifically valid? In other words, does it measurewhat it claims to measure and, if so, how accurately?• Is the test reliable? A test is reliable when it consistently producesthe same result. The court in Rent-A-Center was influencedby the fact that a person could do better or worse onthe test depending on his mood at the time.• Does the test discriminate against a protected class? InRent-A-Center, the court ruled that the test discriminatedagainst the mentally disabled. The same test had been criticizedfor discriminating against racial, religious and sexualminorities.• Is the test the best way to gather information? Will the testtell you anything more about the person’s work history? Ifthere’s a less risky way to obtain such information, employersmay be wise to do the extra legwork and save the legal fees.■ Medical tests. The ADA severely restricts the use of medicaltests in hiring. EEOC regulations limit medical testing untilan employer makes a “real job offer”: i.e., after “the employer hasevaluated all relevant non-medical information which it reasonablycould have obtained and analyzed prior to giving the offer.”Specifically, medical tests are the last step in the hiring process.EEOC enforcement guidance defines a medical test or examinationas “a procedure or test that seeks information about anindividual’s physical or mental impairments or health.” Whendetermining whether a test (or procedure) is a medical examination,the EEOC looks at whether the test:• Is administered by a health care professional• Is interpreted by a health care professional• Is designed to reveal an impairment or physical or mentalhealth• Is invasive• Measures performance of a task or a person’s physiologicalresponses to performing it

screening/Hiring 1.17• Normally is given in a medical setting using medicalequipment■ Alcohol and drug abuse tests. They may be useful orrequired if you are screening applicants for a sensitive job in afield such as transportation, pharmaceuticals or banking. Manystates have enacted strict standards regarding the use of alcoholand drug tests, so check with your attorney. (For a detailed discussionof Alcohol/Drug Testing, see Section 8.)■ Polygraph tests. The Employee Polygraph Protection Act of1988 prohibits lie detector testing by most private employers, whoface fines up to $10,000 per violation. Certain classes of employeesare not protected by the act, including those who work in fieldssuch as toxic waste storage or disposal, public transportation, protectionof currency, negotiable securities or precious commoditiesand distribution of controlled substances. Federal, state and localgovernment employees and contractors doing business with certainfederal agencies are also exempted.If you decide to test applicants, remember that the resultsshould never be used as the sole or final criterion. Also:✔ Note that polygraphs have no scientific validity and are, withfew exceptions, inadmissible as evidence in court.✔ Ensure that whatever test you administer is in compliancewith all federal and state statutes. For example, the Americanswith Disabilities Act establishes strict guidelines for testingdisabled applicants.✔ Have a professional testing service set up a lawful testingprogram. The Society for Industrial and Organizational Psychology(www.siop.org) can refer you to qualified testingservices in your area.✔ Be sure you understand what every test measures and whyyou need to administer it. You must be able to demonstratethat success on the job is closely linked to success on the test.So what should employers do if their test results show a potentiallydisparate impact on minorities? Federal law requires youto determine if there is another, less discriminatory approach to

1.18 Employer’s Practical Legal Guidescreening applicants. But most employers that have developed jobtesting questions appropriately have researched the process andcarefully tied the test to the real-life skills needed to perform thejob. In Ricci v. DeStefano, 129 S. Ct. 2658 (2009), the Supreme Courtruled that absent a “strong basis in evidence” that the test was discriminatory,the results should stand even if minorities performedpoorly on the test. Further, the court noted that fear of a lawsuitisn’t a valid reason for not honoring test results.In a related case in 2010, the Supreme Court unanimouslyruled that the lawsuit clock resets each time an employer usesapparently biased job-qualification tests to make hiring decisions.The court said the timing of Title VII lawsuits doesn’t depend onwhen the test was administered, but on when the employer usesthe test results, even if that’s years later. That means if a test wasinvalid, its continued use may spur litigation long after the testwas actually administered. (Lewis, et al., v. City of Chicago, No.08-974, Supreme Court, 2010)Reference/Background ChecksContacting an applicant’s former employers is an essential step inthe screening process.Most employers seek two types of information from professionalreferences:• Professional data: verification of dates of employment withlast employer, job title, salary, performance evaluation andattendance.• Personal data: verification of academic credentials, drivingrecords (if relevant) and others.Keep in mind that you should not ask a reference any questionsyou are prohibited from asking an applicant. Restrict yourinquiry to job-related issues.You must also check information furnished by all candidateswithout discrimination against any group. Many companies havebeen snagged for making cursory checks of white applicants butprobing more deeply in the case of minorities.

screening/Hiring 1.19Disposal Rule Guards Against Identity TheftEmployers’ files, hard drives and disks are overflowing with sensitiveemployee data. If that information is borrowed or stolen,you could be held liable.The Fair and Accurate Credit Transaction Act (FACTA) requiresyou to take appropriate measures to dispose of sensitive informationderived from consumer reports. Any business or individualwho uses a consumer report for a business purpose issubject to FACTA’s Disposal Rule, which is designed to guardagainst identity theft.The rule requires employers to take reasonable care to safeguardemployee information. For example, employers shouldburn, pulverize or shred papers containing consumer reportinformation; destroy or erase electronic files or media containingsuch data; or hire a document-destruction contractor to disposeof it. (For more details, go to www.ftc.gov.)Make it your policy never to hire a candidate without areference/background check. Your organization could be held liablefor “negligent hiring” or “failure to warn” should the employeeturn violent on the job. If the employee’s past history would haverevealed a problem, but you didn’t spot it because you didn’t check,the courts will say you “should have known.” Your firm not onlymight have to pay damages but would suffer a loss of reputation.If you ask for references without the applicant’s OK or ask thewrong questions, you risk getting sued. Therefore, make it yourpolicy to:• Inform candidates that you will check references.• Get a signed waiver from the candidate authorizing you tocontact references. (References may ask you to provide themwith a copy of the authorization the applicant signed anda release of liability. So you may want to consider adding a

1.20 Employer’s Practical Legal Guidestatement to the authorization that the candidate releasesreferences from liability for anything they say. The waivershould also provide that any reference material will remainconfidential and that the candidate may not see it, whetherhired or not. Without this assurance, many former employersand other common references are naturally reluctant to providemore than dates of employment and position held.)• Focus on the facts: What were the job responsibilities? Underwhat conditions did he work best? Why did he leave the company?Would you rehire him?• Ask references only those questions that you can lawfullyask candidates.• Never rely on a single reference.It’s legal to check public records to verify a candidate’s credentials.You can call a university to confirm a degree or a licensingbody to verify that a candidate is really certified. You can run acriminal records check to see if an applicant was ever convicted ofa crime (although it’s illegal to ask about a criminal arrest, whichmeans the person was only suspected of a crime). Some states makeit illegal to refuse to hire someone convicted of a summary offenseor a misdemeanor. Always check with an employment law attorney.If you are asked to provide a reference for one of your formeremployees, be careful what you say. (Guidelines for providing referencesare given in Section 7 under “Terminations.”)‘Protected’ CandidatesA “protected” applicant is one who has one or more of the characteristicsdefined by Title VII of the Civil Rights Act of 1964, is age40 or older or is disabled. If any of your application procedurestends to screen out certain classes of applicants—such as womenor the disabled—in a way that has nothing to do with the essentialfunctions of the job, you could be accused of discrimination.Some states and municipalities have laws against discriminationbased on sexual preference. Check the laws in your area. Ifsuch statutes are on the books, then gay and lesbian applicants, tothe extent you can identify them, are protected candidates as well.

screening/Hiring 1.21This is the case even if you didn’t intend to disqualify suchapplicants. And that’s where it can be tricky for employers.Consider the Immigration Reform and Control Act and the ADA.A company may be trying to follow these laws to the letter and yetunknowingly violate key provisions.IRCA: Hiring ImmigrantsTwo laws govern U.S. immigration policy: the Immigration andNationality Act of 1952 and the Immigration Reform and ControlAct (IRCA) of 1986, which was amended in 1990.For each new employee hired, U.S. employers must completea Form I-9, Employment Eligibility Verification. The I-9 establishes theemployee’s identity and his or her legal work status. Em ployerscan hire only those eligible to work legally in this country.New employees must fill out Section 1 on their first day ofwork. Employers must complete Section 2 within three businessdays after their employment begins. You must keep an employee’sI-9 on file for three years after his or her hiring date or for oneyear after the date of termination, which ever comes later. Failure tocomplete I-9 forms can lead to significant penalties.Note: Some states require employers to keep I-9s on file as longas the employee is employed, so check the law in your state.You can download and print the current I-9 form at the U.S.Citizenship and Immigration Services (USCIS) website: www.uscis.gov/files/form/i-9.pdf.Caution: Employers can’t afford to be lax about I-9 documentation.Mere paperwork errors can cost you $100 to $1,100 perworker. Employers that knowingly hire illegal immigrants facecivil penalties of anywhere from $250 to $3,000 per violation plusup to six months in prison.Electronic storage of I-9sIn 2010, the U.S. Department of Homeland Security (DHS) issuedfinal regulations that give employers greater flexibility to electronicallysign and store their Form I-9s. The rules say you can use apaper I-9 system, electronic system or a combination of both. Plus,(Continued on page 1.24)

1.22 Employer’s Practical Legal GuideAcceptable Documents for I-9Since 1986, employers have been required to complete theI-9 Form for each new hire to verify the person’s identity andwork eligibility, and then keep the form on file. In 2013, theI-9 Form got a much anticipated facelift. The U.S. Citizenshipand Immigration Services (USCIS) issued a new version of theEmployment Eligibility Verification Form, which employerswere required to start using on May 7, 2013.According to the USCIS, the revised I-9 Form “makes severalimprove ments designed to minimize the errors in formcompletion.”Employers may provide a single document from List A or oneeach from List B and List C. For more details or assistance, callthe USCIS Business Liaison hotline at (800) 357-2099.List A—For Identity and Employment Eligibility:1. U.S. passport or card2. Permanent Resident Card or Alien Registration Receipt Card(Form I-551)3. Foreign passport that contains a temporary I-551 stamp ortemporary I-551 printed notation on a machine-readableimmigrant visa4. Employment Authorization Document that contains aphotograph (Form I-766)5. For a nonimmigrant alien authorized to work for a specificemployer because of his or her status:(a) Foreign passport; and(b) Form I-94 or Form I-94A that has the following: thesame name as the passport; and an endorsement ofthe alien’s nonimmigrant status as long as that period

screening/Hiring 1.23of endorsement has not yet expired and the proposedemployment is not in conflict with any restrictions orlimitations identified on the form6. Passport from the Federated States of Micronesia (FSM) orthe Republic of the Marshall Islands (RMI) with form I-94or Form I-94A indicating nonimmigrant admission under theCompact of Free Association Between the United States andthe FSM or RMI.List B—Documents That Establish Identity:1. Driver’s license or ID card issued by a state or outlyingpossession of the United States, provided it contains aphotograph or information such as name, date of birth,gender, height, eye color and address2. ID card issued by federal, state or local government agenciesor entities, provided it contains a photograph or informationsuch as name, date of birth, gender, height, eye color andaddress3. School ID card with a photograph4. Voter’s registration card5. U.S. military card or draft record6. Military dependent’s ID card7. U.S. Coast Guard Merchant Mariner Card8. Native American tribal document9. Driver’s license issued by a Canadian government authorityFor workers younger than 18:10. School record or report card11. Clinic, doctor or hospital record12. Day care or nursery school record.(Continued on page 1.24)

1.24 Employer’s Practical Legal Guide(Continued from page 1.23)List C—Documents That EstablishEmployment Authorization:1. A Social Security Account Number card, unless the cardincludes one of the following restrictions:(a) NOT VALID FOR EMPLOYMENT(b) VALID FOR WORK ONLY WITH INS AUTHORIZATION(c) VALID FOR WORK ONLY WITH DHS AUTHORIZATION2. Certification of birth abroad issued by the Department ofState (Form FS-545)3. Certification of Report of Birth issued by the Department ofState (Form DS-1350)4. Original or certified copy of birth certificate issued by astate, county, municipal authority or territory of the UnitedStates bearing an official seal5. Native American tribal document6. U.S. citizen ID card (Form I-197)7. Identification Card for Use of Resident Citizen in the UnitedStates (Form I-179)8. Employment authorization document issued by theDepartment of Homeland Security.(Continued from page 1.21)the rules clarify you must complete I-9s within three businessdays (not calendar days) of an employee’s hire date.Read more details at www.theHRSpecialist.com.The E-Verify systemThe DHS advocates use of the E-Verify system, which allowsemployers to file I-9 information online. Currently, federal lawrequires only the federal government and employers with federalcontracts worth more than $100,000 to use E-Verify to check the

screening/Hiring 1.25Personnel Practices Audit:Screening Foreign-Born ApplicantsAnswer the following questions to determine if your personnelpractices discriminate against legal immigrants:Don’tYes No Know1. Do you refuse to consider foreignersfor openings at your company? ❏ ❏ ❏2. Do you tend to dismiss applicantswith a foreign accent? ❏ ❏ ❏3. Do you require a foreign-born applicantto show proof of citizenship or a workvisa before he is hired? ❏ ❏ ❏4. Do you impose height or weightrequirements that have nothing to dowith a job’s essential function and thattend to eliminate individuals of aparticular national origin? ❏ ❏ ❏5. Do you require foreign-born applicantsto take fluency exams or any other teststhat are not given to native-bornapplicants? ❏ ❏ ❏If you answer “Yes” to any of these questions, you may be inviolation of IRCA, as well as liable to charges of discriminationunder Title VII of the Civil Rights Act.work eligibility status of newly hired employees, as well as currentemployees who work directly on a contract. The requirementapplies to federal contracts and subcontracts let on or after Sept. 8,2009. Also, at least five states (Arizona, Georgia, Mississippi, SouthCarolina and Utah) require some employers to use the system.Any employer may voluntarily use the E-Verify system. TheUSCIS offers compliance detail on E-Verify, including who mustcomply and how, at www.uscis.gov/everify.

1.26 Employer’s Practical Legal GuideDiscrimination issuesIRCA also prohibits discrimination against legal immigrants andholds employers liable for unreasonable requests of identificationdocuments.This requirement puts employers in a bind: You must ensurethat anyone you hire is in the country legally; however, you arebarred from verifying such information during the screeningprocess. Your safest course of action: As soon as you make yourhiring decision, have the new employee fill out the I-9 form. Youdon’t have to wait for the person’s first day on the job.While employers face stiff penalties for not firing illegal immigrants,until recently the National Labor Relations Board held thenovel position that if an employer fired a worker it didn’t knowwas an illegal alien for another, illegal reason, the employer wouldbe liable for reinstatement and back pay! In 2002, the U.S. SupremeCourt put an end to the practice. In Hoffman Plastic Compounds,Inc., Petitioner v. National Labor Relations Board, 122 S. Ct. 1275 (2002)the court ruled that even if the employer fired the illegal alien foran illegal reason (in this case, for trying to organize a union), theemployer wasn’t liable for back pay.Shortly after the Supreme Court decision, the EEOC announcedthat it would continue to champion the rights of illegal immigrantswho are discriminated against based on national origin orimmigration status. Although it can no longer order reinstatementor back pay, it’s the agency’s declared intention to seek all otherforms of relief. Employers should be aware that discriminatingagainst illegal immigrants in terms and conditions of employmentcan still cause problems with the EEOC. In other words, employersthat hire illegal immigrants inadvertently (perhaps because theypresented false documentation) can still be taken to task ifthey discriminate against those workers in the terms and conditionsof employment unrelated to their immigrant status.Employers also liable for subcontractorsDon’t think you can escape liability for hiring illegal workers byusing subcontractors either. If you insist on exercising any significantcontrol over how, when and where independent contractors

screening/Hiring 1.27do their jobs, you may end up paying dearly if your organizationis deemed the true employer.Case in point: A group of undocumented janitorial workerssued Wal-Mart, arguing that the contracting company they workedfor didn’t pay them minimum wage or overtime. Because the giantretailer controlled so much of the details of the maintenance work,including hours and duties, it was their co-employer. And thecourt said the illegal workers’ immigration status was irrelevantto their FLSA claim. Zavala v. Wal-Mart, No. 03-5309, DC NJ (2005)Disabled ApplicantsThe ADA prohibits discrimination against qualified applicants onthe basis of a physical or mental disability. (For a detailed discussionof conditions covered by the ADA, see Section 12.) As of 1994, the actapplies to all employers with 15 or more workers.Before you make a job offer, the ADA allows you to ask questionsabout an applicant’s ability to perform job functions butprohibits you from inquiring about a specific disability. Norcan you ask questions that are likely to reveal a disability. Forexample, don’t ask an applicant what prescription drugs he takes;the answer may reveal a disability, such as diabetes or depression.Also, you can’t ask whether the applicant is participating inan alcohol or drug rehabilitation program. Participation in suchprograms is protected by the ADA. You can, however, ask if theapplicant is using any illegal drugs because current illegal druguse is not protected by the law.You may test applicants for either physical or mental capacityto perform the job. Be sure to explain the test to the applicantahead of time. If the applicant reveals a disability, you may askif he requires an accommodation. If so, you and the applicantshould determine together what reasonable accommodation isappropriate.The key point to remember: The test must have a businessnecessity. Usually, this means that the test is gauging thecandidate’s ability to perform an essential function of the job.Consequently, any accommodation for testing should be similarto what would be available to the person performing the job on a

1.28 Employer’s Practical Legal GuidePersonnel Practices Audit: Disabled ApplicantsAnswer these questions about your policies toward applicantswith physical or mental disabilities:Don’tYes No Know1. Do you limit, segregate or classifyan applicant, because of hisdisability, in a way that adverselyaffects his job opportunities? ❏ ❏ ❏2. Do you deny employment opportunitiesto a qualified individual becauseof his relationship or association witha person with a disability? ❏ ❏ ❏3. Do you use qualification standards,employment tests or other selectioncriteria that tend to screen outindividuals with disabilities? ❏ ❏ ❏4. Do you fail to use employmenttests in the most effective mannerto measure actual disabilities? ❏ ❏ ❏On application forms or during job interviews, do you askany of the following:5. Have you ever had or been treatedfor any of the following conditionsor diseases [followed by a checklistof various conditions or diseases]? ❏ ❏ ❏6. Have you ever been hospitalized?If so, for what condition? ❏ ❏ ❏7. Have you ever been treated by apsychiatrist or a psychologist? ❏ ❏ ❏8. Is there any health-related reasonyou may not be able to perform thejob for which you are applying? ❏ ❏ ❏

screening/Hiring 1.29Don’tYes No Know9. Have you had a major illness in thelast five years? ❏ ❏ ❏10. How many days were you absent fromwork because of illness last year? ❏ ❏ ❏11. Do you have any disabilities orimpairments that may affect yourperformance in the position for whichyou are applying? ❏ ❏ ❏12. Are you taking any prescribed drugs? ❏ ❏ ❏13. Have you ever been treated for drugaddiction or alcoholism? ❏ ❏ ❏If you answered “Yes” to any of these questions, you couldbe found in violation of the ADA. The act prohibits any preemploymentinquiries about a disability on application forms,during job interviews or in background or reference checks.regular basis. Employers should keep this in mind when discussingreasonable accommodations for tests.➤ Observation: Federal contractors and subcontractors thatare covered by the affirmative action requirements of Section503 of the Rehabilitation Act can ask individuals with disabilitiesto identify themselves on a job application form or by other preemploymentinquiry, to satisfy the affirmative action requirementsof that section.Negligent HiringThroughout this section, we’ve emphasized the importance ofavoiding questions that can be seen as an invasion of an applicant’sprivacy. That doesn’t mean, however, you should give upon the practice of thoroughly investigating the background of apotential worker.

1.30 Employer’s Practical Legal GuidePersonnel Practices Audit: Negligent HiringAnswer the following questions to determine whether youhave minimized your susceptibility to a negligent-hiring suit:Don’tYes No Know1. Do you customarily conduct abackground check when you hire aworker for a “sensitive” position? ❏ ❏ ❏2. If so, do you adapt the level of thebackground investigation to theresponsibilities of the job in question? ❏ ❏ ❏3. Do you ask the employee about anygaps or missing information on hisrésumé or application? ❏ ❏ ❏4. Do you customarily call the applicant’sformer employers, who can report anyviolent tendencies he may have? ❏ ❏ ❏If you answered “No” to any of these questions, you could beliable to charges of negligent hiring.In fact, if you fail to do background checks on applicants for ​certain positions, you could make yourself vulnerable to anegligent-hiring lawsuit by any worker or customer who has beenhurt by a violent employee. You should check applicants’ backgroundsfor positions such as day care worker, security guard andsales representative.A number of court decisions have established the principle thatan employer has a “duty of care” to protect workers, cus tomersand clients from injury caused by an unfit employee who anemployer knew (or reasonably could have been expected to know)posed a risk. For an employer to be held liable for negligent hiring,the plaintiff must prove that (1) an employee intentionally injureda co-worker, customer or client; (2) few, if any, pre-employmentchecks were performed, and that if they had been, those checks

screening/Hiring 1.31would have likely revealed a worker’s propensity toward violentbehavior; or (3) the employer, knowing a worker’s propensitytoward violence, did not provide proper supervision and security.Most negligent hiring lawsuits arise when an employee hasinjured a third party. For example, an osteopathic surgeon at Put ­nam General Hospital in West Virginia generated 122 lawsuitsfrom surgical errors in just seven months. A jury found the hospitalguilty of “wantonness, recklessness and gross negligence” inits hiring practices. As a result, plaintiffs were able to recover bothpunitive and compensatory damages, eventually leading to thehospital’s closing.Similarly, the Roman Catholic Church was found liable for aLong Island youth minister who repeatedly raped a young manand woman. A jury ruled the Diocese of Rockville Centre and itspastor were guilty of “reckless disregard for the safety of others”when it hired the minister. The jury awarded $11.45 million to thepair and ruled the church was 30% responsible, meaning ifthe minister couldn’t pay the judgment, the church would be liable.Note: Negligent hiring standards vary from state to state.Employers should have their attorney review hiring and backgroundchecking procedures to ensure they comply with state law.Employment ContractsSome employers and employees choose to enter into an employmentcontract. Usually the worker is seeking job security, whilethe company wants to protect its trade secrets and sales territories.(For details on noncompete clauses, see Section 7.)However, if you sign an employment contract, you may findthat you’ve given away more than you bargained for. For one thing,you compromise your at-will relationship with the employee.Most workers are considered to serve at the employer’s discretion,which means the worker can be dismissed by the employer at will,or without cause. (This varies by state. See Section 7 for more on theat-will relationship.) Once you sign certain contracts, however, theemployee can be fired only for cause. Another risk: Many employerswind up giving away far too many rights and preserving fartoo few. This can be a costly mistake if the employee does not work

1.32 Employer’s Practical Legal Guideout. Unexpected obligations and commitments can make the separationextremely expensive.Before entering into any employment contract, you should seeklegal advice on its merits and judicial soundness. Typically, a contractshould include the following information:• Names of the parties involved (the employer and employee).• Term of the contract.• Place the contract is to be performed.• Employee’s duties and obligations.• Working facilities.• Who controls the rights to inventions and patents, as well asan agreement to maintain trade secrets.• Compensation, including wages, salary, commissions, bonuses,overtime or shift differential pay and severance agreements.• Special compensation plans, including deferred compensation,bonuses, profit sharing, stock options and pension andretirement plans.• Expense account, including who pays for travel, meals andlodging.• Covenant not to compete after leaving employment, includingthe length of time and geographical limitations.• Employee benefits, including health insurance, life and disabilityinsurance, workers’ compensation, vacations, holidaysand sick leave.• Right of either party to terminate with proper notice.• Right to discharge an employee for cause.• Remedies for breach of contract.• Methods for modifying, renewing and extending the contract.• Laws governing interpretation of contract.• Date and place of signing the contract.• Signatures (and initials indicating acceptance of certain provisions,as required).

screening/Hiring 1.33• An arbitration clause stating that all employment-related disputeswill be subject to arbitration and that the arbitrationwill be final and binding.Personnel Practices Audit: Implied ContractsDo any of the following circumstances describe yourpersonnel practices?Don’tYes No Know1. When you advertise a position,you use terms such as “permanentemployment” or “guaranteed jobsecurity.” ❏ ❏ ❏2. During interviews, a potential employeemay be told that if he does a good job,he could stay with the company untilthe day he retires. ❏ ❏ ❏3. All new hires sign a form stating theyhave a work contract with your company. ❏ ❏ ❏4. Nonunion workers are told that theyhave the same rights as unionized orcontract workers. ❏ ❏ ❏5. Your employee handbook states that,after a probationary period duringwhich an employee could be terminatedwithout notice, an employee is consideredpermanent. ❏ ❏ ❏6. Your supervisory manual states that the“policy of the company is to terminateemployees for cause only.” ❏ ❏ ❏If you engage in any of these practices, courts in some statescould find that you had a contractual agreement with yourworkers, and your right to fire at will could be compromised.

1.34 Employer’s Practical Legal GuideMany personnel offices assume that an employment contractmust be a written document, and that if a promise is not in writing,there’s no obligation. However, verbal promises, conditions ormodifications to written agreements, made either at the beginningof or sometime during the term of employment, may be found toconstitute an implied and binding commitment.How long you may be bound by an oral agreement depends,in part, on what the employee gave up to accept your job offer.One employee, for example, left a position after nine years withone company. He moved his family from Missouri to Coloradoafter receiving an oral offer of two years’ employment with a newfirm. He was fired after 13 months and sued the employer for theremaining 11 months’ pay. The court found in his favor and ruledthat the oral promise had caused the employee to make seriouschanges in his life, and the employer could not renege.Another employee moved his family cross-country afterhis new employer promised him “lifetime employment.” Whenit didn’t work out and he was fired, he sued the company forout-of-pocket expenses of $15,000 and won his case.To make it difficult for an employee to charge that she had animplied contract with your company, take these steps:✔ Review your company’s recruitment ads, policy statementsand other company literature for language that could implya contractual relationship. Include a statement in your handbookasserting management’s right to discharge at its owndiscretion. Also, include a disclaimer in the company handbookstat ing that it does not constitute a contract, formalor informal.✔ Inform those responsible for recruiting not to oversell thecompany or make oral promises.✔ Eliminate all references to dismissing “for cause only” fromyour employee handbook.✔ Have all applicants sign a statement saying they understandthat their potential employment is strictly at-will. Youmay want to insert annual reminders of the at-will status ofemployees in their paycheck envelopes.

screening/Hiring 1.35✔ Delegate hiring authority to a few managers. An employmentoffer should include at-will provisions. It should alsospecify that it supersedes any verbal promises that havebeen made.Under the right circumstances, oral promises made by supervisorscan be enforced as contractual agreements. That’s especiallytrue if employees or applicants have something in writingto back up their claims, such as handwritten notes. In fact, writtennotes signed by a manager may be enough to bind employers.That’s why managers should never sign anything an applicant oremployee hands them without prior HR approval.➤ Observation: It’s surprising how many employers assumethey can’t be held to written agreements unless the word “contract”appears or unless the agreement is drawn up by an attorneyor notarized. A legally binding agreement is easy to enter into buthard to get out of, unfortunately. Even an in for mal letter of agreementcan constitute a contract that will stand up in court if it spellsout terms and contains the necessary signatures.English-Only PoliciesIf you’re thinking of establishing an English-only policy for yourworkplace, be aware that you risk incurring the wrath of theEEOC. The agency is strongly opposed to English-only rules andwill prosecute employers that commit this type of national-origindiscrimination.Although no laws exist banning English-only workplacerules, such requirements are being challenged under Title VII,which bars national-origin discrimination in employment. YourEnglish-only policy must be justified by “business necessity,”which usually revolves around safety and efficiency issues.The compliance manual used by the EEOC cites these right andwrong examples:• Probably permissible: All workers on an oil rig are requiredto speak English because they need to communicate quicklyand respond to emergencies.

1.36 Employer’s Practical Legal Guide• Probably illegal: A retailer’s policy requires English at alltimes during working hours because its customers object toemployees speaking Spanish.The EEOC’s guidelines on national-origin discriminationinclude a section on “speak-English-only” rules for employers:■ English-only rules in the workplace can have an adverseimpact on those whose primary language is not English, the commissionstates. The rules can create “an atmosphere of inferiority,isolation and intimidation based on national origin.”■ English-only rules applied at all times (including lunchhours and breaks) are presumed to violate Title VII and will bescrutinized closely.■ English-only rules that apply only at certain times may belawful if the employer can show they are justified by businessnecessity.■ If a limited English-only rule is adopted for business necessity,the employer should inform all employees of the rule, explainthe circumstances under which English is required and make sureemployees are aware of the repercussions of violating the rule.■ If an employer fails to provide notice of the rule, includingconsequences for violating it, taking adverse action againstan employee for violating the rule constitutes national-origindiscrimination.■ An English-only rule that’s applied only to a particulargroup violates Title VII as unlawful disparate treatment.■ English-only rules, whether applied at all times or only atcertain times, may create a hostile work environment that couldconstitute unlawful harassment under Title VII.■ If an employer doesn’t hire an applicant because of anaccent or manner of speaking, it must show that the accent interferedmaterially with the person’s ability to perform the job.Even though the courts are more likely to be supportive ofyour decision as long as your policy is evenhanded and backedby a clear business justification, the safest course is to follow theEEOC’s more restrictive guidelines.If you don’t think the EEOC means business, think again. Itrecently settled a national-origin complaint filed against a New

screening/Hiring 1.37York City hotel that required its staff to speak English at all times,even in the break room. The hotel agreed to drop its English-onlyrule, train managers and supervisors on the law and change itscompany handbook. It also agreed to pay a total of $800,000 to theaffected employees.On the other hand, the EEOC lost another case involving a cosmeticretailer, Sephora USA, whose extensive written policy saidsales clerks had to speak English whenever customers were in thestore. Clerks were allowed to speak other languages on breaks andwhen no customers were present. Sephora also encouraged themto speak other languages if customers expressed a preference. Inthis case, the court said the English-only rule was grounded in alegitimate business necessity: making customers feel welcome. Itdidn’t hurt that the policy was flexible rather than absolute, allowingthe clerks discretion when the situation called for it. EEOC v.Sephora USA, No. 03-CIV-8821 (SD NY)

Section 2Employee Conduct/PerformanceOnce you hire a worker, you want her tenure withyour organization to be productive and mutuallybeneficial. That requires effort from both you and theemployee. Start by communicating your company’spersonnel policies early and clearly.Performance ReviewsThere are two important reasons why you should conduct regularappraisals of your employees’ performance. First, periodic andcompetent appraisals reduce the opportunity for a dischargedemployee to claim unfair treatment. The appraisal process alertsan employee to what you expect of her, where she is deficient andhow she can improve her performance. Second, the appraisalsconstitute documented proof of unsatisfactory performance thatwill help you justify employment decisions.To make your appraisal system effective, consider adoptingthe following guidelines:✔ Review your evaluation techniques. Your performancestandards should be quantifiable, not subjective. Standardsfor individuals performing the same job should be appliedevenhandedly.2.1

2.2 Employer’s Practical Legal Guide✔ Emphasize to supervisors the importance of truthful andaccurate performance reviews. Supervisors are often overlylenient when it comes to rating employee performance. Butby sparing the worker’s feelings, the supervisor could beinviting trouble for his employer. In a wrongful-dismissalsuit, it may be difficult for your company to explain why itdischarged an employee for poor performance if he receivedpositive evaluations.✔ Give employees the right to respond to their appraisals.A worker should have the opportunity to agree or disagreewith the list of principal duties on which his performancewas rated. Employees should sign a statement indicating thatthey have read their appraisals.Even ‘excellent’ job evaluation can be retaliationEver since the U.S. Supreme Court decided that “retaliation” canbe anything that dissuades a reasonable employee from comingforward with discrimination charges, employers that lean onworkers who file complaints may find themselves facing a lawsuit.In fact, in the right circumstances, an “excellent” evaluation can beretaliation.Case in point: Kirk Webster, a government employee, filedand settled a series of race discrimination suits. When he wasmoved to another position, he earned an “excellent” job rating,plus a pay hike. Still, he filed a retaliation lawsuit. Why? BecauseWebster’s rating wasn’t high enough to earn a bonus that year.The rating, he alleged, was retaliation for his earlier complaints. Afederal appeals court sent the case to trial, saying he should havea chance to prove that the excellent rating was still retaliation.Webster v. Rumsfeld, No. 04-1739 (4th Cir.)Bottom line: Always document evaluations and decisionson bonuses and promotions with tangible job-performance data.Avoid vague generalities, such as “excellent employee,” “hardworker” or “bad attitude” in either positive or negative comments.Instead, use measurements such as sales numbers, workquality, productivity and other valid business reasons to make alldecisions.

Employee Conduct/Performance 2.3Beware risk of overly complex rating systemsYou may also want to dump overly complex evaluation methods.If your rating system is too complicated for even your supervisorsto understand, it’s time to simplify it.Reason: When employees become confused about the evaluationprocess, they’ll start to believe that you aren’t treating themfairly. That suspicion may prompt a call to an employment lawyer,who’ll want to take a closer look at your system. Then, yourorganization is at the mercy of clever statisticians who will try todeconstruct your plan to prove discrimination.In one recent case, two female employees argued that theiremployer was penalizing them for taking time off to care fortheir children. The women suspected that the company’s complexevalu ation process somehow treated them unfairly, but theyweren’t sure how. So they hired attorneys, who couldn’t figure itout either, so they hired experts. Four experts and 16 expensivedepositions later, the process was deconstructed and the casesettled for $600,000 in lost wages, plus $400,000 in legal and expertfees. It seems the process managed to count protected child-rearingtime as a negative factor, proving the women’s suspicions werecorrect. Vosdingh, et al., v. Quest, No. 03-4284 (DC MN)Keep meticulous employee logsEmployee logs are helpful not only in appraising performance, butin defending personnel actions that could be challenged in court.Many wrongful-discharge suits could be dismissed quickly ifthe company could clearly demonstrate a history of performanceproblems leading to the firing. Employee logs are a legally recognizedmethod of documenting performance problems and justifyingemployment decisions. They can, and most likely will, besubmitted into evidence if an employee takes you to court.Every employment decision you make must be based only onqualifications and performance. This underscores the importanceof including only objective, performance-based observations inemployee logs. Any statement that would be inappropriate in aconversation also is inappropriate in an employee log.

2.4 Employer’s Practical Legal GuidePersonnel Practices Audit:What to Include in Employee LogsBe careful with employee logs. You can be held liable foryour personnel actions if you rely on information in employeelogs that doesn’t pertain to directly observed behavior. Testyour knowledge of what to include and what to omit from logentries.Which of the following do you include?Don’tYes No Know1. Project assignments and deadlines metor not met. ❏ ❏ ❏2. Your assessment of the quality of anemployee’s work. ❏ ❏ ❏3. Rumors or speculation about theemployee’s personal life. ❏ ❏ ❏4. Instances of tardiness, work absencesor extended breaks. ❏ ❏ ❏5. Theories about why the employee isbehaving a certain way. ❏ ❏ ❏6. Information about the employee’sfamily, ethnic background, beliefs ormedical history. ❏ ❏ ❏7. Disciplinary discussions andactions taken. ❏ ❏ ❏8. Your opinions about the employee’scareer prospects. ❏ ❏ ❏9. Employee responses to problemsand questions. ❏ ❏ ❏10. Positive contributions to thework effort. ❏ ❏ ❏

Employee Conduct/Performance 2.5Don’tYes No Know11. Unsubstantiated complaints againstthe employee. ❏ ❏ ❏12. Details of significant personalinteractions with the employee. ❏ ❏ ❏Items 3, 5, 6, 8 and 11 do not belong in an employee log.Restrict log entries to purely behavioral matters—that’s thesafest way to document performance. Write down anything yousaw or heard firsthand from the employee. Don’t write downanything else.Never make reference in log entries to a worker’s race, sex,age, disability, marital status, religious affiliation, sexual orientationor national origin. Don’t suggest reasons for employee actionsor make connections between events without direct evidence.For example, you may know that Daniel’s wife recently filed fordivorce, but don’t suggest that Daniel’s personal problems arethe reason his work has begun to slip. If he tells you he’s havingtrouble concentrating because of problems at home, you can notethe comment in his own words in your log. But, as always, yourfocus must remain solely on work-related issues.A written warning about an employee’s performance shouldinclude these key points: (1) statement of the problem (who, what,when, where, why and how); (2) how the employee’s action hada negative impact on work; (3) company policy on the situation;(4) reference to previous written or verbal warnings about the sameor similar conduct; (5) summary of the agreement between thesupervisor and the employee to correct the problem; (6) warningsof the consequences for failing to correct the problem.Privacy IssuesNone of your policies can compromise your workers’ right toprivacy. You cannot obtain information about employees thatis not relevant to their duties with your company, and there are

2.6 Employer’s Practical Legal Guiderestrictions on what information about employees you are allowedto disseminate.An employee’s file is an important resource for your company.It can be used to make personnel decisions and is a valuable sourceof evidence if a former employee ever takes legal action against you.At the same time, it represents a potential disaster: If the file is notsecure, you could be hit with an invasion of privacy suit.Here are some steps you can take to guarantee the security ofyour organization’s personnel files:• Identify records that can be made available to supervisorsand others in your company.• Determine which employees or departments are in charge ofpersonnel records.• Establish security measures to prevent unauthorized accessor disclosure.• Verify your policy complies with federal and state laws, thencommunicate it clearly to all employees.A personnel file should contain only information that canlegally be the basis for an employment-related decision, such ashiring, firing, promotion, demotion, layoff and training.Since employment decisions may not be based on an applicant’ssex, race, national origin, color, religion, military statusor likelihood of taking FMLA leave, you should file all equalemploy ment opportunity records separately. Similarly, you can’tallow a qualified worker’s disability to influence hiring decisions.You should store all medical records in confidential files separatefrom personnel files. Limit access to confidential files to HRprofessionals who oversee such records and only those managerswho need access to administer reasonable accommodations underthe ADA. All personnel permitted access to such files shouldsign a statement agreeing not to divulge confidential informationexcept for the accommodation process or other legitimatepurpose.In addition, garnishment orders can’t used as a basis foremployment decisions, so all paperwork dealing with them mustbe kept separately. Keep sensitive information, such as insurance

Employee Conduct/Performance 2.7and conviction records, separate from the main personnel file.Also, since I-9 forms must be made available on demand to LaborDepartment inspectors, it’s best to keep them in a separate place.You must be especially careful with any information yougather when evaluating a request for accommodation by a disabledworker under the ADA or a request for leave under theFMLA. (See Sections 12 and 13 for specific recordkeeping requirementsunder both laws.)Employee monitoring and searchesHow far can you go in monitoring employees? Some 75% of U.S.companies do some type of electronic monitoring of workers,according to a recent American Management Association study.But there are fine legal lines involved. Here are four steps youcan legally take:1. Videotape open work areas. The courts have ruled that disclosed,soundless video cameras are the safest option. Don’tuse video surveillance where a worker would have a reasonableexpectation of privacy, such as a restroom.2. Search lockers. Be sure you have grounds for reasonable suspicionof unlawful contents (drugs, weapons, etc.) and havepolice present. Write a clearly articulated policy that sayslockers can be searched if illegal activities or violations ofrules are suspected.3. Monitor email, voice mail and Internet use. Because thecompany owns these communication modes, you are allowedto monitor them. Provide written notice to workers that allelectronic and phone messages are the property of the company,should be used for business purposes and are not consideredprivate.4. Monitor telephone calls. You can monitor phone calls for“legitimate business purposes,” such as checking on the qualityof your customer service calls. Again, it’s best to forewarnemployees and incoming callers that such monitoring mayoccur and the calls may be recorded. Some states make it acrime to record a phone call without the consent of all parties.

2.8 Employer’s Practical Legal GuideWhile monitoring employees with video cameras probablydoesn’t violate employee privacy rights, make sure you don’t stepover the line of reasonable privacy concerns, such as monitoringdressing rooms and restrooms.The safest route is to use soundless video recording, whichwill keep you clear of the federal Electronic CommunicationsPrivacy Act. Plus, many states make it illegal to record conversationswithout consent of one or both parties.Case in point: When vandalism hit the Chattanooga Times FreePress, the newspaper suspected a longtime janitor because she hadunfettered access to the facility. The Press installed surveillancecameras, which irritated the janitor. She was caught on cameramaking an obscene gesture and covered the camera with a papercup. She was fired and sued, alleging invasion of privacy.But the newspaper won because its handbook said, “The Companymaintains electronic surveillance of company property …and employees should have NO expectation of privacy in workor public areas.” It posted the notice throughout the facilities. Thecourt concluded the janitor had been warned and was fired fortampering with the equipment, which the newspaper had a rightto use. Oates v. Chattanooga Times Free Press, No. 04-0743 (Ten nes seeCourt of Appeals)Also, be careful if you decide to conduct employee searches.Heed the lessons from the following case:Elvis Stewart carried a duffel bag so he could change uniformsbetween working at Taco Bell during the day and a McDonald’slocated inside a Wal-Mart at night. It’s Wal-Mart policy to checkall employee bags, but Stewart often objected to having his bagsearched at the end of his shift. He noted that the store didn’tcheck women’s purses. Stewart complained to management thathe felt he was being singled out because he was black. In a subsequentmeeting, a Wal-Mart assistant manager told Stewart that hewasn’t being singled out, but he did admit that some employeeswere searched because they were black.A jury refused to find Wal-Mart (which was not his employerin this case) guilty of violating Stewart’s civil rights, but it did hitthe company for invading his privacy and inflicting emotionaldistress. The state supreme court let the ruling stand. Wal-MartInc. v. Stewart, 990 P.2d 626 (Alaska)

Employee Conduct/Performance 2.9➤ Recommendation: If you have a policy allowing searches,require that employees sign a “consent to search” form whenhired. Any search policy should be applied neutrally and consistentlyto all employees.The type of search policy depends on the nature of your business.If you search all employees, the policy needs to define whatarticles will be searched. Be careful in using “random” searches,which may appear to be motivated by discrimination. If usinga probable-cause standard, treat employees as you would a suspectedshoplifter.Email/Internet UseWhile email and the Internet have revolutionized business, they canbe used for some very unproductive purposes.Employers have any number of legitimate reasons to monitoremployee email. Beyond personal productivity issues, you risk significantloss should an employee download a virus or other damagingsoftware.Many employees may think emails are confidential, but youshould dispel that myth by clearly communicating your organization’spolicy on email/Internet use. The policy should:• State the purpose of electronic mail. Explain clearly whetherit is solely for business-related communication or if personaluse is authorized.• Forbid the use of any derogatory language in email transmissions,even if it’s meant as a joke.• Prohibit the use of email for non-job-related solicitations orproselytizing.• Make it clear that employees can’t have a private password.Although passwords don’t have to be known by otherworkers, an exhaustive list of passwords must be availableto management.• Inform employees that you reserve the right to inspect allemail records and correspondence without advance notice.

2.10 Employer’s Practical Legal GuideFederal courts have rejected employees’ claims of their rightto privacy in email messages. In one district court decision inPennsylvania an employee was discharged for transmitting inappropriateand unprofessional comments to his supervisor overhis employer’s email system. The plaintiff claimed that his dischargeviolated public policy because he had a right to privacy.In granting the defendant’s motion to dismiss, the court held thatthe plaintiff did not have a reasonable expectation of privacy inemail communications made over his employer’s system, despitethe employer’s assurances that such communications would notbe intercepted by management. The court went on to state thateven if the plaintiff had a reasonable expectation of privacy in themessages, an ordinary person would not find the employer’s interceptionof these messages to be a “substantial and highly offensiveinvasion of his privacy.”Moreover, the court ruled, the company’s interest in preventinginappropriate and unprofessional comments, as well as possibleillegal activity, outweighs any privacy interest the employeemay have in the messages. Smyth v. The Pillsbury Co., 914 F. Supp.97 (E.D. Pa.)Caution: Employees must follow all state and federal lawsdirectly or indirectly relating to email and Internet use. For example,employees may not violate copyright laws or download piratedsoftware. Furthermore, if you allowed pornography to exist in theworkplace, you’d be a prime target for a sexual harassment lawsuit.Likewise, allowing employees to send abusive or harassing emailcould land you in court. Finally, you could be liable for allowingminors access to pornographic images.Consider the consequences of ignoring illegal activity conductedvia your company computers. When the mother of a10-year-old girl discovered that her husband had uploaded nudepictures of his stepdaughter to a child-porn website using hisoffice computer, she sued the employer and won.The mother’s theory was a novel one: Because the company’s ITperson discovered that her husband was viewing sexually explicitwebsites, the company was negligent for not investigating furtherand telling the authorities about its findings. Despite evidence theemployee was accessing porn sites, the IT person simply told him

Employee Conduct/Performance 2.11Union-Related EmailsThe National Labor Relations Board (NLRB) recently consideredwhether the Oregon Register-Guard could use its communicationsystems policy to ban use of the company’s email systemfor union-related messages. The newspaper’s policy prohibiteduse of its email system “to solicit or proselytize for commercialventures, religious or political causes, outside organizations orother nonjob-related solicitations.”In Guard Publishing Co. (351 NLRB No. 70), the NLRB held thatemployers may apply such policies to union-related activitiesso long as they are nondiscriminatory. The board upheld theRegister-Guard policy despite the fact that it had allowed manykinds of personal email use on the company’s system becauseit was uniformly applied and union-neutral: There was no evidencethat the newspaper had allowed employees to use email“to solicit support for or participation in any outside cause ororganization other than the United Way.”In its ruling, the NLRB noted that an “employer has a ‘basicproperty right’ to regulate and restrict employee use of companyproperty,” including its email system. That puts emailcommunication on a different level from face-to-face employeecommunication, which is expressly protected under theNational Labor Relations Act (NLRA). But that doesn’t mean it’sopen season on union-related communications. Com mu nicationpolicies must clearly define prohibited materials in a way thatdoesn’t unfairly single out union-related activities.That leaves employers in uncertain territory. Some might chooseto ban use of email systems for anything not directly relatedto work; but enforcing such a policy may be unrealistic and, ifenforced selectively, be discriminatory.(Continued on page 2.12)

2.12 Employer’s Practical Legal Guide(Continued from page 2.11)It’s worth noting that employers don’t have to be unionized to beheld responsible for policies that violate employees’ rights underthe NLRA. Here are some general tips to avoid NLRA violations:• Adopt an email policy and enforce it uniformly. Whetheror not you allow employees to use the email system for personaluses, you must enforce your policy strictly and evenhandedly.• Avoid overbroad restrictions on communication betweenemployees. Communication policies can’t require employeesto keep confidential their wages or prohibit them from discussingother terms and conditions of their employment.• Avoid blanket prohibitions of solicitation and distributionof literature at the work site. Banning such activities willrun afoul of employees’ rights under the NLRA to engage in“concerted activities” related to organizing. Restrictions onsolicitation via email, however, are permissible under GuardPublishing.to stop and never notified a supervisor. The New Jersey AppealsCourt ruled that the company had a duty either to report possibleillegal activity to the police or fire the employee. Doe v. XYC Corp.,No. A-2909-04T2 (Superior Court of New Jersey)Deleting emails: The legal impactEmail is increasingly seen by courts as just another business document.Like many employers today, do you distribute importantpolicy notices via email? Can employees ask about leave or updatetheir benefits information by emailing the human resourcesdepartment? If so, you must have a policy in place for retaininga copy of those email communications. That’s because the EEOCrequires you to keep such records for at least one year. It’s a goodidea to print out your emails to and from employees and place acopy in their personnel files.

Employee Conduct/Performance 2.13Before purging email or other electronic information, readthrough it to determine if it has any legal significance. Althoughyou may wish that some emails had never been sent, deletingthem may not be much help and may be seen by a court later asintentional concealment or even destruction of evidence. It maybe better to have a copy than to be presented with a copy duringlitigation.From a practical point of view, you can never be sure that anemail you think was deleted from the system isn’t stored somewhereelse. Did one of the senders or recipients forward it toothers or to herself at another email address?Perhaps no case illustrates better the potential trouble emailcan cause than the Enron debacle. Once the story of Enron’s collapsehit the media, it wasn’t long before emails between thecompany’s upper management and its accounting firm, ArthurAndersen, were made public. Conversations that before the eraof email company officials would have conducted via phone (andthus not recorded for posterity) were memorialized in a series ofdamning emails.➤ Recommendation: Although email may be convenient,some things are best left to the phone. What hasn’t been writtendown doesn’t have to be deleted.Blogging, social networking, textingNew technology enhances workplace communication and collaboration,but employers whose company policies don’t keep pacecould pay a heavy price.Blogs, where employees may freely type messages to oneanother over the company’s server, have been touted as greatteam-building tools.Similarly, social networking sites, such as Twitter and Facebook,offer employees communi cation outlets that didn’t exist severalyears ago.While these seemingly benign online chats may be seen as 21stcentury water-cooler talk, the fact that they appear on the Internetgives them many attributes of a published document.

2.14 Employer’s Practical Legal GuideGenerally, courts have held that employers may regulate whatoccurs on their electronic devices. However, some recent decisionsshow courts are backing off this absolute protection for employers.In 2009, a New Jersey appeals court ruled that an employee hadthe reasonable expectation that his employer would not reademails sent and received on his personal account even thoughthey were sent from a company computer. Stengart v. Loving CareAgency, 973 A.2d 390 (2009)In 2010, the U.S. Supreme Court issued a long-awaited rulingthat reiterates the importance of all employers to draft and enforcea comprehensive electronic communications policy governinghow employees can use email, the Internet, cell phones and textservices.The case, City of Ontario v. Quon (No. 08–1332, Supreme Court,2010), marked the first time the justices waded into the issueof employee monitoring in the wireless age. They ruled that itis reasonable for employers to search messages sent using thecompany’s own equipment in order to find out if an employeebroke a work rule. The court stopped short of saying when,if ever, employees can expect some degree of privacy in theire-communications at work.In the Quon case, a California city police department disciplinedan officer after discovering he’d sent hundreds of texts tohis wife and girlfriend on a city-issued pager. A lower court ruledthe officer should have a “reasonable expectation of privacy.” Butthe Supreme Court reversed, saying reviewing the pager transcriptswas neither intrusive nor outside the scope of normal business.How should employers handle communication on theiremployees’ own time and equipment? While your options arelimited, here are some guidelines:• Employees must never claim to represent the company inelectronic communications unless they have express instructionsto do so.• Employees should be reminded they are not authorized torelease confidential information or trade secrets when usingsocial media.

Employee Conduct/Performance 2.15• Employees should understand that even though they may discussworking conditions, criticisms of bosses and co-workerscould be potentially libelous or harassing. Even in social networking,a “just the facts” approach works best as long asthose facts aren’t company secrets.NLRB stance on social media postingsThe NLRB has been taking a close look at how employers reactwhen they don’t like what their employees post online. Its recentcases have dealt with: (1) broad policies restricting employees’ freespeech on social media websites and (2) wrongful terminationrelated to such postings.In a recent report, the NLRB found that employees who postedon social media were engaged in “protected concerted activity”when they discussed terms and conditions of employment withfellow employees. However, when the employees were not discussingterms and conditions of employment, the NLRB concludedthey were not taking part in protected activity and, consequently,were not protected by the National Labor Relations Act (NLRA).Note: Usually, protected concerted activity refers to employeeefforts to unionize, but the NLRA also protects the rights of allworkers to discuss the pay, benefits and other conditions of theiremployment with co-workers and others, even in a nonunionworkplace. It doesn’t matter, the NLRB says, whether those discussionsoccur in-person or online.Rules on Electronic Record-KeepingFederal rules of discovery that took effect in 2006 govern howyou keep electronic records. The rules require lawyers and theemployers they represent to come clean on what electronic recordsthey keep and how to decipher them.The rules require all parties to federal lawsuits, includingemployment law cases, to:• Sit down at the outset and hammer out plans for turningover electronic records relevant to the lawsuit.

2.16 Employer’s Practical Legal Guide• Detail exactly what electronic records they have (emails,memos and other information kept on hard drives), photographs,sound recordings and other data compilations.Lawyers representing employees can demand copies of electronicrecords in an electronically searchable form. Employerscan’t simply print the records.➤ Recommendation: If you haven’t already done so, schedulea session with your lawyer to review what records you shouldkeep and which ones you can safely delete.Off-Duty BehaviorIn recent years, employer attempts to regulate what employeesmay do on their own time have become a contentious issue. Manyemployers fear that their employees’ off-duty actions may reflectbadly on them or, even worse, create liability.The U.S. Supreme Court upheld the right of the city of SanDiego to fire a policeman for selling a video showing him strippingoff his uniform and performing sexually explicit acts. City ofSan Diego v. Roe, 543 U.S. 77 (2004) The officer sold the video andpolice-related items online and identified himself as a San Diegopoliceman. The city’s police department notified the officer that heviolated “department policies as to unbecoming conduct, immoralconduct and outside employment” and told him to stop sellingthe items. He refused, was terminated and sued, arguing that thecity was violating his First Amendment right to free speech. TheSupreme Court backed the employer, noting the speech in questionwasn’t protected because it “was detrimental to the missionand functions of the employer.”Employers may regulate off-duty employee behavior withinnarrow limits. Specifically, you should specify what off-dutyactivity is prohibited in terms of unbecoming, immoral or illegalbehavior. Similarly, spell out any restrictions on outside businessor employment.All violations of the policy must be thoroughly investigated,and the employee must have the right to defend his actions.Employers may not fire or discipline an employee on mere suspicionof unbecoming, immoral or illegal behavior.

Employee Conduct/Performance 2.17Personnel Practices Audit:Regulating Off-Duty BehaviorAnswer the following questions about your company’spolicies on workers’ after-hour activities:Don’tYes No Know1. Have you determined specific acts thatyou consider to be questionable off-dutybehavior? ❏ ❏ ❏2. Does the behavior in question affectyour business? (If the answer is yes,what aspect does the behavior affect,such as productivity, morale, health carecosts, workers’ compensation costs,company’s public image?) ❏ ❏ ❏3. Is there an overt relationship betweenoff-duty behavior and the employee’swork performance that could easily beproven in court? ❏ ❏ ❏4. Will your restrictions have an equalimpact on employees, regardless oflifestyle or other factors? ❏ ❏ ❏5. If you decide to impose certainrestrictions, are they enforceable? ❏ ❏ ❏Any “No” answer may be an invitation to a lawsuit.Lifestyle discriminationIn an effort to control health care costs, many employers are tryingto regulate employees’ off-duty behavior that might pose healthrisks. Some are instituting bans on hiring smokers, even if theysmoke only during off-duty hours. Others are charging more forhealth insurance to overweight individuals.

2.18 Employer’s Practical Legal GuideDo employers have free rein to monitor and make decisionsbased on the off-duty conduct of their employees? Not if theirbusiness operates in one of several states with laws prohibitinglifestyle discrimination. In other states, employers have more freedomto take action based on off-duty conduct, particularly whenthere’s a connection between employees’ personal habits and theirworkplace effectiveness or if they have reason to suspect violationsof workplace rules or misconduct.The risk, however, is that employees treated differently becauseof their lifestyles might claim disability discrimination. A smokercould claim he’s addicted to nicotine and his addiction constitutesa disability. A morbidly obese employee could claim she’s disabledbecause she’s substantially impaired in walking.Other employers, instead of screening or firing their way toa healthier workforce, are establishing wellness programs. Someoffer discounts to employees who participate in smoking cessationor “healthy eating” programs. Still others have paid employeesoutright to take off a few pounds.Whether legal or not, employers’ efforts to change employees’personal lifestyles can lead to an unsatisfied workforce. Beforeimplementing any “lifestyle” programs, consult an attorney aboutthe laws in your state.Moonlighting policiesWith nearly 6% of U.S. employees holding second jobs, it’s likelyyour organization will face the business and legal risks associatedwith moonlighting employees.You have a right to prohibit employees from engaging in othergainful employment while at work. But can you (or should you)ban off-the-clock moonlighting? And when should you disciplineemployees for moonlighting?The key: Set a clear policy that outlines what you consideracceptable outside employment. Specify in your policy whetheremployees can moonlight during leave. If you’re silent on theissue, employees may be able to moonlight while they’re out onFMLA leave.Make sure you apply your moonlighting rules uniformly.Otherwise, you run the risk of a discrimination lawsuit.

Employee Conduct/Performance 2.19Case in point: The U.S. Postal Service demoted Denise Rolandafter her Mary Kay cosmetic business began taking up too muchof her day. She sued for race discrimination.Roland, a black supervisor, complained that the USPS gavepreferential treatment to a white male employee by not punishinghim for delivering his wife’s Avon orders along his mail route. Shesued for race bias.The Postal Service said it had a right to come down harder onRoland because her activities were more egregious. She solicitedfellow employees to buy Mary Kay products and become sales reps,plus she tried to sell the cosmetics to postal patrons while on duty.The 11th Circuit agreed. While everyone who violates the rulesshould receive equal treatment, these violations weren’t equal. Thepunishments could differ and weren’t proof of race discrimination.Roland v. U.S. Postal Service, No. 06-12261 (11th Cir.)Anti-Theft PoliciesThe U.S. Chamber of Commerce estimates that employee theftcosts U.S. businesses $50 billion every year. A Small BusinessAdministration report says 30% of employees admit to stealingfrom their employers. Employee theft varies in magnitude,ranging from the relatively minor act of taking pens and legalpads from the supply closet to insider trading or embezzlement.Employers must have clearly defined anti-theft policies to combatthe problem.The following guidelines can help you implement a no-theftpolicy at your organization:✔ Make a list of all items with a potential risk of being stolenor manipulated, including accounts payable and receivable,inventory, confidential information, intellectual property,cash, tools, office equipment and supplies.✔ Keep a list of individuals with access to any items likely to betaken, such as office supplies and computers.✔ Identify the process by which the “items at-risk” are controlled.If you do not have a set procedure for tasks such as

2.20 Employer’s Practical Legal GuidePersonnel Practices Audit:Preventing Company TheftAnswer the following questions about your company’sefforts to curtail internal theft:Don’tYes No Know1. Is all incoming merchandise checkedagainst purchase orders and invoices? ❏ ❏ ❏2. Are all storage rooms locked? If so,are keys restricted to only a fewdesignated employees? ❏ ❏ ❏3. Does someone supervise employeeswhen they receive supplies? ❏ ❏ ❏4. Is access to each part of your plantor office restricted to employeeswho have a reason to be there? ❏ ❏ ❏5. Do you spread responsibility formajor transactions so that they arenot controlled by one employee? ❏ ❏ ❏6. Are employees in “sensitive” jobsasked to lock their desks and files whenthey are away from their offices? ❏ ❏ ❏7. Are visitors always escorted to theperson they came to see? ❏ ❏ ❏8. Does your handbook include astatement on theft of property? ❏ ❏ ❏9. Is everyone expected to abide bythe security rules? ❏ ❏ ❏10. Are infractions investigated thoroughly? ❏ ❏ ❏11. Are disciplinary actions proportionalto the crime? ❏ ❏ ❏If you answered “No” to any of these questions, you shouldexamine and revise your company’s security measures.

Employee Conduct/Performance 2.21ordering and receiving office supplies, it will be difficult todetermine whether missing supplies were stolen or if theywere simply never shipped.✔ Establish a security system (including guards, cameras,remote-control surveillance and magnetic entrance cards) inproportion to the value of the items being protected.Dress CodeWorkplace dress codes, which have become more controversial,touch on a variety of issues, including workplace safety, freedomof speech, personal hygiene, customer relations, religious freedom,the minimum wage and racial and gender stereotypes.Employers have a number of legitimate reasons for imposing adress code, but court rulings have limited their options.■ In Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), the U.S.Supreme Court ruled that employment decisions, including workplacepolicies, may not target one gender. Generally, courts haveinterpreted that to mean employers may create dress codes thatare different for each sex as long as they don’t unduly burden onegender more than the other.Note: Twenty states and the District of Columbia have adoptedlaws prohibiting discrimination based on gender identity, whileothers have adopted similar protections. Some gender identitylaws ban discrimination based on gender identity “expression,”meaning discriminating against people because they dress or otherwiseidentify with the opposite gender.Accommodating religious attireCompany dress codes have spawned numerous religious discriminationlawsuits in recent years. Title VII of the Civil RightsAct requires employers to make a reasonable effort to accommodateemployees’ sincerely held religious beliefs, including theirreligious attire or grooming habits. The law requires employers togrant wardrobe accommodations so long as they do not pose anundue hardship on their business.

2.22 Employer’s Practical Legal GuideIn addition to traditional, organized religions, the law recognizesreligious beliefs that are new, uncommon, not part of a formalchurch or sect, or that seem unreasonable to others—basically,any religious belief so long as it is “sincerely held.”Many conflicts with employer dress codes have arisen overhijabs, or head scarves worn by some Muslim women, and beardsworn by some men to observe their faiths. Title VII requiresemployers to make a reasonable effort to accommodate them.Also, dreadlocks, religious tattoos, prayer caps and religious symbolshave found protection under Title VII.Employers may specify that religious clothing be neat, cleanand in a color that does not clash with the company uniform, ifthat applies. And you may ask workers to tuck in loose clothingto keep it from getting caught in potentially dangerous machinery.Case in point: A young Muslim woman worked at AlamoRent-A-Car and wore a head scarf in accordance with her religiousbeliefs. After 9/11, her employer told her to remove the scarf. Sherefused and was fired. The EEOC sued on her behalf and wonan easy victory. The federal judge hearing the case decided theviolation was so clear-cut that a jury trial wasn’t necessary. Basedsimply on the pleadings and Alamo’s admission it fired the womanfor wearing the head scarf, the judge ruled the employer was liable.EEOC v. Alamo Rent-A-Car, No. 02-1908 (DC AZ)An employer is liable for religious-garb discrimination only ifit results in a worker suffering an adverse employment action, suchas discharge, denial of a promotion or a demotion. In Ali v. AlamoRent-A-Center Inc. et al. 246, F.3d 662 (4th Cir.), a young Muslimwoman, Ali, was hired as a management trainee. While on the job,she wore a head scarf in accordance with her Islamic beliefs, alongwith her company uniform. Her supervisor told her she would haveto stop wearing the scarf or be transferred to a position in which shewould not be in frequent contact with customers. Ali refused to stopwearing the scarf and was transferred. The 4th Circuit concludedthat since Ali admitted that being transferred was not an adverseemployment action, she did not have a case.Note: For information on religious garb and Islam, consult theCouncil on American-Islamic Relations’ booklet, Employer’s Guideto Islamic Religious Practices, at www.cair.com. For more detailson the EEOC’s religious discrimination standards, see Section 10,Civil Rights Act.

Employee Conduct/Performance 2.23Trade SecretsYou need to protect your company’s trade secrets for two importantreasons: (1) You make it less likely that confidential informationwill be misappropriated. (2) It will be easier for you to seekrelief in court if your secrets are stolen.All states provide trade secret protection for businesses, andmost have adopted the Uniform Trade Secrets Act (UTSA). Threestates (Massachusetts, New York and North Carolina) have notenacted the UTSA but have other trade secret protection on theirbooks. Almost any secret information that gives a business entitya competitive edge can be protected under UTSA or other statelaws. In addition, Congress enacted the federal Economic EspionageAct to extend federal protection of intellectual property totrade secrets.The types of secrets that can be protected include manufacturingprocesses, formulas and recipes, software, customer listsand information, general corporate strategy, business plans andmarketing techniques. The only proviso is that the informationmust be secret and be “the subject of efforts that are reasonableunder the circumstances to maintain its secrecy.” In otherwords, to be a trade secret, your company must take steps to keepothers from learning about it. That may mean having a secretformula kept in a safe and memorized by just a few key peopleor storing customer lists on a password-protected server that’shacker-proof.Case in point: Islandia software provider CA Inc. filed a $200million lawsuit against rival Rocket Software of Newton, Mass.,alleging Rocket stole computer source codes and other tradesecrets from CA and used the information to develop almost identicalproducts. The lawsuit alleged that in 2000, Rocket hired fourformer programmers and software developers of a CA subsidiary,Platinum Technology International. Before leaving Platinum, thelawsuit alleges, the engineers downloaded source codes for CAproducts onto laptops and disks, which Rocket used to developsoftware for IBM’s DB2 database management system.In 2009, CA and Rocket settled the suit, with Rocket agreeingto license the source codes.

2.24 Employer’s Practical Legal GuideTip: The CA Inc. case is a powerful reminder that you needsolid noncompete and trade secret agreements for key personnel.Not only do such agreements discourage employee poaching, butalso they give you solid ground to sue if employees breach theterms.17 ways to protect your trade secrets1. Specifically identify each piece of information you wish toprotect as a trade secret.2. Do not be overly inclusive or overly broad in choosing whichinformation to protect; that would trivialize and undermineprotection of your true trade secrets.3. Label as confidential all documents that contain or reflecttrade secret information, and treat them as such. Limit copiesand, where appropriate, register document numbers; thenrequire that such information be returned either when a taskis completed or on demand.4. Limit access to those employees who need to know.5. Instruct all employees who work with company informationas to which is considered trade secret and how they shouldtreat it.6. Have all employees who will be exposed to or using theinformation sign confidentiality agreements and, if appropriate,covenants not to compete.7. Implement security measures, such as secure zones, badges,security guards, passwords and locked cabinets. Limit accessto your company’s facilities through tours or other publicdisclosures. Make visitors sign in and out, wear badges and,if appropriate, sign confidentiality agreements (examples: anyconsultant, prospective purchaser or joint venturer). Prohibitcameras, tape recorders and similar items. Monitor computernotebooks.8. Be careful about information on computer disks or harddrives. Make sure the information is available only throughusing a password, which is given only to appropriate

Employee Conduct/Performance 2.25personnel and changed frequently. Remember: Electronicmail may last forever and be redistributed, and there is nosecurity on the Internet.9. Include a confidentiality provision in all contracts with outsideentities, including temporary workers, distributors, jointventurepartners, licensees, vendors and customers.10. Be careful that information you are trying to protect is notunwittingly disclosed in advertising or marketing andthrough training materials, professional publications and presentationsat trade shows or conferences.11. Conduct periodic trade secret audits to check for leaks.12. If you outsource any of your product/technology assembly,require strict vendor confidentiality agreements, use differentvendors for various components and do not disclose eitherhow the parts relate or any final product information.13. Be aware that outside the United States trade secret protectionvaries widely, from some to none.14. Establish and update written policies and manuals for protectingyour intellectual property, including trade secrets.Require your employees to read, understand and complywith these policies.15. Hold periodic training sessions to remind employees of theserules and to note and correct careless practices.16. Correct, censure, reprimand and/or discipline any employeewho violates these policies.17. Hold exit audits with departing employees to obtain thereturn of all secret information and an acknowledgment thatthey will comply with noncompete, nondisclosure or otherobligations. Note: You can base certain severance payments orbenefits on the condition of continued compliance.

Section 3EmployeeHandbooksYou severely compromise your ability to managethe organization if your personnel policies arenot clearly communicated to the workforce. Considerthis case: A court ordered a company to reinstate anemployee who had been fired for using his officecomputer for personal use after business hours. Thecourt found that the employer had not specificallyforbidden the use of company property for personalpurposes.This example illustrates how easily you can get into trouble ifyour workers don’t know about or fail to understand your rules.That’s why employee handbooks are extremely valuable businesstools.But if you’re not careful, your handbook could land you incourt. In particular, more and more employees are suing forwrongful discharge, pointing to a handbook they claim guaranteedthem employment indefinitely.Your handbook serves many important roles. It documentsyour policies, orients new hires, encourages employees to stayproductive, builds trust for your company and helps you complywith government regulations. It even allows you to prepare3.1

3.2 Employer’s Practical Legal Guidefavorable evidence ahead of time in case you ever face an employ ­ment lawsuit. But a handbook can also work against you if it’soutdated, inconsistent with the way your company operates orgives employees the impression that it’s an employment contract.Protect Your At-Will StatusUnder the law in most states, whenever there’s no employmentcontract, a worker is employed on at “at will” basis. This meansan employee can be fired at any time for any reason or no reasonat all.That doctrine is eroding, however, as federal and state lawsand court decisions find more and more instances in which theemployer is obligated not to dismiss the employee or to do soonly in a certain way. Those situations involve anti-discriminationlaws, implied contracts, public policy concerns, civil wrongs and“implied covenants of good faith and fair dealing.”Oftentimes in court, the handbook becomes a prime piece ofevidence, showing the employer’s policies and promises. By thesame token, the absence of a handbook can provide evidence thata company has no consistent policy.You must pay careful attention to the handbook to help protectyour status as an at-will employer, to the extent allowed by law,and to reduce your chances of losing in court. While the wordingof an “at-will” doctrine sounds harsh, in reality it’s a rareemployer who would fire someone for no reason at all. However,if you guarantee employees that they’ll be fired only “for cause,”you open yourself to having outsiders examining your employmentdecisions to determine if your reason for firing the plaintiffwas justified.Always insert disclaimersThe standard practice for preserving an employer’s at-will statusis to include a disclaimer in the handbook stating that (1) allemployees are hired on an “at-will” basis, (2) each person’semployment is for no specific term, (3) the employer reserves theright to terminate the relationship at any time, and (4) nothing

Employee Handbooks 3.3in the employee handbook should be construed as a contract ora guarantee of continued employment. Some states require thesedisclaimers to be in bold type, capitalized, underlined (or somecombination of the three) and be signed by employees. Checkthe laws in your state to ensure your handbook complies. Even ifnot required by your state law, it’s generally a good idea to haveemployees sign a form acknowledging receipt of the handbookand stating they’ve read and understood it.The 10 Most Common MistakesEmployment lawyers point to the following mistakes thatemployers make in handbooks, which could spell trouble foryour organization:1. Using form handbooks, which usually have many provisionsthat have nothing to do with your organization.2. Meshing policies and procedures, which confuses employeesand provides more fodder for plaintiffs’ lawyers.3. Including a probationary period, implying that anyonewho stays with the company 90 days is then a permanentemployee.4. Being too specific in descriptions and lists, especially thoseinvolving discipline.5. Not being consistent with other company documents.6. Not adding a disclaimer, or not enough in the right places.7. Sabotaging disclaimers by what you do or say, especiallyreassuring employees that their jobs are secure and they’llbe fired only for a really good reason.8. Not adapting the handbook for each state’s laws.9. Failing to update the manual frequently for changing laws.10. Being unrealistic about what your employees or supervisorswill buy into as your policy.

3.4 Employer’s Practical Legal GuideSome employers include other items on the acknowledgment,such as an agreement to submit any disputes with thecompany to binding arbitration, as described in the handbook.(If you’re insisting that the handbook is not a contract, this moveprovides a way to distinguish your arbitration requirement, ifyou have one. Otherwise, an employee could argue in courtthat the arbitration requirement, as part of the handbook, isn’tbinding.)A Dangerous BookRoutinely, employees distraught about losing their jobs or missingout on a big promotion turn to the handbook for evidencethat the company has breached a contract. Courts have often beensym pathetic to their claims, especially when the handbook makesprom ises the company has not kept.The handbook might set forth pro cedures for progressive discipline,which could serve as the basis for a wrongful-dischargesuit by an employee who was summarily dismissed for dishonesty.It might list causes for discharge, giving the impression thatit’s a complete list—and therefore the company can’t fire someonefor other reasons. It might include a brief summary of the healthbenefits, which the employee might rely on instead of reading thesummary plan description.Consider these cases:■ A woman who took leave to adopt a foreign child was firedupon her return to work. While she was overseas, her employerdiscovered that she had failed to send receipts for large donationsmade to the organization she worked for. Part of her job descriptionwas, in fact, to acknowledge promptly all gifts and donations.The company handbook provided that employees would be disciplinedon a progressive basis. The woman sued, arguing that thehandbook was a contract, and therefore her immediate dischargeviolated the contract.Her employer argued that the handbook contained a statementthat it wasn’t a contract and a clause saying the employer “reservesthe right to immediately discharge associates without progressingthrough the first three disciplinary steps.”

Employee Handbooks 3.5A federal appeals court concluded that even if the handbookwas a contract, the company had reserved the right to fire her. Itdismissed the case. Smith v. Memorial Foundation of Allen Hospital,F.3d (8th Cir.)As this case shows, it’s a good idea to place a disclaimer in thehandbook to the effect that the company doesn’t have to followevery pro cedure outlined in the manual.■ An employer doesn’t reserve the right to fire employees forserious offenses without going through the progressive disciplineprocess. Even though U.S. Bancorp’s employee handbook explicitlysaid that “policies and procedures do not constitute a contractualobligation” and “employment with the company is an at-will relationship,”Susan Messinger sued after it fired her.Her claim? The handbook stated that the company’s progressivecounseling “will provide [the employee] with a reasonableopportunity to make the necessary improvements in order tosucceed.” The 9th Circuit Court of Appeals sided with Messinger,concluding the handbook’s promise to provide employees a reasonableopportunity to improve negated the disclaimer language.Messinger v. U.S. Bancorp. No. 04-35548 (9th Cir.)Even if your handbook contains a conspicuous disclaimer, youcould negate employees’ at-will status by offering oral reassurancesof job security.What the Courts ConsiderWhen weighing the evidence in a lawsuit involving employeehandbooks, courts consider many factors, including:■ Employee’s reasonable expectations. While the disclaimermay declare that the employment relationship is strictly at-willand nothing in the handbook should be considered a contract,judges tend to look at the reasonable expectations of the em ployeeinvolved.For instance, in Derrig v. Wal-Mart, the court noted that theemployee understood what the rules were in the handbook and wasfamiliar with the system of progressive discipline described in it.The court decided it was reasonable for the em ployee to expect thatthe company would abide by its own rules.

3.6 Employer’s Practical Legal Guide■ Conspicuous disclaimer. When the handbook contains adisclaimer, where is it located? Would a typical employee see it?In one case a U.S. District Court in Colorado ruled that thecompany may have created a contract in its employee handbookbecause the disclaimer was buried among unrelated paragraphsunder the uninformative heading “Introduction.” Fejes v. Gilpin Ventures,d/b/a the Gilpin Hotel Casino, 960 F. Supp. 1487 (D. Colo.)■ Clarity of disclaimer and receipt. In the Fejes case above,the wording on the receipt was unintelligible, with whole phrasesmissing. That’s confusing and unenforceable, the U.S. DistrictCourt ruled.■ Who’s covered by each provision. A pharmaceutical companyemployed a therapeutic specialist who worked from his home.While the therapist was on FMLA leave for surgery, the companyreplaced him. The therapist sued. In court, the company argued thatthe therapist was not eligible for FMLA leave because the companydid not employ 50 workers within 75 miles of his work site. Anappellate court ruled for the therapist, finding the company wasbound by its handbook, which granted FMLA leave to all employeeswho worked 1,250 hours in the prior 12 months. The employer couldnot selectively eliminate the therapist from that provision after thefact. Peters v. Gilead Sciences, Inc., No. 06-4290 (7th Cir.)■ Oral promises. Even a carefully worded disclaimer can loseits effect if a company executive tells the employees that they willbe terminated only for cause, or that their jobs are secure—andthen he or she discharges them for some minor infraction.■ Consideration. When a company replaces its handbookwith a version that changes the terms of employment—such aseliminating a seniority system that employees have relied on—some courts expect the company to have provided some “consideration”:that is, some additional benefit, payment or privilege otherthan continued employment to compensate employees for the loss.Courts take a dim view of unilateral changes.■ Good faith and fair dealing. Although the handbook maysay employees are hired on an at-will basis, courts in some statesbasically ask whether what happened was fair.Finding an implied covenant of good faith and fair dealing,the court may award damages for outrageously unfair employmentdecisions.

Employee Handbooks 3.7Your Handbook and the UnionIf your organization isn’t unionized, certain aspects of theemployee handbook can either help or jeopardize your chances ofstaying that way.First, be careful with the wording of disclaimers. If you statetoo harshly that your company makes no commitment to continueemployment and may fire employees at any time for anyreason or no reason at all, union organizers may point to the disclaimeras evidence that workers have no job security and need aunion. Soften the language by, for example, explaining the reasonfor the disclaimer: that just as employees may leave a job for anyreason without legal obligations, the company reserves the right toterminate employees for any reason it deems necessary.Second, make the handbook (the work environment) friendlyenough so that employees won’t feel the need to have a union. Forexample:• Emphasize the company’s commitment to good communicationwith every employee.• Establish effective channels for resolving problems, andmake sure employees feel at ease expressing their concerns.• Don’t be afraid to mention the fact that the company doesn’thave a union, and that you’re committed to creating a workenvironment where no union is needed.If your workers are already represented by a union, make surethe employee handbook acknowledges the existence and authorityof the union. In particular:• If certain groups of workers are required to join the union aftera given probationary period, say so in the employee handbookso that it won’t come as a surprise to new employees.• Instead of describing benefits, pay practices and other proceduresdetailed in the collective bargaining agreement (riskinginconsistency and confusion), refer covered workers tothat agreement.(Continued on page 3.10)

3.8 Employer’s Practical Legal GuideEmployee Handbook EssentialsTopics typically covered in handbooks include the following:Welcome to the Company:• Letter from the president.• Brief history of the company.Rules and Procedures:• Working hours.• Lunch periods and breaks.• Holidays, vacations and sick leave.• Family and medical leave.• Disability accommodation requests.• Jury duty.• Military leave.• Personal calls/mail/email.• Personal use of company equipment.• Theft and dishonesty.• Misconduct and insubordination.• Use of illegal drugs and alcohol on the job.• Smoking in restricted areas.• Dress code.• Policy on sexual harassment and discrimination.• Employee privacy.Employment Policies:• Probationary periods.• Performance evaluations.• Promotions and transfers.• Seniority.• Terminations and resignations.

Employee Handbooks 3.9Compensation:• Pay procedures.• Payroll deductions.• Performance bonuses.• Overtime payments.• Salary increases.• Expense reimbursement.• Severance pay.Benefits:• Health, life, disability and other insurance.• Pension and retirement plans.• Workers’ compensation.• Tuition assistance.• Savings and stock purchase plans.Safety and Health:• General safety rules.• Reporting job-related accidents.Affirmative Action Statement➤ Recommendation: Your handbook should include a statementthat each new employee must sign to acknowledgeresponsibility for receiving, reading, understanding and agreeingto abide by your company’s rules. Keep the signed statementin the employee’s personnel file. Your statement couldread as follows: “I hereby acknowledge receipt of the companyhandbook. I certify that I have read and fully understand therules and procedures contained in it. I acknowledge my fullresponsibility to follow them faithfully in all respects.”

3.10 Employer’s Practical Legal Guide(Continued from page 3.7)• Inform union employees that they should speak with theirsteward about any issues covered in the union agreement.• State that no information in the handbook shall be construedto alter the union agreement.(For more information on unions, see Section 14.)Audit Your HandbookIf it’s been awhile since you last overhauled your employee handbook,you may be courting danger. Establish a regular revisionschedule to update your handbook once a year or whenever significantstatutory or other changes occur.You don’t want your employees relying on outdated or evenillegal policies. Plus, you may obtain lower rates on your employmentpractices liability insurance, which protects businesses fromvarious kinds of employee lawsuits.Handbooks must change with the times; those that gatherdust on the shelf may be more dangerous than no handbook at all.That’s especially true if anything in your manual reinforces corporatecultural norms at odds with current discrimination laws.Outdated handbooks can provide ammunition even for otherwisefutile lawsuits, and language from a bygone era may come back tohaunt you.Case in point: A female bank employee quit after 25 yearsbecause a male co-worker earned more than she did. She filed anEqual Pay Act (EPA) lawsuit and won. But that wasn’t all. Becausethe EPA allows employees to win double damages and an additionalyear’s back pay if they can prove the violation was “willful,”the former employee claimed the company handbook provedintent to discriminate.She pointed to a policy that addressed scheduling problemsfor “ladies with children going to school” and another one thatsaid employees couldn’t use sick leave for maternity leave. Thesepolicies, she said, reinforced a corporate attitude that men aremore valuable employees than their female counterparts. Simp sonv. Merchant and Planters Bank, No. 04-3972 (8th Cir.)(Continued on page 3.12)

Employee Handbooks 3.11Personnel Practices Audit:Your Company HandbookUse the following questions to analyze the thoroughness andreliability of your employee handbook:Don’tYes No Know1. Does your handbook clearly state thatit is not to be considered a contract inany way and that you reserve the rightto change it? ❏ ❏ ❏2. If your handbook lists offenses warrantingdiscipline, including discharge,does it make clear that those listedare merely illustrative rather thanexhaustive? ❏ ❏ ❏3. Does your handbook encourageemployees to bring their complaintsto their union or to management? ❏ ❏ ❏4. Does your handbook make clearthat any type of harassment is nottolerated? ❏ ❏ ❏5. Does it provide procedures foraddressing complaints of that nature? ❏ ❏ ❏6. Do the benefits policies contained inthe handbook comply with federal andstate laws? ❏ ❏ ❏7. Do all employees receive copies ofthe handbook each time it is revised? ❏ ❏ ❏8. Do you have a receipt form thatemployees sign when they receivethe handbook or any revisions of it? ❏ ❏ ❏9. Is your handbook up to date inall areas? ❏ ❏ ❏(Continued on page 3.12)

3.12 Employer’s Practical Legal Guide(Continued from page 3.11)Don’tYes No Know10. Does your attorney review yourhandbook regularly to see that itcontains nothing in conflict withfederal and state laws or localregulations? ❏ ❏ ❏11. Is it written clearly and simply? ❏ ❏ ❏12. Is the language respectful ofemployees? ❏ ❏ ❏13. Are the rules described inthe handbook enforced in anevenhanded manner? ❏ ❏ ❏14. Do you make sure that youremployees read the handbook? ❏ ❏ ❏15. Is it free of political statements,including the company’s opinionsregarding labor organizing? ❏ ❏ ❏If you answered “No” to any of these questions, you shouldreview your company policies and the way they are communicatedto your workforce.(Continued from page 3.10)When you prepare the current revision, plan ahead for laterversions by stating in both the conspicuous disclaimer and thereceipt/acknowledgment that you reserve the right to makechanges to any of the handbook’s provisions.Caution: What you exclude from your handbook can be asimportant as what you include. Employment lawyers recommendthat you omit the following:• Instructions to managers.• An arbitration clause.• Details on benefits.• Policies on leaves of absence.

Employee Handbooks 3.13• Details that change frequently.• Any policy that won’t seem enforceable.• Any promise you don’t intend to keep.Keep the language in your handbook simple and the formatreadable. “Use plain English,” advises attorney Brooks Kubik. “Ifyou don’t, people won’t read it.”Have your lawyers review a draft of the handbook to makesure it’s a document that can help you avoid legal troubles, notinvite them. Many federal employment laws, including the FMLAand ADA, require employers to distribute notices and policies inlanguages other than English when a “significant portion of workersare not literate in English.” (29 CFR §825.300) While this provisiondoes not specifically apply to employee handbooks, it standsto reason that enforcing agencies (Labor Department, EEOC, etc.)expect employers to inform workers of their rights in a languagethey understand.➤ Recommendation: When issuing a revised handbook, makesure employees and supervisors discard their old handbooks andsign a receipt for the new one.Alternative Dispute ResolutionIn recent years, various forms of alternative dispute resolutionhave gained popularity. ADR is widely seen as a less costly way ofresolving disputes than going to court. Good ADR programs providea less adversarial forum for resolving disputes than litigation.Examples of ADR include:• Open-door policy: Employees can present their problems totheir own or any supervisor for resolution. For this to workproperly, supervisors must be trained in how to handle theircomplaints.• Ombudsman: Disputes are submitted to a neutral third partyfollowing an in-house investigation.• Peer review: Disputes are submitted to a panel of co-workerstrained in ADR techniques. The panel discusses the problemand suggests creative, nonpunitive resolutions.

3.14 Employer’s Practical Legal Guide• Mediation: Disputes are submitted to a neutral mediator fornonbinding resolution. The mediator’s goal is to move thetwo parties closer together and work toward a resolution. Themediator may suggest a resolution to the dispute, but neitherparty is bound to accept her suggestion.• Arbitration: Disputes are submitted to an impartial arbitratorfor final and binding resolution. Most arbitrations aregoverned by the American Arbitration Association’s NationalRules for the Resolution of Employment Disputes and its DueProcess Protocol.Open-door policies are a good idea, but the results depend toa large extent on the supervisors’ training. They must understandthat complaints brought to them are important whether they applydirectly to them or not. They must know the procedure for resolvingthe dispute and understand what powers they have, if any.Open-door policies can backfire quickly if supervisors:• Are not trained to handle complaints.• Fail to handle complaints properly despite being trained.• Lack the power to resolve small complaints.Because open-door policies raise employee expectations, thesupervisor’s response is key to making the policy work. In fact,poorly trained supervisors may actually make small problemsworse, thereby defeating the purpose of ADR.An ombudsman, in the world of ADR, is a neutral third partywho hears both sides, views the internal investigation and attemptsto bring the parties to some kind of agreement. This person may bea volunteer, retired employee or a paid ADR specialist.Under the peer review process a group of co-workers trainedin ADR techniques hears both sides of the issue and attempts tocraft a compromise. The underlying concept is that the co-workershave no agenda other than quick, fair resolution. They must alsoagree to keep the proceedings confidential.Much like the ombudsman, mediators are third parties whotry to find compromise. They can be employees or outside consultants.Mediators, however, lack the ability to impose a solution.

Employee Handbooks 3.15Because of this, mediation may be appropriate only when the differencesare minor.Binding arbitration is the process by which parties voluntar ilyagree to submit their grievances to an arbiter and accept his decision.For employers, the attraction is that employees sign awaytheir right to sue in federal or state court.Mandatory arbitration can save time and moneyUnder mandatory arbitration employees agree to arbitrate someor all disputes as a condition of employment. Employees who signmandatory arbitration agreements forfeit their right to sue theemployer in federal court.Arbitration agreements are governed by the Federal ArbitrationAct (FAA). Federal courts are generally well disposed toward arbitrationagreements as long as they are deemed fair and do not violatethe employee’s right to due process. In Circuit City v. Adams, 532 U.S.105 (2001), the U.S. Supreme Court upheld the legality of mandatoryarbitration agreements in employment contracts. The decisionstemmed from a California case in which an employee sought to suehis employer for discrimination. The 9th Circuit Court of Appealsruled that the FAA did not apply to employment contracts. However,the Supreme Court overturned that decision, citing references in theCivil Rights Act of 1991 and the ADA to arbitration as an acceptablealternative in resolving disputes.The case was then remanded to the 9th Circuit, which ruled thatmandatory arbitration agreements were illegal under Californialaw and were “contracts of adhesion.” A contract of adhesion is“a standard form contract, drafted by the party with superiorbargaining power, which relegates the other party the optionof either adhering to its terms without modification or rejectingthe contract entirely.” Under California state law such contractsare “procedurally unconscionable.” The court also noted that theFAA calls for arbitration agreements to be treated like any othercontract. Subsequent decisions have applied state laws governingthe formation of contracts to arbitration agreements. As a result,the court argued, arbitration agreements are subject to “generalcontract defenses such as fraud, duress, or unconscionability.” In

3.16 Employer’s Practical Legal Guideother words, arbitration agreements must be negotiated in goodfaith and be fair.The circuit court’s ruling is binding only in California. However,it is based on common-law contract constructs that vary littlefrom state to state. It is likely that the same challenge to mandatoryarbitration agreements will arise in other states, especially more ofthose in the 9th Circuit.Additionally, arbitration is no bar to the EEOC suing anemployer. In EEOC v. Waffle House, 534 U.S. 279 (2002), the SupremeCourt ruled that the commission could sue an employer on behalfof an employee even if the employee had signed a mandatoryarbitration agreement. The EEOC successfully argued before thecourt that it could not be bound by an agreement to which it wasnot a party.On the positive side, when mandatory arbitration works, itsaves a lot of time and money. Often, disputes can be resolvedoutside court without the associated costs of attorneys, deposingwitnesses, filing fees, etc. In most cases, arbitration also saves timebecause participants do not have to wait for backlogged courts tohear their case. Employers also can avoid publicity with an arbitrationagreement, since all parties usually agree to keep the proceedingsconfidential. Finally, barring a tremendously flawed or unfairsystem, arbitration decisions are usually final.Building an arbitration agreementAssuming you are willing to weather the contract challenges toyour arbitration system, you should structure an agreement thatis fair. In Circuit City v. Adams, the appeals court was appalled atthe one-sidedness of the arbitration agreement. The employee wasbound to arbitrate all claims with the employer, but the employerwas free to sue the employee in court. The employee’s potentialrecovery was, in effect, limited to $5,000.Employers should make sure that their arbitration agreementsare in line with others either upheld or commonly in use withintheir jurisdiction. A guiding principle should be that arbitration isan alternative due process, not an excuse to deprive the employeeof it. The employee should have the same chance to win in an arbitrationhearing as she would in court.

Employee Handbooks 3.17In 2011, the U.S. Supreme Court ruled that employers do havethe right to include class-action waivers in their arbitration agreements.The Federal Arbitration Act pre-empts any state laws thatwould try to nullify an arbitration clause that bars class-widearbitrations, the court said. AT&T Mobility LLC v. Concepcion, No.09-893.It’s important to include a clause prohibiting class action arbitrations.In Green Tree Financial Corporation v. Bazzle, 123 S. Ct. 2402(2003), a lender failed to include such a clause and couldn’t thwarta class action arbitration. The U.S. Supreme Court stated that partiesto arbitration agree to have the arbiter interpret the agreementand must live with that decision. In 2010, the Supreme Court ruledthat arbitration of class claims is not permissible when the parties’agreements are silent on the issue. Stolt-Nielsen S.A., et al. v.Animalfeeds International Corp., No. 08-1198.Finally, when evaluating an arbitration agreement, ask yourselfwhether you would sign it if you were looking for a job. Thenrun it by your attorney to make sure it’s fair under the law.EEOC opposed to the ideaAs shown in EEOC v. Waffle House, the commission does not holdbinding arbitration agreements in high regard. The EEOC calls theprocess of mandatory binding arbitration a method of coercionthat unfairly favors the employer. In the EEOC’s view, employerswho use mandatory binding arbitration set themselves upto be sources of repeat business for arbitrators. Employees tendto be “one-shot players” using the arbitration system only once.Arbitrators would, by the very nature of this arrangement, bemore receptive to claims of the employer, therefore eroding theirimpartiality.Since many binding arbitration rulings are not open to publicscrutiny or appeal, they are not held to the same standards ascourt rulings. The EEOC argues that the closed nature works tothe employers’ advantage by focusing on expediency rather thanjustice. The EEOC had to retreat from this position in the wake ofthe Supreme Court’s Circuit City v. Adams decision, but the commissionhas shown it will go after employers it views as discriminatorywhether or not an arbitration agreement is in place.

Fair LaborStandards ActSection 4The Fair Labor Standards Act (FLSA) covers thefederal minimum wage, rules on overtime payand child labor regulations. You must comply with theFLSA’s provisions if your organization is engaged incommerce, has annual gross income of $500,000, is apublic agency or operates a hospital, health care facilityor school.Even employers that don’t meet the above criteria may findthat an employee during some workweeks engages in interstatecommerce: i.e., takes or makes calls to another state or sends orreceives emails interstate. Also, be aware that the child labor andminimum-wage provisions apply to virtually every employer.The FLSA covers domestic service workers (such as day workers,housekeepers, chauffeurs, cooks and full-time baby sitters)if they receive at least $1,700 in cash wages in a calendar year orwork more than eight hours a week for one or more employers.(Starting in 2015, home health aides will also be covered.)Many executive, professional, administrative and outside salespersonnel may be exempt from some provisions of the FLSA providedthey meet certain standards in the Department of Labor’sovertime regulations, which it revised in 2004. Those who aren’t in4.1

4.2 Employer’s Practical Legal Guidecompliance with the revised rules may face lawsuits from workersentitled to overtime, as well as penalties. (For classification guidelines,see pages 4.15–4.34.)Caution: Since 2010, the DOL has increased its investigativeforce by 33%, meaning employers can expect more scrutiny.Hours of WorkTo comply with the FLSA, it’s important to understand the definitionof “hours of work.” Any hour when an employee’s on duty isconsidered time worked. The only period usually excluded: whenan employee uses the time for personal reasons.You don’t need to count meal periods lasting 30 minutes ormore as work time if the employee is completely relieved fromduty. But if, for example, you require someone to assist customersor take business calls during lunch, you must count thoseminutes as paid time. Coffee breaks or other rest periods lasting20 minutes or less are also considered time worked.Federal law doesn’t require rest or meal breaks for workersover age 18. Nearly half the states, however, mandate thatyou must provide rest or meal breaks for a specified minimumperiod each day. For example, in California employers must giveworkers a 10-minute rest period in every four-hour period, plus a30-minute meal break within five hours of starting their shift ifthe workday lasts six hours or more. Be sure to check with anattorney about your state’s law.Caution: If you require employees to wear pagers or berecalled to duty during meal breaks, you must pay them for thattime. You may incur significant liability if you’re not paying entireunits of employees on call during breaks. You can be hit with backpay for up to three years, plus an equal amount as liquidated damages—notto mention attorneys’ fees.When an employee engages in his regular duties, you mustcount the time as work even if it falls before or after his usual shift.(A mere few minutes of work may be excluded as unsubstantial.)If an employee is working at home or any other place outside thejob site, you must also count that time if you know, or have reasonto believe, that the employee is performing work.

Fair Labor Standards Act 4.3Before the workday begins or after it ends, you don’t need topay for time when an employee may engage in certain activitiesrelated to his regular job but not integral to it: for instance, travelbetween a logging camp and the site of logging operations.In 2005, the U.S. Supreme Court decided two cases involvinghours of work. It said manufacturing workers must be paid for thetime they spend changing into and out of protective clothing andsafety gear, a “principal activity … integral and indispensable”to their work. They must also be paid for time spent walkingbetween their workstations and locker rooms where they put onand remove their gear. However, the court didn’t order employersto pay for the time workers spend in line at the beginning ofthe day to get their clothing and safety gear; this is “preliminaryactivity” for which they needn’t be paid. IBP v. Alvarez, 546 U.S. 21and Tum v. Barber Foods, 543 U.S. 1144.Note: In 2010, the DOL issued an interpretation letter (2010-2)on compensable time for “donning and doffing” certain workclothes. Read the pro-employee rules at www.dol.gov/whd/opinion/AdminIntrprtnFLSA.htm.Travel TimeMany nonexempt (hourly) employees are entitled to pay for timespent traveling. Some general guidelines:• Travel between home and work. Regular commuting backand forth to work doesn’t count as paid time unless theemployee performs work en route. Travel time does count,though, when an employee must travel a substantial distancefor an emergency job at a customer’s premises.• Travel as a regular part of the job. When an employee’s dutiesregularly involve travel, you must count that as paid time.• One-day travel assignments. You must count all such timeas work, except meal periods and the ordinary commute.• Extended trips. Travel during normal working hours, no matterthe day of week, counts as work time.In addition, the time an employee spends waiting for workcounts as paid time: for example, when an administrative assistant

4.4 Employer’s Practical Legal Guidewaits for her boss to give her an assignment or a mechanicstands around while a machine’s being repaired. Both have been“engaged to wait”: Their employers require them to be presenteven though they may not have tasks available for the entire shift.Employees on call: Thanks to a recent decision in a classaction case, it’s now clear that if you have employees report totheir regular workplace location in response to a call, they aren’tentitled to extra pay for their trip time. That’s counted as regularcommuting time, which is always unpaid.Your organization can take advantage of this rule only if theemployees report directly to their regular workplace first. If yousend them to another location (such as a customer’s property),you must pay for their travel time. Jonites, et al., v. Exelon Corporation,No. 05-C-4234, ND ILSleeping TimeIn certain circumstances, you must pay for the time an employeeworking an extended shift spends sleeping. If she’s on duty fewerthan 24 hours, the entire period counts as work time even thoughshe may sleep or engage in other personal activities during hershift. If the shift extends beyond 24 hours, you and the employeemay agree to exclude meal periods and sleeping periods of notmore than eight hours from her hours worked.You may also exclude sleeping periods of not more thaneight hours per day if you provide adequate sleeping facilitiesand allow for uninterrupted rest. But when the job interrupts anemployee’s sleep, you must count each interruption as paid time.If an employee can’t get at least five hours’ sleep, you must pay forthe entire period as time worked.Training Programs and LecturesYou must pay an employee for time spent attending training programsand lectures unless the following apply:• Attendance is outside regular working hours.

Fair Labor Standards Act 4.5Other Work-Related ActivitiesSeveral other work-related activities count toward an employee’spaid work hours. For example:■ Medical attention. The time an employee spends waitingfor or receiving medical care on the premises or at theemployer’s direction during his regular workday counts aswork time.■ Grievance hearings. Time spent in grievance conferencesduring working hours is generally considered worktime. If a union is involved, look to past practices or to thecollective bargaining agreement to determine whether thetime counts.• Employees don’t perform any productive work during thesessions.• The program doesn’t directly relate to their jobs.• Attendance is voluntary.If you give employees the impression that they must attend orrisk losing their jobs, their attendance isn’t considered voluntary. Ifthe training is intended to help an employee perform her job better,it’s directly related to her job. But if the purpose is to upgradean employee’s skills in hopes of advancement—and you haven’trequired her to attend—you don’t have to pay her for trainingtime.What about any hours spent in an apprenticeship program?Usually, you can exclude this period from paid time if the apprenticeshipmeets the standards of the DOL’s Bureau of Ap prenticeshipand Training and the instruction doesn’t involve productivework or performing regular duties. You must count instructiontime, however, if the written agreement specifically providesfor it.For further details, contact the Office of Appren ticeshipTraining, Employer and Labor Services at (202) 693-2796 or go towww.doleta.gov/OA/.

4.6 Employer’s Practical Legal GuideCivic and Charitable WorkRecently, the DOL issued two opinion letters addressing questionsabout paying wages to employees performing civic or charitablework at the request of their employers.The DOL regulation defines civic and charitable work as“hours of ser vice for a public agency for civic, charitable orhumanitarian reasons.”Examples include volunteering for nonprofit organizationssuch as food banks, churches and religious organizations, andfund-raising events designed to raise money for disease researchand the like.Essentially, you must pay for hours spent on civic or charitablework if:• The activity takes place during normal business hours or• If outside normal work time, it’s the same type of work theemployee would do as part of her job or• You require employees to participate.You needn’t pay for civic or charitable work if:• You don’t require participation or penalize those who don’t.• The work doesn’t occur during normal work hours.• The duties performed are outside their normal work duties.Minimum-Wage ComplianceIn July 2007, the federal minimum wage increased from $5.15 to$5.85 per hour. Additional raises took effect over the next twoyears: to $6.55 on July 24, 2008, and to $7.25 on July 24, 2009.Many states have passed minimum wage laws of theirown. As of this writing, 18 states and the District of Columbiahave higher minimum wage rates than the federal. Where thestate wage is higher, you must pay workers the state mini -mum rate.

Fair Labor Standards Act 4.7In addition, some cities and municipalities have raised theirminimum wages through so-called “living wage” laws, whichestablish higher minimum pay rates for businesses that receivecontracts or subsidies from local governments. More than 140communities have enacted living-wage laws since 1994, raisinglocal wages up to as much as $12 per hour.Based on the success of living-wage campaigns, many citiesare enacting broader minimum wages that cover most, if not all,employers operating within the city. Santa Fe, which was oneof the first cities to enact its own minimum wage in 2003, has aminimum wage of $10.51 per hour; San Francisco, $10.55 per hour;Albuquerque, $8.50. In these cases the highest rate applies.Under the federal minimum wage law, employers may paysome workers at lower rates: student-trainees, full-time students,tipped employees, workers under age 20 during their first90 days of employment, apprentices and disabled workers.For example, you may pay workers under 20 years old $4.25per hour during their first 90 consecutive calendar days—notworking days—after their hire dates, but only if they don’treplace workers who would have earned the minimum wage.Full-time students may be paid at the rate of 85% of the minimumwage under certain circumstances. Before paying less than theminimum wage, be sure to check with the DOL about any specialcircumstances required.For workers paid on a piece rate, commission, fee or salarybasis, you can usually determine whether you’re meeting theminimum-wage requirements by dividing their total straight-timeearnings by their hours worked in the week. Straight-time earningsinclude all pay other than extra compensation for overtime.No matter how many hours an employee works during a givenworkweek, her straight-time pay for all regular hours workedmust at least equal the minimum wage.Caution: The longest period over which you may average earningsto determine if you’re paying wages at the minimum rateis one workweek: a fixed 168-hour period. For example, if anemployee works 30 hours one week and 50 hours the next, she mustreceive overtime pay for the hours worked beyond 40 in the secondweek, even though her average in the two weeks is 40.

4.8 Employer’s Practical Legal GuideDifficult CalculationsSome situations make it difficult for you to calculate whetheryou’re meeting the minimum-wage requirements:1. Employees working at two or more rates. If an employeedoes two or more jobs for you with different hourly rates, youwould normally calculate the regular rate by taking his total earningsfrom all rates for the week and dividing that by the totalhours he worked at all jobs.2. Piece rates. An employee working on a piece-rate basis(paid his rate of production rather than a set hourly wage) mustearn at least the minimum wage. To determine that, you shoulddivide her total earnings for the workweek by her hours thatweek. If the rate is less than the legal minimum, you must makeup the difference. In other words, in each pay period you mustpay her either actual piece-rate earnings or the minimum wage,whichever is greater. Also, you can’t withhold pay in a secondweek to make up the difference between her earnings in thefirst week and the legal minimum.3. Commissions. Employees paid on a commission basis mustreceive at least the minimum wage for each hour worked in aweek. If you pay an employee a salary plus commissions andthe salary is high enough to cover the minimum each week, thisrequirement poses no problem. But if you pay him solely on commission,you must make up the difference for any week in whichcommission earnings fall short of the minimum wage. Also, thepayment must be made free and clear: You can’t recover any partof the minimum-wage payment from earnings in weeks when hiscommissions exceed the minimum wage.4. Tipped employees. Workers who regularly receive morethan $30 a month in tips are considered “tipped employees.”Under the FLSA, employers that claim a tip credit againsttheir minimum-wage obligation must pay tipped employees acash wage of at least $2.13 an hour. If an employee’s tips andcash wages don’t equal the minimum wage, the employer mustmake up the difference. The tip credit doesn’t apply unless theemployee has been made aware of the credit provisions and hasbeen allowed to retain all the tips he or she received.

Fair Labor Standards Act 4.9Caution: Many states don’t allow a tip credit against the minimumwage or they set the rate higher than the federal $2.13 perhour.Payroll DeductionsOrdinarily, you must avoid making payroll deductions that mightcut into the legal minimum wage. But employers are permittedto make the following deductions for hourly workers even if theybring pay below the minimum:• Reasonable cost of board and lodging.• Taxes.• Union dues under a bona fide collective bargaining agreement.• Insurance premiums paid to independent insurance companies,assuming the payments are voluntary and the coveragedoesn’t yield any benefit to the employer.• Savings plans and bonds requested by the employee.• Repayment of loans, as long as the employer has no connectionto the lender. (Exception: This restriction doesn’t applyto repayment via payroll deductions of free-and-clear cashadvances to an employee.)• Payments on store accounts at the employee’s request if thestores are wholly independent of the employer.• Wage attachments, including court-ordered support payments.• Deductions for lateness or absence. You can deduct anytime an employee doesn’t work, whether due to latenessor absence, because hourly workers are paid only for timeworked. However, you can’t deduct for more than the timemissed as punishment if this would drop the worker’s paybelow the minimum wage for the time he did work.• Meal periods. Be careful if you automatically deduct time formeal periods instead of having hourly employees clock in andout before their lunch or dinner break. Make sure em ployeestake the full meal period and don’t work. Lately, so-called“working off the clock” has spurred many class-action lawsuits,and employees have been winning big awards.

4.10 Employer’s Practical Legal GuideThe following deductions are illegal to the extent they reducewages below the legal minimum:• Fines for infractions, poor work, other disciplinary reasons.• Deductions for damage to employer’s property.• Repayment of cash register shortages, including those resultingfrom mathematical errors or customers walking outwithout paying the check. The Wage and Hour Division haslimited deductions for employee thefts to cases in which theperson has been found guilty in court.• “Voluntary” payments from employee to employer that don’tinvolve deductions from wages, such as a cash bond requiredfrom an employee at the time of hiring.• Wardrobe costs deducted from paychecks to cover employeeclothing purchases when dressing in the store’s signaturestyle is required or “encouraged.” Several class action casesaddressing this issue are pending across the country. Lawyersfor the employees argue that not-so-gentle persuasions to buyemployers’ stylish fashions to wear on the floor amount toforced deductions from hourly rates and violate the FLSA bybringing the hourly wage below the minimum.Computing OvertimeYou must pay overtime to every nonexempt employee who worksmore than 40 hours in a single workweek. The overtime rate is oneand a half times an employee’s hourly rate. If an employee earns afixed hourly rate with no other compensation, computing her baserate is easy. But in many cases, it’s not so simple:■ Fixed hourly rate plus other pay: Divide the employee’stotal earnings for the week (hourly wages plus bonus, for example)by his total hours of work.■ Different rates in the same week: Divide total earnings forthe week by the employee’s total number of hours worked.■ Pieceworkers: Add the total earnings for the workweek(including bonuses) and any sums paid for waiting time or other

Fair Labor Standards Act 4.11hours worked. Then divide the sum by the number of hoursworked in that week.■ Workers on day rates or job rates: When you pay anemployee a flat sum for a day’s work or for doing a particular job(regardless of the number of hours) and he receives no other formof compensation, total all sums received at such day rates or jobrates in the workweek. Then divide by the total hours worked.■ Salaried workers whose pay covers more than a workweek:You can convert a monthly salary to its equivalent weekly wage bymultiplying the salary by 12 months and dividing it by 52 weeks.■ Fixed salary for fluctuating hours by agreement withemployee: Divide the salary by the number of hours worked inthat week. Because you already paid straight time, the employeemust receive additional pay for each overtime hour worked thatweek, at not less than one-half the regular rate.Special Types of PaymentsWhen calculating a worker’s base hourly rate, you must take intoaccount any other wages you pay her, including commissions,bonuses and other money she regularly receives.Whether an employee is paid on salary plus commission oron a straight commission basis only, you must count commissionearnings when calculating the employee’s regular hourly rate. Aproblem may arise when you allocate deferred commissions forovertime purposes.A commission paid on a workweek basis is added to theemployee’s other earnings for that workweek. The total dividedby the number of hours worked in the week equals the employee’sregular rate for that particular week.The FLSA requires that you include all compensation in theregular rate, except some specific exclusions. These include discretionarybonuses, gifts and payments in the nature of gifts onspecial occasions, contributions to certain welfare plans, paymentsmade to the employer for certain profit-sharing, thrift andsavings plans, as well as stock options.Types of supplementary, one-time payments that are usuallyconsidered part of the employee’s base rate include:

4.12 Employer’s Practical Legal Guide• Attendance bonuses.• Productivity bonuses.• Bonuses for quality and accuracy of work.• Nonmonetary awards. You must include in an employee’sregular hourly rate any prize awarded for the quality, quantityor efficiency of the work he performs. The sum to be allocatedwould be the cost of the prize to you.• Premiums paid for hazardous work or night work.• Overtime premiums. Some workplaces use collective bargainingagreements (in a union workplace) or a writtenemployment contract (in nonunion workplaces) that specifyworkers will be paid extra if they work more than eight hoursin a shift even if the total number of hours worked in theweek doesn’t exceed 40 hours. Similarly, such agreements maycall for extra pay if the employee works more than40 hours in a workweek but less than 80 hours over a twoweekperiod. In those cases, the FLSA would not require extrapay. The arrangement is voluntary between the parties. Addthe extra payments to the base rate unless the extra paymentequals or exceeds time and a half.Example: Assume a worker usually earns $10 per hour and aunion contract provides that if she works more than eight hours ina shift, the extra hours will be paid at a rate of $12 per hour. Addthe extra dollars to her base pay when you calculate overtime. If,however, the agreement provides for the extra hours to be paid at$15 per hour, don’t add the extra pay to the base pay.Exclusions From Base-Rate FormulasYou needn’t count the following when calculating a worker’s baserate of pay:✔ Holiday pay. You can’t credit holiday pay against any overtimepay due to the employee. In some instances, employeesentitled to holiday or vacation pay forgo the holiday or vacationand work on that day. If they receive their customary rate

Fair Labor Standards Act 4.13(or higher) for working that day, you can exclude the additionalsum given as holiday or vacation pay from the regularrate of pay.✔ Discretionary bonuses. You may exclude such bonuses, aswell as those paid as gifts for Christmas and other occasions,from your workers’ base-rate computation when the amount issolely within your discretion.✔ Sick pay. When you pay an employee for occasional periodsof work loss caused by illness, you needn’t include that inhis regular time. But you can’t credit such payments againstovertime pay.✔ Show-up and call-back pay. Some employment agreementsprovide for a stated number of hours’ pay if the employeeisn’t provided the expected amount of work. For example, anemployee might be guaranteed at least four hours’ pay forreporting to work or being called back to work after her scheduledhours are over. If the employee works only two hours butis paid for four, you don’t need to count the pay for the twohours not worked toward her regular rate of pay.✔ On-call pay. If on-call employees are required only to leaveword where you can reach them and they aren’t confined toa particular place, their hours spent on-call aren’t consideredwork time. However, any payment for such time, while notattributable to any particular hours of work, must be includedin the employee’s regular rate. If an on-call employee is calledout, the time he spends on the assignment is treated as hoursworked; the employer must count it and pay for it.Child Labor RulesThe child labor provisions in the FLSA restrict the amount of timeand conditions under which minors age 17 and younger are permittedto work. (Exceptions are made for minors engaged in farmwork.) Youths ages 16 and 17 may perform any nonhazardousjob for unlimited hours. Those ages 14 and 15 may work outsideschool hours in various jobs (except manufacturing, mining andhazardous positions) under the following conditions:

4.14 Employer’s Practical Legal Guide• They can’t work more than three hours on a school day,18 hours in a school week, eight hours on a nonschool day ina nonschool week or 40 hours in a nonschool week.• Between Labor Day and May 31, they can’t begin work before7 a.m. or end after 7 p.m. From June 1 through Labor Day,their work must end before 9 p.m.Under a special provision, youths 14 and 15 years old enrolledin an approved Work Experience and Career Exploration Programmay work up to 23 hours during a school week and three hourson each school day.Children under 14 aren’t allowed to work, except in a fewcircum stances, including delivering newspapers, performing inradio, television, movie or theatrical productions and workingin their parents’ solely owned businesses (except in manufacturingor hazardous jobs).Note: Different rules may apply in your state. To check theregulations, go to www.youthrules.dol.gov.Record-Keeping RequirementsThe FLSA requires employers to keep records on wages, hours andother employee data, most of which is generally maintained inordinary business practice. You don’t need to keep the recordsin any particular form or use time clocks. If your company doesuse a time clock, however, its records should correspond as closelyas possible to the actual hours worked.If an employee is subject to both minimum-wage and overtimepay provisions, you must keep the following records: employee’sname, home address, occupation, sex and birth date (if under19 years of age); hour and day his workweek begins; total hoursworked each day and week; total daily or weekly straight-timeearnings; regular hourly pay rate for any week when he puts inovertime; deductions from or additions to wages; total wages paideach pay period; and date of payment and pay period covered.Federal law requires all businesses to post minimum-wagenotices in their workplace, as well as posters about the Equal

Fair Labor Standards Act 4.15Employment Opportunity Act, Family and Medical Leave Act,Employee Polygraph Protection Act and OSHA. To obtain freecopies of the posters, contact the DOL at (866) 487-9243 or go towww.dol.gov/whd/regs/compliance/posters/flsa.htm.Should you track exempt employees’ hours?You also may want to track the number of hours exempt employeeswork just in case you didn’t correctly classify someone. Why?Because if the employee is reclassified as hourly, you must be ableto show how many hours he worked. If you can’t, a court mayforce you to accept the employee’s inflated estimates.Nothing in the law prevents you from requiring all employees(exempt and nonexempt) to record their hours by punching a timeclock or filling out a time sheet. That way, you’ll have the recordsin case you need them. Just make sure you don’t base exemptemployees’ compensation on those hours, or you will jeopardizetheir exempt status.The DOL has a new online tool to help employers determinewhich record-keeping requirements apply to them. The Recordkeeping,Reporting and Notices Advisor is part of a suite of onlinetools called FirstStep advisors, available at www.dol.gov/elaws/firststep.Exempt vs. Nonexempt StatusWhen a new hire comes on board, you must determine whether toclassify him or her as exempt or nonexempt under the FLSA.The key consideration: Exempt workers aren’t eligible for overtimepay. Rather, they’re paid for the job they do, not the hoursthey keep.In light of recent changes to the FLSA regulations, all employersshould carefully review their employee classifications. The newDOL regulations have changed the definition of who’s exempt andraised the minimum salary level that qualifies a worker as exemptfrom overtime.Generally, two requirements must be met before you can classifysomeone as exempt:

4.16 Employer’s Practical Legal Guide1. You pay the worker on a salary basis.2. The worker holds a position with certain duties designatedby the DOL as appropriate for exempt status. These positionsinclude executive, administrative, professional, computer andoutside sales as well as some highly compensated workers.Remember: An exempt worker must meet both the salary andthe duties tests.The DOL offers two interactive e-law tools, “FLSA Coverageand Employment Status Advisor” and “FLSA Overtime Cal cu la torAdvisor,” to help you determine the status of a particular position.Safeguard your organization by using them to classify new positionsand audit your existing classifications. Access them at www.dol.gov/elaws/advisors.html. For detailed information on exemptions,go to www.dol.gov/elaws/esa/flsa/screen75.asp.Salary BasisBeing paid on a salary or fee basis is the quid pro quo of exemptemployees. They aren’t paid overtime for working more than40 hours a week; in exchange, their employer must provide a guaranteedsalary, which can’t be reduced when they work fewer than40 hours. This reflects the understanding that exempt employeeshave the discretion to manage their time and are not answerablefor hours worked or the number of tasks performed. Rather, they’repaid for the general value of the services they provide. In addition,you may not deduct pay for time when work isn’t available if thesalaried worker is ready, willing and able to work.Under the DOL’s revised regulations, the minimum salarya worker must earn to qualify as exempt is $455 per week, $910biweekly (every other week), $985.83 semimonthly (every 1st and15th of the month), $1,971.66 monthly or $23,660 annually.Other characteristics of being paid on a salary basis:• You pay the employee a set salary even if she works onlypart of the week.• You can’t dock her pay as a disciplinary measure unless theemployee has committed a serious safety infraction ( breaking

Fair Labor Standards Act 4.17a rule designed to prevent endangering the facilities or otherworkers). The new DOL regulations state that you may deductfor “unpaid disciplinary suspensions of a full day or moreimposed in good faith for infractions of workplace conductrules,” such as sexual harassment or workplace violence.(You’ll need, however, a written policy that you apply uniformlyto all workers.)• The employee can’t be docked for a partial-day absence.• You must pay the employee for any day he’s ready, willingand able to work.• The DOL recently issued opinion letters “clarifying” whenyou must pay exempt workers for weather-related closingsand delays. Essentially, if you shut down the office forat least a full day but less than a full week, no deductionsshould be made. However, if your company tells exemptworkers that they must take the day as a vacation day andthey have available vacation time, you may dock pay withoutrisking exempt status. The DOL explained that nothingrequires employers to give vacation days, so by its logic,employers are free to set the rules for when they take timeoff. If a worker doesn’t have a vacation day left, no deductionshould be made. The answer is different if the office isopen but the employee doesn’t come to work for an entireday: Then you may deduct from her salary the equivalentof a day’s pay. If she simply shows up late, you can’t make adeduction. (FLSA2005-46 and FLSA2005-41)Make sure you abide by the salary rules. If you don’t, theemployee is no longer exempt, no matter what his duties andresponsibilities are. Destroying his exemption can make you liablefor two years’ overtime pay for any hours worked beyond 40 perweek.Nonexempt: Blue-Collar Workers, First RespondersThe revised rules acknowledge there are still real differencesbetween blue- and white-collar workers. The clearest proof:Some workers will be entitled to overtime no matter how highly

4.18 Employer’s Practical Legal Guidecompensated they are. Under the regulations, workers who “performwork involving repetitive operations with their hands, physicalskill and energy” can’t be classified as exempt. If you haveworkers who gain the skills and knowledge required for their jobsthrough apprenticeships and on-the-job training, they’re probablyentitled to overtime.The regulations list examples of such blue-collar jobs:✓ Carpenters✓ Electricians✓ Mechanics✓ Plumbers✓ Iron workers✓ Craftspeople✓ Longshoremen✓ Construction workers and laborersIn addition, most people involved in law enforcement willcontinue to be eligible for overtime pay, including police officers,detectives, deputy sheriffs, state troopers, investigators,correctional officers, parole and probation officers, park rangers,firefighters, paramedics, emergency technicians, ambulance personneland rescue workers.If their duties are to prevent, control or extinguish fires, preventor detect crime, conduct investigations, perform surveillance, pursuesuspects or supervise them before or after conviction, they’re probablyentitled to overtime no matter how well they’re paid.Thus, first responders and others on the front lines of publicsafety will likely continue to be paid for the extra hours worked.Although many first responders may hold college degrees, theDOL pointed out, a four-year degree is generally not a prerequisitefor employment in their field; therefore, they don’t cleanly fit intoany exempt category.Duties TestsWorkers who earn at least $455 a week may be exempt from overtimepay if they meet the appropriate tests for their classification:executive, administrative or professional. The last category issubdivided into learned professional and creative professional.In addition, special tests control the classification of certain computeremployees and outside sales employees.The rules also create a new exemption category for “highlycompensated” employees. Essentially, any employee earning more

Fair Labor Standards Act 4.19than $100,000 a year and who regularly performs even one ofthe exempt duties of an executive, administrative or professionalemployee is precluded from earning overtime.Exempt executive employeeTo qualify for the executive exemption, an employee must earn aminimum of $455 per week and meet the following tests:• Primary duty: manages the enterprise or a customarily recognizeddepartment or subdivision of the enterprise.• Customarily directs the work of two or more otheremployees.• Has authority to hire or fire other employees or whosesuggestions and recommendations as to hiring, firing,advancement, promotion or other change of status of otheremployees must be given particular weight.A rule of thumb: The executive should devote substantial timeto supervision. That includes interviewing, selecting and trainingworkers, setting and adjusting pay rates and hours, handlingcomplaints and disciplining employees, directing work and determiningwhat materials, supplies, machinery or tools to buy, sell orstock. That’s not to say that an executive can’t perform other taskssuch as stocking shelves or serving food. If the worker remainsresponsible for the success or failure of the operations under hermanagement while performing nonexempt work, she may be anexecutive. In addition, if she controls when nonexempt work isperformed, her exemption is valid.The more time the employee spends doing the work of theenterprise as opposed to directing the work, the more likely heis an “executive” in name only and thus eligible for overtime pay.Take, for example, a court case involving an “executive” who wasthe manager at a car wash. He spent 95% of his workday washingcars instead of directing others’ work and little or no time managingthe business. The court ruled that he wasn’t exempt.The new regulations also clarify that the phrase “directs thework of two or more employees” means two full-time workers or

4.20 Employer’s Practical Legal Guidetheir equivalent. Thus, an executive could supervise four part-timeworkers and meet the qualifications, but not one full-time and onepart-time employee.The final requirement is new: Executives must do more thansupervise to be classified as exempt. They must have actualauthority over those they supervise or at least have some say inthose decisions. It doesn’t matter if the final decision rests with ahigher-level manager. Factors that weigh in favor of meeting thisrequirement include:• Whether recommendations on hiring and firing are part ofthe executive’s job description.• Whether the executive frequently makes suggestions andrecommendations.• How often his suggestions and recommendations arefollowed.Exempt administrative employeeTo qualify for the administrative exemption, an employee mustearn a minimum of $455 per week and meet the following tests:• Primary duty: performs office or non-manual work directlyrelated to the management or general business operations ofthe employer or the employer’s customers.• Exercises discretion and independent judgment with respectto matters of significance in performing her primary duty.The new regulations specify that selling goods or services inretail isn’t work directly related to the management or generalbusiness operations of the employer. Examples that do meet thetest include working in tax, finance, accounting, budgeting, auditing,insurance, quality control, purchasing, procurement, advertising,marketing, research, safety and health, human resources,labor relations, governmental relations, computer networking,Internet and database administration, and legal and regulatorycompliance. In addition, if you have employees who performthe same sort of functions for your customers, they may also be

Fair Labor Standards Act 4.21exempt. Thus, if you employ tax experts or financial consultantswho advise your customers, they’re probably exempt providedthey meet the salary requirement.The administrative exemption applies only if the employeealso exercises discretion and independent judgment. In general,independent judgment means that the employee compares andevaluates possible courses of action and makes a decision afterconsidering the options.The employee must have the authority to make an independentchoice, free from immediate direction or supervision. Even thoughher decisions may be revised or reversed after review, she’s stillexercising independent judgment. However, the term means morethan the use of a skill in applying well-established techniques,procedures or specific standards described in manuals or othersources.Examples of jobs that qualify for the administrative exemption:• Insurance adjusters who analyze claims and make recommendationson litigation or settlement.• Financial service industry workers who analyze customerassets, needs and investments and make recommendations,but not employees whose primary responsibility is to sell afinancial product.• Executive or administrative assistants who, without specificinstructions or prescribed procedures, have delegated authorityregarding matters of significance.• Human resource managers who formulate, interpret or implementemployment policies.• Purchasing agents with authority to bind the company on significantpurchases.• Employees of educational establishments who serve asadministrators, principals and department heads. Specialistssuch as counselors, social workers and dietitians don’tqualify under this exemption but may fall under the learnedprofessional exemption (see page 4.22).Examples of workers who don’t qualify for the administrativeexemption include inspectors who follow strict guidelines such as

4.22 Employer’s Practical Legal Guideelectrical or building codes and comparison shoppers who reportcompetitor prices.Note: In response to employers’ questions, the DOL periodicallyissues opinion letters to classify specific positions as exemptor nonexempt. Recently, for example, it determined that producttechnology analysts for an engineering company were exemptadministrative employees. The analysts were primarily responsiblefor product testing but also served as liaisons with salespeople. The DOL concluded that the position was primarily oneof quality control, research and marketing, and it involved theexercise of discretion in matters of significance to the company’soperations, and was therefore exempt.Exempt professional employeeThe specific requirements for exemption as a bona fide professionalemployee are summarized below. These employees fall intotwo general categories: learned professionals and creative professionals.■ Learned professional exemptionTo qualify for the learned professional exemption, an employeemust earn a minimum of $455 per week and meet the following:• Primary duty: performs work requiring advanced knowledge,defined as work that’s predominantly intellectual in characterand requires consistent exercise of discretion and judgment.• Has advanced knowledge in a field of science or learning thatis customarily acquired by a prolonged course of specializedintellectual instruction.In other words, a learned professional performs work that usuallyinvolves analysis, interpretation or making deductions fromfacts and circumstances. The learned professional works with hisintellect, not with his hands. The regulations go so far as to statethat the advanced knowledge can’t be attained in high school butmust ordinarily be in specialized academic training at a higherlevel. That doesn’t always mean a four-year degree, however; thetest is whether the academic training is a standard prerequisite forentrance into the profession.

Fair Labor Standards Act 4.23The types of learning cited in the regulations include the traditionalprofessions of law; medicine; theology; accounting; actuarialcomputation; engineering; architecture; teaching; physical, chemicaland biological sciences; pharmacy and similar occupations. Thelist will be open to expansion as new professions are created andacademic training and specialized degrees are offered in the fieldsof science and learning. If an advanced specialized degree becomesthe standard for a particular occupation, that occupation willbecome a learned profession. Therefore, it’s a good idea to keep ontop of developments in professional fields and regularly reviewyour job descriptions and minimum training requirements againstnational standards. Otherwise, you may miss the opportunity toclassify professionals as exempt from overtime.The new regulations go to great lengths to demonstrate whattypes of professions the DOL believes fit in the learned professionalcategory:• Doctors and lawyers who hold advanced academic degreesin medicine or law, are licensed in their professions and actuallypractice their profession. The exemption also covers doctorsengaged in internships and residency programs whohave completed the requisite academic degree for the generalpractice of medicine. They include medical doctors, osteopathicphysicians, podiatrists, dentists and optometrists. The salaryrequirement doesn’t apply to doctors or lawyers.• Teachers employed by educational establishments whose primaryduty is teaching, tutoring, instructing or lecturing in theactivity of imparting knowledge. Teachers may be certified bya state agency or may work in private schools or other settingswithout certification, so certification alone is not the solestandard. The salary requirement doesn’t apply to teachers.• Registered or certified medical technologists who have completedthree academic years of pre-professional study at anaccredited college or university, plus a fourth year of coursework in a school of medical technology approved by theAmerican Medical Association.• Nurses who are registered by their state board of nursing asRNs and have completed a specialized academic degree as aprerequisite for being licensed. (Check with your state to see

4.24 Employer’s Practical Legal Guideif that includes a two-year associate degree as well as a fouryearbachelor’s degree.) Under the regulations, licensed practicalnurses (LPNs) or other paraprofessionals don’t meet thelearned professional exemption.‘Highly Compensated Worker’ ExemptionThe revised DOL rules also created an exemption category for“highly compensated employees.” Essentially, any employeeearning more than $100,000 a year and who regularly performseven one of the exempt duties of an executive, administrativeor professional employee is precluded from earningovertime.To qualify as a highly compensated exempt employee, the personmust meet the following tests:• Earns total annual compensation of $100,000 or more,which includes at least $455 per week paid on a salarybasis.• Primary duty includes performing office work or nonmanualduties.• Customarily and regularly performs at least one of theexempt duties or responsibilities of an exempt executive,administrative or professional employee.Thus, for example, an employee may qualify as an exempthighly compensated executive if she customarily and regularlydirects the work of two or more other employees, even thoughthe employee doesn’t meet all the other requirements in thestandard test for exemption as an executive.The required compensation of $100,000 or more may consistof commissions, nondiscretionary bonuses and other nondiscretionarycompensation earned during a 52-week period. Itdoesn’t include credit for board or lodging, payments for medicalor life insurance, or contributions to retirement plans orother fringe benefits.

Fair Labor Standards Act 4.25• Dental hygienists who have completed four years of preprofessionalor professional studies at an accredited college oruniversity approved by the American Dental Association.• Physician assistants who have completed four years of academictraining and graduated from a program certified byone of two professional associations.• Accountants who are certified public accountants or hold jobssimilar to public accountants. Accounting clerks and bookkeeperswho do routine financial work aren’t included in thiscategory.• Chefs with four-year academic degrees in the culinaryarts. However, cooks who perform routine mental, manual,mechanical or physical work don’t qualify for this category.• Athletic trainers who have completed four years of academictraining in a specialized program accredited by theCommission of Accreditation of Allied Health EducationPrograms and are certified by their professional board.• Funeral directors and embalmers licensed by and workingin a state that requires a four-year academic degree programaccredited by the American Board of Funeral Service Edu cation.(Check with your state board of funeral directors for itsrequirements.)The regulations exclude most paralegals or legal assistantsfrom the exempt professional category because entry into thisfield doesn’t require an advanced academic degree. Most paralegalshave two-year associate degrees or certificates rather thanfour-year specialized degrees in the field. Exception: If you hiresomeone in another learned profession to work as a paralegal,she’s probably exempt (for example, a registered nurse who’s hiredas a paralegal to help evaluate medical malpractice claims).Note: The DOL issued an opinion letter to clarify whethermedical coders who work at home are exempt or hourly workers.Because medical coders have no recognized educational programat the college level, the DOL concluded that they aren’t professionals.(It’s not enough that they have a professional certificationprogram available.) This opinion may signal reluctance on DOL’s

4.26 Employer’s Practical Legal Guidepart to expand the professional category beyond well-recognizedprofessional jobs. (FLSA2005-35)■ Creative professional exemptionTo qualify for the creative professional exemption, an employee mustearn a minimum of $455 per week and meet the following:• Primary duty: performs work requiring invention, imagination,originality or talent in a recognized field of artistic orcreative endeavor. The exemption doesn’t apply to work thata person could perform with general manual or intellectualability and training.• Works in a recognized field of artistic or creative endeavor,including music, writing, acting and the graphic arts.Unfortunately, it’s hard to assess whether someone is a creativeprofessional since educational background isn’t a prerequisite.Rather, the exemption hinges on whether the person holding theposition is engaged in a creative endeavor. Thus you should carefullyreview your own job descriptions before placing someone inthe creative professional exempt category.Generally, the following are exempt creative professionals:• Actors.• Musicians, composers and soloists.• Painters and artists who are given general guidelines as tosubject matter.• Cartoonists who are given only the title or underlying conceptfor a cartoon and must rely on their own creative abilityto express the concept.• Essayists, novelists, short-story writers and screenplay writers.• Writers in advertising agencies.• Journalists working for newspapers, magazines, televisionand other media who contribute a unique interpretation oranalysis to a news product or those who appear as on-airpersonalities, conduct interviews, or serve as narrators orcommentators.

Fair Labor Standards Act 4.27Examples of workers who don’t qualify for the creative professionalexemption: reporters who only rewrite press releases, reporton routine community events like school board meetings and thelike; animators who illustrate cells for motion picture cartoons;photographers who only retouch photos.Computer-related professional exemptionTo qualify for this exemption, a computer employee must:• Be compensated either on a salary or fee basis at a rate not lessthan $455 per week or, if paid on an hourly basis, earn at least$27.63 per hour.• Be a computer systems analyst, computer programmer, softwareengineer or other similarly skilled worker in the computerfield performing the duties described below.• Primary duty must consist of:1. Application of systems analysis techniques and procedures,including consulting with users, to determine hardware, softwareor system functional specifications.2. Design, development, documentation, analysis, creation, testingor modification of computer systems or programs, includingprototypes, based on and related to user or system designspecifications.3. Design, documentation, testing, creation or modification ofcomputer programs related to machine operating systems.4. Or a combination of the aforementioned duties that requiresthe same level of skills.No specific educational requirement applies to this exemption.The Labor Department says, however, that workers who simplyuse computers to aid in their work, such as drafters and others incomputer-aided design, don’t qualify. This exemption also doesn’tinclude those who repair computers or assemble them.Outside sales employee exemptionOutside sales employees also may be exempt if their primaryduties are one of the following:

4.28 Employer’s Practical Legal Guide• Making sales or• Obtaining orders or contracts for services or use of facilitiesfor which a consideration will be paid by the customer and• Who are customarily and regularly engaged away from theemployer’s place or places of business while selling or obtainingorders or contracts for services.Essentially, an outside sales employee spends most of her timeaway from the employer’s office facilities “on the road” makingsales calls. The person doesn’t lose exempt status by performing afew tasks that aren’t directly related to sales. For example, she mayrestock display cases, attend sales conferences, write sales reportsand revise sales catalogues as work incidental to the main task ofgetting orders.The outside sales exemption doesn’t apply to salespersons whowork in house or may work from a home office. The regulationspecifies that “outside sales does not include sales by mail, telephoneor the Internet . . .” unless the person is following up on apersonal sales call. The crucial factor distinguishing outside salespeoplefrom others is the emphasis on face-to-face selling.Under the regulations, a driver who also sells may be an exemptoutside sales employee if he:• Provides the only sales contact between the employer and thecustomers visited and takes orders, delivers them from thetruck then or later and is paid based on the volume of goodssold.• Obtains or solicits orders along the route or solicits new customersduring his stops.Not everyone who drives a truck full of goods qualifies. Forexample, drivers who stock vending machines or drivers who getthe occasional order or simply deliver and set up displays are notexempt outside salespersons.No minimum salary requirement applies for outside salesemployees. Many are paid straight commission rather than a salary.This includes insurance and real estate salespeople as well asyour local milkman (if your area still has one).

Fair Labor Standards Act 4.29‘Fee Basis’Administrative, professional and computer employees may bepaid on a “fee basis” rather than on a salary basis. If an employee ispaid an agreed sum for a single job, regardless of the time requiredto complete it, the person will be deemed paid on a “fee basis.”A fee payment is generally paid for a unique job rather than fora series of jobs repeated a number of times and for which identicalpayments are repeatedly made. To determine whether the fee paymentmeets the minimum salary level requirement, the test is toconsider the time worked on the job and whether the payment is ata rate that would amount to at least $455 per week if the employeeworked 40 hours.For example, an artist who’s paid $250 for a picture that took 20hours to complete meets the minimum salary requirement sincethe rate would yield $500 if he had worked 40 hours.Note: For more details on the revised exemption rules, go towww.dol.gov/fairpay.Classifying WorkersEvery employer should regularly review job descriptions to ensureall workers are classified properly. You could do this annually inconjunction with performance appraisals for current employees.Compare their job descriptions to the exemptions allowed by theDOL. Then specify in every job description whether the position isexempt from overtime or is hourly, nonexempt.When you create a new position, consider the implications ofthe classifications. If you can design the job to fit an exemption, doso. That may mean raising the minimum salary to meet the test oradding a minimum education requirement that qualifies the positionfor the administrative or professional exemption.Also, make sure supervisors are well versed in the FLSA andovertime rules. The DOL recently created a task force to ensurethat workers who are owed overtime receive every penny they’reentitled to. Don’t make yourself a needless target of a DOL audit(Continued on page 4.34)

4.30 Employer’s Practical Legal GuideAudit: Test Your ComplianceTo be considered exempt from overtime, an employee mustgenerally be paid on a salary basis and his or her job dutiesmust meet the DOL’s standards for one of the six exemptioncategories discussed below.Use this self-audit to test whether you’re properly classifyingworkers as exempt.■ Executive EmployeeAnswer the following questions to determine whether you’vemisclassified a worker as an exempt executive:Don’tYes No Know1. Is the employee’s primary duty managingthe enterprise or a department orsubdivision of the enterprise? ❏ ❏ ❏2. Does the employee customarily direct thework of two or more other employees ortheir equivalent? ❏ ❏ ❏3. Does the employee have the authority tohire or fire, and do her recommendationscarry significant weight if unauthorized tomake the final decision? ❏ ❏ ❏4. Is the employee paid the equivalent of atleast $455 per week on a salary basis? ❏ ❏ ❏If you answered “No” to any of these questions, you mayhave misclassified the worker as an exempt executive.Note: If the employee is at least a 20% owner of the businessand meets requirements #1 and #2 above, he or she need notmeet the salary requirement in #4 or the authority requirementin #3.

Fair Labor Standards Act 4.31■ Administrative EmployeeAnswer the following to determine whether a worker ismisclassified as an exempt administrative employee:Don’tYes No Know1. Is the employee’s primary duty performingoffice or non-manual work directly relatedto the management or general businessoperations of the employer or theemployer’s customers? ❏ ❏ ❏2. Does the employee exercise discretionand independent judgment with respectto matters of significance? That is, doeshe or she evaluate and compare possiblecourses of action and then make a decisionor recommendation after considering thevarious possibilities? ❏ ❏ ❏3. Is the employee paid the equivalent of atleast $455 per week on a salary basis? ❏ ❏ ❏If you answered “No” to any of these questions, the employeemay be misclassified as exempt administrative.■ Learned Professional EmployeeAnswer the following to determine whether a worker ismisclassified as an exempt learned professional:Don’tYes No Know1. Is the employee’s primary duty to performwork requiring knowledge of an advancedtype in a field of science or learningcustomarily acquired by a prolongedcourse of specialized intellectualinstruction? ❏ ❏ ❏(Continued on page 4.32)

4.32 Employer’s Practical Legal Guide(Continued from page 4.31)Don’tYes No Know2. Is the advanced knowledge obtained bycompleting an academic course of studyresulting in a four-year college degree orleading to certification? ❏ ❏ ❏3. Is the employee paid the equivalent of atleast $455 per week on a salary basis? ❏ ❏ ❏If you answered “No” to any of these questions, the employeemay be misclassified as an exempt learned professional.Exception: Those who’ve completed the educational requirementsfor a law or medical degree need not meet the minimumsalary requirement. Also, teachers need not be certifiedor meet the minimum salary requirement to qualify as learnedprofessionals.■ Creative Professional EmployeeAnswer the following to determine whether a worker ismisclassified as an exempt creative professional:Don’tYes No Know1. Is the employee’s primary duty to performwork requiring invention, originality ortalent in a recognized field of artisticendeavor such as music, writing, actingand the graphic arts? ❏ ❏ ❏2. Does the work require more thanintelligence, diligence and accuracy(i.e., does it require “talent”)? ❏ ❏ ❏3. Is the employee paid the equivalent of atleast $455 per week on a salary basis? ❏ ❏ ❏If you answered “No” to these questions, you may havemisclassified a worker as an exempt creative professional.

Fair Labor Standards Act 4.33■ Computer ProfessionalAnswer the following to determine whether a worker ismisclassified as an exempt computer professional:Don’tYes No Know1. Is the employee paid at least $455 perweek on a salary or fee basis or, if paidhourly, at a rate of not less than $27.63per hour? ❏ ❏ ❏2. Is the employee’s primary duty:• Application of system analysis techniquesand procedures, including consulting withusers, to determine hardware, softwareor system functional specifications; or ❏ ❏ ❏• Design, development, documentation,analysis, creation, testing or modificationof computer systems or programs,including prototypes, based on andrelated to user or system designspecifications; or ❏ ❏ ❏• Design, testing, documentation, creationor modification of computer programsrelated to machine operating systems; or ❏ ❏ ❏• A combination of the aforementionedduties requiring the same level of skills? ❏ ❏ ❏If you answered “No” to #1 or were unable to answer “Yes”to any parts under #2, you may have misclassified the workeras an exempt computer professional.(Continued on page 4.34)

4.34 Employer’s Practical Legal Guide(Continued from page 4.33)■ Outside Sales EmployeeTo determine whether a worker has been misclassified as anexempt outside sales employee, answer the followingquestions:Don’tYes No Know1. Is the worker’s primary duty makingoutside sales? ❏ ❏ ❏2. Does he or she regularly work awayfrom the company’s place of business? ❏ ❏ ❏3. Does the worker sell tangible orintangible items, such as goods,insurance, stocks, bonds or real estate,or obtain orders or contracts forservices or the use of facilities? ❏ ❏ ❏If you answered “No” to any of these questions, you mayhave misclassified the worker as an exempt outside salesemployee.(Continued from page 4.29)or an investigation.Also, some states have more generous overtime rules than thefederal ones. So, be sure to check with your state labor departmentbefore making changes to employee overtime classifications.Caution: The FLSA forbids employers from retaliating againstworkers because they’ve “filed any complaint” about their pay,perks or working conditions. In 2011, the U.S. Supreme Courtruled that such complaints don’t need to be in writing to be considered“protected activity.” (Kasten v. Saint-Gobain PerformancePlastics, No. 09-834) Some lower courts had earlier ruled that theFLSA’s anti-retaliation provision doesn’t cover oral complaints.

Section 5IndependentContractorsMany businesses use independent contractors asa way to sidestep payroll taxes, expensive fringebenefits and red tape. But if the IRS concludes thatthose workers are really employees, you could be liablefor back taxes, penalties and interest charges.What’s worse, the newly classified employees could sue yourorganization to be included retroactively in your benefits plan—forcing you to incur a huge, unexpected personnel cost.The IRS TestTraditionally, the IRS had used a 20-factor test to classify workers,but the cumbersome test often provided little guidance to businesses.In the late 1990s, Congress, labor and business interestspressured the IRS to produce a new test. In 2009, the IRS issueda simpler test listing 10 factors grouped into three categories:behavioral control, financial control and the type of relationshipbetween the parties.Behavioral controlFacts that show whether the business has a right to direct andcontrol how the worker does the task for which he or she is hiredinclude the type and degree of:5.1

5.2 Employer’s Practical Legal Guide• Instructions the business gives the worker. An employee isgenerally subject to the business’s instructions about when,where and how to work. The following are examples of thosetypes of instructions:✔ When and where to do the work✔ What tools or equipment to use✔ What workers to hire or to assist with the work✔ Where to purchase supplies and services✔ What work must be performed by a specified individual✔ What order or sequence to followThe amount of instruction needed varies among differentjobs. Even if no instructions are given, sufficient behavioral controlmay exist if the employer has the right to control how thework results are achieved. A business may lack the knowledge toinstruct some highly specialized professionals; in other cases, thetask may require little or no instruction. The key consideration iswhether the business has retained the right to control the detailsof a worker’s performance or instead has given up that right.• Training that the business gives the worker. An employeemay be trained to perform services in a particular manner.Independent contractors ordinarily use their own methods.Financial controlFacts that show whether the business has a right to control thebusiness aspects of the worker’s job include:• The extent to which the worker has unreimbursed businessexpenses. Independent contractors are more likely to haveunreimbursed expenses than are employees. Fixed ongoingcosts incurred regardless of whether work is currently beingperformed are especially important. However, employeesmay also incur unreimbursed expenses in connection withthe services they perform for their business.

independent Contractors 5.3• The extent of the worker’s investment. An employee usuallyhas no investment in the work other than his or her owntime. An independent contractor often has a significantinvestment in the facilities he or she uses in performing servicesfor someone else. However, a significant investment isnot necessary for independent-contractor status.• The extent to which the worker makes services available tothe relevant market. An independent contractor is generallyfree to seek out business opportunities. Independent contractorsoften advertise, maintain a visible business location andare available to work in the relevant market.• How the business pays the worker. An employee is generallyguaranteed a regular wage for an hourly, weekly or otherperiod of time. This usually indicates that a worker is anemployee, even when the wage or salary is supplemented bya commission. An independent contractor is usually paid aflat fee for the job. However, it’s common in some professions,such as law, to pay independent contractors hourly.• The extent to which the worker can realize a profit or loss.Since an employer usually provides employees a workplace,tools, materials, equipment and supplies needed for the work,and generally pays the costs of doing business, employees donot have an opportunity to make a profit or loss. An independentcontractor can make a profit or loss.Type of relationshipFacts that show the type of relationship the parties have include:• Written contracts describing the relationship the partiesintended to create. This is probably the least important ofthe criteria, since what really matters is the nature of theunderlying work relationship, not what the parties choose tocall it. However, in close cases, the written contract can makea difference.• Whether the business provides the worker with employeetypebenefits, such as insurance, a pension plan, vacationpay or sick pay. The power to grant benefits carries with it

5.4 Employer’s Practical Legal Guidethe power to take them away, which is generally exercisedby employers over employees. A true independent contractorwill finance his or her own benefits out of the overall profitsof the enterprise.• The permanency of the relationship. If the business engagesa worker with the expectation that the relationship will continueindefinitely, rather than for a specific project or period,this is generally considered evidence that the intent was tocreate an employer-employee relationship.• The extent to which services performed by the worker area key aspect of the regular business of the company. If aworker provides services that are a key aspect, it’s more likelythat the business will have the right to direct and control hisor her activities. For example, if a law firm hires an attorney,it will likely present the attorney’s work as its own and havethe right to control or direct that work. This would indicatean employer-employee relationship.(You can download the full test, IRS Publication 15-A, 2013edition, page 6, at www.irs.gov/pub/irs-pdf/p15a.pdf.)Watch State LawsDon’t overlook state laws, which may provide more protectionfor independent contractors. While the IRS is largely concernedwith the issue of who collects and who pays taxes on earnings,states have different interests to protect. Thus, some states mayprefer for some contractors to be considered employees under theIRS rule.For example, workers’ compensation insurance coversemployees injured on the job. If an independent contractor isinjured, it may be the state that ends up picking up the tab formedical treatment and rehabilitation. Therefore, it’s in the state’sinterest to consider the independent contractor as an employee.The same is true for unemployment compensation.Check with your state’s labor department to see if stricter rulesapply. If so, be sure to structure your independent-contractor relationshipto comply.

independent Contractors 5.5Audit Blitz: IRS Turning Up the HeatIf you classify any workers as “independent contractors”—or have plans to do so—make sure you get that classificationcorrect. A massive new “Misclassification Initiative” launchedby the IRS and the DOL is targeting employers with moreaudits and new scrutiny.In 2010, the IRS began intensive audits of 6,000 randomlyselected employers across all industries and company sizes. Inaddition to independent contractor status, the audits examinecompliance in payroll taxes, fringe benefits and executive compensation.As part of the crackdown, the DOL hired 100 newauditors solely to investigate misclassifications.The federal government predicts its new crackdown onemployee misclassification will reap at least $7 billion in federalrevenue over the next 10 years. States are also cracking downon improper misclassifications across the board.Feds offering amnesty deal: Recently, the IRS unveiled a newVoluntary Classification Settlement Program (VCSP), whichallows eligible taxpayer employers to voluntarily reclassify workersas employees for federal employment tax purposes. The programfeatures partial amnesty for past misclassifications, limitingan employer’s liability. Instead of paying penalties and interestfor misclassifying workers, VCSP participants will be liable forjust over 1% of the wages paid to those reclassified workers forthe past year. No penalties or interest will be due, and the IRSwill back off on audits related to these workers for earlier years.To learn more about the VCSP and find out if your organizationqualifies, go to www.theHRSpecialist.com/VCSP.Note: This new offer is strong incentive because the IRS and theDOL recently announced they’ve begun an information-sharinginitiative with several states to “end the business practice of misclassifyingemployees.” The agreements should make it easier forboth the states and feds to go after employers that misclassify.

5.6 Employer’s Practical Legal GuideGenerally, those states that set higher standards concentrate onthree factors: whether the contractors are free from control overtheir work, have an off-site place of business and have an independentlyestablished business and customers.Although these criteria seem remarkably simple compared tothe IRS’ common-law test, the states require that all three conditionsbe fully satisfied. To further complicate the issue, IRS standardsfor employees may differ from those of the Department ofLabor. The FLSA defines “employ” to mean “to suffer or permitto work” (29 USC 201 §3 (g)) and defines an employee as “anyindividual employed by an employer.” The FLSA has a lengthylist of exceptions to this rule but doesn’t specifically excludeindependent contractors. Nor does it specifically adopt theIRS’ framework for defining employees. A reclassification ofem ployees by either the DOL or a state agency often leads to anIRS investigation.When hiring a contractor, you are less likely to be entangledin federal anti-discrimination laws, such as Title VII and the ADA.However, state laws in your area may supersede the federalstatutes and extend discrimination protection to contractors. Inaddition, if your company is a federal contractor or subcontractor,you must comply with most of these laws.The IRS’ New AttitudeBesides shifting gears on the 20-factor test discussed earlier, theIRS now has the burden of proof when it interrogates an employerabout its worker classifications. Before the Small Business JobProtection Act of 1996, the onus was on the employer to prove thatthe individual did not qualify as an employee.But the new law does prohibit employers from relying on aprior audit to validate the classification unless the audit specificallyexamined the worker’s status.Section 530 reliefUnder revised IRS training manual guidelines, IRS agents mustinform you of your so-called Section 530 relief. The law provides

independent Contractors 5.7you with immunity from back employment taxes if the IRS reclassifiesyour contractors as employees.However, employment law experts say many employers missout on the tax break because IRS agents fail to explain it fully. Ifan agent does not provide you with a copy of IRS Publication 1976(9-96), he or she is breaking the rules.While Section 530 does provide for back tax relief, the IRSwill still require you to convert those workers to employees andbegin paying payroll taxes. To be eligible for Section 530 relief,employers must prove that they:• Had a “reasonable basis” for treating the workers asindependent contractors.• Regularly filed a Form 1099 for each worker.• Consistently classified all workers with similar jobs asindependent contractors—never as employees.To view a copy of the IRS’ revised training manual guidelines,go to www.irs.gov/pub/irs-utl/emporind.pdf.New IRS initiatives have also cut the tax liability from threeyears to one year for employers who misclassify workers. And inan effort to convince offenders to confess their misclassification ofworkers, the IRS launched a clemency program in 1996 wherebyemployers may be able to escape liability for back taxes if theyagree to reclassify their workers. This applies only if firms notifythe IRS before they are audited.Form SS-8: Inviting a rulingDespite these steps to simplify the process, many employers stillfind it daunting to classify their workers. The IRS’ attempts tostreamline the classification test have not eliminated the complexity.Case in point: Form SS-8, “Determination of Employee WorkStatus for Purposes of Federal Employment Taxes and Income TaxWithholding.”Employers who submit this completed four-page form receivea written ruling from the IRS on whether an individual qualifiesas an independent contractor. Revised in 2011, it remains a

5.8 Employer’s Practical Legal Guidelong, detailed and somewhat ambiguous document. Form SS-8 isdesigned as a checklist so that employers (or workers) can answera series of questions based on the 20-point test, but the form leavesroom for different interpretations.In some cases, angry workers who think they’ve been misclassifiedby their employers as independent contractors will file FormSS-8 to clarify their status. Although the individuals will receivean IRS ruling, they will also probably irritate their employer forattracting the IRS’ attention.The IRS on PatrolVirtually every taxpayer dreads an IRS audit. For employers, itgets even worse. IRS agents can scrutinize your company’s booksfor days, demand reams of documentation and even interviewdozens of individuals before making a ruling.The IRS has only one chance to audit the same workers. That’sbecause the so-called prior-audit rule prohibits the agency fromcoming back and challenging the status of the same people again.But beware: Because the prior-audit rule—along with new provisionsin the Small Business Job Protection Act—makes it harderfor the IRS to prove that workers are employees, tax investigatorshave designed a procedure that legally gives them another shot atyour firm.Called a “compliance check,” it’s not officially an audit, soyou’re not facing as much potential liability. But business ownersand managers alike should know the difference.Compliance check or audit?When the IRS contacts you to inspect your employment recordson worker classification, your first question should be: Is this acompliance check or an audit? Here’s how to tell the difference:■ Compliance checks. Basically, a compliance check is just apop quiz on how you keep your payroll records. Under this procedurethe IRS can:• Check your math on certain IRS forms you’ve completed(Form 1099 for independent contractors and Forms W-2, 940and 941 for employees).

independent Contractors 5.9Form 1099: Handle With CareThe information you record on Form 1099 is a top audit target.Be sure your records are in order when the IRS comes to call.Form 1099 shows the payments you’ve made to your independentcontractors, and the form must be mailed to your freelancersevery year, postmarked by Jan. 31.If you mailed your 1099s on time and filed them properlyin-house, you have a good chance of avoiding retroactivepayroll taxes even if an auditor reclassifies your freelancers asemployees. What is the auditor looking for? Here’s a checklistof common slip-ups:■ The number of 1099s on file doesn’t match the number ofcontractors who work for your firm.■ You have certified mail receipts to show that you mailedthe forms on time, but you don’t have copies of all the formson file.■ You have all the forms on file, but you can’t show that youmailed them on time.■ The payments recorded on your 1099s do not match youraccounting records.Of course, the IRS reviews other criteria. But if your 1099s aremisfiled, you might be ineligible for other exclusions, and if so,you might get hit with three years’ worth of back payroll taxes.Even if the IRS approves the status of your workers, misfiled1099s will cost you $50 per form.➤ Recommendation: When you mail your Forms 1099, be sureto include the phone number of someone in your firm who cananswer contractors’ questions. If you forget to include the phonenumber, you’ll pay a penalty of $50 per form.

5.10 Employer’s Practical Legal Guide• Ask you to correct errors.• Determine if the forms are completed and filed properly.• Ask if you understand the recordkeeping rules and provideinformation.During a compliance check the IRS can impose penalties formisfiled records, but this is not likely to happen.■ Audits. The stakes get higher when the IRS launches a fullscaleinvestigation of how you use and classify workers. Duringan audit the agent can:• Examine all your books and records.• Interrogate you in detail about the relationship between yourfreelancers and your full-time staff.• Suggest which staffers should be treated as contractors andwhich should be considered full-time employees.• Determine whether you’ve calculated all your tax liabilitiescorrectly.• Determine whether employee reimbursements or fringe benefitsyou’ve paid are taxable.In some cases, a compliance examiner might slip into an auditwithout warning. If you notice the IRS agent crossing the line intoaudit territory, take these steps:• Tell the agent that he is conducting an audit, not a compliancecheck.• State that you will claim your prior-audit right if you areaudited in the future.• Demand a full audit report so that your freelancers areshielded under the prior-audit rule.If you’re audited a second time within a few years, the IRSis allowed to examine workers who perform different jobsfrom those who were investigated during the prior audit. But if

independent Contractors 5.11certain workers were deemed contractors during the first audit,the IRS cannot change its mind this time and reclassify themas employees.Preventive StepsWhile sloppy preparation of 1099s is an obvious tip-off that youmay be in violation of other tax regulations as well, you can takepreventive steps to keep your company out of harm’s way.The most important step is to enforce uniformly the workerstatusrules. For example, if you categorize some data entryworkers as employees and others as contractors, you better havea well-documented reason for doing so. And if you give some contractors1099s, send them to all outside workers.Also, pay attention to the following issues to avoid messy lawsuitslater:■ Communicate your benefits policy. When distributingyour benefits plan information, have independent contractors andleased employees acknowledge in writing that they aren’t covered,even if their classification is later changed and they become socalledcommon-law employees.■ Have an accountant or attorney certify your worker classifications.For extra protection, ask him or her to provide a letterrendering an opinion about your workers’ status. You can usethis document as evidence that you relied on professional advice.While it may not free you from liability, it will demonstrate thatyou made a good-faith effort to comply with the law.■ Compose a contract. While formal contracts with independentcontractors don’t offer total protection, they can reduce theodds that you’ll face tax penalties when the IRS comes calling. Thecontract should describe the work to be performed, the durationof the agreement and the amounts paid to the contractor. It shouldalso state that no benefits will be provided and that the contractoris responsible for paying federal and state taxes. Also, haveworkers sign an acknowledgment that they have complied withapplicable business licensing requirements and maintain theirown employment records.

5.12 Employer’s Practical Legal GuideContracts: Your Most Important ProtectionYour contract with an independent contractor establishes paymentrates and methods, the nature of the work to be completed,the deadline for completing the job and performance standards.No matter how casual the relationship or how well you know thecontractor, you should always have a signed contract describingthe work to be done. Why?• It helps establish that your intent was to hire the individualas a contractor, not an employee. The contract won’tprove a bona fide contractor relationship existed, but the lackof a contract makes it extremely difficult to prove such a relationshipexisted.• It offers you protection should the contractor’s work beunacceptable in some way. If a disgruntled contractor suesyou and there’s nothing in writing, it’s up to the court todecide whether the terms of the contract were met.• Most reliable contractors will insist on a contract. After all,the contract represents the freelancer’s best protection as well.Remember: Although the contract affirms your intent to hirethe individual as a contractor and not as an employee, an IRSinquiry would focus on how the contractor performed his work.Thus, the safest course is to ensure that your company’s supervisorsunderstand that they must produce a quality end productwith only minimum involvement with contractors.Courts may overlook the contractEven if you draft a contract that classifies workers as independentcontractors and they sign it, you’re not home free. Ifthe workers challenge their status, a court may care less aboutthe contract they signed and more about the actual terms of thework relationship.FedEx found this out the hard way. In 2005, a California trialcourt ruled that FedEx’s delivery drivers were employees becausethe company exercised “close to absolute actual control” over the

independent Contractors 5.13drivers. In fact, the court described FedEx’s operating agreement,the basis of the company’s defense, as “a brilliantly drafted contractcreating the constraints of an employment relationship with[the drivers] in the guise of an independent contractor model.” Thecourt awarded $5 million in damages.Personnel Practices Audit:Independent ContractorsAnswer these questions to determine if these workers arecorrectly classified as independent contractors.Don’tDoes your company:1. Purchase supplies for the contractor touse in his or her work for you?Yes❏No❏Know❏2. Lend equipment or supplies to thecontractor to finish the work for you? ❏ ❏ ❏3. Provide ongoing supervision of thecontractor’s progress? ❏ ❏ ❏4. Insist that the contractor work only foryour company for the duration of thecontract? ❏ ❏ ❏5. Provide continuous, ongoing work forthe contractor? ❏ ❏ ❏6. Have the contractor perform the samejobs as your employees? ❏ ❏ ❏7. Withhold taxes or provide benefits forthe contractor? ❏ ❏ ❏8. Stipulate what hours the contractorwill work for you? ❏ ❏ ❏If you’ve answered “Yes” to any of these questions, the IRSmay say that this contractor is really your employee and you’reliable for back taxes, penalties and interest charges.

5.14 Employer’s Practical Legal GuideA Superior Court affirmed, ruling, “The drivers look likeFedEx employees, act like FedEx employees, are paid like FedExemployees and receive many employee benefits.” The judge added:“If it looks like a duck, walks like a duck, swims like a duck, andquacks like a duck, it is a duck.” To date, the courts have awardedmore than $14 million in damages in that case.But that was just the tip of the iceberg for FedEx. More than27,000 drivers in 19 states have been certified in further classaction lawsuits over the company’s driver classification. Worse,the IRS originally hit FedEx with a $319 million tax assessmentfor improperly classifying 12,000 of its drivers as independentcontractors. But in 2009, the IRS backed off the assessment andallowed the workers to be classified as employees. Still, severalstates aren’t giving up the fight and plan to sue FedEx over thoseclassifications.In a high-profile case, hundreds of Microsoft Corp. programmerswho had signed a document saying they were independentcontractors later sued the company for inclusion in its 401(k) planand claimed they were really employees. The programmers hadworked full time for 18 months in Microsoft’s offices, side by sidewith full-timers doing similar work, so it was hard to tell the difference.The 9th Circuit judges ruled that because the differencebetween these workers and Microsoft’s regular employees was notvery clear, the independent contractors qualified as common-lawemployees eligible for benefits. The software giant’s argument thatits freelancers signed contracts agreeing to independent- contractorstatus was ruled invalid. Vizcaino v. Microsoft Corp., 97 F.3d 1187(9th Cir. 1996), cert. denied, 522 U.S. 1098 (1998)Note that in the Microsoft case the contractors won the rightto participate in the company’s 401(k) plan because the benefitwas made available to all employees. But in a later, similar case theDuPont Co. was able to escape a similar fate because DuPont’sbenefits plan explicitly excluded contractors. Clark v. E.I. DuPont,105 F.3d 646 (4th Cir. 1997)➤ Recommendation: You can avoid similar problems withcontingent workers by carefully wording the language in yourbenefits plans to exclude contract workers.

independent Contractors 5.15Contractors Can Sue for DiscriminationIn an important ruling in 2000, the U.S. Supreme Court let standa lower court’s $300,000 award under Section 1981 of the CivilRights Act of 1866, which bars racial discrimination in makingand enforcing contracts. Congress had broadened the racial biaslaw in 1991, and some courts say the new language protects independentcontractors. Here are the specifics of the case:A Mexican-American owner of a company hired to cleanparking lots at Wal-Mart claimed that several racially tingedincidents—such as the words “white supremacy” being paintedon the lot—created a hostile work environment. Wal-Marthad argued the ruling would make a company responsible forprotecting all its contractors, but the 1st Circuit said only onsiteworkers would likely be affected. The 1st Circuit’s decisionapplies to Maine, Massachusetts, New Hampshire, Rhode Islandand Puerto Rico. Danco Inc. v. Wal-Mart Stores Inc., 178 F.3d 8(1st Cir. 1999), cert. denied, 528 U.S. 1105 (2000)Nonetheless, there are limits to suing under Section 1981, asthe U.S. Supreme Court recently decided. The case involved JohnMcDonald, a black male who was president of his own incorporatedbusiness. He contracted with Domino’s Pizza to buildrestaurants in Las Vegas. Their relationship became strained, andeventually Domino’s refused to deal with McDonald’s company.A Domino’s rep allegedly told him, “I don’t like dealing with youpeople anyway.” McDonald sued, alleging Domino’s violated thecontract-bias law.In a unanimous decision, the Supreme Court threw out thecase. It concluded that because McDonald did business as a corporation,Section 1981 didn’t protect him. Only individuals can sue,the court said. Domino’s Pizza v. McDonald, No. 04-593 (2006)Liability for Contractor’s ActionsIn 2003, the U.S. Supreme Court ruled that when independentcontractors are acting as a company’s agents, the company is liablefor their actions. While this is a long-held common-law principle,the court’s decision actually protects individual owners of the

5.16 Employer’s Practical Legal Guidecompany from liability arising from the actions of an independentcontractor.The case involved a charge of racial discrimination by a realestate agent in violation of the Fair Housing Act. The SupremeCourt ruled that the agent and company could be sued, but not theofficers or owners of a company in cases when the law specificallyforbids individual suits against the owners. Meyer v. Holley et al.,537 U.S. 280 (2003)The Fair Housing Act doesn’t allow individual lawsuits orauthorize personal liability for employees who violate the law. Beaware, however, that supervisors and managers can be sued individuallyunder both the Family and Medical Leave Act and theFair Labor Standards Act.

Section 6Workers’ Safety/HealthEmployers have an obligation to provide a safe workenvironment for their employees. Those who don’twill pay a heavy price. Their workers’ compensationand other liability insurance costs will rise, workersmay sue, and the Occupational Safety and HealthAdministration (OSHA) may impose heavy fines.In 2012, workplace fatalities declined to 4,383, but in the privatesector construction deaths increased over the previous year,according to the DOL. The most hazardous occupations: construction,transportation, fishing, agriculture and forestry.The threats come on many fronts: domestic violence carriedinto the workplace, drug use, hazardous materials and terrorism.Note: In 2011, OSHA issued its first enforcement instructionsregarding incidents of workplace violence. Officials will use thedirective to decide whether allegations of workplace violence warrantan investigation. For employers, it details methods they canuse to minimize the possibility of workplace violence. Read moreabout the rules at www.theHRSpecialist.com/violencerules.Increasingly, employers are facing a tougher web of workplaceregulations and must coordinate activities with more fed eral, stateand local agencies. Also, workplace safety frequently intersectswith other issues, such as disability discrimination, privacy rights,retaliation and homeland security.6.1

6.2 Employer’s Practical Legal GuideOccupational Safety and Health ActThe main law addressing workplace safety is the OccupationalSafety and Health Act, enacted in 1970 and enforced by OSHA. Theact requires all employers to provide a safe and healthy workplace.It also mandates specific guidelines for certain industries and protectsworkers who file whistle-blower complaints about hazardousconditions in their companies. The “general duty” clause of thestatute requires you to provide workers with a workplace free ofhazards that could cause death or serious physical harm.Under certain circumstances, you can be granted a permanentor temporary variance from an OSHA standard. To apply for apermanent variance, you need to demonstrate that you alreadyhave conditions and practices in place that provide at least as safeand healthful a workplace as those required by the OSHA standards.If there are valid, business-related reasons why you can’tcomply with a standard by its effective date, you can apply for atemporary variance. You must explain why you need more timeand demonstrate that you have taken all appropriate steps to safeguardemployees against the hazard covered by the standard. Youmust describe your plan to achieve compliance with the standardas soon as possible. Also, you must certify that workers have beeninformed of the variance application and of their right to requesta hearing on the application.OSHA officers may inspect work sites for compliance with thestandards. Inspections are done to check the following:• Imminent danger. OSHA will send an inspector when thereis reasonable certainty of an immediate danger of death orserious physical harm.• Catastrophes and fatal accidents. Any fatal accident, oran accident resulting in hospitalization of three or moreemployees, must be reported to the nearest OSHA officewithin eight hours. The agency often sends an inspector tosee if the hazard has been corrected.• Employee complaints. An employee may request an inspectionif he believes there is a hazard that could result in physicalharm.

Workers’ Safety/Health 6.3In addition, OSHA will regularly perform “programmed”inspections of high-risk industries, such as toxic waste disposal.Keep Workers InformedOSHA requires employers to post the following materials in aprominent place at the work site:• Job safety posters informing employees of their rights andresponsibilities under the act. You also must make copies ofthe act and relevant OSHA rules and regulations available toemployees upon request.• Summaries of petitions for variances from standards andrecordkeeping procedures.• Copies of OSHA citations for violations of standards. Theymust remain posted at or near the location of alleged violationsfor three days or until you correct the violation, whicheveris longer.• Summary of occupational injuries and illnesses.Every employer that is subject to OSHA and has more than10 employees is required to maintain records of occupational injuriesand illnesses. For each workplace injury, employers must fillout OSHA Form 301, “Injury and Illness Incident Report.”Each year, employers must complete OSHA Form 300A, asummary of all work-related injuries and illnesses that occurredin the prior year, and post it from Feb. 1 to April 30. You arerequired to post only the summary Form 300A, not the fullinjury log (OSHA Form 300). Employers with no recordable injuriesor illnesses in the prior year must post the form with zeroson the total line. A company executive must certify all establishmentsummaries.You must display the form in a common area wherevernotices to employees are usually posted. Also, you must makea copy of the summary available to employees who move fromone work site to another, such as construction workers, andem ployees who don’t report to any fixed establishment on a regularbasis.

6.4 Employer’s Practical Legal GuidePersonnel Practices Audit:Complying With OSHATo review your personnel practices regarding workplacesafety, answer the following questions:Don’tYes No Know1. Do you have rules requiring employeesto use or wear protective equipmentat all times? ❏ ❏ ❏2. Do you keep detailed records ofjob-related injuries and illnesses? ❏ ❏ ❏3. Do you regularly perform an audit ofyour operations to ensure compliancewith all standards and rules? ❏ ❏ ❏4. Have you established and postedsafety rules on operating machinery? ❏ ❏ ❏5. Do you train all employees on howto use their equipment safely? ❏ ❏ ❏6. Do you perform a safety check ofyour employees’ tools and equipment? ❏ ❏ ❏7. Do you have copies of OSHA’sstandards available to your workers? ❏ ❏ ❏8. Do you place posters and signswarning employees of hazards? ❏ ❏ ❏9. Do you monitor and keep medicalrecords on your employees’ exposureto toxic or hazardous substances? ❏ ❏ ❏10. Do you post the annual summary ofrecorded illnesses and injuries, asrequired? ❏ ❏ ❏If you answered “No” to any of these questions, you shouldreview your policies to ensure your company is complyingwith OSHA’s provisions.

Workers’ Safety/Health 6.5Although the records are generally not filed with OSHA, youmust maintain them at the work site for five years and make themavailable to employees and OSHA inspectors. Also, you mustmaintain other records for certain periods—for example, medicalrecords about workplace injuries and illnesses, for up to 30 years.Go to www.osha.gov/recordkeeping for details on what businessesare covered by OSHA requirements, the records you mustkeep, what injuries count as work-related, what qualifies as lightduty, how employee privacy must be maintained, and so forth.OSHA imposes numerous other responsibilities on employers.You must:• Provide a workplace free from recognized hazards.• Examine workplace conditions to ensure compliance withapplicable OSHA standards.• Ensure that employees have and use safe tools and equipment,and properly maintain this equipment.• Use color codes, posters, labels or signs to warn employees ofpotential hazards.• Establish or update operating procedures, and communicatethem to employees so that they can follow safety and healthrequirements.• Provide medical exams and training when required byOSHA standards.• Not discriminate against employees who exercise their rightsunder OSHA.Be aware that employees who file OSHA complaints regardingworkplace safety and health hazards have the right to requestthat their names not be revealed to their employers. Employeesare now able to file complaints online at www.osha.gov/workers.Caution: OSHA officials are seeing an increase in accidentsinvolving Hispanic workers who have not been properly trainedbecause of a language barrier. In one case, a building contractorwas recently cited and fined $73,800 by OSHA after one ofits workers was killed in a crane accident. The worker, whospoke very little English, was not taught in Spanish about safety

6.6 Employer’s Practical Legal Guideprecautions or the hazards of the job, OSHA said. If you havenon-English-speaking workers, you should consider communicatingyour safety rules in their native language.Hispanic workers continue to experience a disproportionatenumber of workplace injuries. OSHA has created a HispanicOutreach module to help employers keep those workers safe andinformed. For a compliance assistance quickstart guide, go towww.osha.gov/dcsp/compliance_assistance/quickstarts/hispanic/index_hispanic.html.OSHA PenaltiesViolations of the Occupational Safety and Health Act carry civiland, in some cases, criminal penalties. The penalties vary and arebased on the type of violation, its frequency and its severity:■ De minimis violations. When violations have no direct orimmediate relationship to employee safety or health, no citation orpenalty will be applied.■ Nonserious violations. When violations have a direct relationshipto job safety but would probably not cause serious physicalharm or death, OSHA may assess a fine of up to $7,000.■ Serious violations. A penalty of up to $7,000 will beassessed when there is a substantial probability that a violationcould have resulted in death or serious physical harm.■ Willful violations. When the employer intentionally andknowingly commits a violation, the agency can impose a penaltyof up to $70,000. The mandatory minimum penalty is $5,000.■ Repeat violations. A penalty for a repeat violation may beassessed for violations involving a different piece of equipment orlocation within the workplace, provided that, upon reinspection,the new violation involves the same standard that had previouslybeen violated. OSHA may assess a penalty of $70,000 for eachrepeat violation.■ Abatement violations. If you fail to correct a violation forwhich a citation was issued within the abatement period, youcan be fined up to $7,000 for each day that the violation remainsuncorrected.■ Posting violations. Failure to post required materials mayresult in civil fines of up to $7,000 per incident.

Workers’ Safety/Health 6.7Home-office exemptionIf you let workers perform hazardous manufacturing operations outof their homes—such as assembling electronic components—yourcompany can be held liable for any federal safety or health violationscommitted there. But if you employ white-collar telecommuters,your company is exempt from home-office liability.OSHA’s clarification on this issue came after an about-face inearly 2000 on a policy letter that would have required employersto fix any home-office hazard “of which they are, or should be,aware.”OSHA said it does not expect employers to inspect homeoffices, nor does the agency’s staff plan to randomly inspect them.ErgonomicsIn 2001, OSHA issued sweeping ergonomics regulations designedto reduce repetitive-stress injuries (RSIs) in the workplace. Butthe regulations were the costliest ever to come out of OSHA, andCongress, in response to business outcry, scrapped the regulationsa few months later.Recently, OSHA said it plans to propose a rule requiringemployers to report work-related musculoskeletal disorders(WMSDs) in a new column on their Form 300 workplace injurylogs. Some believe the move is a precursor to reintroducing ergonomicstandards.For many reasons, employers should monitor and addressergonomic issues. Ergonomic injuries severe enough to cause aworker to miss a day of work occurred at a rate of 117 cases per10,000 full-time, private-industry workers in 2011. Many ergonomicinjuries can be prevented through low-cost adjustments tothe workplace.Employers that proactively address ergonomic issues willfare better under OSHA scrutiny. Keep in mind that OSHA canstill perform workplace inspections and issue citations under the“ general duty” clause. Employers that have implemented ergonomicsafety measures in good faith would only receive ergonomichazard letters and would have 12 months to correct the problem

6.8 Employer’s Practical Legal Guidebefore OSHA would perform a follow-up inspection to ensurecompliance.Note: OSHA may develop industry-specific ergonomic standardstargeting those with high rates of ergonomic injuries suchas health care and transportation. Read more about OSHA’splans and ergonomic workstation tips at www.osha.gov/SLTC/ergonomics.Ergonomic TipsHere are five ways your organization can reduce office ergonomicrisks:• Position PC monitors below eye level, tilted back and awaylike a book. To avert neck strain, place monitors directly infront of users and a bit farther away than normal readingdistance. Turn screens away from window glare to preventeyestrain.• Provide chairs with good lower-back support. Encouragegood posture and urge workers to stand and stretchevery hour.• Use downsloping keyboards, which have proved to greatlyreduce upper body discomfort and wrist strain. When typing,wrists should be extended straight, not flexed up or down.• Avoid repetitive mouse clicking. Use shortcut keys onthe keyboard or switch to a glide-point mouse that youmaneuver by moving your finger across a pad. Give handsand wrists a good massage occasionally.• Assemble an employee committee to review workstationdesign, collect worker input and suggest solutions.Note: OSHA has begun to develop suggested guidelines onergonomics for certain industries: thus far, for shipyards,poultry processing, retail grocery stores and nursing homes.To review those guidelines, go to www.osha.gov/SLTC/ergonomics/guidelines.html.

Workers’ Safety/Health 6.9Whistle-Blower ProgramA special whistle-blower program is designed to protect workerswho report employer wrongdoing or dangerous conditions. Underthe program employers may not retaliate or discriminate againstworkers who file complaints with OSHA, seek or par ticipate inOSHA inspections, or participate or testify in any inspectionrelatedproceeding.“Discrimination” can include:• Firing or laying off• Assigning to undesirable shifts• Blacklisting• Demoting• Denying overtime or promotion• Disciplining• Denying benefits• Failing to hire or rehire• Intimidation• Transfer or reassigning work• Reducing pay or hoursNote: Beginning in 2012, the Dodd-Frank Wall Street Reformand Consumer Protection Act amends the Sarbanes-Oxley Act tomake it easier for employees to blow the whistle on their employers.Dodd-Frank gives OSHA the authority to quickly investigatewhistle-blower allegations and employee retaliation claims.Employees now have longer to file complaints—180 days instead of90 days from the date of the violation or date the employee learnedof the violation. OSHA must provide a copy of the complaint to theemployer and the Securities and Exchange Commission within 20days, and issue findings within 60 days.Wellness ProgramsSince the 1980s, many employers have adopted the holisticapproach to their employees’ well-being. They’ve begun sponsoringactivities that encourage workers to improve their health.

6.10 Employer’s Practical Legal GuideSome companies subsidize memberships in health clubs orsponsor company sporting events and teams on the theory that ahealthy employee is less likely to be involved in a workplace accident,miss time at work because of illness or be less productive.New rules under the Affordable Care Act (ACA), which tookeffect on Jan. 1, 2014, allow employers to reduce the cost of employees’health insurance premiums if they participate in wellnessprograms that encourage exercise, smoking cessation, weight lossand health screenings.The rules say employers may offer premium reductions of upto 30% for participating employees. (Prior rules only allowed forincentives that trimmed 20% from employee premiums.) On theflip side, the rules allow employers to charge smokers up to 50%more for health insurance.Wellness programs must be structured so “every individualparticipating” can “receive the full amount of any reward or incentive,regardless of any health factor.” That means participation isthe key, not employee success in actually improving their health.The rules address wellness incentives for two kinds of programs:• Those in which all employees become eligible for incentivessimply by participating. Examples include completing a healthassessment or taking a wellness class.• Programs that aim for achieving a specific health goal, suchas trying to lose weight or reduce blood pressure. Thoseprograms are further divided into activities that are “outcomes-based”—loweringcholesterol levels, for example—and“activity-based” programs that involve physical effort, such asa lunchtime walking club.Note: If an employer offers monetary incentives for activitybasedprograms (like lunchtime walking programs), it must offeran alternative way to cash in for employees who are medicallyunable to participate.Online resource: Access compliance advice on the ACA, pluslinks to training tools, government guidance and model notices atwww.theHRSpecialist.com/healthlaw.

Workers’ Safety/Health 6.11AIDS ProgramsAs AIDS continues to affect all segments of the population, itsconsequences are being felt in the workplace. Employers are nowcompelled to confront issues related to AIDS, such as employees’fear of the disease, company policy decisions and benefitprograms.Individuals with HIV, as well as those with AIDS, are coveredby the ADA. The U.S. Supreme Court affirmed this inBragdon v. Abbott, 118 S.Ct. 2196 (1998), extending the protectionof the law to those who are HIV-positive but show no symptomsof the disease.Under the ADA you cannot discriminate against an applicantor employee with AIDS, and you must make “reasonableaccommodation” for the condition. This may include liberal useof leave time and restructuring of responsibilities. (But rememberto keep these measures voluntary. Forcing an employee tochange his work habits could be prosecuted as a violation ofthe ADA.)No federal laws prohibit mandatory AIDS tests for yourworkers, although many states do have statutes related to theissue. Check with your state labor department. If man datorytesting is allowed and you have a legitimate, business-relatedneed for this information, be sure all employees are required totake the test. Otherwise, you could be accused of discriminatingagainst certain workers.Businesses are in an excellent position to educate employeeson how to avoid contracting the disease—thereby preventingthe potentially devastating financial impact the illness can haveon company health care costs. Any AIDS awareness programyou offer should reflect the needs of your company as well asyour employees.A number of government and private agencies have developedprograms and materials on AIDS-related workplace issues.Among them are the CDC National Prevention InformationNetwork at (800) 458-5231 or www.cdcnpin.org and the NationalAids Fund at www.aidsunited.org.

6.12 Employer’s Practical Legal GuideWorkers’ CompensationWorkers’ compensation insurance provides compensation toemployees who are injured or disabled on the job. It pays for nec -es sary medical treatment, loss of wages during a period of disabilityand compensation for permanent disability or disfigurement.Benefits are also provided for dependents of workers who die inwork-related accidents or from occupational illnesses.Workers’ comp is a no-fault insurance system. To collect benefits,workers are not required to prove that they are completely freefrom fault or that the employer is at fault. Workers’ compensation isalso an “exclusive remedy” system: In exchange for the expectationof benefits, workers are not permitted to bring a civil suit againstan employer to collect damages for work-related injuries.Exceptions are made to the “exclusive remedy” rule in cases ofintentional injuries caused by the employer and injuries caused bya third party.Each state has its own workers’ compensation law with differentrequirements regarding coverage, benefits, premium ratesand insurers. One fact, though, is universal: Employers pay for thesystem.Who’s coveredNearly every employer in the United States is covered by a stateworkers’ compensation law. There are some exceptions: the selfemployed,railroad and harbor workers and federal employees, whoare protected by federal workers’ comp programs.Workers’ comp insurance is compulsory in every state exceptTexas. Each state has its own numerical standard as to how manyemployees a company must have before it is required to buy coverage.For example, in South Carolina you are required to purchaseinsurance if you employ four or more workers; in Michigan, if youemploy three or more.In most states, employers purchase workers’ comp insurancefrom private insurance companies. Some states offer a competitivestate-run insurance fund as an alternative or last-resort source.Five states have exclusive state funds.

Workers’ Safety/Health 6.13Most states also allow for self-insurance if an employer meetscertain financial standards; generally, only the largest employersqualify for self-insurance.How rates are setHow much you pay for workers’ compensation insurance dependson your company’s industrial classification and loss experience, aswell as on rates set by state law:• Loss experience is based on your actual losses over a threeyearperiod and your actuarially projected losses. If yourexperience is better than expected, your premiums decrease.If your experience is worse than expected, your premiumsincrease.• There are about 700 industrial classifications, each with itsown premium rate. Your company is assigned a classificationbased on your principal line of business.In some states insurance companies are allowed to set theirown premium rates in an effort to encourage competition andreduce costs. In Illinois, for example, this has resulted in insurancecosts running below the national average.Benefit awardsWhen a worker gets injured, your workers’ compensation insurerwill pay for the following: visits to an approved doctor, hospitalstay, surgery, dental care, drugs and medical devices.Payments for lost wages usually begin after a worker has beenoff the job for more than seven days. In about 35 states the amountis calculated based on the worker’s average weekly wage for aperiod before the accident, usually 13 weeks, limited by the state’saverage weekly wage as set by law. This results in payments thatequal about 66²⁄3% of the worker’s average weekly wage.The duration and payment of benefits varies greatly from stateto state. Some states make payments for the duration of a temporarydisability; others set limitations on the length of time benefitscan be paid. Some states also pay a set sum for the loss of a limbor function, and others allow workers and employers to settle an

6.14 Employer’s Practical Legal Guideongoing claim for a lump sum. Always check with an experiencedworkers’ comp attorney in your state before tackling a claim. Thepractice of workers’ compensation law is highly specialized andrequires familiarity with the state system.State administrationWorkers’ comp is administered by each state’s workers’ compensationagency, which investigates claims and adjudicatesdisputes. Many states now have dispute-resolution programs tosettle claim disputes. In Florida, claims cannot be heard before ajudge until the parties have engaged in dispute resolution.In most states it is a misdemeanor, punishable by fine orimprisonment, for employers not to carry workers’ compensationinsurance. Fraud by claimants, employers or health care providersis a felony in New York State.Keeping down your costsYou can significantly reduce the cost of your workers’ compensationpremiums by following a program of accident prevention,better claims management and prevention of fraud and abuse.Specifically, you should:• Investigate all accidents. You cannot design an accident preventionprogram unless you know the source of the accidents,what types of accidents most frequently occur and whichones are the most severe. Keep records on all accidents, notonly the ones resulting in claims. (Your OSHA records arethe place to start.)• Have an accident prevention program. Many states offerfree consultations with safety and health specialists who willcome to your business to design specific accident preventionprograms. Some states hold free workshops throughout theyear to advise employers on how to avoid workplace injuriesand occupational diseases. West Virginia alone conductsmore than 1,000 workshops a year.• Report accidents promptly. The sooner you file an accidentreport, the sooner your employee will be evaluated, treated

Workers’ Safety/Health 6.15and returned to work. Delays in employer reporting result inemployees contacting lawyers and litigating claims. Employersusually have 10 days in which to file an accident report.• Stay in touch with the injured worker and the doctor.Follow the progress of the worker’s recovery. This will helpyou design an appropriate return-to-work program.• Follow the progress of a worker’s claim. Doing so will helpyou detect errors, fraud and abuse.• Use return-to-work/light-duty programs. These are one ofthe most effective ways to reduce your workers’ compensationcosts. If a worker is too severely injured to return toregular work, make sure you have transitional or light-dutyalternatives available.• Know your insurance system. Are you in the lowest rateclassification for your type of business? The classificationshould be based on your principal line of business, not on aparticularly hazardous job.In addition, keep in mind that in most cases workers’ compabsences also qualify as FMLA leave (see Section 13). (The absencewill not qualify as FMLA leave unless the injury is deemed aserious health condition, one that usually requires continuedtreatment by a health care provider.) If the injury does constitutea serious health condition under the FMLA, remember to promptlynotify the employee that time missed for a workers’ comp injurywill run concurrently with his remaining amount of FMLA leave.Otherwise, a worker would be able to take 12 weeks of family/medical leave in addition to any time off for a workers’ compclaim.Injured workers may also be covered by the Americans withDisabilities Act if their injuries rise to the level of disability underthat federal law. To be a disability under the ADA, a condition oran injury must substantially impair a major life function, such aswalking, talking, breathing, seeing, caring for oneself or working.Disabled workers, regardless of the cause of their disability, areentitled to reasonable accommodations for those disabilities. Eachcase is decided on an individual basis. That means you cannot, forexample, enforce a blanket “fully healed” policy before allowing a

6.16 Employer’s Practical Legal Guideworker to return to work. You must assess his ability to performthe job and decide whether any reasonable accommodations arepossible. (See Section 12 for more information on the accommodationsprocess.)Don’t retaliate against employeesSeveral states have not allowed an employee to present a claimfor wrongful discharge after being fired in retaliation for filing aworkers’ compensation claim. However, a Pennsylvania SupremeCourt decision held that an employee may now bring a claim forwrongful discharge in a workers’ comp case. The court reasonedthat if employers could get away with retaliatory firings, employeeswould be coerced into giving up their entitlement to workers’comp benefits to avoid getting fired. Shick v. Shirey, 552 Pa. 590, 716A.2d 1231Caution: When interviewing a job applicant, you cannot askwhether the person has ever filed for workers’ compensation. TheEEOC’s regulations regarding disability-related questions are themost limiting at the initial interview stage. Once you have madea conditional job offer, you are allowed to investigate past claims.However, you cannot withdraw a job offer based on a person’scurrent or past disability or on the fact that he has exercisedhis rights in the past. If the person is able to perform the job’sessential functions, you may not use his disability as a basis fordiscrimination.No insurance? A cautionary taleAngela Hobson, a young mother, worked as a pole dancer forShangri-La, an entertainment complex in Fort Wayne, Ind. Whileon stage performing, she sprung around the pole and felt a pullin her neck. The pain spread, and Hobson could no longer lift herchildren or perform other household tasks.Hobson told her employer she had been hurt and eventuallyhad surgery to correct a herniated disc. Because her employer hadno posted notice about workers’ compensation, Hobson waitedover a year before filing her claim. She then found out that thecompany hadn’t been carrying workers’ comp insurance.

Workers’ Safety/Health 6.17The Workers’ Compensation Board ordered benefits over theemployer’s objection. Shangri-La appealed, arguing that Hobsonnever told them about the injury.The Court of Appeals of Indiana refused to reverse the decision,pointing out that the employer’s testimony was suspect. Thecourt chastised the employer for its lack of records and insurance.Finally, it said that Hobson was entitled to double the amountshe ordinarily would receive as lost wages because the employerdidn’t have insurance. Wholesalers, Inc., d/b/a Shangri-La v. Hobson.

Terminations/LayoffsSection 7In today’s tight economy, employers want and needflexibility. To adjust to rapidly changing economicconditions, employers need to hire, train, promote,transfer and sometimes terminate employees. Withoutthe flexibility to adapt to change, many smalland midsize companies wouldn’t survive in the bravenew world of constant innovation. The last thing anemployer needs is a lawsuit from a disappointed ordisgruntled applicant, employee or former worker. Yetmore and more employees are suing when a job is lostor an ambition frustrated.Lawsuits are disruptive, expensive and time-consuming. Theydistract management from the business at hand and lower moraleall around.Nevertheless, a surprising number of employers don’t do thenecessary preventative and maintenance work to protect againstemployee lawsuits.This section is designed to help you create legal discharge proceduresthat minimize your potential liability.7.1

7.2 Employer’s Practical Legal GuideFiring at WillUnder the law in most states, if there’s no employment con tracta worker is employed on an “at-will” basis. That means the workerhas the right to leave the company at any time, and, conversely, theemployer has the right to terminate the employee at its discretion.If a worker is under contract, however, the terms of the contractapply. A written contract may specify the reasons the employee canbe terminated, while an oral contract usually implies that terminationcan occur only for cause. Usually, that means the employercan terminate the worker only for poor performance, derelictionof duty, an act of dishonesty or insubordination, or because thecompany needs to eliminate the position the employee holds.A contract may be a formal, signed agreement, a collective bargainingpact or an implied contract. (See Section 1.) Not all statesrecognize implied contracts. If your state does honor such agreements,a court might conclude that an implied contract exists if anemployee handbook, policy manual or verbal statement alludesto job security. Other courts have held that the totality of theparties’ relationship must be reviewed to determine whether theemployer’s conduct gave rise to an implied promise that it wouldnot arbitrarily terminate an employee.Besides implied contracts, the at-will doctrine is being chiseledaway by federal laws, state statutes and court decisions as thenumber of wrongful-discharge suits spirals higher.Here’s why:■ Federal laws. Employers subject to certain federal laws maynot terminate employees for prohibited reasons, such as racialdiscrimination, or for exercising their rights under the laws. Thelaws include the Equal Employment Opportunity Act, Title VII,the Occupational Safety and Health Act, the ADA, the FMLA, theADEA and the Pregnancy Discrimination Act.■ State laws. Likewise, state legislatures have passed wage/hour laws, workers’ compensation and other statutes that restrictemployment decisions.■ Implied covenant of good faith and fair dealing. Somestates also hold that every agreement contains an implied covenantof good faith and fair dealing, which basically means that the(Continued on page 7.4)

terminations/Layoffs 7.3Personnel Practices Audit: TerminationsAnswer these questions about your company’s terminationpractices to ensure that you can defend yourself in a wrongfuldischargesuit.Does your company have a history of discharging employeesfor any of the following reasons?Don’tYes No Know1. Filing a workers’ comp claim? ❏ ❏ ❏2. Being outspoken on issues withwhich your company disagrees? ❏ ❏ ❏3. Refusing to engage in activities theyfelt violated state or federal statutes? ❏ ❏ ❏4. Reporting suspected health hazardsto a state agency? ❏ ❏ ❏5. Missing time because of jury duty? ❏ ❏ ❏6. Blowing the whistle on a superioror a co-worker who violated a lawor company policy? ❏ ❏ ❏7. Filing a wage-hour complaint? ❏ ❏ ❏8. Filing charges with or giving testimonyto a state or federal agency forworkplace violations? ❏ ❏ ❏9. Having wages garnished? ❏ ❏ ❏10. Opposing a discriminatory employmentpractice or filing a charge? ❏ ❏ ❏11. Testifying or helping in an employmentrelatedinvestigation? ❏ ❏ ❏12. Refusing a polygraph test? ❏ ❏ ❏You cannot fire an employee for any of the reasons listed here.If you answered “Yes” to any of these questions, you may beliable in a wrongful-termination suit.

7.4 Employer’s Practical Legal Guide(Continued from page 7.2)parties will treat each other fairly. When an employer fires someonein a manner that a jury considers patently unfair, the formeremployee may be able to recover damages.■ Public policy. In some states, courts will hold an employerliable for wrongful discharge if an employee is terminated for areason that violates public policy. That means, for instance, youcannot fire one of your engineers for informing the EPA that yourcompany has been dumping toxic waste in the river or anotheremployee for refusing to lie to a tax examiner. Likewise, it’sagainst public policy to fire someone for filing a workers’ compensationclaim or reporting for jury duty.■ Torts. Some employees have won judgments against theircompanies by suing over a civil wrong, such as “intentional inflictionof emotional distress.”In many court cases, an employee handbook is a prime pieceof evidence showing the employer’s policies and promises. Youmust pay careful attention to your handbook to help protect yourstatus as an at-will employer, to the extent allowed by law, and toreduce your chances of losing in court. (See Section 3 on EmployeeHandbooks.)■ USERRA. Under a little-known provision in the Uni formedServices Employment and Reemployment Rights Act, it’s illegalto fire returning soldiers and reservists without a valid, businessbasedreason. In other words, soldiers are temporarily no longerat-will employees even if they were before they deployed orsigned up for the Reserves. You can’t terminate employees returningfrom active duty or reservist leave unless:• You can point to “just cause” for doing so. This special protectioncontinues for one year if the person served on militaryduty for more than 180 days or for six months for thoseon military leave between 30 and 180 days, and• You can prove the soldier/employee knew or was notifiedthat his actions could constitute just cause for discharge, and• You can prove that the termination was “reasonable.”Presumably, that means the workplace rules that the organizationaccused the employee of violating were reasonable.

terminations/Layoffs 7.5Minimize Your RiskWhen you dismiss an employee, be sure to minimize yourexposure to charges that you broke a contract, violated publicpolicy, acted vindictively or engaged in discriminatory practices.These steps will help you avoid litigation or support your casein court:✔ Publicize your policies. Policies that are effectively drafted,communicated and enforced uniformly can help you justifya dismissal. Communicate your policies and any associatedpenalties for noncompliance clearly. If an employee was neverinformed of your company’s policies, or if those standardswere communicated to him poorly, you may be forced tooverturn his termination or pay a large settlement.➤ Observation: Review your policies for relevance to yourbusiness. Policies on attendance and misconduct, for example, arealways relevant, but a dress code may not be.✔ Conduct employee performance reviews regularly. Ensurethat you or anyone acting on your company’s behalf adheresto your company’s strict anti-discrimination policy. Statementsfrom managers and supervisors must be free of anyovertones of discrimination. Even just-cause terminations canbe jeopardized by discriminatory remarks.➤ Recommendation: To head off charges of discrimination,periodically review whether your firing policies have a disproportionateimpact on certain employees. If an audit of terminationpractices reveals, for example, that black employees are beingdischarged at a significantly greater rate than whites, it’s timeto make a thorough and immediate examination of your terminationcriteria. You may want to ask an employment lawyerto conduct the audit to help prevent the audit from being subject todisclosure in subsequent lawsuits.✔ Use consensus decision-making: One of the best ways tomake sure a discharge decision sticks is to adopt a consensusapproach to the decision-making. It’s best to include someone

7.6 Employer’s Practical Legal Guidefrom the HR department as well as someone outside theemployee’s immediate chain of command.Progressive DisciplineThe most reliable way to protect yourself from charges of wrongfuldismissal is to establish a system of progressive discipline.Having such a structure in place, and making it clear to allsupervisors that they are expected to abide by it, is your bestdefense against a wrongful-dismissal suit. You can ensure thatany employee fired because of inferior performance was treatedfairly and in accordance with your company’s policies. (See box onpage 7.8 for a “Model for Progressive Discipline.”)If you do use progressive discipline, leave yourself an out incase you need to dismiss an employee immediately. Retain theright to dismiss an employee for serious offenses without goingthrough progressive discipline. In addition, make sure your handbookdoesn’t give any guarantees that employees will have anopportunity to improve their performance.Case in point: An employee handbook contained languagea court interpreted to mean entitled employees to progressivediscipline. The handbook stated the company’s progressive disciplinecounseling “will provide [the employee] with a reasonableopportunity to make the necessary improvements in order tosucceed.” A federal appeals court read that to mean the employeemust always have an opportunity to improve. Messinger v. U.S.Bancorp, No. 04-35548 (9th Cir.)Constructive DischargeSome supervisors try to get around the whole issue of firing byresorting to constructive discharge. Their logic: If we make anemployee’s time at work so intolerable, he or she will choose toresign. This is not a wise strategy.For starters, your company becomes vulnerable to chargesof discrimination by the targeted employee. After all, he or shewas specifically singled out for special treatment—the essence ofdiscrimination. In such cases, a former employee will allege that

terminations/Layoffs 7.7the working conditions were so intolerable that a reasonable personwould have been forced to resign.In fact, some disgruntled employees may even be advised byplain tiff’s lawyers to “set up” their bosses so it looks as though conditionswere intolerable. The worker then quits in disgust and filesa lawsuit that adds a hostile work environment count to the complaint.And the court system is increasingly accepting constructivedischarges as the equivalent of a firing, especially if it’s a super visorwho appears to be making life a nightmare for the worker.Take, for example, the sexual harassment case won by a womanwho claimed her boss regularly made lewd gestures, suggestingshe perform a sexual act. The U.S. Supreme Court concluded theharassment was severe enough to compel her to quit without firstgoing through the company’s internal complaint process. (Seedetails in Section 11.)Courts view different kinds of personnel practices with varyingdegrees of disapproval. Practices that can get you into trouble includethe following: improper demotion, improper transfer or failure totransfer, coercion into early retirement, discriminatory pay, and sexualor racial harassment or harassment based on age or disability.To increase your company’s odds of prevailing in a constructivedischargesuit:• You need to educate supervisors about the concept of constructivedischarge. Often, supervisors will try to sidestepthe unpleasant task of firing an employee outright by forcinghim to quit.• If an employee is demoted, he should be encouraged toaccept the demotion. If you want him out, your best bet isto document his shoddy performance and fire him. If theemployee files a complaint, investigate it. Encourage him notto resign until the investigation is completed.• When an employee resigns, have him provide a signed statementspecifying why he is leaving. Unless he accuses you inthe statement of unfair treatment, a court would be unlikelyto side with him if he later charges you with constructivedis charge. For example, an employee who resigned for abetter job with another company could not successfully claimhe quit because you discriminated against him.

7.8 Employer’s Practical Legal GuideModel for Progressive DisciplineTake the following steps to establish a routine of progressivediscipline:✔ As soon as a supervisor perceives a worker’s perform -ance problem, she should issue an oral reprimand. Thesuper visor should ask the worker if there are any longtermproblems or skill deficiencies that need to be corrected.Have the manager keep detailed notes or preparea memo to file about the conversation, in case furtheraction is necessary.✔ If the problem persists (or more problems emerge), thesupervisor should provide the employee with a writtenwarning delineating the objectionable behavior, alongwith the consequences. Explain the standards that willbe used to judge the employee. Specify the time framewithin which performance must improve, and state thatcontinued failure will result in termination. A copy of thememo should be placed in the employee’s personnel file.Have the worker in question sign a copy to acknowledgereceipt. Other wise, he could claim that he never receiveda copy.✔ If performance does not improve, deliver a final writtenwarning, perhaps accompanied by probationary statusfor the employee. The final warning should contain copiesof the previous warnings, indicate specific areas in whichthe employee must improve and specify the time periodwithin which the worker’s behavior or performance mustbe corrected.✔ If the problem persists, the supervisor should notify thehuman resources department or other company authority.In general, supervisors should not be given firing authority.Someone else in the company should evaluate the fullrange of discharge-related considerations. Some companies

terminations/Layoffs 7.9suspend the employee while his performance is investigatedby a human resources manager or other companyofficial (other than the worker’s supervisor). Witnesses areinterviewed, and documents are analyzed. The employeeis confronted with the facts revealed by the investigationand is given the opportunity to present his side of the story.Regardless of whether there is a formal investigation, beforetaking any final action, your com pany should consider thesequestions:• Does the employee claim that a contractual relationshipexists, and if so, does that assertion have merit?• Has the employee recently filed a workers’ compensationclaim, complained to a government agency aboutalleged workplace violations or taken any other actionsthat might make a discharge look like unlawful retaliationby the employer?• Is there an issue relating to good faith and fair dealing,especially if the termination involves a long-termemployee?Even if the answer to any of these questions is “Yes,” you stillcan survive a challenge to a firing; however, you must be ableto prove that the circumstances of the particular case justifyyour actions.✔ Assuming that you decide to support the recommendationof the worker’s supervisor, send a letter of terminationto the worker and clearly state the reasons for dismissal.Admittedly, this is a time-consuming process. When aworker is not performing his job satisfactorily, you don’twant to have him on the staff any longer than necessary;however, if you dismiss a worker and he can prove in courtthat he was treated unfairly, you could be forced to pay alarge settlement or reinstate him.

7.10 Employer’s Practical Legal GuideNoncompete ClausesOne of the risks you run when losing crucial employees is thepotential leaking of valuable information. If you take the precautionof having them sign covenants not to compete and confidentialitycovenants when they join your company, you may be ableto limit this risk. The enforcement of such covenants depends onthe individual state, and some states refuse to sanction any kindof noncompete clause. Be sure to check with your attorney aboutthe legality of any agreement you are considering.Other factors to consider when drafting noncompete covenants:1. The agreement must be reasonable. If you take too manyoptions away from the employee, the entire contract may not beenforceable and courts will view it as a “restraint of trade.” Whenthe job market is tight, ex-employees have fewer job alternativesand may have little choice but to work for your competitors. In thiscase, the courts would be more likely to invalidate an unreasonableagreement.Reasonable, in the view of most courts, refers to the timeperiod and the geographic area. For example, preventing a hairdresserfrom working as a stylist for two years within a 50-mileradius of your shop is probably reasonable, while preventingher from working in the profession anywhere in the country for10 years probably isn’t. The restrictions should be broad enoughto protect you from competition, yet narrow enough to allow theperson to make a living.2. The covenant must have mutuality of obligation. A noncompetecovenant is a contract, and in order for it to be valid, bothparties must have obligations to fulfill. If you make the noncompeteagreement part of the original employment contract, the quidpro quo for agreeing not to compete is the job itself under somestates’ laws.3. Covenants ride up the job ladder. Like other elements ofemploy ment contracts, the noncompete provision stays with theemployee throughout the term of employment. You don’t have todraw up a new one every time you promote the employee. However,you may want to execute new covenants with new considerationswhen an employee is promoted, receives expensive training or isexposed to particularly sensitive information or trade secrets.

terminations/Layoffs 7.11Personnel Practices Audit: Noncompete ClausesAnswer these questions to evaluate the potential liability ofyour noncompete agreements:Don’tYes No Know1. Does your covenant have a time limit? ❏ ❏ ❏2. If there is a time limit, is it realistic? ❏ ❏ ❏3. Does the covenant set geographicallimits to the ban on competition? ❏ ❏ ❏4. If there are geographical limits, do theyreflect only those areas in which yourbusiness operates or reasonably expectsto function? ❏ ❏ ❏5. Does the restriction afford the persona reasonable opportunity to pursue alivelihood in her chosen occupation? ❏ ❏ ❏If you answer “No” to any of these questions, you run the riskof a court overturning your noncompete agreement. Redraft allnoncompete clauses with the advice of your attorney.Severance PaySeverance pay is defined as pay an employee receives upon terminationfrom an organization due to job cuts or any reason otherthan a resignation or being discharged for cause.Severance policies are generally considered employee benefitplans that are entitled to ERISA protection, many courts haveruled. For employers, this means conforming to ERISA’s recordkeepingand disclosure requirements (see Section 15).➤ Recommendation: If you have a severance pay plan or arethinking of establishing one, review the details with your legaladviser to ensure compliance with ERISA and to determine thatthe provisions are reasonable and legally sound—particularlyif the policy will include waivers.

7.12 Employer’s Practical Legal GuideNo federal law mandates severance pay. If you do decide tooffer severance or other benefits, consider making the payment orbenefit contingent on the employee signing a release of any liabilityfor employment discrimination. Just be sure that an attorneyprepares the release because certain technical conditions must bemet for such a release to be enforceable.If you offer severance packages, don’t assume workers wantmoney. With rising health care costs, workers are choosing lessseverance pay and more outplacement benefits, such as continuedhealth coverage. You may want to negotiate noncash optionsinto your severance plan. You could save money plus avoid legaltrouble: A departing worker who feels that he squeezed someconcessions out of you is less likely to sue later.Also, don’t assume that taking a severance check alwaysmeans the employee can’t bring a complaint to the EEOC or thatthe agency won’t sue. In fact, the EEOC has filed federal lawsuitsagainst employers challenging their right even to include an “Iagree not to sue” clause in the agreement.In EEOC v. Lockheed Martin Corp., 444 F. Supp. 2d 414 D. Md.,the court ruled that Lockheed’s severance agreement was faciallyretaliatory. In EEOC v. Ventura Foods, LLC, No. 05-663 D. Minn.,Ventura settled, agreeing to remove language from its standardseverance agreement that required separated employees to agreenot to file a discrimination charge in exchange for severance; reofferseverance benefits to former employees who had refused tosign the agreement; and notify employees who received benefits oftheir right to file a charge without losing benefits or violating theterms of their prior severance agreement.Providing ReferencesDespite all the risks, providing employers with references concerningyour former workers is a good business practice. Refusingto provide references is not a responsible stance and will eventuallycompromise your own ability to find out about applicants youare considering hiring. In addition, you can be sued for refusing togive a potential employer information on a former worker’s dangerousor illegal conduct.

terminations/Layoffs 7.13Personnel Practices Audit: Reference InquiriesAnswer these questions about how you field inquiries fromother employers about your former workers:Don’tYes No Know1. When hired, are all workers askedto sign a consent-and-release formthat gives your company the rightto respond truthfully to potentialemployers’ inquiries and waives anylegal claims of the workers that mayarise from giving references? ❏ ❏ ❏2. Do you have one person on staffwho is responsible for handlingreference inquiries? ❏ ❏ ❏3. Do you always check the identityof the person requesting a referenceabout one of your former employees? ❏ ❏ ❏4. Before providing information, do youask the reference checker to send orfax you the employee’s authorizationto contact you for a reference? ❏ ❏ ❏“No” responses indicate that a former employee could chargeyou with violating his right to privacy.As long as the information you provide is objective and welldocumented, the courts should side with you in the event a formeremployee files a defamation suit. Give serious consideration toa policy that limits references to basic employment information,such as dates of employment, job duties and salary history.Another defense: The statements made in the reference areprotected by a “qualified privilege”: that is, a libel charge will notstand up in court if the comments were made without malice ordeliberate ill-will and were given only to those with a vested businessinterest.

7.14 Employer’s Practical Legal GuideTwenty-nine states have enacted laws protecting employersthat provide bad references without malicious intent. But many ofthose laws don’t provide much protection.For example, under Texas law, employer’s immunity is limitedto (1) written statements; (2) regarding the reason for discharge;and (3) in an action for libel. As the Texas example illustrates,the immunity may not cover all potential claims. Employers thusremain potentially liable for retaliation under Title VII because theTexas statute protects only against libel claims. (Be sure to checkthe language of your statute to determine the extent of protectionprovided.)Bottom line: Don’t let the existence of a reference immunitystatute in your state lull you into thinking that you can now speakfreely about current and former employees. Rely on the statuteonly in cases of emergency—that is, when you know that the individualin question may be dangerous.To make it easier to defend your company against libel chargesbrought by ex-workers, follow these guidelines:• When you fire an employee, record all facts that led to thetermination, ensuring that the information is accurate.• Restrict information about the circumstances leading to a terminationor resignation only to those in the company with aneed to know.• When you discuss the firing with other employees, avoidmaking derogatory comments about the individual.• Don’t make examples of fired workers.Caution: The Supreme Court ruled that former employees,as well as current ones, are protected under the anti-retaliatoryprovisions of Title VII. Robinson v. Shell Oil Co., 519 U.S. 337 (1997)In the Robinson case, a discharged employee filed a complaintwith the EEOC against his ex-employer. Meanwhile, he appliedfor a job elsewhere. The potential employer called the companyfor a reference check. The plaintiff alleged that the company gavehim a negative reference in retaliation for filing the dis crim i nationcomplaint. The Supreme Court ruled that former employees arestill protected by Title VII even though technically they’re notemployees anymore.

terminations/Layoffs 7.15Layoffs: The WARN ActThe term “layoff” or “reduction in force” is often used interchangeablywith “firing” or “termination.” Yet there are importantdistinctions between these terms. A layoff occurs when workersare let go for reasons beyond their control—for example, the companyhas suffered an economic downturn or it has been restructured,bought out or shut down.A wave of corporate mergers and downsizings in the 1980sled Congress to pass the Worker Adjustment and RetrainingNotification (WARN) Act of 1988. The act requires certainemployers to give 60 days’ notice of an impending layoff or plantclosing to affected employees. You can be liable for back pay toemployees for any portion of the 60-day notice period.Under the WARN Act, a “plant closing” is defined as a temporaryor permanent shutdown that results in 50 or more full-timeemployees losing their jobs. A “mass layoff” is a workforce reductionthat is not the result of a plant closing but causes employmentloss at a site for any 30-day period for one-third—but not less than50—of the full-time workers, even if the plant remains open. If500 or more full-time employees are affected in the layoff, the onethirdrequirement does not apply.WARN’s provisions apply to any employer that has 100 or morefull-time employees or has 100 or more employees, including parttimeworkers, whose total work amounts to at least 4,000 hours perweek, not counting overtime.Before contemplating a layoff or shutdown, consult an attorneyto see what your obligations are under the WARN Act. Also, keepin mind that many states and municipalities have notification lawsmore stringent than the federal law.The WARN Act requires employers to send notices to:• Each employee affected by the closing or mass layoff (or, ifunion workers are affected, to the designated representative).• The state’s dislocated worker unit, which provides trainingand assistance to employees who have lost their jobs.• The appropriate local government official (usually the mayoror city manager).

7.16 Employer’s Practical Legal GuideAll notices must be made in writing at least 60 days before theaction and must include, at a minimum, the following:• Name and address of the employment site where the actionwill occur.• Name and phone number of a company official to contact forfurther information.• A statement as to whether the planned action is expected tobe permanent or temporary and if the entire facility is to beclosed.• Expected date of the first separation and the anticipatedschedule for making separations.• Job titles of positions to be affected and names of workerscurrently holding those jobs.Notices to the state’s dislocated worker unit must also state thenumber of employees holding each job title and whether bumpingrights exist.Exceptions to notificationThe advance-notice rule has four key exceptions. If you rely on anyof them to give less than 60 days’ notice, you bear the burden ofproof that it’s true:• “Faltering company” exception. This applies to plant closingsbut not to mass layoffs. It covers situations in which acompany has sought new capital or business in order to stayopen and giving notice would ruin the opportunity to obtainnew capital or business.• “Unforeseeable business circumstances” exception. Yourcompany can be exempted if the layoff or plant closing wasbrought about by a sudden, dramatic and unexpected actionor condition beyond your control: for example, an economicdownturn, a strike at a major supplier or the sudden terminationof a major contract.

terminations/Layoffs 7.17• “Natural disaster” exception. This applies to plant closingsand mass layoffs in the wake of a natural disaster, such asa flood, earthquake or storm. Note: Employers don’t have togive notice when closing a temporary facility or if a closing orlayoff results from completion of a project. But this exemptionapplies only if the workers, upon hiring, knew that their jobswere limited to the project’s duration.• “Government action” exception. After 9/11, the governmentfederalized all airport security. Contractors that providedthe service were legislated out of business. To add insult toinjury, displaced workers sued their employers under theWARN Act, arguing they didn’t provide appropriate notification.The 9th Circuit ruled that company closings due togovernmental action are exempt from WARN’s requirements.Deveraturda v. Globe Aviation Security Svcs., Case No. 04-16633,9th Cir.Caution: Lawsuits challenging WARN Act compliance havebecome more common in the wake of the recent increase in layoffs.Meanwhile, states have enacted their own layoff notificationlaws, which vary considerably from state to state. Check your statelaw before undergoing any mass layoffs.Your COBRA ObligationsUnder the Consolidated Omnibus Budget Reconciliation Act(COBRA) of 1985 you are required to continue offering medicalinsurance benefits to workers and their covered dependents fora specified period of time after they leave the company. The lawapplies to all companies that have 20 or more workers and havegroup health insurance plans (including self-insured plans). Notethat some states have lower minimums concerning the number ofemployees.Under COBRA an employee and any of his or her qualifiedbeneficiaries may elect to continue health coverage if one of thefollowing qualifying events occurs. The length of time coveragewill continue depends on the qualifying event:

7.18 Employer’s Practical Legal GuideQualifying Event✔ Voluntary or involuntarytermination✔ Reduction in hours (a strike,layoff, switching from full-timeto part-time status, leave of absence)✔ Employee’s death✔ Divorce or separation of theemployee and spouse✔ Employee’s entitlement toMedicare benefits✔ Cessation of coverage for adependent child past a certainage (specified in the insurance plan)✔ Employer’s bankruptcyLength of Coverage18 months(29 months if disabled)18 months(29 months if disabled)36 months36 months36 months36 monthsLifetime (retirees)Qualified beneficiaries are spouses and dependent childrenwho are covered under the plan the day before the qualifyingevent occurs. They have rights to COBRA coverage separate fromthe employee. Thus, a spouse and children could elect to continuecoverage under the employer’s plan even if the terminatedemployee does not.Caution: If you fire an employee for “gross misconduct,” youcan refuse to extend COBRA coverage to him. However, since thelaw does not define “gross misconduct,” you could be on shakylegal ground and the burden of proof is on you to defend yourreason.You may require the employee to pay up to 102% of the costto the plan for maintaining benefits. (The extra 2% is designed tocover any administrative costs incurred.)Note: The American Recovery and Reinvestment Act of 2009provided federal funding for eligible workers to receive a 65%subsidy toward continuation health insurance purchased underCOBRA. The subsidy was limited to those laid off between Sept. 1,2008, and the end of 2009, and then extended to those laid off

terminations/Layoffs 7.19through May 31, 2010. Also, the economic stimulus law allowedgroup health plans to offer a variety of COBRA coverages, soformer employees could choose a policy different from the onesoffered to current employees.Watch notice requirementsThe law requires you to notify the health plan administrator within30 days if one of these qualifying events occurs: an employee’stermination, death, reduced hours of employment, entitlement toMedicare or the company’s bankruptcy. (It is up to the employee tonotify you of changes in marital status, a dependent’s status or adisability that would trigger eligibility for COBRA coverage.) Theplan administrator then has 14 days to notify the employee andbeneficiaries of their election rights. The worker and his familyhave 60 days to make their decision.Caution: You must give proper written, separate notices tothe worker and all his beneficiaries regarding the details. If youhave an outside plan administrator, make sure that it adheres toCOBRA regulations, or else you could face a lawsuit for lack ofgiving proper notice.Case in point: An employee was forced to retire because ofemphysema. A company representative visited the worker andgave him general information about his termination and COBRArights. The representative, however, failed to send the employeea confirmation letter describing in detail his COBRA rights. Theemployer subsequently notified the employee that he had failedto elect continuing coverage, effectively terminating his COBRArights. The employee was later hospitalized but, due to the apparenttermination of his COBRA rights, had no insurance to pay forhis stay.The court ruled that the employer did not sufficiently in formthe employee about the 60-day notice period regarding con tinuingcoverage under COBRA. It also failed to provide the employeewith sufficient information about individual and family coverage,including premium amounts. The court awarded the employee$40,000 in insurance benefits plus $44,000 in attorney fees. Smith v.Rogers Galvanizing Co., 128 F.3d 1380 (10th Cir.)

7.20 Employer’s Practical Legal GuideOverlapping coverage issue resolvedYou cannot cancel a former employee’s medical coverage underCOBRA because he was already covered under his wife’s healthplan, the U.S. Supreme Court ruled in 1998. In the case a terminatedemployee who had cancer elected to continue his coverageunder COBRA. Six months later, his ex-employer told him he wasnot entitled to COBRA benefits because, on the date he electedCOBRA coverage, he was already covered by his wife’s group planat work. The ex-employer then forwarded all outstanding medicalbills to him, and he sued.The Supreme Court said you cannot deny COBRA coverageunder your health plan to an otherwise eligible beneficiarybecause he is covered under another plan at the time he electsCOBRA coverage. Geissel v. Moore Medical Corp., 524 U.S. 74 (1998)More COBRA auditsThe DOL announced it is adding investigators to ensure employercompliance across the board. Employers can expect more COBRAaudits in the future. So be prepared and review the wording on allCOBRA-related documents and notices.COBRA audits tend to focus on rule changes that took effect in2000. Under those rules, plan sponsors must:• Not deny coverage because a beneficiary is covered underanother group health plan when making a COBRA choice.• Apply COBRA to employees who don’t return to work aftertaking time under the Family and Medical Leave Act.• Count a part-time employee as a full-timer when qualifyingfor the small-employer exception.• Meet certain requirements to exclude flexible spendingaccounts from COBRA coverage.• Either treat underpayment of premiums as satisfying the planor notify the employee of the total amount owed and givehim up to 30 days to pay.• Review and revise all notices and documents—including

terminations/Layoffs 7.21summary plan descriptions—to ensure the wording complieswith the latest changes.For more details, contact the DOL’s Employee Benefits SecurityAdministration at (866) 444-EBSA to request a free copy of thebooklet Health Benefits Under COBRA or visit www.dol.gov/ebsa/pdf/cobraemployee.pdf.Reservist coverageAfter the events of Sept. 11, 2001, many employers awoke to thereality that employees who serve in the National Guard or otherreserve units were being called to active duty. When reservistsare away from work for extended periods, they are protected bythe Uniformed Services Employment and Reemployment RightsAct. Reservists on active duty can maintain health insurancecoverage by electing COBRA continuation. If they drop coverage,the law requires that coverage be reinstated when they return towork with no waiting period. (See details in Section 13.)Note: Employers are also obligated to count time spent onactive duty toward the calendar and hour requirements forcoverage under the FMLA. Reservists who return, for example,after a six-month active tour of duty should be treated as if theyhad worked those six months for the company: They would beeligible for FMLA leave if that time put them over the 12-month,1,250-hour requirement for eligibility.Health Insurance PortabilityThe Health Insurance Portability and Accountability Act (HIPAA)of 1996 made changes to three areas of the continuing-coveragerules that apply to group health plans under COBRA:■ Beneficiaries may extend their COBRA coverage periodfrom 18 months to 29 months if they become disabled withinthe first 60 days of COBRA continuation coverage. The 29-monthperiod also applies to a disabled beneficiary’s nondisabled dependents.Under the old law, a beneficiary had to be deemed disabled(under the Social Security Act) at the time of the qualifying eventin order to receive 29 months of COBRA continuation coverage.

7.22 Employer’s Practical Legal Guide■ A child who is born to or placed for adoption with a terminatedemployee during the continuation coverage period is alsotreated as a qualified beneficiary.■ HIPAA limits the circumstances in which health planscan apply exclusions for pre-existing conditions, thus allowingemployers to cut off COBRA continuation coverage sooner.The intent of the HIPAA is to enhance employees’ abilityto continue health coverage when they leave their jobs and toprohibit plans from discriminating against employees and theirdependents based on their health status. Individuals may notbe excluded from coverage or charged more for benefits under ahealth plan just because they have a particular illness.The period of any pre-existing condition exclusion that wouldapply under your group plan is limited to 12 months (18 monthsfor late enrollees), but that period is reduced by the number ofdays of “creditable coverage” the worker acquired under his previoushealth plan. Thus, if a new employee joins your company,he is not subject to a new 12-month exclusion for a pre-existingcondition if he had 12 months of continuous coverage previously(without a break in coverage of 63 days or more).Limits on pre-existing conditionsA group health plan may impose a pre-existing condition exclusiononly if it relates to a condition for which medical advice, diagnosis,care or treatment was recommended or received during thesix months prior to an individual’s enrollment date. Pre-existingconditions cannot be applied to pregnancy, regardless of whetherthe woman had previous coverage. Also, an exclusion cannot beapplied to a newborn, adopted child under age 18 or a child under18 placed for adoption as long as the child was covered under thehealth plan within 30 days of birth, adoption or placement foradoption, and provided the child did not incur a break in coverageof 63 days or more.The HIPAA also amended ERISA’s disclosure requirements forgroup health plans to improve their summary plan descriptionsand summaries of changes. Group health plans must:

terminations/Layoffs 7.23• Notify participants and beneficiaries of “material reductionsin covered services and benefits” within 60 days of adoptinga change.• Disclose to participants and beneficiaries information abouttheir plan, including name and address of issuer, to whatextent the plan’s benefits are guaranteed under a contract orpolicy, and the nature of the payment of claims.• Inform participants and beneficiaries as to what DOL officethey can contact for more information on ERISA and HIPAA.• Disclose that federal law generally prohibits plans and issuersfrom limiting hospital stays for childbirth to less than48 hours for normal deliveries and less than 96 hours forCaesareans.The HIPAA provisions apply to any group health plan havingtwo or more employee participants, as well as to all self-insuredplans. States may impose stricter rules on insurance issuers, socheck with your state insurance commissioner’s office.HIPAA’s privacy rulesIf your company sponsors an employee benefit plan, it likely hasto comply with new privacy standards under the HIPAA PrivacyRule, designed to protect the confidentiality of employees’ medi calinformation.Health plans with annual receipts (e.g., premiums and payments)exceeding $5 million had to be in compliance by April2003. Plans that fall below the $5 million threshold, so-called“small health plans,” had to comply by April 2004. HIPAA appliesto your company if your health plan has 50 or more participantsor uses a third-party administrator to run the plan.Your company could bump up against HIPAA’s privacy rulesany time it exchanges a person’s individually identifiable healthinformation, such as when an employee with a chronic illnesscontacts the HR department to ask about a claim.Considering that noncompliance can erupt into civil andcriminal penalties, not to mention invasion of privacy lawsuits, it’s

7.24 Employer’s Practical Legal Guideimportant that employers make sure their policies are in line withthese new requirements.Under the privacy rules, organizations that have personalinfor ma tion related to an individual’s health care (or payment forhealth care) can’t disclose it, except directly to the employee, to thegovernment for certain purposes (public health or abuse/fraudprevention) or if there’s a signed consent form to carry out treatment,payment or health care operations.The rules cover personally identifiable information, wherethe health care data can be linked to a person’s name, SocialSecurity number, employee number or other identifier. It’s legalto disclose summarized data that can’t be linked to any specificperson.Gone are the days when an employer could simply call itshealth plan or a provider to get that information freely. Employers,doctors and health plans must now make an effort to release aminimum amount of medical information.Meanwhile, state laws also play a role. Many states havedeveloped their own health-information protections. HIPAA’sstandards generally pre-empt state law unless the state rules arestricter.To comply with the privacy rules, you should:• Beef up administrative, technical and physical safeguardsfor health care data. Example: Put up “firewalls” betweenplan-related uses and employment-related uses.• Amend health plan documents to spell out the rules.• Train employees and name a privacy officer. The lawrequires employers to assign staff to develop and implementHIPAA policies, including designating a privacyofficer.• Police any business associates with whom your organizationshares protected health information (such as technologyvendors and plan administrators), and rewrite contracts toensure that third parties are in full compliance with HIPAA.Reason: Employers can be liable for violations by businessassociates if they disclose protected information.

terminations/Layoffs 7.25For answers on common questions surrounding the privacyrules, visit the government’s main HIPAA website at www.hhs.gov/ocr/privacy/index.html.Note: The Affordable Care Act health care reform lawmodifies several HIPAA provisions. For details, go to www.TheHRSpecialist.com/healthlaw.Unemployment InsuranceUnder the Federal Unemployment Tax Act (FUTA) and state laws,employers are obligated to pay payroll taxes to provide unemploymentcompensation to workers who have lost their jobs. The federaltax rate is set by law, while the state tax rate varies accordingto the state. By understanding how the system works, you may beable to cut your state tax rate through efficient claims control.The joint federal/state program on unemployment insurance(UI) originated in the Social Security Act of 1935. The system isfinanced almost exclusively by a payroll tax on employers. Notaxes are withheld from employees’ paychecks.Workers are eligible to receive unemployment benefits if theyhave become unemployed through no fault of their own and theyare physically and mentally able to work. While drawing unemployment,workers must make themselves available for work andmust actively seek a job. In most states 26 weeks is the maximumpayment period for an unemployed worker. Extended benefits,funded on a shared basis with the federal government, are availableduring periods of high unemployment.Federal tax set by lawUnder FUTA you must pay federal unemployment insurance taxesin the following circumstances:• You employ one or more individuals for some portion of aday during any 20 weeks in the current or preceding year oryou paid wages of $1,500 or more in any calendar quarter.• For household employees you are subject to FUTA tax only ifyou paid total cash wages of $1,000 or more (for all household

7.26 Employer’s Practical Legal Guideemployees) in any calendar quarter in the current or precedingyear.• For farm workers, you must pay FUTA tax if you paid cashwages of $20,000 or more during any calendar quarter or youemployed 10 or more farm workers for at least some part of aday during any 20 weeks in the current or preceding year.The FUTA tax rate is 6.2%, which applies to the first $7,000paid to each employee in wages during a calendar year. However,you may receive a credit of up to 5.4% of taxable wages againstyour FUTA tax rate if you pay your state un employment tax ona timely basis. Therefore, if you consistently pay your state taxon time, your net federal tax rate would be .8%. This would thencost you $56 per employee per year in federal tax (.008 x $7,000).How states determine your taxable wage baseEmployers pay UI tax based on wages paid to each worker. Eachstate sets a taxable wage base. For example, California taxeswages up to $7,000 per worker. Maryland’s base is $8,500; NewJersey’s base is $30,900. State legislatures periodically changethese figures.Taxable wages may include other types of remuneration. Forexample, tips and employer-paid off-premises meals and lodgingare taxable, while discounts on goods and other privilegesare not.Setting your tax rateFor new employers a new account rate is set based on the averageof the rates for all employers in the state. For example, Virginia’snew employer rate is currently 2.98%; Florida’s is 2.7%.An experience rate is set after you have paid employees for aspecified period: for example, two fiscal years in Maryland, 10quarters in Florida. The state may add a percentage to the rate toensure solvency of the UI fund. Frequent charges to your accountresult in a high UI tax rate in proportion to reported taxable wages.A low rate reflects fewer claims charged against your account.(Continued on page 7.28)

terminations/Layoffs 7.27Tips on Lowering Your Tax Rate• Use work-sharing programs. A state work-sharing programmay make it cheaper to keep employees on atreduced hours than to lay them off. For example, Floridaprorates unemployment benefits for employees whosehours and pay have been reduced to avoid total layoff.• Document unsatisfactory work performance. If youcontest an unemployment claim, you need proof of theemployee’s unsatisfactory work or misconduct.• Keep accurate, complete records. You may protest theawarding of benefits, your share of liability or your taxrate. You must have specific facts and documentation tosupport your case.• Verify each statement of benefits charged to youraccount. Promptly answer requests for information toavoid unnecessary benefit charges. Follow up to makesure that corrections are made and penalties are notassessed.• Appeal claims decisions promptly.• Don’t turn a voluntary termination into a constructivedischarge. If you do, the worker will then qualify forunemployment benefits. (Refer back to “ConstructiveDischarge” in this section.)• Expand slowly. When you expand into a new state, startwith a small, stable staff. Don’t add to the payroll untilyou’ve established a low claims rate. That will reduce thetax rate when you send in the rest of the staff.• File jointly. Your company and its affiliates or subsidiariesprobably have different employee turnover rates. If youcalculate your liability collectively, you might end upwith a net savings.(Continued on page 7.28)

7.28 Employer’s Practical Legal Guide(Continued from page 7.27)• Pay extra tax. Make voluntary contributions to yourreserve account. How this pays off: Generally, your company’sunemployment tax rate depends on the status ofyour reserve balance. That’s the amount of tax you payless unemployment claims. A voluntary contribution toboost your reserve balance could result in a lower taxrate—and the savings might exceed the amount of theextra contribution.• Segregate seasonal workers. Organize a separate corporationto employ seasonal workers. That way, your seasonalunemployment tax rate won’t be applied to yourregular staff.(Continued from page 7.26)For example, in New Jersey the experience rates range from0.30% to 5.4% on the first $29,700 of salary earned by each employee.Virginia’s minimum is 0.58% and its maximum is 6.68%, on awage base of $8,000.Charges against your accountGenerally, the state will first determine: (1) the employee’s wagesduring a base period, (2) the employee’s reasons for leaving thecompany and (3) the percentage of employer liability:1. Determining the base period: State laws vary. For example,Maryland defines base period as the first four of the last fivecompleted calendar quarters prior to the filing of the claim.California omits the most recent four-to-six-month periodbefore a claim is filed and looks back 16 to 18 months to determinethe quarter in which the highest wages were paid.2. Reasons for leaving employment: Your account will not becharged if your employee:

terminations/Layoffs 7.29• Quit voluntarily without good cause.• Quit voluntarily for a better job.• Quit voluntarily to attend approved training.• Was discharged for gross misconduct.Workers may be disqualified, permanently or temporarily, ifthey refuse suitable work or are unemployed because of a labordispute. State law may set other disqualifying reasons.3. Percentage of liability: You are 100% liable if you are theworker’s only employer. Charges are prorated if the workerhad more than one employer.Reporting requirementsEmployers are required to deposit FUTA taxes quarterly and filereports of wages paid. Data for each employee must include name,Social Security number, gross wages paid during the quarter and thenumber of base weeks earned by the employee during the quarter.If your FUTA tax liability for any calendar quarter exceeds$100, you must deposit the tax by electronic funds transfer or inan authorized financial institution using Form 8109 (Federal TaxDeposit Coupon). You report federal unemployment tax on Form940 (Employer’s Annual Federal Unemployment Tax Return) or, ifyou qualify, on Form 940-EZ.Note: You can be assessed penalties for late filing or failure tofile. Filing is compulsory even if you had no employees during aquarter.For household employees, you are not required to depositFUTA taxes unless you report their wages on Form 941 or 943. Ifyou don’t use these forms, you report the tax for these employeeson Schedule H (Form 1040), Household Employment Taxes.Exit InterviewsMost companies these days conduct exit interviews with departingemployees to determine why they’ve resigned. Exit interviews canbe a great HR tool, but you have to know what questions to askand, at the same time, what questions to avoid for legal reasons.

7.30 Employer’s Practical Legal GuideDocumentation: Do’s and Don’tsDocument what you hear in exit interviews—without goingoverboard. Follow these guidelines, provided by Paul Salvatore, apartner in the New York office of Proskauer Rose LLP:• Use quotation marks in your notes to signify the employee’sexact words.• Ask the employee to read and sign your notes at the end ofthe interview if you have reason to believe you may not beable to reach this person in the future.• Imagine you’re writing your notes for a jury to read. Beclear, orderly and precise.• Don’t tape-record the exit interview. That would make theemployee nervous.• Don’t try to document everything to fit the questions on anexit interview form.• Don’t fail to document details, such as the day and time anincident occurred.At its best, an exit interview provides a rare glimpse of theinner workings of your company from a departing employee’s perspective.Your company can benefit from the feedback in severalways. Exit interviews may:• Uncover reasons for high turnover or poor morale.• Generate ideas to improve business operations or personnelmanagement.• Expose poor working conditions or help you spot potentiallegal problems at an early stage.Consider how a routine exit interview for a departing support-levelemployee at Bankers Trust Co. in New York exposedmassive fraud in the firm’s securities-processing business. As aresult of comments during the interview, investigators found that

terminations/Layoffs 7.31managers were misappropriating unclaimed money that shouldhave gone to security holders. The funds were used to cover thedepartment’s general expenses, which in turn falsely inflatedprofits. The evidence led Bankers Trust to plead guilty and agreeto a $63 million fine.Exit interviews are usually done with employees who arevoluntarily leaving the company. Some large organizations alsoarrange exit interviews when employees transfer to other divisionsor relocate within the company. But what about fired employees?Conducting exit interviews with fired employees introduces avariety of risks. Someone who’s been discharged would have littleincentive to make dispassionate observations about morale or discussmanagement issues in an unbiased way.Also, fired employees may disagree with the reason theywere terminated. If an argument breaks out, it could lead to legalturmoil later. The worst mistake the interviewer could make is torehash past decisions: namely, restating in his own improvisedlanguage why the company decided to terminate the employee. Ifhe strayed from the wording used in firing the employee, he mightexpose himself and the firm to legal liability.Thus, many employment lawyers advise managers to skip exitinterviews for discharged employees. Instead, they suggest usingthe termination meeting itself and possibly a follow-up discussionwith an HR representative to allow the individual to vent. Thatway, you can learn the employee’s complaints about the job andaddress them forthrightly before you get a call from her lawyer orthe EEOC.Above all, be consistent in how you handle departing workers.Don’t invite some terminated employees to exit interviews whilebypassing others. A standard approach is to set a blanket policythat all employees who leave the company voluntarily will have anexit interview, but terminated employees will not.Prepare for the worstOne reason managers dread conducting exit interviews is that theymight hear something they don’t want to hear. An employee mightcomplain about inappropriate or even illegal activity, which couldtrigger the need for an investigation. You’re better off learning

7.32 Employer’s Practical Legal Guideabout such matters in an exit interview, rather than getting caughtoff guard by a lawsuit later.If an employee complains about a boss, determine if it’s meredislike by a disgruntled worker or if it’s serious improper behavioron the part of the supervisor (such as discrimination, harassmentor signs of a propensity for violence). Always document eitherway. Federal law requires an employer to conduct an investigationif it learns of improper behavior.Say an employee tells you in an exit interview that she hasbeen sexually harassed on the job. Even though she insists she’squitting for a better job, not due to the harassment, you cannotignore her allegation. After all, the alleged harasser may be causingharm to others. Even if you ultimately determine there wasno harassment, the departing employee may still sue the com panyin the future. Her remarks in the exit interview may be admis siblein court. By investigating her complaint promptly and thoroughly,you strengthen your legal defense.Moreover, an employee’s critical comments or observationsabout a boss or co-worker may serve as evidence admissible incourt if the boss or co-worker was ultimately fired and then suedyou. That’s why you must investigate rather than ignore potentialproblems you hear about in an exit interview.As a rule, treat any mention of harassment or discriminationby a departing employee in an exit interview as you would anysimilar complaint by another employee. Apply uniform standards,and conduct the same type of investigation. Don’t assumeemployees will always spell out the illegal behavior they’ve witnessed.They may drop hints about a nasty conflict or gloss overan otherwise serious issue that they deem inconsequential. Don’taccept these indirect comments at face value or tuck them away. Digfor more information in a tactful way.Ease fear of retaliationIf an employee seems reluctant to open up in an exit interview,reassure her that you won’t retaliate for her comments. Stress thatretaliation is against the law. But don’t open the exit interviewwith some overly dramatic statement, such as “We promise not toretaliate for anything that’s said in here today.” That would causethe employee to become suspicious.

terminations/Layoffs 7.33If the employee fears reprisal (such as a bad reference), cite yourcompany’s policy for giving recommendations. For example, say,“Our policy is only to confirm dates and facts of employment.”“As a rule, it’s better to sound wishy-washy in an exit interviewthan to imply or make a promise,” says Kelly J. Davidson, anattorney with Ober, Kaler, Grimes & Shriver in Baltimore. “Avoidsaying, ‘Oh, we’ll give you a great recommendation in any case, sodon’t worry.’ That kind of statement can come back to haunt you.”What should you ask?The questions you ask in an exit interview should flow fromyour goals. In most cases, employers want to reduce turnover,promote goodwill among departing employees and identifytheir concerns.Every exit interview should cover the basics, such as asking theemployee’s opinion on his compensation and company benefits,training and advancement opportunities, quality of supervisionand upper management, as well as the appropriateness of theoverriding corporate culture.The most obvious question—“Why are you leaving?”—canpresent the most problems. Many employees resort to safe codewords rather than tell you the real reason. Probe for the truthby trying a different approach. Say, “It’s been said that peopledon’t quit companies—they quit bosses. What do you think?”Listen and observe the employee’s response. You may find that bybroaching this delicate issue in a general sense, you can extractmore revealing information than by asking point-blank, “Are youquitting because of your boss?”Also, beware of asking inappropriate questions in an exitinterview. In general, steer clear of the kinds of personal questionsthat are illegal to ask in a job interview, such as “Are you marriednow?” or “Are you sending your kids to religious school?” Alsoavoid taunting questions, such as “Do you want a great recommendation?”or “Why were you so difficult to work with at times?”Questions such as these could create problems later. For example,if a departing employee later reapplied for a job and you decidednot to hire her, she could claim the personal things you had askedin her exit interview had made you biased.

7.34 Employer’s Practical Legal GuideBottom line: Don’t annoy people in their exit interview. Don’tpry into their affairs or ask questions that will put them on thedefensive.Finally, realize that when it comes to exit interviews, confidentialitydoes not flow both ways. While you can, and should, tell theemployee in the exit interview that you won’t share what you hearwith other employees, the individual is under no obligation to dothe same. Assume the employee will share everything you say inan exit interview with others.Using exit interview formsYou may want to give departing employees an exit interview formto fill out a few days before your final meeting. That will helpensure all the bases get covered, and it gives employees time toprovide more detailed, thoughtful input.But don’t force employees to complete the form, and don’trequire that they sign it. If they come to the exit interview withoutthe form, ask them why. Their answer may be a tip-off to certainconcerns you may need to focus on in the exit interview.Some lawyers say there’s no need to include a statement ofconfidentiality on the exit interview form. They contend thatemployees will simply refuse to complete the form if they’re worriedabout revealing too much, in which case you can address suchissues in the exit interview. Other attorneys believe it’s prudent toreinforce your intent to maintain confidentiality when ever youcan, including on any forms you give to employees.

Alcohol/DrugTestingSection 8Employers have the right to demand a drug-freeworkplace, but employees also have reasonablerights to privacy. That’s why drug testing and substanceabuse prevention programs carry legal risks ifthey’re not managed properly.One out of every 12 U.S. workers is using illegal drugs, accordingto a recent study by the Substance Abuse and Mental HealthServices Administration (SAMHSA). Inevitably, some of thoseworkers will come to work drunk or high and pose a threat to theworkplace.Even more shocking may be the rates of drug use by profession.About 4% of teachers and social workers admitted to illegaldrug use; among construction workers, more than 15%. The highestrate of illegal drug use occurs in the restaurant sector, with17.4% of full-time employees using drugs.“Employers who think alcohol and drug abuse will never bea problem in their workplace need to consider that more thanthree-quarters of adults who have serious drug and/or alcoholproblems are employed,” says Charles Curie, former SAMHSAadministrator. “Encouraging employees to find help when theyneed it can result in fewer accidents and fewer workers absenton Monday morning. It may even save an employee’s life, familyor job. Creating a drug-free workplace program or enhancing an8.1

8.2 Employer’s Practical Legal Guideexisting program can lead to a healthier, more productive workforceand be an important part of solving one of our nation’smost persistent problems.”Although workplace drug testing has grown dramaticallyover the last decade, a recent study by the American Man age mentAssociation indicates that fewer employers may be performingworkplace drug tests than in the past. If so, they’re leavingthemselves open to charges of negligent hiring should one of theirimpaired employees injure someone.Tread CautiouslyDrug testing and substance abuse prevention programs can posesubstantial legal liability if they are not managed and administeredproperly. Employers can safely administer drug testing inthree situations: before hire but after a conditional job offer; duringa fitness-for-duty test; and after a preventable accident.Here are some key legal issues you’ll need to address in yourtesting policy:■ Disability discrimination: Drug tests for illegal substancesaren’t considered medical exams under the ADA, so employerscan conduct them at any time during the pre-employment stage.But because those tests can reveal the presence of legal drugs in anapplicant’s system, this could tip you off to a person’s disability. Infact, to avoid liability, wait to test until you make a conditional joboffer. Because applicants who test positive for illegal drugs aren’tcovered by the ADA, you can withdraw a job offer based on thoseresults. (For more details, see page 8.4.)■ Fair warning: Always inform applicants and employees ofthe specifics of your anti-drug policies, and obtain a signed, datedconsent form before you administer any drug tests. Notify applicantson the application form that you will drug-test. That willturn away many drug users.■ Clear policy: A well-written substance abuse policy will:• Prohibit the use, possession or distribution of drugs or alcoholon the job.• Explain how you’ll deal with employees who violate thepolicy, test positive or refuse to take a test.

alcohol/Drug Testing 8.3Cut Insurance CostsMore states are adopting drug-free workplace laws that cantranslate into lower insurance rates for employers. Georgia,Ohio, Virginia, Florida, Tennessee, Washington and other statesallow reductions in workers’ comp premiums for employers thatparticipate in drug-testing programs.For more information on setting up your own drug-free workplaceprogram, contact the Center for Substance Abuse Preventionat (800) WORKPLACE or see “Making Your Workplace Drug-Free” at www.samhsa.gov.• State your policy on drug testing, including when you willtest and your business reasons. Include the right to retestingand verification of the results.Consider these questions when weighing the need for a policy:• Do workers handle hazardous materials or run complexequipment?• How many company vehicles do you have on the road?• Who would be harmed—and how seriously—if an employeemade a mistake on the job or breached security because ofsubstance abuse?• Does your insurance cover incidents related to substanceabuse?Also, think about when you’ll do drug testing: The most commontime for tests is during pre-employment screening, after apreventable accident and as part of an evaluation of employeeswith job performance problems.Courts look more favorably on random drug testing in jobswhere there is a safety or security concern. Absent a state law thatrestricts employee drug testing, employers often argue successfullythat their right to terminate employees at will applies whena worker refuses a drug test.

8.4 Employer’s Practical Legal GuideState laws: If your organization decides to implement adrug testing program, first consult state law where the coveredemployees work. More than half the states have laws regulatingdrug testing, creating a legal quagmire. In nine states, for example,it’s illegal for an employer to make a job applicant or employeepay for a drug test. In 14 jurisdictions, testing is permitted onlyin safety-sensitive jobs or is forbidden altogether. In seven states,employers may be barred from imposing discipline after anemployee’s first positive test. (A handful of cities and counties aswell have their own drug testing ordinances.)The DOL offers a state-by-state breakdown in the Laws andRegulations section of its website: www.dol.gov.EEOC issuesThe ADA includes alcoholism on its list of covered disabilitiesas well as former illegal drug use and addiction. The EEOC hastaken the position that pre-offer alcohol screening violates the ADAbecause it would reveal a covered disability. Also, you cannot askabout the use of prescription drugs because the answer may reveala medical problem that requires the use of prescription (and thereforelegal) controlled substances. You can, however, ask whether thecandidate is currently taking illegal drugs.It’s unclear whether employers may use past drug use as alegitimate reason for refusing to rehire a former employee. In2003, the U.S. Supreme Court ruled that companies may havepolicies against rehiring workers who broke workplace rules;however, if those policies result in disparate treatment of disabledworkers (i.e., recovering drug addicts), they’re illegal. Raytheon v.Hernandez, 540 U.S. 544Under the ADA, an employer’s ability to make disabilityrelatedinquiries or require medical examinations is analyzed inthree stages: pre-offer, post-offer and employment. At the firststage (prior to an offer of employment) the ADA prohibits alldisability-related inquiries and medical exams, even if they arerelated to the job.The EEOC specifically excludes testing for illegal drugs fromthe definition of medical examination, so that presumably it

alcohol/Drug Testing 8.5would be legal to screen for illegal drug use. The problem, however,is that some drugs that are illegal without a prescription(including many opiate derivatives such as codeine and drugsused to treat attention deficit disorder and narcolepsy) are availablewith a prescription to treat medical conditions that are disabilities.If your drug screening picks up these, you have revealeda potential disability.The safest course of action is to withhold drug tests for illegalsubstances until after you make a conditional employment offer.Another reason for doing so is that drug screening is expen sive;testing every applicant to whom you might make an offer probablyisn’t cost-effective. If you do conduct pre-offer drug screens,try to limit the screening to drugs with no medical use, such ascocaine, heroin and marijuana.Protect Employees’ PrivacyBe sure your drug testing procedure passes legal muster. Statesoften specify the labs and testing procedures you can use and themanner in which you must keep test records. If yours doesn’t,use a lab certified by the U.S. Department of Health and HumanServices or accredited by the College of American Pathologists.You must make every effort to protect workers’ privacy and dignity.You must also confirm positive test results by means of asecond test before using the results as the basis for any employmentor disciplinary decision. In addition, you may want to allowemployees to retest the same sample at their own expense if theydispute the results.Finally, supervisors and managers should never discuss theresults of a drug screen with anyone other than those who havea need to know. If an employee is terminated because of a positivetest or refusal to submit to testing, others should merely beinformed that the employee violated company rules.➤ Observation: You cannot force applicants or employees tosubmit to drug tests, but you can refuse to hire the former anddiscipline or fire the latter if they refuse to be tested.Drug testing should be only a small part of your company’scomprehensive substance abuse policy. For a policy to be effective,it must have management’s commitment. You should also

8.6 Employer’s Practical Legal Guideform a drug education program and provide names of counselorswhom employees may consult in strict confidence. Also guaranteeto workers that tests will be administered in an impartialmanner and that your policy contains adequate safeguardsagainst abuse.Caution: The Drug-Free Workplace Act of 1988 requires allorganizations receiving procurement contract awards of $100,000or more and all recipients of federal grants to provide a drug-freeenvironment for their employees. (The law does not extend to subcontractorsor subgrantees.)Accommodating Legal Pot?Eighteen states and the District of Columbia have legalized theuse of medical marijuana: Alaska, Arizona, California, Colorado,Connecticut, Delaware, Hawaii, Maine, Massachusetts, Michigan,Mon tana, Nevada, New Jersey, New Mexico, Oregon, RhodeIsland, Vermont and Wash ington.Whether employers in these states must accommodate legalmedical marijuana use depends on how courts interpret statelaw. For example, the California State Supreme Court ruled thatemployees do not break the law if they use marijuana for medicalreasons; state law does not require employers to accommodatethat use.The U.S. Supreme Court ruled in Gonzales v. Raich, 125 S.Ct. 2195 (2005) that state medical marijuana laws don’t protectindividuals who wish to grow marijuana for personal use. Thatactivity still violates the Controlled Substances Act. The decisionstopped short of invalidating any state laws. So residents ofthe 18 states may legally use marijuana in accordance with theirstate’s law.The Supreme Court of Oregon was the first state court to considerwhether employers must accommodate legal marijuana usein the workplace.The case involved a millwright whose doctor prescribed marijuanafor muscle spasms that prevented him from sleeping wellat night. His employer’s drug policy prohibited employees fromreporting to work with a controlled substance in their systems.

alcohol/Drug Testing 8.7The millwright tested positive and was fired. He sued underOregon’s disability discrimination law. His lawyers arguedemployers must accommodate use of medical marijuana in theworkplace.The Oregon Supreme Court dismissed the case without rulingon the question. Concluding that his muscle spasms didn’tamount to a disability, it said the disability law didn’t protect themillwright. Thus, whether accommodations are required is stillan open question. Washburn v. Columbia Forest Products, No. SCS52254 (Oregon Supreme Court 2006)➤ Observation: The ADA doesn’t require employers to accommodatecurrent illegal drug use, and the Supreme Court decisionwould indicate that medical marijuana is still illegal under federallaw. However, employers and their legal counsel should alsolook to their own state disability laws to determine their courseof action.New laws legalizing marijuana for recreational use: Votersin Colorado and Washington state recently approved legalizationof marijuana for recreational use. Alaska, Oregon, California andas many as five more states are expected to legalize personal useof marijuana within two years. But take note: Employers—even inthose states—can still set strict drug-use policies for their employeesand punish employees who fail drug tests. In fact, several largeemployers in Washington—including Boeing and Costco—havesaid they’ll continue to prohibit marijuana usage regardless oftheir state laws.The Colorado law explicitly says, “Nothing in this (law) isintended to require an employer to permit or to accommodate(marijuana’s) use … or to affect the ability of employers to havepolicies restricting the use of marijuana by employees.”

Gender/AgeDiscriminationSection 9The question of discrimination is one of the mostdifficult issues for employers because it affectsevery step of the employment relationship. As notedin Section 1, Title VII of the Civil Rights Act of 1964prohibits discrimination against workers on the basisof race, color, religion, sex or national origin. An arrayof federal and state laws further refine the definition ofdiscrimination.In this day and age, few companies engage in overtly discriminatorypolicies. However, with the myriad laws on the books andnew initiatives being debated seemingly every day, it’s easy to seehow an employer could unwittingly violate the laws.There are steps you can take to minimize the chances of yourorganization being accused of discrimination:• Review the criteria for hiring, promotion and firing throughoutyour company. You must be able to demonstrate that anytest or criterion is job related, has a business necessity anddoes not have a disparate impact.• Be consistent, fair and clear in your policies and procedures.9.1

9.2 Employer’s Practical Legal Guide• Make sure your managers are trained to enforce antidiscriminationlaws to protect you from hostile-environmentand retaliation lawsuits.Caution: It’s more important than ever to independently checksupervisors’ disciplinary recommendations to ensure they haveno ulterior motives, in light of a U.S. Supreme Court ruling in 2011:The court said an employer can be found liable for the discriminatoryintent of supervisors who influence—but don’t ultimatelymake—an adverse employment decision. The justices concludedthat a member of the military reserves had been fired from hisjob because of his bosses’ anti-military bias, even though the HRperson who actually terminated him didn’t know that the supervisorswere discriminating against him. Staub v. Proctor Hospital, No.09-400. The only way to avoid liability in such cases, the court said,is if an employer (1) conducts an independent investigation and(2) that investigation concludes that the decision was entirely justifiedregardless of the supervisor’s input.In 2000, the Supreme Court ruled unanimously that workersdon’t need direct evidence that their employer intended to discriminateagainst them. Workers have to show only that theysuffered adverse treatment (like firing or demotion) and the company’sexplanation for it was false. Then a jury would be allowedto decide whether the company’s real motive was discriminatory.(For more details see page 9.13.)In 2006, the Supreme Court decided a landmark retaliationlawsuit that created a broad national standard for Title VII retaliationclaims.The new legal standard says that, to successfully bring retaliationclaims to court, employees must prove two elements:1. They engaged in a protected activity (i.e., filed an EEOCcharge, testified in an investigation, reported discriminationto the company, etc.).2. Their employer subjected them to an “adverse action”because of that protected activity.The second element is problematic in that the court defined“ad verse action” quite broadly. To be retaliation, an employer’s

gender/Age Discrimination 9.3alleged action must be “materially adverse” to the point that itwould dissuade an individual from making a discriminationcharge.The question no longer is whether an employee was fired,demoted or denied a promotion because she charged discrimination.Instead, the question is whether the action would intimidatea reasonable employee. For example, while a schedule changemight not bother some employees, it might create a big problemfor a mother with young children.In the Supreme Court case, Sheila White worked as a forkliftoperator before she filed sexual harassment charges. Soon afterward,the company transferred her to a more physically demandingjob and suspended her without pay for a short time.Although she was reinstated with full pay just 37 days later,the Supreme Court still concluded the employer had retaliatedagainst her. It pointed to the toll that time without pay can take.Also, the court noted that requiring an employee to spend moretime on “the arduous duties and less time on those that are easierand more agreeable” would be a good way to “discourage anemployee … from bringing discrimination charges.” BurlingtonNorthern & Santa Fe Railway Co. v. White, No. 05-259 (2006)“Third-party” retaliation: In 2011, the U.S. Supreme Courtwidened the circle of people who can bring retaliation lawsuitsunder Title VII. The court said it was illegal for a company toretaliate against an employee who had filed a discrimination complaintby firing her fiancé, who worked at the same company. Itsaid Title VII was clearly intended to protect everyone who mightbe harmed by retaliation, not just those who file discriminationcomplaints. Thompson v. North American Stainless, No. 09-291The Thompson case has important implications for allemployers, especially now that retaliation claims have surpassedrace claims to become the No. 1 job discrimination complaintwith the EEOC.Oral complaints protected from retaliation: In 2011, theSupreme Court ruled that an employee’s Fair Labor Standards Actcomplaints don’t have to be written to be protected from retaliationby their employers. It said an employee’s oral complaintsabout his employer’s time clocks were just as valid as a writtencomplaint. Kasten v. Saint-Gobain Performance Plastics, No. 09-834

9.4 Employer’s Practical Legal GuideIt’s now harder to sue for bias, retaliationA pair of U.S. Supreme Court rulings handed down in 2013 willmake it more difficult for employees to file lawsuits claiming jobdiscrimination or retaliation:■ New definition of “supervisor” in discrimination cases:The Supreme Court ruled that only someone with the power totake “tangible employment action” can be considered a “supervisor”in Title VII discrimination cases.That’s an important distinction. By law, employers are typicallypresumed liable for discrimination caused by a supervisor.However, when it comes to discrimination between co-workerswho have little power over one another, employers are liable onlyif management does nothing in response to bias complaints.This ruling clarified exactly who is a “supervisor” in suchcases. It said a supervisor must have the power to take a “tangibleemployment action” such as “to hire, fire, demote, promote, transfer,or discipline.” Now, anyone without that authority will beconsidered only a co-worker in Title VII lawsuits. Previously, mostcourts (and the EEOC) took the position that a supervisor wassomeone who was simply in a position to direct an employee’swork. Vance v. Ball State University, No. 11-556■ Court sets higher bar for retaliation lawsuits: The SupremeCourt said employees can win retaliation lawsuits only if they canprove their employer retaliated against them solely because of theemployee’s protected activity. This decision could lead to fewerretaliation lawsuits against employers.The questions before the Court:• Must an employee prove his protected status or activity wasthe only reason that he suffered retaliation? (That’s the socalled“but-for” standard, as in “But for the protected status oractivity, would the employer have retaliated?”)• Or, can protected status or activity be just one of many motivesfor the retaliation? (The “mixed-motive” argument.)The court decided that the first, more restrictive definitionshould be the standard. University of Texas Southwestern MedicalCenter v. Nassar, No. 12-484

gender/Age Discrimination 9.5Gender IssuesYour supervisors probably understand that they can’t pay a malemore than a female to perform the same job or dole out promotionsonly to males. What they may not appreciate are the more subtleforms that gender discrimination may take. They may not makean effort to scrutinize their decisions to uncover any entrenchedpatterns of discrimination and practices that discourage womenfrom applying for promotions or asking for raises.Even if you’re not looking for patterns, be aware that plaintiff’sattorneys are. Take one disgruntled female and one contingent-feeemployment lawyer, add some discovery, and you may face a classaction lawsuit. Every year, at least one major employer settles aclass action filed on behalf of its female employees.In a highly anticipated ruling in 2011, the U.S. Supreme Courtsaid a huge lawsuit on behalf of 1.5 million female Walmartemployees cannot proceed as a single class-action case. Expertssay the important ruling will make it more difficult for employeesto band together in giant class-action cases against employers.Walmart v. Dukes, No. 10-277The Walmart decision reversed a ruling by the 9th Circuit thatgave the green light to the class action by current and formerfemale employees who claimed Walmart consistently promotedmen over women and paid men more for similar work. Theissue in the case wasn’t whether the company discriminated, butwhether such a large group could link together in a class action.The Supreme Court said the plaintiffs’ claims didn’t have enoughin common to be banded together into a single case.Three major federal laws outline how you must treat femaleworkers: the Equal Pay Act, the Pregnancy Discrimination Act andthe Civil Rights Act. Together, they provide a great deal of protectionfor women in the workforce.While sexual harassment (see Section 11) is the gender issue thatmakes the most headlines, many employees, especially those withyoung families, are more concerned with balancing home andwork. Many employers have attempted to address work/life balanceissues through flexible scheduling, family leave, on-site daycare facilities and the like.

9.6 Employer’s Practical Legal GuidePersonnel Practices Audit:Complying With the Equal Pay ActAlthough the Equal Pay Act has been in effect for more than30 years, men and women performing the same job oftenstill receive different pay. In fact, women earn 81 cents, onaverage, for every dollar men earn for full-time, year-roundemployment, according to the Bureau of Labor Statistics.Do your company’s policies violate the Equal Pay Act?Answer the following questions:Don’tYes No Know1. Does your wage classification systemdifferentiate between “male” and“female” workers? ❏ ❏ ❏2. Do you use “head of household” or“head of family” or “principal wageearner” classifications to justify higherpay or different benefits? ❏ ❏ ❏3. Do you use a collective bargainingagreement to justify unequal rates? ❏ ❏ ❏4. Do you provide different benefitsbased on gender? ❏ ❏ ❏5. Does your pension or retirement plandifferentiate on the basis of gender inoptional retirement ages? ❏ ❏ ❏If you answered “Yes” to any of these questions, you may havea hard time defending an action brought against you under theEqual Pay Act.Unfortunately, making life easier for families may also leadto resentment among employees who are single, childless orhave already raised their families. This may lead to unconsciousdiscrimination, especially among managers who may believe

gender/Age Discrimination 9.7they’ve already paid their dues and risen in the ranks whilejuggling family/work schedules without help from their employersor entitlement programs such as the Family and Medical LeaveAct. The result may be less overt discrimination.Equal Pay ActThe Equal Pay Act of 1963 prohibits employers from paying differentwages on the basis of gender for “equal work on jobs the performanceof which requires equal skill, effort, and respon sibilityand which are performed under similar working conditions. …”Period. Female employees must also receive the same level of benefitsas their male colleagues.The EEOC administers the law. The agency can conduct auditseven if it hasn’t received a complaint and can initiate suits onbehalf of those whose rights have allegedly been violated.Some employers wrongly believe that they’re not vulnerableto an EPA lawsuit if the two jobs in question aren’t identical. Butfemale employees don’t need to meet such a high standard tobring their equal pay claim to court. The EEOC says females needonly prove that they’re paid less than men who work in “substantiallyequal” jobs.When deciding whether jobs are substantially equal, titlesdon’t matter. Duties and responsibilities do. If members of onegender hold most of the high-paying positions, alarm bells shouldsound.Pregnancy Discrimination ActDiscriminating against a woman because she’s pregnant is a mistakeemployers can’t afford to make. In 2013, the EEOC received3,541 pregnancy discrimination complaints, resulting in damagesof $17 million. That figure doesn’t even include the cases thatmade it to court.The Pregnancy Discrimination Act (PDA) of 1978 prohibits discriminationon the basis of “pregnancy, childbirth and related medicalconditions.” A woman cannot be denied a job or a promotionmerely because she is pregnant or has had an abortion. She cannot

9.8 Employer’s Practical Legal Guidebe fired because of her condition or forced to go on leave as longas she is physically capable of performing her job.In short, the law requires that pregnant employees be treatedthe same as other employees on the basis of their ability orinability to work. That means you must provide the same accommodationsfor an expectant worker that you do for any employeesunable to perform their regular duties. For example, if youprovide other work for an employee who can’t lift heavy boxesbecause of a bad back, you must make similar arrangements fora pregnant worker.Employers that use light-duty programs to cut workers’compensation costs often make one big legal mistake: They haphazardlyapply their policies, allowing some employees to takelight-duty jobs, but not others. That inconsistency is the fastestway to trigger discrimination lawsuits from employees who needlight-duty positions temporarily for other reasons, such as somepregnant women.In addition, the PDA requires you to provide sick leave anddisability benefits on the same basis or conditions that apply toother employees who are granted leave for temporary disability.Women who take maternity leave must be reinstated under thesame conditions as employees returning from disability leave. (SeeSection 13 for details on the FMLA.)At the same time, you are allowed to apply the same requirementsthat you impose on other employees. Thus, if you usuallyrequire employees to obtain a doctor’s note before allowing themto take sick leave and collect benefits, you can impose the samerule on pregnant employees.Any employer that is subject to Title VII (having 15 or moreemployees) must comply with the Pregnancy Discrimination Act.Other provisions of the PDA are:• You can’t exclude single women from maternity benefits.• You must provide the same coverage for pregnancy-relatedconditions as you do for illnesses and disabilities. The FMLAprovides eligible parents with up to 12 weeks of unpaidleave for the birth of a child. Should a new mother still beunable to return to work after exhausting her FMLA leave,

gender/Age Discrimination 9.9her condition should be evaluated under the ADA to determinewhether additional time off is a reasonable accommodationgiven her condition. Some states provide longer than12 weeks for parental leave. Check the laws in your state.• You can require a pregnant employee to use her vacation benefitsbefore she can collect sick leave or disability pay, as longas you have the same requirement for employees absent forother types of disabilities or illnesses.• Clauses excluding insurance coverage of a pre-existing condition(that is, a condition that existed when the insuredworker’s coverage took effect) can be extended to pregnancy,as long as the same restriction is applied to other conditions.• An employee with a single-coverage policy cannot be forcedto purchase a family policy in order to be covered when shebecomes pregnant. However, she should be allowed to switchto the family plan after the birth so that her child will be covered.➤ Observation: Charges of discrimination on the basis ofpregnancy or related conditions are difficult to fight in court. Youwill lose unless you can clearly prove that the reasons for nothiring or for discharging the plaintiff were unrelated to the pregnancy.Consider this case:Motherhood Maternity, a Philadelphia-based retailer, paid$375,000 to settle a pregnancy discrimination and retaliationlaw suit brought by the EEOC. The lawsuit charged that the retailerrefused to hire qualified female applicants because they werepregnant.The lawsuit also charged Motherhood with illegally discipliningand firing an assistant manager because management believedshe was pregnant and in retaliation for her discrimination complaints.EEOC v. Mothers Work Inc., dba Motherhood Maternity.With respect to the Pregnancy Discrimination Act, courtsemploy a three-part analysis (similar to that employed under theADEA). First, the plaintiff is required to establish a prima faciecase by showing that she belonged to a protected class; was qualifiedfor the position from which she was terminated; and personsoutside the protected class were retained.

9.10 Employer’s Practical Legal GuideOnce a plaintiff establishes a prima facie case, the burdenshifts to the employer to articulate a legitimate, nondiscrimi natoryreason for her termination. Finally, if the defendant provides sucha reason, then the plaintiff must show that the reason was a pretextfor a discriminatory motive.Singling out pregnant employees for any reason can lead toa lawsuit. If supervisors make little jokes about pregnancy andchildbirth, rein them in. In one recent case, when a top performerreceived an award at a luncheon, she was taken aback when herboss casually said, “You’re not gonna get pregnant now, are you?”As luck would have it, she did become pregnant the followingmonth. Then her boss began calling her “Prego” and soon wascriticizing her work. She complained to HR, but the com panydidn’t investigate. She sued, and the court concluded calling her“Prego” and making comments about pregnancy amounted to ahostile environment. Zisumbo v. McleodUSA Telecom, No. 04-4119(10th Cir.)Sex DiscriminationThe third major law regulating how employers may treat femaleworkers is Title VII of the Civil Rights Act, which outlaws discriminationbased on race, color, sex, national origin, religion anddisability. Enforced by the EEOC, it gives workers the right to suetheir employers in federal court. Sexual harassment is a form ofsex discrimination and is illegal under Title VII. (See Section 11for details.)Title VII requires that you treat male and female workersequally in all terms and conditions of employment. That meansnot only paying and promoting women on the same terms andconditions as men, but also meting out punishment equally. Thatwas the issue in this case decided by the U.S. Supreme Court:In Desert Palace v. Costa, 123 S. Ct. 2148 (2003), the court’s unanimousdecision made it much easier for all workers to prove allegationsthat their employers discriminated against them becauseof race, sex, national origin, color, religion or disability. The courtconcluded that direct evidence of discrimination isn’t necessary:Workers can rely on circumstantial evidence.

gender/Age Discrimination 9.11Catherina Costa, the plaintiff, had worked most of her life ina male-dominated environment. She operated forklifts and palletjacks in a warehouse owned and operated by Caesar’s Palace Hotel(formerly Desert Palace) in Las Vegas. In 1994 she was fired allegedlyfor fighting with a male co-worker.Costa was by many accounts a tough cookie. She swore withher male co-workers and often got into arguments. Over the years,she was written up and warned that her conduct was unacceptable.Costa apparently took offense when a male co-worker calledher a vulgar name. When she complained to management, it investigatedand concluded she had provoked the epithet. She receiveda three-day suspension for “engaging in verbal confrontation witha co-worker . . . that resulted in use of profane and vulgar languageby the other employee.”The final incident occurred when she argued with anothermale co-worker in an elevator. The fight left her with severalbruises, which she alleged occurred when the co-worker grabbedher and pushed her into the wall. When she complained, managementfired her and suspended the co-worker, claiming it couldn’tfigure out who had done what.Costa sued, claiming that it was sex discrimination to applythe rules more harshly against her.The jury hearing the case agreed and awarded Costa $364,377.On appeal, the company argued she needed direct evidence ofdiscrimination, not just circumstantial, such as that men werepunished less harshly. The Supreme Court disagreed and concludedthat circumstantial evidence is enough. Costa need only prove thatas a female, she was treated differently than her male co-workers.To protect yourself from sex discrimination claims, followthese guidelines:• Before punishing a female worker, consider how you’ve punishedother workers for the same offense. Treat males andfemales the same. (Don’t treat women with kid gloves, however.That could lead to a reverse discrimination lawsuit by a male.)• Perform a regular audit of all personnel actions and look forpatterns of discrimination. If you find a pattern, make managersaware of the problem and insist that they correct it.

9.12 Employer’s Practical Legal Guide• Consider making equal enforcement of the rules a measureof your managers’ performance. This will reinforce the policythat you’re serious about eliminating sex discrimination.• Review your hiring, promotion and recruiting practices.Make sure you don’t rely excessively on employee referrals orpromotions based on an informal old-boy network. Doing somay mean you are unintentionally excluding qualified applicantsand workers. If a female worker can show a statisticalpattern of fewer women being hired or promoted, she maybe able to make a case of sex discrimination. Intent becomesirrelevant. Use consistent, measurable and sex-blind criteria tohire, fire and promote.Reverse sex discriminationAlthough not as common as discrimination against women, therehave been cases of so-called reverse sex discrimination. For example,the EEOC settled a case against a company that maintainedsex-segregated job classifications. The employer, Jillian’s Entertainment,operates family restaurants in 25 states and has morethan 5,000 employees. A class action lawsuit was filed against itby male workers who alleged that only women were allowed tohold “server” positions, which paid on average more than positionsopen to the men. The company had to pay the men $350,000in damages and agreed to rewrite its job descriptions to removereferences to gender.Lilly Ledbetter Fair Pay ActIn January 2009, the Lilly Ledbetter Fair Pay Act took effect, makingit easier for women and others to sue for pay discriminationthat may date back decades. The law, retroactive to May 2007,liberalizes statutes of limitations on when employees can file suchlawsuits.Drafted in response to a 2007 U.S. Supreme Court decision thatsaid employees had at most 300 days to file pay discriminationcomplaints, the new law counts each unfairly low paycheck as afresh discriminatory act. It caps damages at $300,000 and retainscurrent limits on back pay to two years’ worth.

gender/Age Discrimination 9.13In Ledbetter v. Goodyear Tire & Rubber, 127 S.Ct. 2162, theSupreme Court affirmed a Title VII provision requiring employeesto file pay discrimination complaints within 180 days of thealleged discriminatory act (300 days in cases covered by a state orlocal anti-discrimination law).In the case, Lilly Ledbetter had argued that each low paycheckshe received over the years constituted a new discriminatoryact. But the court said the discriminatory act happened decadesearlier, when Goodyear first hired her at a pay rate below that ofmale employees. Since more than 180 days had passed since then,the court said Ledbetter could not sue her employer.The Ledbetter Fair Pay Act amends Title VII to make clear thateach allegedly unfair paycheck shall be considered a fresh incidentof discrimination.Age Discrimination in Employment ActUnder the Age Discrimination in Employment Act (ADEA),enacted in 1967, employers with 20 or more workers cannot engagein personnel practices that discriminate against individ uals age 40and older. (Many states have laws that apply to companies withfewer than 20 workers.)Although age discrimination suits have traditionally beenbrought when a worker over 40 loses his or her job, a recentSupreme Court decision allows older workers to challenge anypolicy that has a disparate impact on older workers. (See Smith v.City of Jackson, page 9.19.) In 2009, the Supreme Court ruled thatemployees may not bring “mixed-motive” age discriminationcases against employers. In effect, employees must prove that “butfor their age” the employer would not have taken the adverseaction. Gross v. FBL Financial Services, 129 S. Ct. 2343 (2009)Workers over 40 who are terminated have two ways to proveage discrimination under the ADEA: the direct method and theindirect. To be successful under the direct method, a plaintiff mustproduce direct evidence of discrimination. The evidence may consistof deposition testimony containing discriminatory statementsor other evidence revealing an anti-older-worker bias on the partof management.

9.14 Employer’s Practical Legal GuidePersonnel Practices Audit:Complying With the ADEATo review your personnel practices regarding older workers,answer the following questions:Don’tYes No Know1. Do you differentiate or classifyemployees in any way that wouldset them apart and deprive them ofemployment opportunities becauseof age? ❏ ❏ ❏2. In your ads, do you specify a preferencefor “young” applicants or “recent collegegraduates”? ❏ ❏ ❏3. Do you vary your levels of compensationor terms of employment on the basisof age? ❏ ❏ ❏4. Do you limit older workers’ participationin health and benefits plans? ❏ ❏ ❏5. Do you in any way limit or denyopportunities for training for employeeswithin the protected age range? ❏ ❏ ❏If you answered “Yes” to any of these questions, your companymay have violated provisions of the ADEA.Under the indirect method, first, a plaintiff must establish aprima facie case of discrimination by showing that he or she:1. Is within the protected class (age 40 or older).2. Was performing the job satisfactorily.3. Was discharged.4. Similarly situated, substantially younger employees weretreated more favorably.

gender/Age Discrimination 9.15Second, if the plaintiff is able to establish a prima facie case, theburden shifts to the employer to produce evidence of a legitimate,nondiscriminatory reason for the termination. Third, the plaintiffmust then show that the employer’s reason was a pretext for discrimination.However, at this third stage, the plaintiff is not required to produceany new or additional evidence, according to a U.S. SupremeCourt ruling in an ADEA case. The high court said if evidence inthe record contradicts the employer’s reason, the case can proceed toa jury, which could infer that the employer was attempting to coverup a discriminatory motive. Reeves v. Sanderson Plumbing Products,530 U.S. 133 (2000)Most age discrimination cases grow out of wrongful dischargeand mandatory retirement policies, but they can involveany adverse change in working conditions, including denial of apromotion or training.An employer may defend itself on several grounds:• The employee’s age represented a bona fide occupationalqualification (BFOQ)—that is, an older worker could not performthe job by virtue of his age. For example, age qualifiesas a BFOQ for pilots, who cannot receive FAA certification ifthey are older than age 65.• The employee was terminated for just cause, which may bebased on his misconduct, performance or incompetence.• The employee was discharged for business necessity. Inthis defense the employer must prove the existence of validbusiness reasons, unrelated to age, that required the terminationof the employee. These might include a major companyreorganization because of financial difficulties.An employer will often defend an ADEA case on the ground thatthe disputed employment decision was not based on age, but ratheron “reasonable factors other than age. . . .” [29 U.S.C. §623(f)(1)] Ingeneral, the higher cost of salary, overqualification and lesser yearsof remaining service are not considered “reasonable factors otherthan age” because they are so closely related to age. These reasons

9.16 Employer’s Practical Legal GuideYouth-Bias ClaimsUnder federal law, employees must be 40 or older to filean age-bias lawsuit. But several states—among them Maine,Michigan, New Jersey, New York and Oregon—don’t include aminimum age at which legal protection begins. They either setno minimum or define “age” as older than 18 and have allowedyouth-based discrimination claims.Case in point: Kimberly Zanni, a 31-year-old account executive,was fired and replaced by an older, less qualified woman.One supervisor had told Zanni that she sounded too young onthe phone and that her clients wanted an older account exec.Zanni sued for age discrimination under Michigan’s Civil RightsAct, and the state court of appeals let the case go to trial. Thecourt said the state law, which forbids bias on the basis of“chronological age,” also covers employees under 40. Zanni v.Medaphis Physician Services Corp., 240 Mich. App. 472, 612N.W. 2d 845In a similar case, the New Jersey Supreme Court ruled thatits state law protected a 25-year-old bank vice president whowas fired after the bank’s chairman discovered his age. BergenCommercial Bank v. Sisler, 157 N.J. 188, 723 A.2d 944➤Recommendation: You can avoid even the threat of legal troubleby basing any hiring, firing or promotion decisions on meritand experience—not on either end of the age spectrum.are frequently called “proxies” for age, and a defense based on oneof these grounds will probably not be successful.In 1986 an amendment was added to the ADEA banningmandatory retirement at any age, regardless of early retirementprovisions in an employee benefits plan or seniority system. Thisamendment does not preclude provisions permitting employees toelect early retirement at a specified age or at their option.

gender/Age Discrimination 9.17➤ Observation: The prohibition against mandatory retirementdoes not apply to employees who are at least 65 and who, for thetwo years immediately preceding retirement, are employed in ahigh policy-making or bona fide executive position and are entitledto receive employer-financed pensions or other retirementsbenefits of at least $44,000 annually.Note that in a 1996 case the U.S. Supreme Court held thatemployees alleging that their employer violated the ADEA donot have to show that they were replaced by someone under theage of 40. Rather, they simply have to show that they are 40 ormore years of age and substantially older than their replacement.The court stated that “the fact that a replacement is substantiallyyounger than the plaintiff is a far more reliable indicator of agediscrimination than is the fact that the plaintiff was replaced bysomeone outside of the protected class.” In this case the plaintiffwas a 56-year-old regional manager who was discharged after hisemployer reorganized its geographic sales territories. The man’sterritory was taken into another, and a 40-year-old was namedmanager of the new region. O’Connor v. Consolidated Coin CaterersCorp., 517 U.S. 308 (1996)Waivers/OWBPAIf you have to terminate a worker, it’s a smart move to ask him tosign an agreement waiving his right to sue for discrimination orwrongful discharge. But that’s not enough if the worker is over40 years old because he could also sue you for age discriminationunder the ADEA.To protect yourself, you must put an additional provision inyour waiver agreement that specifically deals with ADEA claims.What’s more, it won’t be legally binding unless you also give theworker some extra benefit in return—such as extra severance payor additional health care coverage.But you’re still not done yet. To be valid, ADEA waiveragreements must comply with all the requirements spelled outin a 1990 amendment to the ADEA, the Older Workers BenefitProtection Act (OWBPA). The amendment states that ADEA waiversare legal only when workers sign them in a “knowing andvoluntary” manner. A waiver applying to an individual workerwill meet OWBPA’s requirements as long as it:

9.18 Employer’s Practical Legal Guide• Is written so that the employee can clearly understand it andrefers specifically to age-discrimination rights and claims.• Does not ask the worker to waive rights or claims that mightcome up after the waiver is executed.• Offers the worker money or something else of value to whichhe otherwise would not be entitled.• Advises the worker—in writing—to consult an attorneybefore signing the agreement.• Allows the worker at least 21 days to consider signing theagreement. However, the agreement can be withdrawn priorto acceptance. Ellison v. Premier Salons International, 164 F.3d1111 (8th Cir.)• Gives the worker at least seven days to revoke the agreementafter it is signed.You face additional waiver hurdles whenever you fire, lay offor offer early retirement or severance packages to more than oneemployee. In these group situations, your waiver also must:• Give workers at least 45 days, instead of 21, to consider thewaiver agreement.• Provide the job titles and ages of all individuals being laidoff or being offered the same early retirement plan. Plus, youmust provide the ages of workers in the same job classificationor organizational unit who are not eligible or selected forthe plan.Caution: Make sure your age-bias waiver procedure is airtight.Workers still retain the right to sue if your waiver policystrays at all from the OWBPA, according to the Supreme Court’sruling in Oubre v. Entergy Operations, 522 U.S. 422 (1998). In the casea 41-year-old worker was asked to resign after receiving a poorreview. She signed a release waiving her rights to sue the companyand then received (and spent) her severance pay. She later filedsuit, claiming she was pressured into quitting because of her age.Lower courts agreed to dismiss the case, but the Supreme Court

gender/Age Discrimination 9.19said the case could proceed because the com pany’s waiver proceduredidn’t follow OWBPA’s requirements.The EEOC says the burden is on you—not the fired employee—toprove that a waiver complies with federal law. To read the EEOC’sregulations, “Waivers of Rights and Claims Under the ADEA,” goto www.eeoc.gov.Equal pay for older workersWhen designing your compensation plans, take into considerationwhether the pay schedules have a negative impact onolder workers. Several pay discrimination cases have reached theSupreme Court in recent years.The first case was General Dynamics v. Cline, 540 U.S. 581 (2004).At issue was whether an agreement that gave greater healthbenefits to workers over age 50 than to those between 40 and 50violated the ADEA. The Supreme Court concluded it did not andruled that favoring the oldest among the old was not illegal agediscrimination.In 2005, the Supreme Court ruled that the city of Jackson, Miss.,didn’t violate the ADEA when it instituted a new pay plan thatgave slightly smaller pay increases to police officers with moreexperience, almost all of whom were over 40. However, the courtdid state that workers can sue employers when they can identify“any specific test, requirement, or practice … that has an adverseimpact on older workers.” In the court’s view, the officers suing inthis case failed to meet that standard. Smith v. City of Jackson, 125S. Ct. 1536 (2005)The Supreme Court’s subsequent decision in Meacham v. Knolls,No. 128-2395 (2008) made it easier for employees to bring disparateimpact suits under the ADEA:In 1996, Knolls Atomic Power Lab conducted an involuntaryreduction in force. The laboratory asked supervisors to rankemployees from 0 to 10 on three factors—performance, flexibilityand the criticality of their skills—and then add up to 10 pointsfor years of service. Based on the resulting scores, Knolls laid off31 workers. All but one of the workers was over age 40.The workers sued, claiming that the subjective scoring criteriadiscriminated against older workers. A circuit court found for

9.20 Employer’s Practical Legal GuideKnolls, ruling that the workers had failed to show that the scoringsystem was unreasonable. The Supreme Court overturned thatdecision, finding that it was up to Knolls to prove that its criteriawere reasonable.Bottom line: Employers should always be sensitive to howchanges affect older workers and never make employment decisionsbased on age.Note: For a discussion on age discrimination and pensionplans, see Section 15: ERISA.

Section 10Civil Rights ActThe United States has come a long way sincepassage of the Civil Rights Act in 1964. But thespecter of racial, ethnic, national origin and religiousdiscrimination still remains. In 2013, the EEOC, whichenforces the law, received 33,068 charges of race discrimination,10,642 of national origin discriminationand 3,721 of religion-based discrimination.Many of the cases are dismissed or settled, but others end upin federal court. Well-founded ones may result in multimilliondollarsettlements or verdicts. Even if employers are vindicatedin court, their legal bills mount and they incur the intangible costof disruption and time away from doing business. Clearly, discriminationbased on race, religion and national origin remains aproblem.In 1991, Congress amended the Civil Rights Act to strengthenenforcement. Those amendments added compensatory and punitivedamages to the awards that employees can receive if they goto court. Today, workers are entitled to a jury trial to determine ifthey were discriminated against based on race, religion, nationalorigin, gender, disability or age.The Civil Rights Act applies to all employers that have at least15 full- or part-time workers and includes U.S. companies thatemploy Americans abroad.While race discrimination is the focus of many employmentlawsuits, employers are seeing new challenges. Swelling His panic10.1

10.2 Employer’s Practical Legal Guideand Muslim populations have created conflicts based on culturaldifferences, including language, dress and religious practices.Social and political problems arising from illegal immigrationhave sparked anti-Hispanic sentiment and discrimination inmany areas. Muslim dress and prayer rituals have led to conflictswith employers and co-workers alike. The Council for American-Islamic Relations has been busy intervening in workplace disputes,often brokering agreements out of court. Numer ous lawsuits havebeen filed by employees seeking leave to observe the Jewish andChristian Sabbaths.The issue of religious accommodation has become so widespreadand complex that the EEOC released new guidelines in2008 that clearly delineate employers’ obligations to accommodateemployees’ sincerely held religious practices.Still, nine out of 10 race harassment charges are filed by blackworkers, and numerous cases of nooses, swastikas and other racistgraffiti in workplaces continue to make their way into the courts.In 2008 the EEOC secured the largest settlement in its history fora single race discrimination plaintiff: Charles Daniels, a blackelectrician for Bethesda, Md.-based Lockheed Martin, received$2.5 million for harassment by co-workers, who sub jected him torepeated racial slurs.The EEOC has been aggressively pursuing discriminationcharges, and employers that turn a deaf ear to complaints arecourting disaster.When it comes to any form of discrimination, you should:1. Treat every employee equally, without regard to sex, age,race, national origin, religion, disability or any other characteristicnot related to job performance.2. Expect the same from all your managers, supervisors andemployees, and don’t tolerate any form of harassment.3. Diversify your hiring efforts. Relying on only one form ofrecruiting can backfire. Experiment with print ads, radiospots, agency placement, Internet recruiting and outreachthrough job fairs to ensure you’re reaching a pool of applicantswho reflect the racial and ethnic mix of your area’stotal labor force.

civil Rights Act 10.3Hostile EnvironmentThe Civil Rights Act protects employees from having to work in aracially hostile environment. It doesn’t take much for an environmentto turn hostile, as shown in this U.S. Supreme Court case:The court told employers they can be sued over supervisor’scomments that some may interpret as racist, such as using theterm “boy” when addressing black men. A lower court had ruledthe word by itself, without a racial adjective, wasn’t evidence ofdiscriminatory intent. The Supreme Court disagreed, concludingit was a loaded term. Employers were advised to look at “context,inflection, tone of voice, local custom and historic usage” of thewords they use when addressing members of a protected class.Ash, et al., v. Tyson Foods, No. 05-379 (2006)That’s a powerful reason for employers to be extra vigilantabout any signs of racial tension, including posters and cartoons,jokes that target a particular race and bullying of any kind.Disparate ImpactEven if your employment practices are facially neutral (free of intentionalbias), you could be found in violation of the Civil Rights Act.If a plaintiff can demonstrate a statistical disparity between thenumber of qualified minorities applying for the jobs in questionand the number of minorities given those jobs, you could lose alawsuit. If a worker can prove that an employer’s “decision-makingprocesses are not capable of separation for analysis,” those processescan be analyzed “as one employment practice.”The employer’s only defense: The employment selection practiceis “job-related” and consistent with “business necessity.”Unfortunately, the act does not explain the terms “job-related”and “business necessity.” A ruling by the U.S. Supreme Court,however, defined “job-related” as “predictive of or significantlycorrelated with important elements of work behavior which compriseor are relevant to the job or jobs for which candidates arebeing evaluated.” Griggs v. Duke Power Co., 401 U.S. 424 (1971) Inprior cases, “business necessity” has been defined as a practiceessential to effective job performance.

10.4 Employer’s Practical Legal GuideThe 1991 act prohibits any employment practice that discriminateson the basis of race, thus expanding Section 1981 of the CivilRights Act of 1866, which prohibited racial discrimination in themaking and enforcement of contracts.Mixed-Motive DiscriminationSometimes, an employment decision depends on several factors.Say, for example, a female employee applied for a line supervisorposition at a factory. She didn’t get the job for two reasons.First, she didn’t have enough supervisory experience. Second, hersupervisor didn’t believe that a woman could exercise authorityover the assembly line workers, most of whom were men. Underthe act, she could sue for discrimination even though the decidingfactor—the fact that she didn’t have enough experience—was notin itself discriminatory.That she could sue runs counter to the Supreme Court’s rulingin Price Waterhouse v. Hopkins, 490 U.S. 228 (1989). In that case thehigh court held that an employer’s decision would not be considereddiscriminatory “even if one factor might be seen as discriminatory,”provided the same decision would have been made fornondiscriminatory reasons.Now, under the 1991 act, if you can demonstrate that youwould have reached the same employment decision, discriminationexcluded, you may not have to pay monetary damages or berequired to hire, reinstate or promote the plaintiff. The court, however,can prohibit you from making employment decisions basedon a discriminatory motive in the future, award other declaratoryrelief and award plaintiff attorneys’ fees and costs. Thus, no aspectof an employment decision can show bias of any sort.Affirmative ActionFew phrases elicit such a strong reaction as “affirmative action,”the effort by employers, schools and governments to remedy theeffects of past discrimination.Affirmative action programs are usually designed with onegoal in mind: to give a short-term preference to members of

civil Rights Act 10.5a historically disadvantaged group. In theory, these efforts areintended to level the playing field and help overcome the resultsof past discrimination.The first serious challenge to affirmative action programs camein 1977, when a white male applicant to a medical school sued afterbeing rejected for admission while a black applicant with lowergrades and test scores was admitted. This was the first of many“reverse discrimination” lawsuits in which employees, studentsand others have sued because they contend they’ve been passedover in favor of a member of a protected class. The white plaintiffwon his case in the U.S. Supreme Court, which con cluded that anaffirmative action program that sets aside a quota of positions formembers of a protected class is illegal.Since then, employers and educational institutions have modifiedaffirmative action programs to avoid “quotas” in favor of lessobvious measures to integrate their workplaces and classrooms. In2003, the United States decided two more “reverse discrimination”in education lawsuits, filed by rejected white applicants againstthe University of Michigan undergraduate school and its lawschool. The undergraduate school had a rating system that gavepoints to minority applicants for their ethnicity; applicants witha given number of points obtained admission. The law school’ssystem balanced a student’s qualifications against the need to havea “critical mass” of minority students that would help minoritiesfeel comfortable in the school.The Supreme Court ruled that awarding points was a quotain disguise and threw out that approach. However, the courtapproved the law school’s system: using grades, test scores, qualityof the undergraduate institution as well as race and an essayexplaining how the applicant’s presence would benefit the lawschool.The decisions indicate that employers who use affirmativeaction programs to attempt to create a diverse workforce mustnarrowly tailor those efforts and avoid the use of quotas and thelike. You should always consult with an experienced employmentlawyer before putting any affirmative action program in place,regardless of what group the program is meant to benefit.

10.6 Employer’s Practical Legal GuideYour Burden of ProofOver the years, the Supreme Court has developed a framework fortesting whether an employer’s actions are evidence of discriminationor the result of legitimate business practices. The test issomewhat complicated. If you’re sued, your attorneys will use theevidence you have (such as testimony, employment records andcompany handbooks) to construct a defense to allegations thatyou discriminated on the basis of race, religion, national origin,disability, sex or age.The test (often referred to as the McDonald-Douglas burdenshiftingtest) has three parts that shift the burden of proof of wrongdoingback and forth between the plaintiff and the employer. Itworks like this:■ Step 1: The plaintiff must first present some proof that shewas the victim of discrimination and was a member of a protectedclass, such as being a woman, a black, over age 40 or disabled.Then she must show evidence that the protected characteristic wasa possible factor in the employment decision.Assume, for example, that the plaintiff, a black male, presentsevidence that he was the only worker fired for poor performancein the last five years. He has made a prima facie case, and now theburden of proof shifts to the employer.■ Step 2: The employer presents evidence to show that it had alegitimate reason to fire the plaintiff. In our example, the employershows the court its employee handbook, which states that workerswhose productivity falls below a certain level are subject to dismissal,as well as work logs demonstrating how the plaintiff’sproductivity dropped below that level. The employer has now metits burden of proving that it had a legitimate, nondiscriminatoryreason for the dismissal. The burden of proof then shifts back tothe plaintiff.■ Step 3: The plaintiff must now prove that the reason raisedby the employer in Step 2 was merely an excuse to cover up racialdiscrimination. He can do this by showing that white workerswith similar productivity records were not fired or that managersdiscussed ways to “get rid of” black workers.

civil Rights Act 10.7What’s the best way to prepare for such litigation? Have inplace specific procedures and expectations for employees andcarefully document all employment decisions. Apply your rulesequitably to everyone, and keep records showing that you’vebeen scrupulously fair in enforcing the rules. In addition, trainall supervisors and managers to avoid even the appearance ofprejudice. Point out that they also must not tolerate racism, sexism,ageism, or religious, ethnic or disability discrimination in theirdepartments. If they turn a blind eye to prejudice at any level, theirinaction will be the focus in court.Section 1981: New Avenue for ClaimsJackie Lauture, a black woman, was an at-will employee at IBMfor 16 years before she was fired for poor performance. She suedfor race discrimination but not under Title VII. Instead, she tookan increasingly common route—and one with the potential for abigger windfall.She filed suit under Section 1981 of the Civil Rights Act of1866, which prohibits racial discrimination in making and enforcingcontracts. The “contract” in this case, she argued, was that sheagreed to work and the employer agreed to pay her. The argumentworked, and she won.The 2nd Circuit rejected IBM’s argument that Title VII is theonly remedy for workplace discrimination. It noted that more than11 million at-will employees work for companies that aren’t coveredby Title VII because they have fewer than 15 employees. Lauture v.International Business Machines Corp., 216 F.3d 258 (2nd Cir. 2000)➤ Recommendation: If your company is too small to becovered by Title VII, don’t be complacent about the potential fordiscrimination suits. As the Lauture ruling shows, you need ananti-discrimination policy that’s enforced throughout the company.Also, as more courts allow employees to bring Section 1981suits, your liability increases in two major ways:• Maximum damages available under Section 1981 are notcapped as they are under Title VII. Consider buying insurancethat will cover a judgment larger than the Title VII cap.(See award caps on page 10.10.)

10.8 Employer’s Practical Legal Guide• The statute of limitations is the same as that of your state’s contractlaw, which is usually a much longer time limit than underTitle VII. Make sure your record-retention practices cover thestatute of limitations under your state’s contract law.In 2008, the U.S. Supreme Court dealt a huge win to employeesby ruling that Section 1981 provides a cause of action for retaliationclaims. Considering that many employees lose their discriminationcharges but still prevail on retaliation, the decision couldsignificantly increase discrimination filings and awards. CBOCSWest, Inc. v. Humphries, No. 06-1431 (2008)Screening TestsThe DOL ruled in 2007 that Georgia Pacific’s use of a literacytest to screen paper mill applicants was discriminatory, sincesuch workers don’t need to read well and black applicants aremore likely to fail a literacy test than whites, the DOL said.The Atlanta-based papermaker disagreed but said it wouldcomply with the department’s order to stop using the tests andto pay $750,000 in back pay and interest to 399 black applicantsturned down over the prior two years. The company also agreedto hire 24 of those applicants.A Georgia-Pacific spokeswoman said the company screenedapplicants with the literacy portion of the Test of Adult BasicEducation because Georgia-Pacific promotes from within and considersliteracy important for higher-level jobs. No one complainedabout the test; the department uncovered the practice during aroutine audit conducted because of a federal contract.The Civil Rights Act requires tests to be “job-related” andof “business necessity.” Tests that have a disparate impact onprotected groups should be re-examined to determine if a lessdiscriminatory method is available to test applicants. In 2009, theU.S. Supreme Court ruled in Ricci v. DeStefano that employers thatcannot find a less discriminatory way to test applicants must usethe test results unless they can establish a “strong basis in evidence”they would be liable under Title VII. (See also Lewis v. Cityof Chicago in Section 1.)

civil Rights Act 10.9➤ Recommendation: Take great care in developing job tests.Involve a diverse group of qualified individuals in performing thejob analysis and developing narrowly tailored, job-specific tests.The better your test preparation, the better the test and the morelitigation-proof it is.Race Norming of Employment TestsAdjusting the scores of employment-related tests on the basis ofrace, religion, sex or national origin is known as test norming. TheCivil Rights Act of 1991 specifically prohibits the practice.Employers have been using test norming as part of their affirmativeaction programs to identify potentially qualified women orminorities. Civil rights groups, however, have attacked the practiceas stigmatizing women and minorities. Now you have to relyon the unadjusted test scores.‘Systemic Discrimination’In 2006, the EEOC announced an initiative to combat what it callssystemic discrimination, defined as a “pattern or practice, policyand/or class cases where the alleged discrimination has a broadimpact on an industry, profession, company, or geographic location.”Systemic cases are prosecuted in two ways: (1) When anemployer is the target of numerous, similar complaints, the EEOC(or equivalent state agency) may look more deeply into thatemployer’s hiring or promotion practices to discover barriers facedby minority workers that others do not experience. (2) The agencyuses employment statistics to show that a particular employerdoes not employ minorities in the same numbers as similarly situatedemployers.➤ Recommendation: All in all, another good reason to reachout to minorities when recruiting.Damages and Jury TrialsFor claims filed under Title VII of the Civil Rights of 1964, plaintiffscould seek only “equitable” remedies (such as back pay, front

10.10 Employer’s Practical Legal Guidepay, reinstatement or injunctive relief requiring employers to startaffirmative action programs or to refrain from discrimination).Compensatory and punitive damages were available only to racialclaims under Section 1981 of the Civil Rights Act of 1866.Now, the 1991 act also allows jury trials where the plaintiffalleges intentional discrimination and seeks compensatory orpunitive damages. However, a jury cannot be told of the statutorylimits on the amount of compensatory and punitive damages it canaward. The cap ranges depend on the size of your company:• $50,000 for 15 to 100 employees.• $100,000 for 101 to 200 employees.• $200,000 for 201 to 500 employees.• $300,000 for more than 500 employees.➤ Observation: These limits apply only to cases where intentionalbias is found, and they do not apply to many states’ antidiscriminationlaws.In a Title VII case in 2001, the U.S. Supreme Court found thatthis cap did not apply to damages awarded for “front pay” (i.e.,money awarded for lost compensation from the time of judgmentuntil the worker’s reinstatement). Pollard v. E.I. du Pont de Nemours& Co., 532 U.S. 843 (2001) The court’s decision means that juries maynow award damages for front pay in excess of the statutory cap,further increasing the risk of litigation for employers.

Section 11Sexual HarassmentIt’s becoming easier for workers to win sexual harassment lawsuits, thanks to U.S. Supreme Court rulingsover the past two decades. Employers that don’ttake affirmative and decisive action to prevent sexualharassment are facing an increasingly impatient courtsystem. The Supreme Court has repeatedly made clearthat it meant what it said in 1998 when it decideda string of sexual harassment cases. Employers arefinding that it may not be enough to have sound antiharassmentpolicies on the books and act quicklywhen a complaint surfaces.Sexual harassment is a form of sex discrimination outlawedunder Title VII of the Civil Rights Act of 1964. The EEOC, whichenforces the Civil Rights Act, defines sexual harassment this way:“Unwelcome sexual advances, requests for sexual favors, andother verbal or physical conduct of a sexual nature constitute sexualharassment when this conduct explicitly or implicitly affectsan individual’s employment, unreasonably interferes with an individual’swork performance, or creates an intimidating, hostile oroffensive work environment.”Last year, the EEOC received 7,256 complaints from workerswho believed they were victims. (In 2013, 17.6% of those complaintswere made by men.) The agency settled 11.3% of the cases filed in2013, recovering $44.6 million for harassed workers.11.1

11.2 Employer’s Practical Legal GuideWhether you employ 15 workers or 5,000, you can’t afford toignore sexual harassment.Quid Pro Quo and Hostile EnvironmentThe EEOC and the courts recognize two forms of sexual harassment:quid pro quo and hostile environment.Quid pro quo (literally, “this for that”) harassment is blatant. Itoccurs when an employer or a supervisor uses job rewards (such aspromotions or raises) or punishment (such as demotions or firing)to force a worker into a sexual relationship. Workers do not have tosuffer actual physical contact to win a harassment suit. The victimneeds to show only that a coercive offer was made. A single incidentof quid pro quo harassment is enough to justify a lawsuit.“Hostile-environment” harassment is more subtle and is subjectto personal tastes. Workers who bring hostile-environmentsuits claim the workplace atmosphere was so sexually chargedthat it affected their job performance. Recognized causes of thistype of harassment include pornographic pictures, verbal abuse,hugs or back rubs, sexually explicit jokes and demeaning remarksbased on the employee’s gender.Employer Liability IncreasesSeveral Supreme Court decisions have broadened the scope ofsexual harassment and the degree of liability for employers. Thisis especially true if the harasser is an employee’s supervisor.■ In Oncale v. Sundowner Offshore Services, Inc., et al., 523 U.S. 75(1998), the Supreme Court ruled that sexual harassment is actionableunder Title VII even when the victim and the harasser are ofthe same sex. In the case an offshore oil rig worker was harassedby his male supervisor and two male co-workers through sexualcomments, suggestions and rough touching that went beyondlocker room horseplay. When “harassing conduct” of a sexualnature is so “severely hostile or abusive” that workers cannot dotheir jobs, it violates the law, the justices ruled. It also doesn’t matterwhat the sexual orientation of the parties is in order for samesexharassment to occur.

sexual Harassment 11.3■ During the same term the Supreme Court ruled that aharassment victim need not show any consequences from refusingto submit to sexual advances to establish a claim of discrimination.In Burlington Industries Inc. v. Ellerth, 524 U.S. 742 (1998),the employee was the target of a barrage of sexual commentsand innuendo from her supervisor, who alternatively threateneddemotion and promised promotion and advancement in the companyif she submitted. None of the promises or threats was carriedout, and the employee suffered no adverse consequences on thejob. However, the poisoned atmosphere created by the supervisor—and,by implication, the company—led the employee toresign and then file a claim.■ Of greatest concern to employers, the court deliveredanother opinion that expanded an employer’s liability for theactions of its agents—even low-level employees and supervisors.In Faragher v. Boca Raton, 524 U.S. 775 (1998), the justices held thecity of Boca Raton vicariously liable for the actions of two of itslifeguard supervisors, who created a hostile work environment fora female lifeguard. The city had argued that it had a sexual harassmentpolicy in place and was never informed of the supervisors’misconduct. But the justices said the city “failed to disseminate itspolicy against sexual harassment among the beach employees and. . . its officials made no attempt to keep track of the conduct of[her] supervisors.” Furthermore, the city’s policy “did not includeany assurance that the harassing supervisors could be bypassed inregistering complaints.”■ In 2004 the Supreme Court clarified its 1998 opinions inPennsylvania State Police v. Suders, 124 S. Ct. 2342 (2004). It concludedthat under some circumstances workers who are harassed by theirsupervisors don’t have to file an internal complaint and wait for theresolution. Instead, they can quit and sue immediately.Suders complained that her supervisor continually made lewdcomments and lewd gestures. In extreme circumstances whenit would be obvious that even if the employee complained, nothingwould be done, the employer won’t be allowed to rely on havinga sexual harassment policy in place. It will be strictly liable forthe harm perpetrated by the supervisor who caused the harassedworker to quit in disgust. This case makes it clear that the best policyfor employers is to prevent sexual harassment in the first place.

11.4 Employer’s Practical Legal Guide■ In 2006, the U.S. Supreme Court greatly expanded thedefinition of retaliation in White v. Burlington Industries. Accordingto White, the anti-retaliation provisions of Title VII forbid allemployer actions that would be materially adverse to a reasonableemployee or job applicant, if harmful to the point that theycould dissuade a reasonable worker from making or supporting acharge of discrimination.Under the White definition of retaliation, employers must beespecially careful to educate their supervisors to consult withHR before taking any employment action against an employeewho has engaged in a protected activity under Title VII. In thesecircumstances, it’s important to treat the complaining employeethe same as all other similarly situated employees—no better andno worse.■ In 2009, the U.S. Supreme Court handed down a major decisionthat some attorneys worry will open the litigation floodgatesfor employees who believe they have suffered retaliation. Thehigh court unanimously ruled that Title VII protects from retaliationemployees who cooperate with their employers’ internalharassment investigations. Crawford v. Metropolitan Gov ern ment ofNashville and Davidson County, Tennessee, No. 06-1595 (2009)In the Crawford ruling, the Supreme Court followed the precedentit set in Burlington Industries and Faragher, affirming the government’sinterest in encouraging employees to report employermisdeeds without fear of being punished.The above cases send a clear message to employers: You havea responsibility to prevent, monitor and end all forms of sexualharassment on the job or else face substantial liability. Not knowingor pretending not to know about the misconduct is no longeran excuse for companies.Shielding Your CompanyTo comply with the new mandates, your company should, at aminimum, take the following steps:■ Establish a policy prohibiting sexual harassment of anykind. Your policy should be written broadly, in gender-neutralterms, so that it applies to all individuals, regardless of the sex

sexual Harassment 11.5of the alleged harasser and the victim. Make sure the policy conformsto state as well as federal law. Communicate the policy toall employees in your company, regardless of management level.Review and update your policy on a regular basis.An effective sexual harassment policy should contain:1. A broad definition of the type of conduct that constitutessexual harassment as well as specific examples.2. A statement that offenders will be subject to appropriatediscipline, up to and including discharge.3. A statement encouraging employees who feel victimized bysexual harassment to report the offensive conduct.4. A statement requiring employees and supervisors to reportany offensive conduct that they experience or witness.5. A statement providing assurances that there will be noretaliation against an employee reporting sexual harassment.6. A statement indicating that all reports of sexual harassmentwill be promptly and thoroughly investigated, and prompt remedialaction will be taken should the company conclude that sex ualharassment has occurred.➤ Recommendation: It’s a good idea to include the policyin your handbook and post it on the company bulletin board.Periodically distribute memos reminding everyone of the policy.■ Establish a complaint procedure. Your policy should bein writing and communicated to all employees. You should guaranteeconfidentiality to the greatest extent possible. Provide thenames and phone numbers of contact people (preferably of bothgenders) to whom workers can report misconduct. (If you hadonly one contact, it would be difficult for someone harassed bythat person to file a complaint.) Specify who will investigate anddecide the outcome of a complaint. Set a time frame to process andresolve complaints quickly and fairly, and decide how appeals willbe handled.■ Institute an investigative procedure. Every complaintof sexual harassment must be taken seriously and investigatedpromptly.Develop a method to interview the accused, the accuser andpotential witnesses, as well as a system for gathering and recording(Continued on page 11.8)

11.6 Employer’s Practical Legal GuideSample PolicyA clearly written, thoughtful sexual harassment policy clarifiesyour position to everyone on your staff, including potentialperpetrators and their victims. It also provides solid proof tojudges and juries that you’re committed to eliminating andpreventing sexual harassment. Courts specifically look for suchevidence that top management does not tolerate inappropriatebehavior.The wording is up to you, but you’ll want to ensure that thelanguage is clear, emphatic and easy to understand. Yourpolicy should not read like a legal document or governmentregulation. It should answer questions, rather than raise them,and represent your most practical tool for educating employeesabout how to interact on the job.You may use the model policy below or adapt it for your organization.The statement should appear on company letterhead,signed by the CEO or another high-level executive.Sexual Harassment Policy[Name of company] is pledged to preserving a working environmentfree from sexual harassment. Harassment is againstthe law and is a form of gender discrimination. [Name ofcompany] does not tolerate discrimination on the basis ofgender, pregnancy, sexual orientation, race, religion, age,national origin, citizenship, veteran status, disability or anyother personal characteristic unrelated to an employee’s abilityto perform work requirements. The aim of this policy isto prevent harassment of any kind by anyone employed by orassociated with the company.Sexual harassment consists of unwelcome sexual advances,requests for sexual favors or unwanted sexual attentionby anyone associated with the company, whether male or

sexual Harassment 11.7female. Harassment may include references to employmentstatus or conditions or may serve to create a hostile, intimidatingor uncomfortable work environment. Harassmentincludes, but is not limited to, obscene jokes, lewd comments,sexual depictions, repeated requests for dates, touching,staring or other sexual conduct committed either on oroff company premises.Victims of sexual harassment have the right to sue boththe company and the perpetrator by contacting the EqualEmployment Opportunity Commission or a state agency.For this reason and for the protection of all our employees,[name of company] seeks to prevent sexual harassment.All [name of company] employees are responsible for helpingensure that our workplace is kept free of sexual harassment.If you feel you have been a victim of sexual harassment,report the behavior to our Sexual Harassment Coordinators[name, location, phone number] or to any supervisor, memberof the personnel department or the company president.If you have witnessed sexual harassment, you also are urgedto report the incident so that prompt action may be taken.All complaints will be treated seriously, kept as confidentialas possible and investigated fully. [Name of company]expressly forbids any retaliation against employees forreporting a sexual harassment incident. If, however, thecompany finds that false charges have been filed, disciplinaryaction may be taken against any individual who providesfalse information.If an investigation confirms that sexual harassment hasoccurred, immediate action will be taken to put an end tothe harassment. [Name of company] will take appropriatecorrective actions against anyone found to be in violation ofthis policy, including possible termination of employment.

11.8 Employer’s Practical Legal Guide(Continued from page 11.5)evidence. Treat all parties with dignity and respect. Conductall interviews privately and ensure the confidentiality of theinvestigation.■ Enforce your company policy. If your investigation revealsan actual sexual harassment case, notify the involved parties anddecide on the type of disciplinary action to take. Depending onthe harasser’s work record and the gravity of the charge, you maydecide on an oral or written warning, a deferral of a raise or promotion,a demotion, suspension or discharge.Be fair in your judgment, and apply your disciplinary actionsevenly. Make sure you have all the necessary documentation toback up any disciplinary action. Keep all those records containedin one file. If the harasser decided to sue for wrongful terminationor job discrimination, you would be able to locate all the informationyou need to justify your decision.Caution: You have discretion in deciding the penalty; however,you must administer discipline consistently. If you dischargeone worker while another employee guilty of the same offensereceives a two-day suspension, you could be inviting a lawsuit.More than ever, you need to walk a tightrope when handlingsexual harassment charges. Employers can get caught in a doublebind if they react too slowly or too zealously to employee complaints.You already know that if you fail to act on an employee’sclaim, you can get hit with a hostile-environment suit. But if youhastily fire the alleged harasser, you could end up facing a suit forwrongful termination.■ Issue a gag order while investigating a complaint. Nothingdisrupts the workplace more than unbridled rumors, especiallywhen they’re about sexual harassment. Like a game of“telephone,” the incident inevitably becomes distorted. Such chattercan make it hard to carry out a fair and impartial investigation.For that reason, you can, and should, be proactive about curbingidle speculation.You can even punish employees who insist on feeding therumor mill, as long as you make it clear you’re handling the complaint.Meanwhile, employees need to get back to work.In one case, the employee who first reported that others mayhave been sexually harassed was told to stop talking about it

sexual Harassment 11.9since HR was investigating. But she couldn’t leave things aloneand was fired. Her lawsuit was dismissed. The court concludedemployers can’t tell employees to ignore sexual harassment, butonce they do report such conduct, you can tell them to let theappropriate people handle it. Block v. Kelly Services, et al., No.05-20978 (5th Cir. )■ Establish training programs, and encourage communication.Hold in-house meetings to communicate your policy. Askworkers to give you their input and to voice their concerns.Even after reading your policy, many workers might notunderstand the limits of acceptable behavior on the job. More over,many people find the topic difficult to discuss, so they may behesitant to ask questions. You should use focused training to clarifyyour standards, answer questions and provide employees withmore detailed information about how to identify, respond to andprevent sexual harassment in your company.An effective training program may also help limit your liabilityif your company ends up facing a lawsuit despite your bestefforts. Your documentation will certainly provide support for alegal defense; but more important, training is your best bet forminimizing the potential of a lawsuit.Keep your training ongoing so that your employees, and especiallynew hires, will be aware of current guidelines. A good trainingprogram consists of a series of presentations and workshopsfor all employees. Make sure the training sessions include openinvolvement by top management and are conducted by an outsideexpert to ensure objectivity. Also require mandatory attendanceby everyone on staff, supply written materials to supplement thelectures and monitor employees’ mastery of the subject throughtests/evaluations.Senior managers, middle managers and supervisors shouldreceive additional, separate training that focuses on how to identifyand respond to harassment complaints. Because you can beheld liable for harassment perpetrated by a supervisor, you wantto make sure your management staff understands and abides byappropriate behavioral standards.There are several types of training programs available foremployers to purchase: workbooks and booklets with quizzes,videos, computer-based programs that employees can use at their

11.10 Employer’s Practical Legal Guidedesks and even live presentations given by employment law firms.Programs are tailored to appeal to different audiences and toachieve different goals, so study their content and methods carefullybefore purchasing one.Caution: The EEOC has become proactive in protectingworkers from a sexually hostile work environment. Some notablecases:■ Madison Square Garden paid VP of marketing AnuchaSanders $11.6 million in damages over harassment and retaliationby its executive in charge of basketball operations, Isiah Thomas.Sanders said she complained for a year about fraternity-styleantics at the Garden, including sexual advances and inappropriateremarks. In response, Thomas fired her, allegedly for poorperformance. When the case went to federal court, the Gardensaid instead that Sanders had been fired for interfering with theinternal investigation by hounding other employees to supporther case. Sanders v. Madison Square Garden, et al., No. 06-Civ-589,SD NY.■ United HealthCare of Florida paid $1.8 million to settle anEEOC lawsuit over same-sex harassment and retaliation on behalfof a male former senior account executive.The account executive complained several times to uppermanagement that the male former regional vice president of keyaccounts repeatedly was verbally harassing him. United Health­Care reportedly responded by disciplining the account executiveand denying him stock options and commissions. The accountexecutive even complained to parent company United Health­Group Inc. before finally quitting because of the retaliation.The EEOC Reporting ProcessDon’t hesitate to inform employees about their right to reportsexual harassment to the EEOC or a state agency. Your failureto provide information about alternatives to internal reportingwon’t prevent employees from seeking redress from a governmentauthority. In fact, your reluctance to reveal such information maybe used against you as proof that you don’t have the employees’interests at heart.

sexual Harassment 11.11Sexual Orientation IssuesAlthough Title VII does not specifically protect workersbecause of their sexual orientation, 21 states and the Districtof Columbia have laws that do. Similarly, 17 states and theDistrict of Columbia have laws barring private employers fromdiscriminating based on gender identity. Many municipalitiesalso have sexual orientation and gender identity ordinances.Despite Title VII’s silence on sexual orientation and genderidentity issues, federal courts have increasingly brought thesetypes of discrimination under the Civil Rights Act umbrella.For example, the 6th Circuit Court of Appeals ruled that anemployer discriminating based on gender stereotypes andidentity violated Title VII. Barnes v. City of Cincinnati, 401 F.3d 729.Generally, the law requires employers to provide a harassmentfreeworkplace, so a company policy barring harassment basedon sexual orientation or gender identity best protects theemployer and lets employees know exactly what the rules are.It’s also important that your anti-harassment policy and complaintprocedure contain information about the time frames forfiling charges of unlawful harassment with the EEOC or a state’sfair employment practice agency.It should explain that the deadline runs from the last date ofunlawful harassment, not from the date that any internal complaintis resolved. In general, workers have 180 days from theharassing incident to file a complaint with the EEOC. If there is astate agency that handles discrimination cases, the complaint mustgenerally be filed with that agency first, and the employee gets upto 300 days to file with the EEOC. However, in cases of a hostilework environment, the time limit doesn’t start running as long asthe environment continues to be hostile.

11.12 Employer’s Practical Legal GuideWhat happens if you don’t tell workers they can file a complaintwith the EEOC or a state or local agency? Some courts havesaid that actively discouraging workers from filing or draggingthe case out so that the worker misses a filing deadline acts tostop the clock. The employer can’t turn around and argue that theworker missed the deadline. See Currier v. Radio Free Europe/RadioLiberty, Inc., 159 F.3d 1363 (D.C. Cir.)Complaining parties do not need to retain an attorney torequest help from the EEOC. When evaluating alleged charges,the EEOC will look at the nature of the accusations and the company’strack record in responding to complaints. The agency willlikely interview the alleged victim to obtain as much informationas possible about the incident; notify the employer that chargeshave been filed; interview witnesses; make a determinationregarding the merits of the charge; and attempt to seek remedyfrom the employer. If the employer does not agree to resolve thecase voluntarily, the EEOC may file charges in federal districtcourt on the plaintiff’s behalf.

Americans withDisabilities ActSection 12The Americans with Disabilities Act is to the disabledwhat the Civil Rights Act was to disenfranchisedand underemployed blacks in the 1960s. Eachgroup fought for a federal law to even the playing fieldand help its members participate fully in the country’seconomic and social life.In practice, however, the ADA proved much less potent a remedyfor employment discrimination than Title VII, due in part toU.S. Supreme Court decisions that chipped away at the definitionof “disabled” until it no longer included people with conditionssuch as cerebral palsy, epilepsy, cancer and diabetes. As a result,plaintiffs lost 97% of ADA employment cases that went to trial in2004, for example.In response, Congress passed the ADA Amendments Act of2008 (the ADAAA), which took effect in January 2009. The lawexpressly rejected several Supreme Court decisions and clarifiedand broadened the ADA’s protections, bringing it closer in linewith Title VII.The ADAAA provides much-needed direction to disabledworkers, job applicants and employers in an area of the law thathas proved frustrating for all of them.12.1

12.2 Employer’s Practical Legal GuideADA CompliancePassed by Congress in 1990, the ADA prohibits discriminationagainst qualified individuals with disabilities: those who canperform the job’s essential functions with or without reasonableaccommodation. (An accommodation is considered reasonable ifit doesn’t place an undue hardship on the employer.)All employers that have 15 or more employees must complywith the ADA. Note: Business partners who aren’t involved inthe day-to-day operations of a firm are not counted as employeesunder the ADA. Clackamas Gastroenterology Assocs., P.C. v. Wells,123 S. Ct. 1673 (2003)Covered employers must not discriminate against disabledapplicants or employees who meet the definition of “qualified individualwith a disability.” Further, the ADA prohibits employersfrom regarding a non-disabled person as disabled because thiswould further society’s stereotypes about people with handicaps.The ADA has had a profound effect on hiring procedures.Employers must now maintain up-to-date, accurate job descriptionsto determine each job’s essential functions. As a general ruleduring the hiring/interviewing process, employers should stick toquestions about an applicant’s ability to perform the job’s essentialfunctions.Under no circumstances should an employer ask a questionlikely to elicit an answer that would reveal an applicant’s disability.For example, if a job requires a person to lift 50 pounds, it ispermissible to ask the applicant whether or not he or she can liftthat much. By contrast, it’s not permissible to ask applicants whatprescription drugs they are taking.Employers may not conduct medical exams on job applicantsuntil after they make a conditional offer of employment. If a medicaltest reveals a disability after the offer was made, the employerand employee must begin an interactive process to determinewhat reasonable accommodations are available that would allowthe applicant to perform the essential job functions. If they canagree on an accommodation, the employee is hired.

americans with Disabilities Act 12.3Who’s CoveredThe scope of the ADA’s definition of protected disabilitiesextends to persons who:• Have a history of a disability, whether or not they are currentlylimited in a major life activity.• Are perceived by their employer as having a disability, eventhough the impairment is not substantially limiting.• Have mental disabilities that substantially limit their relationswith others.• Are recovering or former drug addicts. (Current drug usersare not protected.)• Are infected with AIDS or the HIV virus.• Are able to control their disability through mitigating measuresbut are still substantially limited in a major life activity.Note: A person who has a contagious disease is considered tohave an impairment. You don’t have to hire or retain anyone,however, whose contagious disease poses a direct threat to thehealth or safety of your customers or other employees if no reasonableaccommodation could reduce or eliminate the threat.Not Covered:Conditions that are not considered disabilities under the statute:• Sexual disorders (transsexualism, pedophilia and genderidentitydisorders).• Compulsive gambling, kleptomania or pyromania.• Psychoactive substance-abuse disorders resulting from currentillegal use of drugs.• Personality traits, such as poor judgment, quick temper andirresponsible behavior.• Cultural or economic disadvantages, such as lack of educationor a prison record.

12.4 Employer’s Practical Legal GuideWhen making a hiring decision, you may not consider whetheran applicant requires an accommodation. You should thoroughlydocument any decision regarding reasonable accommodation orhiring a disabled applicant.Any medical information obtained from medical tests, medicalcertification of a disability or freely volunteered by the individualis confidential.This information should be kept in a confidential file, separatefrom the applicant or employee’s general file. Access to the fileshould be restricted to company employees who must see it tocarry out the accommodation, or to government officials in thenormal and proper course of their duties.Definition of a DisabilityThe ADA Amendments Act of 2008 rejected a strict interpretationof disability, invoking the ADA’s original intent “to provide broadcoverage to protect anyone who faces discrimination on the basisof disability.” The ADAAA also directed the EEOC to redefine“substantially limits,” stating that the agency’s prior definition of“significantly restricts” posed too high a standard.The ADAAA defines disability as a physical or mental impairmentthat substantially limits one or more major life activities, arecord of such impairment or being regarded as having such animpairment. The law provides the following non-exhaustive list ofmajor life activities: caring for oneself, performing manual tasks,seeing, hearing, eating, sleeping, walking, standing, bending,speaking, breathing, learning, reading, concentrating, thinking,communicating and working.It also includes as major life activities the operations of a majorbodily function, including functions of the immune system, normalcell growth, digestive, bowel, bladder, neurological, brain,respiratory, circulatory, endocrine and reproductive functions. Inaddition, it includes conditions that are episodic or in remission,but it excepts transitory impairments (conditions lasting less thansix months).The amended ADA also settled the ongoing question ofwhether an employee who can compensate for a disability throughdrugs or other aids qualifies as disabled. The law determined that

americans with Disabilities Act 12.5for the purpose of determining whether someone is disabled, amelioratingdevices beyond ordinary eyeglasses should be ignored.In other words, just because someone can correct deafness withhearing aids or take insulin to control blood sugar does not meanthe person is not disabled and protected under ADA.The ADAAA expressly prohibits consideration of the followingaids when determining whether someone is disabled: medication,medical supplies, equipment or devices, low-vision devices(beyond ordinary glasses or contact lenses), prosthetics includinglimbs and devices, hearing aids and implants, mobility devices,oxygen therapy equipment or supplies, assistive technology, andauxiliary aids and services.You don’t have to accept a worker’s or an applicant’s word thathe or she is disabled. You’re entitled to proof that the individualmeets the definition of disabled: i.e., has an impairment thatsubstantially limits a major life function. Before you can decidewhether the impairment is limiting, though, you need proof thatthe person indeed has an impairment.Sometimes an impairment is obvious, such as blindness or theneed to use a wheelchair. But more subtle physical and mentalconditions may require verification. Remember, you’re required toaccommodate only substantially limiting impairments, not everyphysical or mental condition.The EEOC’s final regulations, issued in 2011, further expandthe ADAAA’s goal of broadening the definition of “disability”under the ADA. As a result, a greater number of employees willbe covered under federal disability law and be eligible to file ADArelatedclaims. The stated goal of the final regulations—like thatof the ADAAA—is to limit extensive analysis over whether anemployee’s ailment does or does not qualify as an ADA-covereddisability. Instead, it encourages courts to focus on whetheremployers have “complied with their obligations and whether discriminationhas occurred.”Drug and Alcohol AddictionThe ADA was drafted broadly to provide disabled Americans theopportunity for gainful employment. Congress recognized thatsome disabilities, by their nature, are special and pose safety risks.

12.6 Employer’s Practical Legal GuideDrug and alcohol addiction are two such disabilities. The ADArequires employers to walk a fine line between enforcing reasonableworkplace safety and behavioral rules and making accommodationsfor those who are addicted.As a general rule, employers are allowed to enforce reasonableworkplace rules against coming to work under the influence andagainst disruptive behavior, even if that behavior may be associatedwith an addiction to drugs or alcohol. That is, employers canpunish inappropriate behavior and require that employees showup clean and sober.The waters get murkier, however, when workers addictedto drugs or alcohol want to clean up their act. In some circumstances,you may be required to accommodate their attempts.In addition, they may be eligible for leave under the Familyand Medi cal Leave Act. Under the ADA, what the employee isaddicted to makes a difference in how much leeway you mustprovide as an employer.The ADA does not protect current users of illegal (i.e., “street”)drugs. It does, however, protect those who’ve shaken their addictionsufficiently to no longer be classified as active illegal drugusers. You should offer these workers reasonable accommodationsto keep them on track: for example, time off for therapy,counseling and attending Narcotics Anonymous meetings or eveninpatient care for related psychiatric problems like depression.You can fire people who are current drug users even if theirwork isn’t suffering. Just be sure that the use in question is really“current.” The ADA specifies that a worker who is “currentlyengaged in the illegal use of drugs” isn’t covered by the law.The EEOC has taken the position that “current” means “theillegal use of drugs that has occurred recently enough to indicatethat the individual is actively engaged in such conduct.” (29 CFR§1630.3)The EEOC’s Technical Assistance Manual provides that “currentdrug use means that the illegal use of drugs occurred recentlyenough to justify an employer’s reasonable belief that involvementwith drugs is an ongoing problem. It is not limited to the day ofuse, or recent weeks or days, in terms of an employment action. Itis determined on a case-by-case basis.”

americans with Disabilities Act 12.7So how long does it have to have been since the worker tookdrugs before the ADA protects him? What if your drug tests takethree weeks to come back from the lab? Can he argue that anyaction you take against him three weeks later violates the ADAbecause he’s now a “former” drug user? The answer is unclear.Your best bet is to make sure that any action you take against himis based on his violation of an established workplace rule, not justthe fact that he had a positive drug test.The ADA covers workers who are alcoholics even if they currentlydrink. To be covered by the ADA, the alcoholic’s addictionmust be severe enough to substantially impair a major life functionsuch as taking care of himself. Many heavy drinkers maymeet that test. That does not mean, however, that you have totolerate alcoholics coming to work drunk.Courts have consistently held that employers have the right toestablish reasonable workplace rules, including coming to workclean and sober. For example, in Salley v. Circuit City, Inc., 160 F.3d977 (3rd Cir.), a federal appeals court ruled that the retailer waswell within its rights when it fired a manager who admitted tousing illegal drugs with a co-worker, was absent due to recreationaldrug use and reported to work high. His behavior violatedcompany policy. The court found no evidence that the drug userwas singled out for special consideration: i.e., no evidence thatnon-addicted workers who broke the rules weren’t punished.Because the policies were facially neutral and impartially applied,the court upheld the firing.How you treat a former drug user is more problematic. Someappeals courts have taken the position that you can’t have a blanketpolicy by which you refuse to hire anyone who has a historyof drug abuse. In a recent decision, the U.S. Supreme Court consideredwhether a former addict was entitled to a second chance:an opportunity to be rehired.Joel Hernandez worked for Hughes Missile Systems in Arizonafor about 30 years, first as a janitor and then as a technician. In1991 he flunked a drug test because he had done cocaine thenight before. When confronted, he agreed to resign for violatingcompany rules rather than being fired. He then received treatment.Three years later, he was clean and applied for a job with

12.8 Employer’s Practical Legal Guidethe company again. It refused to rehire him ostensibly becauseit had a policy against rehiring anyone who’d been fired orresigned for violating company rules.Hernandez sued, alleging that under the ADA he was entitledto preferential treatment. The 9th Circuit Court of Appeals agreedand concluded that workers who’ve recovered from addiction can’tbe excluded from rehiring if the workplace rule they vio lated hadbeen directly linked to their disability—in this case, coming towork under the influence.The Supreme Court heard the case and sent it back to theappeals court to determine whether a reasonable jury mightbelieve that the employer refused to rehire Hernandez becauseof his past drug use, and not due to the company’s blanket norehirepolicy. Hernandez couldn’t raise the question of whetherthe blanket no-hire policy has a disparate impact on disabledapplicants because he hadn’t raised it in his original pleadings.The appeals court ruled that the case should go to trial. Raytheonv. Hernandez, 362 F.3d 564 (2004)Employers dodged the bullet with this case, but they may notbe so lucky next time. The Supreme Court didn’t rule on whetheremployees could bring disparate-impact lawsuits if employersimplement policies that harm disabled workers more than nondisabledworkers.➤ Recommendation: To avoid being a test case, examine allof your blanket policies to determine if they disparately harm thedisabled or any other protected group.To protect yourself from lawsuits by former addicts, followthese guidelines:• Set job-related rules against coming to work under theinfluence of drugs or alcohol.• Establish behavioral rules such as demanding punctualityand regular attendance, allowing for appropriate FMLAabsences.• Apply the rules consistently. That is, if you fire someonewho comes to work high, you should terminate those whoshow up drunk. In both cases, you’re punishing behavior(intoxication), not a disability (alcoholism or addiction).

americans with Disabilities Act 12.9• Keep records of whom you discipline and why. Review howyou discipline workers who violate your rules with an eyetoward identifying patterns. For example, see if you’ve disciplinedthose who come to work late because of an addictionmore harshly than those who show up late for other reasonssuch as “traffic” or “car trouble.” Remember, a neutral rulecreated for a valid business purpose, applied evenhandedly,will stand up in court.Recreational drug use or binge drinkingNot everyone who uses drugs (legal or illegal) or drinks alcohol isdisabled. Remember, to be a disability, a condition must substantiallylimit a major life activity. A worker who sometimes smokesmarijuana or a social drinker who sometimes is hung over onMonday is probably not disabled. Neither is covered by the ADAor needs to be accommodated.In fact, you should enforce all workplace rules against theseworkers. The reason is simple: If you go easy on weekend drinkersor drug users when you catch them and then land heavily on thetrue addict, you may create an ADA case. You would, in effect,be applying your neutral policy (“Don’t come to work under theinfluence”) to the disadvantage of the disabled addict. Define thecrime, and then make sure everyone who breaks the rules doesthe time.AIDS and HIVIn 1998 the Supreme Court issued its first ruling on an issue relatedto AIDS and its first major interpretation of the Americans withDisabilities Act. The justices made it clear that all persons who areHIV-positive, even though they may show no overt symptoms ofthe disease, are protected under the ADA. Bragdon v. Abbott, 524U.S. 624 (1998)Lower courts had long held that people infected with fullblownAIDS are protected by the ADA. Since the Supreme Courtruling, employers must afford the same protection to workers orapplicants who are HIV-positive but show no outward signs ofthe infection.

12.10 Employer’s Practical Legal GuideNote: According to the Centers for Disease Control and Pre vention,one in 16 employers with 50 or fewer employees, as well asone in six large employers, has “experienced” an employee who isHIV-positive or has AIDS.Caution: The ADA prevents you from asking workers abouttheir HIV status or what medications they are taking. It is alsoillegal to deny a job or health insurance to applicants because theyare HIV-positive.Your best bet: Avoid even the appearance of discrimination.Follow these guidelines:• If your insurance pool requires blood tests for classifyingcovered employees, have everyone take the same test. Thenmake sure that managers who are making hiring decisionsdon’t have access to test results.• Don’t ask medical questions during interviews. If an applicantvolunteers that she is HIV-positive, just say, “We don’tneed to discuss that at this time.”• Keep medical records private, and store them away fromregular personnel files.• Establish a company policy on HIV and AIDS. Educateemployees about HIV transmission.• Consult a lawyer before making any employment decisionrelated to HIV or AIDS.Mental Disabilities: EEOC GuidelinesIn 1997 the EEOC released guidelines to clarify the employer’sresponsibility in applying the ADA to workers who have psychiatricdisabilities.An employee with a mental disability is protected by the lawand needs to be accommodated in the same way as a worker witha physical disability, the commission stated.Although it is often obvious when a worker is physicallydisabled, it is more difficult to determine when an employee ismentally disabled. Obvious or not, though, if an employee hasa “mental impairment” that “substantially limits a major life

americans with Disabilities Act 12.11activity,” that worker is protected, and the employer is potentiallyliable for discrimination under the ADA.Under the new EEOC rules, employers need to be alert to thepossibility that traits regarded as undesirable—chronic lateness,poor judgment, hostility to co-workers or supervisors—“may belinked to mental impairments.” Although the traits themselvesare not mental impairments, they may be shown to be related tomental impairments, the EEOC stated.The following disorders are considered mental or emotionalimpairments:• Major depression• Bipolar disorder• Anxiety disorder• Schizophrenia• Personality disorder• Mental retardation• Specific learning disabilities• Alzheimer’s diseaseWhat if a worker claims she’s mentally disabled because shecannot interact with her fellow employees? You should ask formedical certification of this condition. To be a valid disability,it must be diagnosed by a psychiatrist in accordance with theAmerican Psychiatric Association’s Diagnostic Statistical Manual(DSM).If the condition does fit a diagnosis in the DSM, you mustexplore ways of accommodating the disability unless it’s one ofthe specifically excluded conditions, such as kleptomania, pyromaniaand sexual disorders.If the disability cannot be accommodated in the current position,the person may be transferred to another vacant position forwhich she is qualified. You are not obligated to create new jobsor remove other workers from existing jobs to accommodate adisabled employee.If the worker’s condition is not a disability, then you may evaluateher job performance based on her behavior. She is subject toany disciplinary procedures that any other nondisabled workerwould receive for the same performance.Employees who are so disruptive that they are a “directthreat” to themselves or others are not protected under the ADA.This applies to physical conditions as well. Chevron v. Echazabal,536 U.S. 73 (2002)

12.12 Employer’s Practical Legal GuideEmployers may use the “direct threat” defense to refuse tohire an applicant or to terminate an employee. However, you mustdocument every decision and show clearly that the person poseda direct threat to himself or others. This documentation will eithersupport or kill your direct-threat defense in court.Accommodating psychiatric disabilitiesThe EEOC rules give examples of the types of adjustments anemployer may need to make to accommodate individuals withpsychiatric disabilities. They include:• Modifying schedules, including providing additional unpaidleave.• Making physical changes, such as erecting room dividers toreduce workplace noise.• Changing policies. For example, allowing a worker who hasa dry mouth because he’s on psychiatric medication to drinkbeverages on duty.• Adjusting supervisory methods, including providing moredetailed, day-to-day guidance, feedback or structure.• Providing a job coach.• Allowing job changes.Reasonable accommodations “must be determined on a caseby-casebasis because workplaces and jobs vary, as do people withdisabilities,” the EEOC stated. Remember: You may need to makethese accommodations for individuals who are able to control theeffects of their disability with medication because these workersalso are protected under the guidelines.To obtain a copy of the guidelines, The Americans with DisabilitiesAct and Psychiatric Disabilities, call the EEOC Publications Center at(800) 669-3362 or access the guidelines online at www.eeoc.gov.Note: The most common psychiatric disabilities are anxietydisorders and depression, according to the Department of Healthand Human Services. Although both disorders are highly treatable,only one out of four Americans with these disorders get

americans with Disabilities Act 12.13treatment. A treatment policy at the workplace may allow anemployee to continue working effectively without disrupting yourbusiness.An employer’s biggest concern is how co-workers will behavearound an employee with a psychiatric disability. Initiatingemployee education programs can help eliminate certain stereotypesas well as emphasize the company’s anti-harassment policytoward people with illnesses.As an employer, you’re responsible for the actions of yourworkforce. An increasingly fertile ground for lawsuits againstemployers is employee harassment. If you allow co-workers tocreate a hostile work environment for disabled workers, you maypay a high price.Some co-workers may voice resentment when they perceivethat someone with a mental disability is getting “preferentialtreatment” in the way of accommodations. Don’t tolerate a hostileenvironment.Also, keep information about a disability confidential unlessthe disabled worker chooses to disclose this fact to co-workers.Guidance for Specific DisabilitiesThe EEOC is regularly adding to its guidance with suggestions foraccommodating specific disabilities. Guidelines already re leasedinclude the following common disabilities, which may require reasonableaccommodations: diabetes, cancer, epilepsy, vision impairment,hearing impairment and intellectual disabilities.Employers can find accommodations for many disabilities atthe Job Accommodation Network site: www.askjan.org/soar.➤ Recommendation: When confronted with an accommodationsituation, use the JAN website and document all the stepstaken. Courts will have a hard time ruling against an employerthat evaluated every accommodation listed on the site.In addition, the EEOC has begun issuing guidance for spe cificindustries. The first one, published in 2004, provided guidance forrestaurants and other food service establishments. You can accessother guidelines as they are released at www.eeoc.gov.

12.14 Employer’s Practical Legal GuideHiring Practices and the ADAThe ADA has revolutionized the job interview. Although interviewshave historically been an unreliable way to determineemployee performance, employers continue to use them out ofa sense of tradition. The ADA has brought some structure to thejob interview, and by making employers focus on the applicant’sability to perform the job’s essential functions may even enableemployers to hire better employees.The chart on page 12.15 provides some guidance as to whatquestions may or may not be asked in a hiring interview.Remember: You may not ask any question whose answermight reveal a disability. To be safe, only ask questions aboutthe person’s ability to perform the job’s essential functions. Ofcourse, in order to do this, employers must have accurate and upto-datejob descriptions outlining essential and nonessential jobfunctions. Job descriptions should be updated regularly by takinginput from both employees and supervisors. Courts frown uponout-of-date job descriptions.Make interview site accessibleThe place you conduct interviews says a great deal about yourorganization’s willingness to accommodate disabled workers.The interview site should be easily accessible for wheelchairboundapplicants and have disabled-accessible restrooms. Additionally,check the site for other accessibility issues: handicappedparking spaces, properly sized aisles and doors, and alarmsystems that emit both audible and visual signals in the event ofan emergency.Note: Building accessibility guidelines are available from theUnited States Access Board at www.access-board.gov.Essential FunctionsYou don’t have to hire a disabled person who doesn’t have therequisite skills, experience and education for the job in question. Ifthe deciding factor is the disability, however, you must prove that

americans with Disabilities Act 12.15Interview Do’s and Don’tsMay I ask . . .? Yes or No ReasonHow many days were No. The answer may indicateyou off sick last year?a disability and its severity.Other than vacation, Yes. The answer tends to showhow many Mondays or abuse of leave rather thanFridays were you absent use for a disability.last year?Have you ever been No. Addiction is a disability.addicted to illegal drugsor alcohol?Other than due to illness, Yes. The answer highlightshow many days wereattendance problems notyou absent last year?associated with a disability.Have you ever taken No. Casual, illegal drug useillegal drugs?is not a disability, butanswering “yes” mightreveal a past addiction.Are you on illegal Yes. Current use of an illegaldrugs today?drug is not a covereddisability.Are you taking Ritalin? No. The answer will likelyAZT?reveal a disability (attentiondeficit hyperactivitydisorder or narcolepsy, orHIV/AIDS-related diseases).Do you drink the No. The answer couldequivalent of more than reveal alcoholism.a six-pack of beer a day?Do you drink socially? No. The question could elicitconfessions of binge drinking,which may be a disability.

12.16 Employer’s Practical Legal Guidethe disability interferes with what the ADA terms the “essentialfunctions” of the job.Those functions should be reflected in the job description. ForADA purposes, a job function is considered essential when:• The position was established so that the function could beperformed. For example, a proofreader’s ability to examine apage visually is an essential function.• There are a limited number of employees available to performthe function. For example, in a very busy office, all employeeswould be required to answer the phone in addition to theirregular tasks. So even if someone was hired as a typist, youcould argue that speaking on the phone was still an essentialjob function.• A function is highly specialized, and the person in the positionis hired for special expertise or ability to perform it.• The employee spends most of his time performing the essentialfunction.• There would be dire consequences if the function were notcarried out. For example, a firefighter may have to carry aheavy person from a burning building only occasionally, butthe ability to do so is essential to the job.• The function is cited as essential in a collective bargainingagreement. If such an agreement lists duties to be performedin particular jobs, the terms of the agreement may provideevidence of essential job functions. However, the agreement,like a job description, would be considered along with otherevidence, such as the actual duties performed in these jobs.• Those who’ve performed the job identify it as essential.Caution: If you intend to use a job description as evidence ofessential functions, it must be prepared before advertising or interviewingfor the position.According to the EEOC, a job description prepared after analleged discrimination action cannot be used as evidence. Also,when determining essential functions, keep in mind that youmust concentrate on the result of the function, rather than the

americans with Disabilities Act 12.17Disability QuestionsIf you’re confused about which disability-related questions youcan legally ask a job applicant or a current employee, you maywant to read the EEOC’s guidelines on the issue.For questions related to interviewing new job applicants, go towww.eeoc.gov/policy/docs/preemp.html to read EnforcementGuidance: Preemployment Disability-Related Questions andMedical Examinations. These guidelines cover what you can andcannot ask in the pre-offer and post-offer stage and when youcan legally conduct medical examinations.Or, if you’re confused about when you can ask currentemployees about their medical condition or medical tests, theEEOC recently published Enforcement Guidance: Disability-Related Inquiries and Medical Examinations of EmployeesUnder the Americans with Disabilities Act. Available online atwww.eeoc.gov/policy/docs/guidance-inquiries.html, the guidelinesoffer specific scenarios on when employers can obtainmedical information on current employees. (If an employee ishaving no performance problems, it’s typically inappropriate toask about his medical condition.)The EEOC’s rules also explain how you must treat currentemployees applying for a different job within your company. Itsbasic position: Treat them as you would any applicant, meaningthat you are restricted in asking medical questions and requiringexams before making a conditional job offer.To obtain either set of guidelines free in booklet form, call theGovernment Printing Office at (800) 669-EEOC.manner in which it is performed. If, for example, a job requireshaving access to a computer for input and retrieval, it is notessential that the person use an ordinary keyboard to enter data

12.18 Employer’s Practical Legal Guideor visually read the information on the screen. Adaptive deviceswould enable the person to perform the functions differently butwith the same results.Reasonable AccommodationA “reasonable accommodation” is a modification or adjustment toa job, work environment or work process that enables a qualifiedindividual with a disability to perform the job duties successfully.An accommodation must ensure equal opportunity in the applicationprocess; assist a qualified individual with a disability toperform the essential functions of a job; and enable him to enjoyequal benefits and privileges of employment.An accommodation is considered “unreasonable” (or, in theterminology of the ADA, “causes an undue hardship”) if it is toodifficult or expensive for a company to provide. What is consideredreasonable varies greatly and depends on the size andresources of the company, as well as on the nature of the accommodationbeing made.To argue that an accommodation would cause your companyan undue hardship, you must have supporting data in the followingareas:■ The nature and net cost of the accommodation needed.The cost is the actual cost to your company. Specific federal taxcredits and deductions are available for accommodations requiredby the ADA. Also, sources of funding are available to help pay forsome accommodations. If you qualify for a tax credit, deductionor partial funding for an accommodation, only the net cost to youshould be considered.■ Various financial factors. The financial resources of thefacility making the accommodation, the number of employees atthat facility and the financial impact of the accommodation all canbe considered. If you have only one facility, the cost and impactof the accommodation will be considered in relation to the effecton expenses and resources of that facility. If your facility is partof a larger entity, you should also consider the overall financialresources, size, number of employees and the type and location offacilities of the corporation covered by the ADA.

americans with Disabilities Act 12.19■ The type of operation. This includes the structure andfunctions of the workforce and the geographic, administrativeor fiscal relationship to the larger entity of the facility involvedin making the accommodation. For example, an independentlyowned fast-food franchise that receives no funding from themother company may assert that it would cause undue hardshipto provide an interpreter for a deaf applicant to perform as acashier. Assuming the financial relationship between the nationalcompany and the local facility is limited to payment of an annualfranchise fee, only the resources of the local franchise would haveto be considered in determining whether this accommodationwould cause an undue hardship.■ The impact of the accommodation on the facility. Thisincludes how the accommodation would affect other employees’job performance and your ability to conduct business. For example,a person with a visual impairment applied for a job as a waitress ata nightclub. The club maintains dim lighting to create an intimatesetting and lowers its lights further during the floor show. If thejob applicant requested bright lighting as an accommodation sothat she could see to take orders, you could assert that this wouldbe an undue hardship, one that would seriously affect the natureof your operation.The following examples show what kinds of accommodationsmay be needed to make facilities accessible and usable:• Installing a ramp at the entrance of a building.• Removing raised thresholds.• Making restrooms accessible, including toilet stalls, sinks,soap and towels.• Rearranging office furniture and equipment.• Making a drinking fountain accessible, for example, byinstalling a paper cup dispenser.• Adding flashing lights, when alarm bells are normally used,to alert an employee with a hearing impairment.Job restructuring or job modification is a form of reasonableaccommodation that enables many qualified individuals with

12.20 Employer’s Practical Legal Guidedisabilities to perform jobs effectively. This often involves reallocatingthe secondary functions of a job. However, you are notrequired to reallocate the essential functions of a job as a reasonableaccommodation.For example, an essential function of a security guard’s jobgenerally is to inspect identification cards. If a person with a visualimpairment could not verify the identity of an individual from hisphotograph and other information on the card, you would not berequired to transfer this function to another employee and youwould be justified in denying an applicant the position.Reassignment to a vacant position should be considered onlywhen an accommodation is not possible in an employee’s pres entjob or when it would cause an undue hardship. Reassignment maybe a reasonable accommodation if both you and the employeeagree that it is more appropriate than an accommodation in thepresent job.➤ Observation: The reassignment accommodation is requiredonly for current employees. You don’t have to consider a differentposition for a job applicant if she is not able to perform the essentialfunctions of the position she is applying for, with or without areasonable accommodation.Similarly, you are not required to create a new job or bumpanother employee from a job in order to provide reassignment.Nor are you required to promote an individual with a disabilityto make such an accommodation.Case in point: Forcing an employer to reassign more than40% of a disabled employee’s tasks to other workers “would notlikely constitute a reasonable accommodation” and would pose anunfair burden on other employees, the U.S. Court of Appeals forthe 11th Circuit ruled in affirming the decision of a lower court.Jones v. Alabama Power Co., 77 F.3d 498 (11th Cir.)Performance and Conduct StandardsSometimes an employee’s disability may create performance orconduct problems. When this happens, a reasonable accommodationoften will eliminate the problem. But what if the employeedoesn’t ask for an accommodation? Can an employer raise theissue without running afoul of the ADA?

americans with Disabilities Act 12.21In response to numerous performance-related questions fromemployers, the EEOC released a detailed guide to help employersapply performance and conduct standards to employees with disabilities.Here’s a summary of the EEOC’s recommendations.Employers should apply the same requirements and performancestandards to disabled employees that they do to all workers.Even though disabled employees may require accommodations tomeet those requirements, the requirements should be the same foreveryone. As with any performance standard, employers shouldgive clear guidance regarding the quality and quantity of workand the timetables for producing it. When evaluating employees,the same principle applies: Employees with disabilities shouldreceive an objective appraisal of their performance.If someone’s disability leads to a performance problem, theobjective appraisal (which need not raise the reasons for the performanceproblem) may prompt the employee to raise the issueof his or her disability and request an accommodation, but theemployer should not broach the subject of disability.If an employee requests an accommodation in response to aperformance evaluation or discipline, the employer should beginthe interactive process of finding a reasonable accommodation.Just like other workers, disabled employees may be disciplinedfor violations of conduct rules, even if the violations result fromthe disability, so long as the rules result from a business necessityand are applied evenly to all workers.The common denominator is neutrality: Set clear policies forall employees and adhere to them. For more information, visitwww.eeoc.gov/facts/performance-conduct.html.Financial and Technical AssistanceSeveral sources of financial assistance are available to help businessesmake reasonable accommodations and comply with ADArequirements:Tax credit for small businessIn 1990 Congress established a special tax credit to help smallercompanies make accommodations required by the ADA. An

12.22 Employer’s Practical Legal Guideeligible small business may take a tax credit for one-half the costof “eligible access expenditures” of more than $250 but less than$10,250 for the taxable year. An eligible small business is one withgross receipts of $1 million or less for the taxable year, or if thatcriterion does not apply, one with 30 or fewer full-time employees.Access expenditures that qualify for the tax credit include:• Removing architectural, communication, physical or transportationbarriers to make the business accessible to peoplewith disabilities.• Providing qualified interpreters or other methods to facilitatecommunication for people with hearing disabilities.• Providing qualified readers, taped texts or other methodsto make printed materials readable for people with visual disabilities.• Acquiring and modifying equipment or devices for peoplewith disabilities. To qualify for the tax credit, your accommodationsmust meet technical standards of the ADA AccessibilityGuidelines, where applicable.Tax deduction for architectural and transportationbarrier removalA business may deduct up to $15,000 per year for expenses inremoving specified architectural or transportation barriers. Coveredexpenses include the costs of replacing barriers such as steps, narrowdoors and inaccessible parking spaces and toilet facilities.Assistive technologyReasonable accommodations for some disabilities may involve theacquisition of assistive technologies. These can be simple devicessuch as larger computer monitors or voice command software.As disabled workers enter the workplace in greater numbers,employers are likely to be asked to provide a broader range ofassistive technology.State education departments are helping more students withdisabilities by preparing them for the transition from school to

americans with Disabilities Act 12.23work. These efforts include development and training on the useof technology.The Assistive Technology Act of 2004 provides grants to statesto fund better assistive technology for students with disabilities aswell as give them information about what technologies are availableto assist them in transitioning from school to work. That’sgood news for employers. Students with disabilities who enter theworkplace will already know what works for them, making thereasonable accommodations process easier, faster and less financiallyrisky.Work opportunity creditThe Work Opportunity Credit, which replaced the TargetedJobs Tax Credit in 1996, applies to newly hired individuals fromtargeted groups, including those in vocational rehab programs.Employers can receive a credit of up to 40% of the qualified individual’sfirst-year wages. The program must be reauthorized eachyear by Congress.Other sources of fundingState and local vocational rehabilitation agencies and state commissionsfor the blind can provide financial assistance for equipmentand accommodations for their clients.The Department of Veterans Affairs also provides financialassistance to disabled veterans for equipment needed to help performjobs. Some organizations that serve people with particulartypes of disabilities also provide financial assistance for the neededaccommodations. Other types of assistance may be available inyour community.For technical assistance on accommodations, there are severalsources available, many of them at no cost. The ADA RegionalBusi ness and Disability Technical Assistance Centers are a majorsource of information, assistance and referral to specialized localagencies. Other sources include state and local vocational rehabilitationagencies, independent living centers, the Job Accommoda tion Network (JAN), ABLEDATA and the DOL’s Office ofDis abil ity Employment Policy. (See listings in Appendix B.)

12.24 Employer’s Practical Legal GuideGenetic Information Nondiscrimination ActPassage of the Genetic Information Nondiscrimination Act (GINA),which took effect in 2009, grew out of concern that employerscould use genetic information to discriminate against employees.For years, business groups argued the ADA’s “regarded as” protectionswere sufficient to prevent genetic discrimination.But the ADA primarily applied to employers and not insurers.Further, many disability advocates believed the ADA’s provisionsdid not go far enough. And the medical community weighed in,with doctors claiming people were avoiding genetic tests out offear the results could be used against them.The EEOC defines genetic information as “information aboutan individual’s genetic tests and genetic tests of an individual’sfamily members, as well as information about any disease, disorderor condition of an individual’s family members.” In effect,genetic information is anything that might indicate a probabilitythat a person may develop a disease or condition in the future.The law prohibits employers from discriminating againstemployees or applicants based on their genetic information in anyaspect of “employment, including hiring, firing, pay, job assignments,promotions, layoffs, training, fringe benefits or any otherterm or condition of employment.”Similarly, employers may not harass employees because oftheir genetic information and may not retaliate against employeeswho bring genetic information discrimination charges.While it is generally true that employers should not seek orpossess genetic information, there are some cases where it may benecessary. Regulations allow employers to acquire genetic informationunder several conditions, including:• Inadvertent acquisitions of genetic information do not violateGINA, such as in situations where a manager or supervisoroverhears someone talking about a family member’s illness.• Genetic information (such as family medical history) may beobtained as part of health or genetic services, including wellnessprograms, offered by the employer on a voluntary basis,if certain specific requirements are met.

americans with Disabilities Act 12.25• Genetic information may be acquired as part of the certificationprocess for FMLA leave (or leave under similar state orlocal laws), where an employee is asking for leave to care for afamily member with a serious health condition.• Acquisition through commercially and publicly available documentslike newspapers is permitted, as long as the employeris not searching those sources with the intent of findinggenetic information.Employers must remember that any legitimately obtainedgenetic information must be kept confidential. If you have a legitimateuse for the information, it should be kept in the employee’sconfidential file and accessed only by company personnel with alegitimate need to know.Penalties for GINA violations can be large. Minimum fines forGINA violations are $2,500. However, fines for unintentional violationsmay go as high as $500,000 or 10% of the company’s healthinsurance costs, whichever is less. But should a court determinethat the employer deliberately violated GINA, there is no cap.Safe harbor provision for employersGINA regulations provide employers with a “safe harbor” for collectinggenetic information while obtaining medical certificationof an employee’s need for FMLA leave or reasonable accommodationunder the ADA. When requesting medical information froma health care provider, employers should include the followingstatement:The Genetic Information Nondiscrimination Act of 2008 (GINA)prohibits employers and other entities covered by GINA Title II fromrequesting or requiring genetic information of an individual or familymember of the individual, except as specifically allowed by this law. Tocomply with this law, we are asking that you not provide any geneticinformation when responding to this request for medical information.“Genetic Information,” as defined by GINA, includes an individual’sfamily medical history, the results of an individual’s or family member’sgenetic tests, the fact that an individual or an individual’s family member

12.26 Employer’s Practical Legal Guidesought or received genetic services, and genetic information of a fetuscarried by an individual or an individual’s family member or an embryolawfully held by an individual or family member receiving assistivereproductive services.Include this safe harbor language on all requests for employeemedical information, such as for fitness-for-duty determinations.Note: If the leave request pertains to an immediate familymember’s serious health condition, do not include the safe harborlanguage. By definition, the provider must provide family membermedical information.To read the EEOC’s final GINA regulations, go to www.eeoc.gov/laws/types/genetic.cfm.

FMLA Leave,Military LeaveEmployees may take unpaid leave for a number ofreasons. The two most common are leave takenunder the Family and Medical Leave Act (FMLA) andmilitary leave taken by activated reservists, who areprotected by the Uniformed Services Employment andReemployment Rights Act (USERRA).In addition, employees may now take leave to attend to needsarising out of a family member’s active military duty or call toduty, including caring for injured service members. (See details onpage 13.21.)Family and Medical Leave ActSection 13Since 1993 the Family and Medical Leave Act has provided qualifiedemployees up to 12 weeks of unpaid, job-protected leave peryear for the birth, adoption or foster care of a child; caring for achild, spouse or parent with a serious health condition; or convalescenceafter an employee’s own serious health condition.For 16 years, complying with the FMLA was complex, but atleast the law stayed the same. In 2009, that all changed when thefirst major overhaul of the FMLA took effect. The DOL’s revisedFMLA regulations contain several key changes in administeringleave that employers and HR professionals need to be aware of and13.1

13.2 Employer’s Practical Legal Guideincorporate into their company policies. (For a summary of the keyFMLA changes, see page 13.3.)Compliance RegulationsThe FMLA affects about 50 million workers in the private sectorand 300,000 U.S. businesses, according to the Bureau of LaborStatistics.Any company with 50 or more employees working withina 75-mile radius of the “work site” and “engaged in commerce”must comply with the FMLA. The courts have interpreted theterm “engaged in commerce” so loosely that virtually all types ofbusinesses meet the definition.The regulations specifically bar employers from shiftingemployees from one work site to another to evade the employeelimit. The 50 or more workers must be employed “for each workingday during each of the 20 or more calendar workweeks in thecurrent or preceding calendar year.”If your company is owned by another corporation, how wouldyou determine the total number of employees for compliancepurposes?The companies would be considered separate entities unlessyou met the “integrated employer” test. Four criteria are used todetermine if two or more companies are an integrated employer:“common management, interrelation between operations, centralizedcontrol of labor relations and degree of common ownership/financial control,” according to Section 825.104c (2) of the FMLAregulations. If you meet those tests, the employees of all the companieswould be counted in determining whether you are coveredby the law.If you are uncertain of your status, call the Wage and HourDivision, Department of Labor, at (866) 487-9243.Employee EligibilityTo be eligible for leave, an employee must have worked for thesame employer for at least 12 months and clocked at least 1,250(Continued on page 13.5)

FMLA Leave, Military Leave 13.3Summary: Revised FMLA RegulationsThe DOL revised the FMLA regulations in early 2009 toreflect both court decisions and changes Congress made inthe National Defense Authorization Act of 2008. (Congressagain changed the military family leave rules in the 2010NDAA.) Here are the most important changes:1. Military caregiver leave. The 2008 NDAA allows coveredemployees in military families to take up to 26 weeksof unpaid FMLA in each 12-month period to care for a familymember with a service-related illness or injury. The 2010NDAA expanded the definition of service-related illness orinjury to include a condition related to military service completedin the last five years. Also, while the 2008 NDAA coveredonly activated reservists and National Guard members,the 2010 NDAA includes the regular armed services as well.2. New leave for families of National Guard and Reservemembers. Families of National Guard and Reserve personnelon active duty are allowed to take up to 12 weeks of jobprotectedFMLA leave per year to manage their affairs.The FMLA leave of the employee (a spouse, son, daughteror parent of the military member) must be related to certainqualify ing circumstances related to the military service. Therules define a qualifying situation as one involving: (1) shortnoticedeployment; (2) military events and related activities;(3) child care and school activities; (4) financial and legalarrangements; (5) counseling; (6) rest and recuperation;(7) post-deployment activities; and (8) additional activitiesin which the employer and employee agree to the leave.3. Revised definition of a “serious condition.” The new regulationstinker with the definition of an FMLA-qualifying “serioushealth condition.” The law says a serious condition must involvemore than three consecutive calendar days of incapacity plus“two visits to a health care provider.” Those two visits mustoccur within 30 days of the period of incapacity.(Continued on page 13.4)

13.4 Employer’s Practical Legal Guide(Continued from page 13.3)4. Direct contact with doctor allowed. Good news: The newregulations allow employers to directly contact an employee’shealth care provider to seek clarification about information onan employee’s FMLA certification form.Note: An employee’s “direct supervisor” is prohibited frommaking such inquiries. The rules give this right only to a“health care provider, a human resources professional, a leaveadministrator (including third-party administrators) or a managementofficial.” Also, employers can’t ask doctors for informationbeyond what is required by the certification form.5. New employer notice obligations. In addition to conspicuouslyposting a notice about your FMLA and complaintfilingprocedures, you must provide the same notice in youremployee handbooks (or distribute a copy of your FMLA policyupon hire).Employers will now be given five business days—instead oftwo—to send out FMLA eligibility and designation notices toemployees.6. Less leeway for employees’ notice. Previously, the law wasinterpreted to allow employees to give notice of their need forFMLA leave up to two business days after being out on FMLAleave, even if they could have given notice earlier.But the new rules say that, in most cases, employees who takeintermittent FMLA leave must follow the employer’s call-inprocedures for reporting an absence, unless there are unusualcircumstances.7. Settlement of past FMLA claims allowed. The rules clarifythat employees can retroactively (typically as part of a severanceor settlement agreement) volunteer to settle their FMLAclaims with their employers without getting court or DOL

FMLA Leave, Military Leave 13.5approval. Prospective waivers of FMLA rights will continue tobe prohibited.8. Light duty doesn’t count as FMLA leave. The rules makeclear that the time employees spend performing “light-duty”work does not count toward their 12 weeks of FMLA entitlement.(This was included because at least two courts ruled thatemployees used up their 12 weeks of FMLA leave while onlight-duty assignments after FMLA leave.)9. Perfect-attendance awards can be denied. Employerscan deny perfect-attendance awards to employees whotake FMLA leave (and thus are absent) as long as they treatemployees taking non-FMLA leave the same way.For full details on the FMLA revisions, including a link to theregulations, go to www.theHRSpecialist.com/newFMLArules.(Continued from page 13.2)hours of service (slightly more than 24 hours per week) during the12 months leading up to FMLA leave.On-call time counts toward the 1,250 hours, but paid time off,such as vacation or sick time, does not. Note: In 2008, the DOLdetermined that time spent in “light duty” work does not countagainst an employee’s FMLA leave entitlement.Employees at a newly acquired company are eligible from thefirst day of work if they had one year’s seniority with the previouscompany. If the employer challenges an employee’s time-workedclaim, the burden of proof is on the employer.Leave TimeEligible employees can take up to 12 weeks of unpaid leave duringa 12-month period. DOL regulations require you to set a fixed12-month period for all employees based on one of the followingmeasuring-year methods:

13.6 Employer’s Practical Legal Guide• A calendar year.• A “leave year,” such as your fiscal year.• A year mandated by state law.• A year starting on the anniversary of the employee’s date ofemployment.• A rolling period, starting on the date the employee first tookFMLA leave.The last scenario, a rolling period, would prevent an employeefrom taking 24 weeks of leave at once—that is, 12 weeks at the endof one year followed by 12 weeks at the beginning of the nextyear.Be careful in selecting your tracking system. You don’t want togive employees a chance to elect the most advantageous measuringmethod when they take their leave. Plus, if you fail to designatea measuring-year method, an employee must be given themost generous leave period available among all the options.Who Is Considered Family?Specific guidelines define the qualifications for FMLA protection.Employees, both men and women, may take leave for the birth oradoption of a child or to provide foster care. Employees also canrequest FMLA leave to provide needed care to a sick spouse, parentor child (see definition of “son or daughter” on page 13.7). In statesthat recognize common-law and same-sex marriages, couples arenow considered spouses under the FMLA.Care provided to unmarried domestic partners is not covered,nor is care for siblings, aunts, uncles, cousins, grandparents orin-laws. Once children become 18, they don’t qualify unless amental or physical disability makes them incapable of self-care.In addition, employees who have family members serving in themilitary are entitled to FMLA-qualifying leave. (See page 13.21.)According to FMLA regulations, you as the employer arerequired to designate the leave requested by an employee asFMLA leave and to notify the worker in writing that the leavequalifies as such.

FMLA Leave, Military Leave 13.7FMLA Now Covers Care by Same-Sex ParentsIn 2010, the DOL issued a broad interpretation of the definitionof “son or daughter” under the FMLA. It clarified thatany employee who assumes the role of caring for a child willreceive parental rights under the FMLA, regardless of the biologicalrelationship.For example, an employee who cares for a domestic partner’schild—or whose partner gives birth or adopts a child—is noweligible to take FMLA leave to care for the child.The DOL made clear that “employees who have no biologicalor legal relationship with a child may nonetheless stand inloco parentis to the child and be entitled to FMLA leave.”The new rule applies regardless of sexual orientation or conventionalfamily ties. That means it also covers FMLA leavefor extended family members. For example, an uncle who iscaring for his sick niece while the child’s single parent is calledinto military duty is eligible.For details, go to www.dol.gov/whd/regs/compliance/whdfs28f.pdf.There are only two instances in which you would be allowedto designate FMLA leave after the leave was taken: (1) if you didnot know why an employee had been on leave, as long as you designatethe leave within two days of the worker’s return to work, or(2) if you had already provisionally designated the leave as FMLAleave but were waiting for the medical certification.‘Serious Health Condition’ DefinedThe FMLA defines a “serious health condition” as an illness,injury, impairment, or physical or mental condition that involvesone of the following:

13.8 Employer’s Practical Legal GuideHospital Care: Inpatient (overnight) care in a hospital, hospiceor residential medical care facility, including any period of incapacityor subsequent treatment connected to inpatient care.Absence Plus Treatment: A period of incapacity of more thanthree consecutive calendar days (including any subsequent treatmentor period of incapacity relating to the same condition) thatalso involves one of the following:• Two or more visits to a health care provider. The first visitmust occur within seven days of the first day of the incapacity,and both visits must take place within 30 days of the firstday of the incapacity.• A regimen of continuing treatment, with the first visit takingplace within seven days of the onset of the incapacity.Pregnancy: Any period of incapacity due to pregnancy or forprenatal care.Chronic Conditions Requiring Treatments: A chronic conditionthat extends over a period of time and requires periodic treatmentsby a health care provider. “Periodic visits” are defined asat least two visits to a health care provider per year. During thatperiod, the incapacity may be episodic or recurrent rather thancontinuous. Examples include asthma, epilepsy and diabetes.Permanent/Long-Term Conditions Requiring Supervision:A permanent or long-term incapacity due to a condition thatmay not respond to treatment. The employee or family membermust be under the continuing supervision of, but need not bereceiving active treatment by, a health care provider. Examplesinclude Alzheimer’s, a severe stroke and the terminal stages ofa disease.Multiple Treatments (Non-Chronic Conditions): Any periodof absence to recover from or receive multiple treatments forrestorative surgery after an accident or injury, or for a conditionthat would likely result in a period of incapacity of more thanthree consecutive calendar days in the absence of medical interventionor treatment, such as cancer (chemotherapy, radiation),severe arthritis (physical therapy) and kidney disease (dialysis).

FMLA Leave, Military Leave 13.9You are not required to give FMLA leave for certain types ofcare, such as a face lift, acne treatment or orthodontia—at leastin theory. But if the employee spends time in a hospital to geta face lift, the person can demand leave time under the FMLAbecause of a subordinate clause in the regulations excludingmedically unnecessary treatment “unless inpatient hospital careis required.” Routine medical exams are explicitly excluded fromFMLA coverage, as are most procedures that aren’t medicallynecessary.Substance abuse may qualify as a serious health condition if itmeets certain criteria.For example, substance abusers may take leave under theFMLA but only for substance abuse treatment that is administeredby a health care provider. If an employee is absent from workbecause of a substance abuse problem, instead of treatment, youdo not have to grant him FMLA leave. And remember: Treatmentfor substance abuse does not mean you cannot take disciplinaryaction—including termination—against the employee. As long asyour policy on substance abuse is the same for all employees andis communicated to all of them, you can take action. But you cannotdiscipline an employee because he has exercised his right totake FMLA leave for treatment.Health Care ProvidersDOL rules stress that the status of a health care provider isn’t limitedto physicians. A provider is defined as a doctor of medicine orosteopathy authorized to practice medicine or surgery in a specificstate or states or any other person whom the Secretary of Labordeems capable of providing health care services. Here’s a partiallist of those who are considered providers:• Physicians• Clinical social workers• Podiatrists• Christian Science practitioners• Optometrists• Health care providers recog-• Nursesnized by the employer or the• Dentistsbenefits manager of the• Clinical psychologists employer’s group health plan• Chiropractors

13.10 Employer’s Practical Legal GuideNotice RequirementsFMLA leave requests fall into two categories: foreseeable and unforeseeable.When the leave is foreseeable, employees are required toprovide at least 30 days’ notice or notify the employer as soon aspracticable if the leave is foreseeable but will begin within 30 days.Examples of foreseeable leave are childbirth and nonemergency surgeryfor the employee or an immediate family member.When leave is unforeseeable, employees must follow theiremployers’ usual and customary call-in procedures for reportingan absence, unless unusual circumstances prevent themfrom doing so. Some flexibility is necessary here. Obviously,an employee who is in a coma following a car accident wouldbe unable to notify you, and family members may or may notbe available to inform you. (Technically, the family is under nolegal obligation to do so.)Notification can be verbal or written. Employees do not haveto use the term “FMLA leave.” Simply, any indication that theemployee will be off work for a reason covered by the FMLA is sufficientnotice. You must train your supervisors and any other appropriatepersonnel to recognize FMLA requests. When the request isreceived, you should document it and formulate a response.In situations where an employee has been absent with no communicationfor two days and he is eligible for FMLA leave, youshould send out an FMLA notification stating that you are provisionallyapproving FMLA leave if the employee:• Can show the need for leave was valid under the FMLA oryour company’s FMLA policy.• Can produce medical certification from a health care providerjustifying the time off.The letter should also explain the consequences of failing toprovide this information.Employers must ask for medical certification from a healthcare provider. To maintain employee privacy, requests for informationmust come from a health care provider, an HR professional,a leave administrator or a management official. In no case

FMLA Leave, Military Leave 13.11Notifying Employee of FMLA LeaveYou should always send a letter within five business days toemployees who take FMLA leave that outlines your organization’sspecific requirements on use of the leave.Make sure your letter covers these issues:1. The employee’s need to provide you with medical certificationthat proves the leave qualifies under FMLA.2. The employee’s need to present medical certification thatshe is fit for duty upon return from leave.3. The employee’s right to substitute paid leave for unpaidleave.4. Your right to require all workers to use their paid sick time,annual and personal leave as part of their FMLA leave.5. Whether the employee must make partial premium paymentsto maintain health insurance benefits while on leave.6. The employee’s potential liability for payment of his healthinsurance premiums in the event he does not return fromleave.7. The employee’s right to return to the same or an equivalentjob after the leave.may the employee’s direct supervisor make the request. Further,employers may not ask health care providers for additional informationbeyond that required by the certification form.Employers may use the DOL’s optional certification forms:WH-380-E: FMLA Certification of Health Care Provider for Employee’sSerious Health Condition or WH-380-F: FMLA Certification of HealthCare Provider for Family Member’s Serious Health Condition. Healthcare providers are allowed, but not required, to provide a diagnosisof the patient’s health condition as part of the certification.

13.12 Employer’s Practical Legal GuideIf you find the medical certification insufficient, you mustspecify in writing what information is lacking, and give theemployee seven calendar days to correct the deficiency.Caution: Be careful to observe all provisions of HIPAA whenrequesting and storing employee health records.Once you have medical certification covering the FMLA leave,you should also obtain a projected date of return from the healthcare provider. In cases of childbirth or adoption, the employee isentitled to take up to 12 weeks regardless of the health condition.You should monitor the situation and get updates as the pro jecteddate of return to work approaches.Employers are required to take certain steps to inform theiremployees about their FMLA rights:• You must conspicuously post in your workplace the DOL’snew FMLA poster and general notice, detailing employeerights and employer responsibilities.• You must distribute the general notice to all employees inyour company handbook (if you have one) or provide a copyto each new employee upon hire. (Electronic distributionis permitted.) You should have your own company FMLApolicy outlining leave usage and procedures.• When an employee requests FMLA leave or you becomeaware of the person’s need for leave, you must notify theemployee of his or her eligibility for FMLA leave withinfive business days, absent extenuating circumstances. If theemployee is ineligible, the notice must state at least one reasonfor the person’s ineligibility.• If the employee requires further FMLA leave within the sameeligibility period and his or her status has not changed, noadditional eligibility notice is required.Note: An employer may be liable for any harm that anemployee suffers because the employer did not follow the FMLAnotice requirements. In 2008, the DOL eliminated a prior rule thatgranted additional leave as a penalty.

FMLA Leave, Military Leave 13.13Key EmployeesUnder the FMLA you are allowed to designate a class of “key”employees to whom you can deny reinstatement after their FMLAleave but only if reinstatement would cause your business “substantialand grievous economic injury.” You cannot deny FMLAleave to a key employee, only reinstatement. There is no precisetest to determine such an injury, so until case law on this matterdevelops, there are no clear guidelines.To qualify as a key employee, the individual’s salary (includingbase pay and bonuses) must be in the top 10% at your company.Stock options, benefits and perks are not included in thesalary calculation. You don’t have to determine whether someoneis in the top 10% until she requests the leave.Undue DisruptionYou can negotiate with employees about the time when theywould start a foreseeable FMLA leave. The law says that employeesshould schedule their leave “so as not to unduly disrupt theemployer’s operations.” Elective surgery, for example, could beperformed at a date more convenient to your needs as long as anypostponement does not endanger the health of the employee orthe family member involved.A parent can take leave to care for a newborn or newly adoptedchild any time in the first 12 months after the birth or adoption.The leave must be concluded before the 12-month period ends.Presumably, the idea is that if a working mother takes 12 weeksand then returns to work, the father can care for the baby for thenext 12 weeks.If both parents work for the same company, they would beentitled to a combined total of 12 weeks for the birth or adoptionof a child. In this case, each parent would have the differencebetween 12 weeks and the amount of leave they took for the childfor any other legitimate FMLA reason in that year. For example,Bob and Linda Jones have a child and are employed at the samecompany. Bob takes four weeks’ leave, and Linda takes eightweeks’ leave related to their child’s arrival. Bob still has eight

13.14 Employer’s Practical Legal Guideweeks of leave to use in that year for any other FMLA purpose;Linda has four.Intermittent LeaveEmployees are generally entitled to take intermittent leave for medicaltreatment or for other medical reasons, whether it be for theemployee or for a family member. For example, an employee cantake two hours of leave twice a week for medical appointments orseveral days at a time spread over six months for chemotherapy. Inshort, he can opt to work part time, and you can deduct the time heis absent from his 12-week FMLA eligibility. Someone who worksfour days instead of five can do so for a total of 60 weeks beforeexhausting his FMLA leave time. By that time, the employee mayalso be eligible for a new 12 weeks of FMLA leave.Clearly, this can be abused by someone who’d rather work afour-day week. That’s why you should always ask for recertificationsand exercise your right to seek a second or third opinion.You may also transfer an employee who needs to take intermittentleave to an alternative position that would cause fewer disruptionsto your operations. The transfer must be temporary, and pay andbenefits have to be the same as the initial position.Paid vs. Unpaid LeaveFMLA leave is unpaid unless you voluntarily decide to continuepaying the worker. You may insist that the employee first use allher paid time (such as annual leave and sick leave) and count thattoward her total FMLA time. If you do not insist that a worker firstmust use her paid leave as part of FMLA, she is entitled to suchleave on top of the 12 weeks of unpaid leave.Should an employee take both paid leave and unpaid FMLAleave, the paid time will count against her total FMLA time. Forexample, if she takes 3 weeks of paid leave, she is entitled to only9 weeks of unpaid FMLA leave.You are better off having a formal FMLA policy that outlineshow leave is handled. A policy that is uniformly applied leavesless room for charges of discrimination.

FMLA Leave, Military Leave 13.15Note: Employers are not required to give employees noticethat their paid leave will be counted toward their 12 weeksof unpaid leave. McGregor v. Autozone, Inc. 180 F.3d 1305 (11thCir. 1999)BenefitsYou must continue to provide health benefits to an employee onFMLA leave. The same services your group plan provides on-thejobemployees must be made available to those on FMLA leave. Ifyou change coverage or adopt a new plan that offers new serv ices,such as dental care, while the employee is on leave, the new benefitsmust be made available to him as well.An employee may choose to forgo health coverage duringhis leave, perhaps to avoid paying his share of the premiums.However, if he does, you must reinstate him on the same termswithout any qualifying period, physical exam or exclusion of preexistingconditions. But the employee on leave does not get a freehealth insurance ride. If he paid part of the health insurance costwhile working, he would continue to do so while on FMLA leave.If premiums are raised for all workers, the on-leave employee isrequired to pay the new premium. Payments by an employee onleave can be made directly to you or to the insurance carrier.What happens if an employee on leave does not pay his premiums?If payments are 30 days late, you can terminate coverage.However, you still have to take him back at the end of his leaveand restore coverage and benefits to their former status withouta waiting period or medical exam. According to the final FMLAregulations, you must notify an employee in writing that you didnot receive payment for the health coverage premium, and youmust wait 15 days after notifying the employee before you cancancel his coverage.That’s why many companies may wind up paying a worker’sshare of the premiums while he is on unpaid leave. If the worker’sinsurance lapses, many insurance companies would treat thereturning employee as a new customer. As such, a waiting periodor medical exam may be required. Even more significantly, preexistingconditions may not be covered by the carrier. If this were

13.16 Employer’s Practical Legal Guidethe case, the worker would not be returning to the same levelof benefits he had before he went on leave. In other words, youwould be in violation of the FMLA.If the worker for whom you paid premiums never returns,you can demand repayment, provided that he didn’t have a validreason for not returning. Valid reasons include “continuation,recurrence or onset of a serious health problem” or “other circumstancesbeyond the employee’s control.”➤ Recommendation: Make it clear to an employee takingunpaid leave what portion of his benefits plan he must pay. Often,a worker doesn’t realize how much is being taken out of his paycheckto cover health insurance. Let him know that he must stillpay this sum even if he is not being issued a paycheck. Don’t getinto a situation in which you are paying an employee’s premiums.Send him a warning explaining that because he has not made payments,his coverage is about to stop.When a Worker ReturnsAn eligible employee who takes FMLA leave is entitled to berestored to the same position or to an equivalent position withequivalent benefits, pay and other terms and conditions ofemployment.The new position must involve the same or substantially similarduties and responsibilities and must entail equivalent skill,effort, responsibility and authority.The FMLA does not clearly specify what privileges, perquisitesand status qualify as “conditions of employment.” The meaningof “substantially similar duties and responsibilities” is murky,as is the phrase “substantially equivalent skill, effort, responsibilityand authority.”Consider the example of a manager who had supervised12 employees before taking FMLA leave. If, when she returns, shehas responsibility for only four employees, she could argue thatshe no longer has the same authority. Eventually, the courts willcome up with the precise definitions of these terms. But unlessyou like the idea of being a test case, your best bet is to hold theworker’s job during FMLA leave.

FMLA Leave, Military Leave 13.17If an employee falls behind in his skills during his leave, youmust give him a “reasonable” chance to catch up when he returns.The regulations do not say whether you have to pay for such training,but presumably if you paid for this type of training before theemployee went on leave, you must pay for it when he returns. Moreimportant: You must address any physical or mental impairmentsthe employee has upon his return, including any continuation ofthe health problems that sent him on FMLA leave in the first place.As the law points out, provisions of the ADA take over and thenwould govern your obligations. (See Section 12.)The returning employee is entitled to any cost-of-livingincrease granted other employees during his absence, as wellas any other unconditional pay increase. But you don’t have togive a raise based on seniority, length of service or work done. Ifyou have a policy to grant such increases to other employees onunpaid leave, you have to do the same for those on FMLA. Theequivalent-pay provision includes restoration of any shift differentialor regular overtime. If the employee worked an average of 10hours overtime before leaving, he is entitled to the same overtimewhen he returns.Additionally, you cannot move a returning employee to a distantwork site, although you can assign him to a “geographicallyproximate” one. If you closed a site during his leave and movedthe workforce to another city, you must offer him a transfer underthe same conditions offered to other employees.Don’t tamper with benefitsBe sure not to tamper with a returning employee’s benefits. He’sentitled to everything everybody else gets—group life, health anddisability insurance, as well as sick leave, annual leave and educationalbenefits. Pensions are particularly inviolate. Because youcannot require the returning employee to take a physical exam orundergo a waiting period to resume insurance coverage, you mayhave to modify benefits programs so that the employee will beeligible on his return. Your best course of action may be to pay forhis benefits, even if he defaults on premiums, and then try to getyour money back later.

13.18 Employer’s Practical Legal GuideAlthough you don’t have to grant the employee additional benefitsand seniority during his leave, you are obliged to count leavetime as work time for pensions and any other retirement programyou have. If a vesting date falls during leave time, you must treatthe date as if the employee had been working. He is entitled to thesame opportunity for bonuses, profit sharing and similar discretionaryand nondiscretionary payments as workers who remainedon the job. FMLA leave cannot be considered as an absence for disciplinaryreasons or for purposes of attendance bonuses.Caution: When an employee indicates that she wants to returnto work, the employer must obtain a medical release or clarifyany qualifications. When obtaining a medical release, you shouldrequest only a description of the employee’s functional limitations.Receiving any other information may be perceived as aninvasion of privacy and subject your company to litigation.In addition, any policy requiring an employee to be a certain%healed before returning to work will get you into trouble. Theproper inquiry should be whether the employee can do the jobafter being provided with reasonable accommodations.Refusing to Reinstate an EmployeeThe FMLA does allow you to refuse to reinstate a worker returningfrom FMLA leave under limited circumstances. For example,if your company has experienced a reduction in force due to theeconomy or a companywide reorganization, you may be ableto eliminate the returning worker’s job. You must, however,not consider the worker’s taking FMLA leave as a factor in thedecision. That means you can’t create a layoff list that includesabsenteeism as one of the criteria unless you exclude any timethe worker was on FMLA leave or was absent due to an FMLAcoveredevent.What if the employee returning from leave was facingdischarge for poor performance before she took leave or youdiscovered work problems during the absence? You can thentake disciplinary action. Just be prepared to defend your actionswith concrete evidence and make sure every worker with a similarwork record is treated the same. If you fire a worker with a

FMLA Leave, Military Leave 13.19poor employment record who took FMLA leave but retain onewith a similar record who did not, you’re opening yourself to aretaliation lawsuit. As always, good records help. Always documentevery decision, reorganization and layoff decision, and useobjective, job-related criteria for those decisions. Doing so minimizesthe chances of a successful lawsuit second-guessing yourdecisions.Under some circumstances, you’re not required to reinstate aworker who is no longer capable of performing the position sheheld before taking FMLA leave. This could happen, for example,if the worker had a serious health condition that has not resolveditself enough to allow the employee to return full time. However,if the condition also qualifies as a disability under the ADA, youmay have to offer reasonable accommodations. This is an increasinglycommon problem.For example, workers returning after major heart surgery mayhave new restrictions or those with cancer may need additionaltime off for chemotherapy or radiation treatments. Althoughsomeone may no longer be eligible for unpaid time off under theFMLA, that time off may be a reasonable accommodation underthe ADA.You should do a separate analysis of the situation using theADA criteria. For all practical purposes, the FMLA’s requirementof 12 weeks’ unpaid leave has become the minimum accommodationrequired by the ADA.Record-Keeping at a MinimumThe FMLA record-keeping requirements are less onerous thanthose of other laws. For example, you are not normally requiredto submit books or records to the DOL more than once duringany 12-month period. Caveat: If the DOL has “reasonable cause” tosuspect an FMLA violation or is investigating a complaint, it candemand to see records anytime it chooses.You don’t need to complete any special forms or revise yourcomputerized payroll or personnel records system to complywith the FMLA. But your FMLA records must show basic payrolland identification data, including the employee’s name, address,

13.20 Employer’s Practical Legal Guideoccupation, rate of pay, hours worked per pay period, deductionsand total pay. You also need to keep records of the dates on whichFMLA leave is taken and designate the leave as such so that it ismaintained separately from leave provided under state law or anemployer plan different from the FMLA.Also, note the hours an employee takes when going on intermittentleave and the weekly hours worked on a reduced scheduleto which you and the employee have agreed. Make sure you havethis information in writing.Keep copies of the FMLA notices you provided to employeesin their personnel files. And make sure you have documents thatdescribe your employee benefits and personnel practices abouttaking both paid and unpaid leave. All medical documents—suchas certification of FMLA eligibility, recertification or the employee’sor his family’s medical histories—must be kept in a separate file.You have to treat them as confidential, although you may makethe contents known to supervisors who must accommodate anemployee’s medical needs. You must handle FMLA medicalrecords with the same level of confidentiality required by the ADA.The Sarbanes-Oxley Act forbids employers from destroyingor discarding any documentation, paper or electronic, that couldpossibly be needed as evidence in a lawsuit. FMLA-related recordsof an employee involved in a whistle-blower suit could be relevant,especially if retaliation is charged. It’s best to coordinate alldocument storage and destruction schedules so as not to run afoulof any federal or state law.Other Laws ApplyThe relationship between the FMLA and other federal and statelaws on family and medical leave is clear: The law that providesgreater benefits to the employee applies. Be sure to have yourattorney check the laws in your jurisdiction.State laws: In 2004, California became the first state to mandatepaid family and medical leave. The new law dramaticallyexpanded family leave rights and allowed more conditions to triggerleave than the FMLA does.California workers are guaranteed up to six weeks of paidfamily leave in addition to any paid leave they’ve accumulated.

FMLA Leave, Military Leave 13.21Employees on leave receive 55% of their wages, up to a maximumof $728 per week. The program is funded by payroll deductionsaveraging about $27 per year.Eleven states have enacted family leave laws that expand onthe FMLA, and many more are considering similar legislation.Contact your state labor department to check the current law inyour state.Workers’ comp: Keep in mind that in most cases workers’comp absences also qualify as FMLA leave. That means youshould promptly designate time missed for workers’ comp injuriesto activate the 12 weeks of allowable FMLA leave. Other wise, youwould enable employees to take 12 weeks of leave on top of anytime taken for a workers’ comp injury.Under the FMLA’s Final Rules an employee has the right toreject an employer’s light-duty assignment and take the full FMLAleave as long as his serious health condition remains. But yourworkers’ comp insurer can limit or terminate claim payments ifthe employee refuses to accept a light-duty assignment.The ADA: An employee returning from FMLA leave mayalso qualify to receive reasonable accommodations based on theADA. Thus you may have to modify an employee’s schedule orwork environment or even permit additional time off beyond the12 weeks of FMLA leave as required under the ADA.Military Family Leave Under the FMLAThe National Defense Authorization Act of 2008 (NDAA) grantednew leave rights to family members of men and women whoserve in the military. Because the NDAA amended the FMLA, thechanges apply only to employers with 50 or more employees.The law creates a new qualifying reason for leave. Eligibleemployees may take up to 12 weeks of unpaid leave over asin gle 12-month period for “any qualifying exigency” arising fromthe active military service or call to service of a spouse, child orparent.The provision is intended to help employees meet familyneeds that arise as service members prepare for or return fromdeployment. “Qualifying exigencies” include:

13.22 Employer’s Practical Legal Guide• Short-notice deployment• Military events and related activities• Child care and school activities• Financial and legal arrangements• Counseling• Rest and recuperation• Post-deployment activities• Additional activities for which the employer and employeeagree to the leave.The NDAA more than doubles the amount of leave availableto care for a family member injured in the line of duty. A spouse,parent, child or next of kin may take up to 26 weeks of unpaidleave to care for a covered service member recovering from aservice-related injury or illness.Important: To be covered, the illness or injury must haveoccurred in the last five years and while the individual was onactive military duty. (The only exception is for injuries that resultfrom the service member’s misconduct.) Under this definition, asoldier who is injured in a car accident or diagnosed with cancerwhile on active duty is eligible for the coverage.All military family leave runs concurrently with existingFMLA leave, not in addition to it. During a 12-month FMLAperiod, an eligible employee is entitled to a maximum of 26 workweeksof leave if the leave includes time to care for a coveredservice member. For example, a qualified employee who takes12 weeks of nonmilitary-related FMLA leave may take up to anadditional 14 weeks of military family leave, for a combined totalof 26 weeks. The leave may be taken intermittently or on a reducedleave schedule.Employees may elect, or employers may require, the use of theemployee’s accrued paid vacation leave, personal leave, sick leaveor medical leave for any part of the 26-week period. The NDAAdoes not require employers to provide any additional paid leave.As with ordinary FMLA leave, employers may request documentsto support the need for leave, such as certification from theservice member’s health care provider.

FMLA Leave, Military Leave 13.23Note: Some states have passed family military leave lawsthat may grant additional rights beyond the federal NDAA.California, Connecticut, Illinois, Indiana, Maine, Maryland,Minnesota, Nebraska, New York, Oregon and Washington havepassed legislation granting unpaid family military leave.For the full amendment and additional information, visitwww.dol.gov/whd/fmla/2013rule. The DOL also publishes “SpecialFMLA Rules for Returning Reservists (USERRA)” at www.dol.gov/whd/fmla/userra.htm.Military Leave: USERRAThe Uniformed Services Employment and Reemployment RightsAct requires employers to re-employ someone returning fromduty in the uniformed services if he/she meets five criteria:1. The person must have held a civilian job.2. He/she must have given notice to the employer upon leavingthe job for duty in the uniformed services, unless givingnotice was precluded by military necessity or otherwiseimpossible or unreasonable.3. The cumulative period of service must not have exceededfive years.4. The person must not have been released from service underdishonorable or other punitive conditions.5. He/she must have reported back to the civilian job in atimely manner or submitted a timely application for reemployment.USERRA establishes a five-year cumulative total on militaryservice with a single employer, with certain exceptions allowed forsituations such as call-ups during emergencies, reserve drills andannually scheduled active duty for training.The law requires employers to provide to service members anotice of their rights, benefits and obligations. Employees’ restorationrights are based on the duration of military service ratherthan the type of military duty performed (e.g., active duty for

13.24 Employer’s Practical Legal Guidetraining or inactive duty), except for fitness-for-service examinations.The time limits for returning to work are:• Less than 31 days’ service: By the beginning of the firstregularly scheduled work period after the end of the calendarday of duty, plus time required to return home and an eighthourrest period. If this is impossible or unreasonable, then assoon as possible.• 31 to 180 days: The employee must apply for re-employmentno later than 14 days after completion of military service. Ifthis is impossible or unreasonable through no fault of theemployee, then as soon as possible.• 181 days or more: The employee must apply for re- employmentno later than 90 days after completion of military service.• Service-connected injury or illness: Reporting or applicationdeadlines are extended for up to two years for those who arehospitalized or convalescing.USERRA guarantees pension plan benefits that accrued duringmilitary service, regardless of whether it’s a defined-benefit ora defined-contribution plan.Under the law, service members activated for duty on or afterDec. 10, 2004, may elect to extend their employer-sponsored healthcoverage for up to 24 months. (Those activated prior to that datecould elect to extend coverage for up to 18 months.) Employersmay require these individuals to pay up to 102% of total premiumsfor the elective coverage.In addition, USERRA prohibits employment discriminationagainst a person on the basis of past military service, current militaryobligations or an intent to serve. Two cases of note:■ The city of Margate, N.J., paid $89,649 to a police officerwho sued for harassment after he was called up to active service inthe U.S. Army Reserve. The officer, who had served in the Reservesfor 24 years and on the Margate police force for 15 years, had neverhad trouble obtaining leave to attend military training in the past.But when he was called to active service, his supervisors denied

FMLA Leave, Military Leave 13.25his requests for leave, changed his work assignments and reducedhis pay. The officer was deployed to Iraq and served for a year,then returned to the Margate police force.■ The city of Port St. Lucie, Fla., was ordered to reinstatea demoted meter reader and pay her $60,000 to settle a racediscrimination and USERRA lawsuit. The meter reader, a blackwoman, returned from two years of active Army duty in 2005 tofind a white man had taken her job as supervisor, while she wasdemoted to crew leader. The woman was earning $19.56 per houras a crew leader, while her replacement, who was hired four anda half years after her, earned $24.32. The settlement restored her tothe same position, salary and benefits as the man who replaced her.Hostile environment lawsuits under USERRAThe VOW to Hire Heroes Act of 2011, which provides employerswith tax credits for hiring veterans, includes an amendmentto USERRA that allows hostile environment lawsuits. Until now,courts had been reluctant to allow these suits.How to comply: The new amendment means you must trainsupervisors that military-connected employees may not beharassed because of their military service. Update your equalopportunity statements to include military service. Offer militaryconnectedemployees who wish to report harassment the samechannels you make available to sexual harassment victims.Dealing with returning disabled soldiersA lesser-known USERRA provision deals with how employersmust handle soldiers who return from active duty with injuries orother disabilities.The law offers broader protections than the ADA and appliesto all employers, while the ADA applies only to employers with15 or more workers. Plus, USERRA offers returning disabled soldiersmore generous rights.Specifically, employees who were injured on active duty haveup to two years after their return to claim reinstatement to theirjobs. Plus, if returning disabled military personnel can’t performtheir former jobs, you must offer training and accommodations to

13.26 Employer’s Practical Legal Guidehelp them return to them, or make every effort to qualify them fora position of equivalent seniority, status and pay. If they still can’tmeet position requirements, USERRA demands that you find aposition they can perform that is as close as possible to their predeploymentpay, status and benefits.More than 150,000 veterans of the wars in Iraq and Afghanistanare receiving disability benefits, with high incidences of braininjuries, psychological trauma and multiple amputations.For more information on how to meet your obligations underUSERRA, visit www.dol.gov/vets/programs/userra.

Section 14Your Rights in aUnion SituationThe National Labor Relations Board (NLRB) appliesstrict rules of conduct to employers during aunion-organizing campaign. But whether you chooseto accept the union or resist it, you can still exerciseyour rights effectively. Or, if a union has already wona representation election in your company, you need toknow how to prevent the union from encroaching onyour management rights.Scope of Unions TodayUnion membership has been on a steady decline since the 1950s.The overall percentage of U.S. workers who are members ofa union was 11.3% in 2013, according to the Bureau of LaborStatistics. That contrasts to 20.1% in 1983 and is the lowest levelsince 1935, when the National Labor Relations Act was enacted.The union membership rate runs much higher for public sectorworkers (35.3%) than in the private sector (6.7%). Teachers,other educators, police officers and firefighters had the highestunionization rate, at 35.3%. Sales and related occupations (2.9%)and farming, fishing and forestry (2.1%) had the lowest rates.14.1

14.2 Employer’s Practical Legal GuideLook for labor to continue targeting transportation, construction,manufacturing and service businesses. Plus, unions willpush the NLRB to support a “single site” organizing rule, whichgives unions an advantage in organizing multiple locations ofsmall businesses.NLRA and the Taft-Hartley ActIn 1935 Congress passed the National Labor Relations Act (NLRA),giving workers the right to organize, bargain collectively andstrike. By the late 1940s unions had become politi cally and economicallypowerful, and Congress decided to amend the act todevelop a more balanced national labor policy.In 1947 the Labor Management Relations Act, commonlyknown as the Taft-Hartley Act, was enacted to correct union abuseof power.The Taft-Hartley Act changed the law by specifying six unfairunion practices. Under Section 8(b), it is unlawful for unions to doany of the following:• Force an employee to join a union.• Force an employer to discriminate against nonunionemployees.• Refuse to bargain collectively (provided that the union is theappropriate representative of the employees).• Engage in secondary boycotts.• Charge excessive or discriminatory fees or dues.• Force an employer to pay for work that is not performed(“featherbedding”).Other important Section 8 changes added the “free speech”proviso and established the basic responsibilities of the partiesin collective bargaining. Section 9 gave employers the right topetition for an NLRB-conducted election and gave employeesthe right to petition to decertify a union. Under Section 10(j), theboard may seek injunctions to stop unfair labor practices, whileSection 10(l) requires the board to obtain injunctions to stop secondaryboycotts.

your Rights in a Union Situation 14.3Also, in a bitter defeat for the unions, the act preserved frompreemption the states’ “right to work” laws.Examples of unfair labor practices by unions include the following:engaging in picket line violence; barring nonstrikingemployees from entering a plant; fining or expelling memberswho cross illegal picket lines; refusing to process grievances fordiscriminatory reasons; picketing within 12 months after a unionloses an NLRB-conducted election; and insisting on the inclusionof illegal clauses in a collective bargaining agreement.National Labor Relations BoardThe National Labor Relations Board, which administers theNLRA, has two primary functions:• To conduct secret-ballot elections in which employees choosewhether or not to be represented by a union.• To investigate and remedy unfair labor practices committedby either employers or unions.The five-member board decides cases brought before it onappeal from administrative law judges’ decisions. Board decisionsmay be appealed directly to one of the federal courts of appeal.The NLRB’s Office of General Counsel is responsible for investigatingand prosecuting unfair labor practice charges and forsupervising the work of the board’s regional offices.The board and the general counsel cannot act on their own initiativeto bring charges of unfair labor practice or to file representationpetitions to hold secret-ballot elections.An employer, a union or an employee must file a complaint or apetition with one of the board’s regional offices to start proceedingsunder the NLRA.If You’re Targeted by a UnionIf yours is a nonunion company, it’s important to understand whatfactors might make you a target for unionization:• Job insecurity or lack of opportunity• Poor communication with management

14.4 Employer’s Practical Legal Guide• Noncompetitive compensation or benefits• Perceived favoritism in the workplace• Poorly trained supervisors• Lack of standards or feedbackEmployers have control over some of these factors, but notall. Job insecurity may be due to market conditions. Lack of opportunityalso may stem from the economy or may be due to companypolicies, such as an unwillingness to train or promote fromwithin. Many issues that make a company vulnerable to organizingefforts deal with fairness. Unions sell the idea that a collectivebargaining agreement eliminates favoritism.More Information About UnionsThe appearance of a union could be a sudden surprise. Youmight have no information on its background, where it hasbeen active or whether it has been successful. Where do youfind what you need?For starters, your local and state industrial and trade associations.You also can get help from the economic developmentcouncils responsible for bringing industry into your area. Don’tforget other company executives, local chambers of commerce,trade or business association meetings and publications thatcover union activities.In a broader context, a key source of information on unionorganizingefforts is the NLRB’s monthly Election Report,which summarizes details of union campaigns. For each unioncampaign, it lists the union involved; name, address and marketof the company; types of jobs; and whether the union wonor lost, and by what margin.For more information on the report, go to www.nlrb.gov.

your Rights in a Union Situation 14.5You should evaluate all aspects of employee relations. Howdo your pay and benefits compare with the rest of your industry?Look at terminations, disciplinary actions and lawsuits to see ifcertain practices or particular supervisors show a pattern of causingproblems. Survey employees to discover potential problems.Make changes if necessary.If you find yourself the target of an organizing effort, keepyour head. Some activities can spell disaster. Both the NLRAand the Taft-Hartley Act prohibit employers from discriminatingagainst employees for participating in union activities. (See detailson page 14.7.)Ultimately, whether you’re targeted or not may depend moreon your geographic location and industry than on actual workingconditions. That’s because many unions target specific areas orindustries to gain momentum and credibility with workers. Thenthey try to negotiate a “model” compensation plan that they canuse at other companies to attract new members.Your Rights in a Union-Organizing CampaignLabor law gives your employees the right to join a union. Assum -ing you prefer to operate as a nonunion company, what are yourrights?In 2008, the U.S. Supreme Court dealt employers a victory inChamber of Commerce of the United States et al. v. Brown. The rulingoverturned a California law that restricted some employers’rights to communicate with workers during union drives. Thecase underscores the fact that you have the right under the NLRAto communicate your views with employees during a unionorganizingcampaign, and you also have the right to run yourbusiness.Use and protect those rights by exercising caution and controllingyour own behavior:■ Don’t act emotionally or with a feeling of betrayal. Besure you have a thorough knowledge of the labor law rules andhave expert help. Your own conventional wisdom won’t suffice,nor will your own determination of what is fair, no matter howobjective you think you are.

14.6 Employer’s Practical Legal GuideCase in point: When some employees at Dynasteel Corporationstarted talking openly about organizing a union, the companygot worried and reacted emotionally, threatening to “shut thedoors and fire everyone” rather than let in a union.Shortly after, union organizers sent several applicants to thecompany, each wearing a pro-union button or shirt. They weretold either it had no openings or their applications were acceptedbut less qualified applicants were hired.Then, several pro-union employees let it be known they weremeeting other interested employees at a local diner to discussstrategy. A supervisor just happened to show up long enough tocount the number of employees who came to the meeting.The NLRB ruled that Dynasteel committed unfair laborpractices by refusing to hire union supporters and trying toin timidate or spy on employees interested in joining the unionby stopping by the diner. Dynasteel appealed, but the 5th Circuitupheld the ruling. Dynasteel v. NLRB, No. 06-60006■ Present your side and get the hearing you want by followingthe game plan the law allows. It may appear too restrictive, butyou clearly have weapons available. Despite labor law pitfalls andrestrictions and the frustrations they may cause, you can emergeintact from a union’s organizing campaign.■ Don’t allow union organizers to harass your employees.Union campaigns can’t invade employee privacy.Case in point: When the Union of Needletrades, Industrial &Textile Employees (UNITE) tried to organize Cintas, a large uniformlaundry company, employees complained that union organizersshowed up at their homes. Apparently, UNITE had takendown license plate numbers and ran Internet database searcheson their plates. That’s how they found their home addresses. Afederal court agreed that action amounted to an invasion of privacyand ordered the union to pay each affected employee $2,500.Pichler v. UNITE, No. 04-2841 (ED PA)Whatever route you choose—whether to accept the union orresist it—you can exercise your rights effectively. Make sure youdo so systematically, lawfully and intelligently. Also, remember:Just because a union-organizing campaign is under way doesn’tmean you have to relax discipline. You can hand out punishment

your Rights in a Union Situation 14.7for infractions of rules even to the most vocal of the union sympathizersas long as you can show that the sanctions are con sistentwith the way you handled similar situations before the organizingdrive began.What you can’t doThe following list covers some activities that constitute unfairlabor practices. Make sure that you don’t:✔ Discriminate in any way against any employee for participatingin union activities. This prohibition applies to all aspectsof employee relations.✔ Promise or grant benefits to your employees (such as wageincreases, holidays, benefits or improvements in workingconditions) to encourage them to abandon the union.✔ Make threats based on employee support of the union,including threats of discharge, layoffs, plant closure or discontinuingcurrent benefits.✔ Interrogate your employees or prospective applicants concerningunion-organizing activities.✔ Prevent pro-union oral solicitation by employees during nonworkinghours and breaks.✔ Prohibit union insignia on shirts and jackets.✔ Engage in surveillance of employees to determine their viewson the union.✔ Take a straw vote of employees as to whether they favor ordon’t favor the union, except in special circumstances and inaccordance with legally mandated procedures designed toprotect employees. (Consult your legal counsel.)Although not necessarily unfair labor practices, the followingconduct may result in invalidation of an election:✔ Campaigning on company time and premises within 24 hoursof an NLRB-scheduled election. Meetings held off-premisesmay take place under special circumstances.

14.8 Employer’s Practical Legal Guide✔ Reproducing and distributing official NLRB ballots andshowing employees how to mark them.✔ Discussing the union with employees in a supervisor’s office,regardless of the noncoercive tenor of your remarks.✔ Prohibiting distribution of union literature in nonwork areasduring nonwork time, such as in the lunchroom during thelunch hour.✔ Requiring employees to wear “Vote No” buttons in the plantor office.What you can doYou may hold meetings with your employees on company timeand property to answer questions and discuss the company’s positionand unionization. Just make sure the meetings aren’t held ina supervisor’s office. Talk with employees at their own workstationsor in a group meeting. You can also mail literature to theemployees’ homes, stating the company’s position, but be carefulwhat you say.Here are some of the things you can say:✔ Describe the good features of working for your company,such as existing benefits, job security and steady work.✔ Remind them that signing union authorization cards does notmean they must vote for the union.✔ Inform them of the disadvantages of belonging to a union,such as the possibility of strikes, serving on picket lines, payingdues, fines and assessments.✔ Explain the meaning of the phrases “dues checkoff” and“union shop.”✔ Inform them of any prior experience you’ve had with unionsand what facts you know about the particular union that’strying to organize them.✔ Tell your employees how their wages and benefits comparewith other unionized and nonunionized companies with lessdesirable packages.

your Rights in a Union Situation 14.9✔ Disclose the names of known gangsters or other undesirableelements who may be or have been active in the union, providedthis is accurate information that can be verified by officialsources.✔ Inform them that, insofar as their status with the company isconcerned, they are free to join or not to join any organizationthey choose.✔ Express the hope that your employees vote against this orany union.A lawfully waged campaign may defeat an organizing drive.Violation of the rules of conduct, however, can result in invalidationof a company-won election or certification of a union that lostan election. It’s important, therefore, that you seek legal advicepromptly.➤ Observation: You don’t have to bend over backward tocooperate with unions either. In a recent court of appeals decision,a company had refused to let union organizers post notices oftheir upcoming meetings on a company bulletin board. The NLRBruled this discriminatory because the company had allowed otherworker notices to be posted. However, the appeals court said theonly notices previously allowed on the bulletin board were byemployees selling cars and household goods, so it was not discriminatoryto say “no” to union backers. To take ad van tage ofyour right not to be cooperative with union organizers, don’t allowyour bulletin boards to become a general forum for workers. Asthe court noted, the company never posted notices for any type ofmeeting, so it was not discriminatory in preventing workers fromposting union meeting notices.Caution: If you try to pick and choose the meetings you thinkare worth publicizing and those that are not, you will have a hardtime showing a judge that the rejection you gave to the unionsupporters was not discriminatory. Also, you must not seem to bedesigning a policy for bulletin boards or other communicationschannels that appears to target unions. Put a policy in place—andstrictly adhere to it—when there is not a threat of unionization inthe air, and it will stand you in good stead should the organizerslater target your company.

14.10 Employer’s Practical Legal GuideIf You’re a Unionized EmployerLet’s say you become a unionized employer—that the union haswon the representation election. Suddenly, after running yourown business, you’ve got a partner. No more unilateral decisionsin dealing with your employees.The key question: How do you protect yourself in your decisionmaking and thus prevent union encroachment on your prerogativesas a boss—including your right to terminate deadwoodemployees? It may seem ironic, but your best defense is somethingthat comes with a union: the negotiated contract. The contractlanguage spells out your management rights. So what you do innegotiating that contract—the goals you formulate—is vital toprotecting your interests.Through the years, decisions of the NLRB and the courts havetended to narrow management’s rights, in what has seemed tobe an invasion of business decisions. An example is the area ofsubcontracting, interpreted to involve “terms and conditions ofemployment”—the definition for union involvement. Even suchissues as dropping a product line, automating or moving a plantand having an in-plant cafeteria or food vending machines havebeen held to be subject to bargaining.In negotiating a contract, nail down your right to make a widevariety of business decisions. The contract language becomes yourprotection because it will surely be scrutinized if a dispute withthe union arises.You will want to assert your rights in a variety of contractclauses, such as the right to discipline for absenteeism, the right todischarge for excessive time spent away from work, and the rightto discipline and discharge. Arbitration clauses—another factorthat can seriously intrude on your rights—should meticulouslydefine which issues in conflict are to be dealt with exclusively byan arbitrator.At the same time, avoid going overboard with a blanketmanagement-rights demand aimed at covering all bases. In itsdecisions, the NLRB has interpreted this strategy as an effort tostrip the union of its statutory prerogatives by holding that it wasnot a good-faith approach to bargaining.

your Rights in a Union Situation 14.11Why Employees Should Not Want a UnionUnion membership is costly. In addition to monthly dues (averaging$20–$50), there can be periodic assessments (“voluntary”)to such union organizations as COPE (Committee on PoliticalEducation). Dollars to COPE may go to support candidates withviews diametrically opposed to a member’s. After the initialcampaign all new employees who are required to join the unionare obligated to pay an initiation fee, which can range from $50to $200 in some unions. Also:• Through strike assessments, employees may have to financiallysupport striking workers at other companies.• The union is an equalizer. Under the union concept everyemployee is the same (except for seniority), thereby equatingthe poorest worker to the best.• The only real weapon the union has is to strike. Whenthat occurs, employees lose wages, which are usually neverrecovered, and employers are compelled to take extraordinarymeasures to continue operating.• Employees who participate in an “economic” strike canbe permanently replaced by their employer. The law allowsthe employer to continue to operate his business during astrike by using supervisors, nonstriking employees, volunteersand new employees.• Local union members often have little say concerningtheir own employment. Usually, orders come from thenational or local office of the union.• A union’s primary interest is not in an employee as anindividual but rather as a source of income and power.Unions can, and sometimes do, bring with them strikes,bad feelings and even violence on occasion.• Employees can be adversely affected by internal politicsand external union problems with other companies andmay even be required to picket at other companies.

14.12 Employer’s Practical Legal GuideThere are other pitfalls to avoid. In case the contract languageis imprecise where your rights are concerned, you should havean accurate record of contract negotiations to fall back on. Thismeans keeping a well-documented account of bargaining historythroughout all contract negotiations. In addition, the practices youfollow with the ongoing contract can affect your rights. If yourelax discipline or give benefits not called for, these concessionscan become an inherent part of the company relationship with theunion, without benefit of contract language.On the bright side, a well-crafted collective bargaining agreementcan keep an employer out of court. The U.S. Supreme Courtruled in 14 Penn Plaza v. Pyett, 129 S. Ct. 1456 (2009) that a col lectivebargaining agreement that “clearly and unmistakably” compels aunion member to arbitrate claims under the Age Discriminationin Employment Act (and presumably other employment laws) isbinding on the employee.Court Nixes Pro-Union Poster RequirementIn 2013, the U.S. Court of Appeals for the D.C. Circuit refused anNLRB bid to retry a case in which the court said employers couldnot be required to display a pro-union poster. The NLRB declinedto appeal the ruling to the U.S. Supreme Court.The federal ruling put to rest the NLRB’s legal efforts to reviveits controversial poster, “Employee Rights Under the NationalLabor Relations Act.” The poster explicitly stated that the NLRAguarantees workers the right to form or join a union.Litigation over the poster began almost as soon as it wasreleased in 2011. Business groups that filed suit to stop the postingrequirement said they were engaged in a “fight against an overreachingNLRB.”Note: Since 2010, federal contractors have been required to posta notice of employees’ rights under the NLRA if they are governmentcontractors doing $100,000 or more in business with thefederal government or subcontractors with contracts worth morethan $10,000. Find more details at the Office of Federal ContractCompliance Programs site: www.dol.gov/ofccp/.

Section 15ERISAThe Employee Retirement Income Security Actof 1974 (ERISA) governs the administration ofemployee benefit plans and the rights of plan beneficiaries.Like many other federal statutes, ERISA wasreactionary: Congress passed the law in response toperceived abuses of retirement benefits by privatesectoremployers, with the goal of protecting employeesagainst the loss of promised benefits.While many tend to associate ERISA only with retirement benefits,the law covers many other areas:• Medical, surgical or hospital care• Benefits for sickness, accident, disability or death• Vacation benefits• Apprenticeship and training programs• Day care centers• Scholarship funds• Prepaid legal services• Holiday or severance payIn light of the complex rules involved, complying with ERISAcan be difficult. There are three components to compliance:reporting, disclosure and paying claims. Employers must submit15.1

15.2 Employer’s Practical Legal Guidecertain reports to the IRS each year and comply with Departmentof Labor requests; must advise employees of certain facts regardingtheir benefits packages; and must spell out in all their benefitplans the procedures for processing and payment of claims.Application of ERISACongress clearly intended that ERISA be the governing law foremployee benefit plans and that such plans follow uniform standards.As such, ERISA preempts state laws relating to employeebenefit plans, with a few exceptions (those involving insurance,banking or securities laws).ERISA covers any “employee benefit plan” established ormain tained by an employer or employee organization engagedin commerce or in any industry or activity affecting commerce.The term “employee benefit plan” can refer to either an employeewelfare benefit plan or an employee pension benefit plan. Essentially,an employee welfare benefit plan involves the following types ofbenefits: medical, accident, disability, death, unemployment, vacation,apprenticeship or other training programs, day care, scholarshipfunds, prepaid legal services, and those benefits describedin Section 302(c) of the Labor Management Relations Act. Anemployee pension benefit plan involves retirement benefits.The definition of “employee” is broadly defined as “any individualemployed by an employer.” Fortunately, the U.S. SupremeCourt provided some guidance on this in Nationwide Mut. Ins.Co., et al. v. Darden, 503 U.S. 318 (1992). It said the status of an“employee” is determined by the amount of control the employerexerts over the employee to differentiate him from an independentcontractor. However, the court also noted that “all of the incidentsof the relationship must be assessed and weighed, with no onefactor being decisive.”Under ERISA, employees must be permitted to participate ina plan if they are 21 and have one year of service (any 12-monthperiod in which an employee works 1,000 hours or more).The following are exempt from ERISA’s provisions:• Government plans.• Church plans.

ERISA 15.3• Foreign plans.• Self-employed individuals. Their benefits are not ERISA plansif only the individual and his family members arecovered.• A partnership of lawyers, physicians or accountants with aplan that covers only the partners.Besides the above exemptions, a plan is not governed by ERISAif the following are true:1. No contributions are made by an employer or employee organization.2. Participation is completely voluntary for the employees ormembers.3. The employer’s sole functions are, without endorsing the program,to permit the insurer to publicize it to the employees,to collect premiums through payroll deduction and to remitthem to the insurer.4. The employer or employee organization receives no compensationfor administration of the program other than a reasonablefee for processing the payroll deductions.Impact of GINA, MHPA onERISA-Covered Health PlansEmployers that offer health benefits must ensure their planscomply with all ERISA requirements. Over the last several years,Congress has amended ERISA with several bills regulating healthbenefits, including the Genetic Information NondiscriminationAct and the Mental Health Parity Act.The Genetic Information Nondiscrimination Act of 2008(GINA) prohibits discrimination in group health plan coveragebased on genetic information. The law provides that grouphealth plans and health insurance issuers cannot base premiumson genetic information. (However, premiums may be increasedfor the group based on the plan’s actual medical experience.) In

15.4 Employer’s Practical Legal Guideeffect, GINA prohibits employers and health insurers from discriminatingagainst individuals based on possible future medicalconditions.Also, GINA generally prohibits plans and issuers from requestingor requiring an individual to undergo a genetic test. Genetictesting information may be requested to determine payment of aclaim. The plan or issuer may request only the minimum amountof information to determine payment.Any genetic information the employer uncovers while processingclaims, related leave requests (such as FMLA) or disabil ityaccommodation requests must be treated as confidential. Suchgenetic information may not be used in hiring, firing or promotiondecisions.Under the Mental Health Parity Act, health plans that provide“both medical and surgical benefits and mental health orsubstance use disorder benefits” must apply the same financialrequirements to all types of benefits. The law requires plans tohave the same cost-sharing benefits for medical and surgical coverageand mental health or substance abuse coverage. Similarly,plans must have the same treatment limitations for all types ofcoverage offered.Fiduciary DutiesUnder ERISA, when a pension plan is set up, the individuals whomanage the pension assets (the “fiduciaries”) are subject to a particularstandard of conduct.In terms of benefit plans, the concept of a fiduciary is significantbecause failure to pay a valid claim is a breach of fiduciaryresponsibilities.Under ERISA, the fiduciary is required to exercise “the care,skill, prudence and diligence under the circumstances then prevailingthat a prudent man acting in the like capacity [would use].”Furthermore, the fiduciary has a statutory responsibility to diversifyinvestments of the plan so as to minimize the risk of lossesunless, under the circumstances, it would not be prudent.The recent collapse of the subprime mortgage market, followedby the financial crisis on Wall Street, has led to a proliferation of

ERISA 15.5breach of fiduciary duty lawsuits. As of this writing, an estimated1,500 lawsuits are pending against fiduciaries.In 2008, Countrywide Financial Corp., Bear Sterns Companiesand Washington Mutual were hit with class action lawsuits allegingbreach of fiduciary duties to employees’ 401(k) and pensionplans.While such lawsuits have seen mixed results in the courts,the U.S. Supreme Court decided two cases in 2008 in favor ofemployees:■ In LaRue v. DeWolff, Boberg & Associates, Docket No. 06-856(2008), the high court ruled that individual employees may sue forbreach of duty to their retirement plans.James LaRue sued DeWolff, alleging the company had neglectedto make changes that he requested to his 401(k) plan, resulting infinancial losses. Underlying district and circuit courts found forDeWolff, ruling that ERISA was designed to protect entire plansfrom misuse of plan assets, and did not provide a remedy forlosses to individual accounts. Not anymore: The Supreme Courtreversed.■ The Supreme Court decided an ERISA welfare benefitlawsuit brought by Wanda Glenn against MetLife. Glenn workedfor Sears Roebuck Co., where she was covered by the company’slong-term disability plan with MetLife. In 2000, she took a medicalleave following a heart attack. MetLife approved her disabilityleave but urged her to apply for Social Security as well. One monthlater, MetLife reversed its decision and cut off Glenn’s disabilitypayments.A district court found for MetLife, while the 6th Circuit Courtreversed.Ultimately, the Supreme Court found for Glenn, ruling thatERISA benefit claim decisions made by administrators who alsopay the claims result in an inherent conflict of interest, one whichthe courts must consider when reviewing their decisions. MetLifev. Glenn, Docket No. 06-293 (2008)Given those decisions, and the ongoing uncertainty in thestock market, employers should seek professional advice from anattorney with expertise in the area before making any ERISA plandecisions.

15.6 Employer’s Practical Legal GuidePension BenefitsThere are two major categories of pension plans: qualified andnonqualified plans. Qualified plans meet the requirements ofERISA and the Internal Revenue Code and qualify for four significanttax benefits:1. Income generated by the plan assets is not subject to incometax because it is earned and managed within the frameworkof a tax-exempt trust.2. An employer is entitled to a current tax deduction for plancontributions.3. Plan participants do not have to pay income tax on theamounts contributed on their behalf until the year the fundsare distributed to them.4. Under the proper circumstances, beneficiaries of qualifiedplan distributions are afforded special tax treatment.By contrast, nonqualified plans do not meet ERISA and IRCguidelines and, as such, have no preferential tax treatment.Nonqualified plans are usually designed to provide deferred compensationexclusively for one or more executives.Other categories of pension plans include defined benefitplans, defined contribution plans and hybrid plans.Defined benefit plansA defined benefit plan is set up to provide a predetermined retirementbenefit to employees or their beneficiaries, either as a sumcertain or a specific percentage of compensation. Assets for theplan are contained in a pool, rather than in individual accounts;thus employees have no choice in investment decisions. Theemployer must continue to fund this plan after it is started even ifthe company shows no profits in a given year.There are three types of defined benefit plans: flat benefit, unitbenefit and variable benefit:• Under a flat benefit plan, all participants receive a flat dollaramount as long as the minimum-years requirement is met.

ERISA 15.7Automatic Contribution ArrangementsAs of 2008, employers may offer a new kind of automaticenrollment program for 401(k) plans. Qualified AutomaticContribution Arrangements, or QACAs, require minimum levelsof 401(k) deferrals and exempt 401(k) plans from nondiscriminationrules and top-heavy testing.Under a QACA, eligible employees must be included unlessthey opt out or elect to participate at a different contributionrate. The minimum automatic deferral is 3% of compensationfor the first two years of participation, then increasing 1% peryear to 6%. QACAs require a minimum employer contribution.Employers may match 100% of the first 1% of employeedeferral, and 50% of the next 2–6% of deferrals, up to a totalemployer matching contribution of 3.5%. Or, employers maychoose a minimum nonelective contribution of 3%, which mustcover all eligible employees, not just participants.A QACA also offers a two-year vesting period, as opposed toa traditional 401(k), in which employer contributions are vestedimmediately.Employers must notify all employees of the plan provisionswithin a reasonable period before the beginning of each planyear.For details, see www.irs.gov/pub/irs-pdf/p4674.pdf.• Under a unit benefit plan, a percentage of compensation ora fixed dollar amount is multiplied by the qualifying years ofservice.• Under a variable benefit plan, benefits are based on allocatingunits, rather than dollars, in connection with contributionsto the plan. Thus, the benefits allocated to the retireewould be the proportionate value of all units in the fund.

15.8 Employer’s Practical Legal GuideThe maximum annual contribution that can be made to a definedbenefit plan is the lesser of $210,000 or 100% of the participant’s averagecompensation for the three highest consecutive years. Keep inmind that defined benefit plans do not typically yield cost-of-livingadjustments. Also, defined benefit plans are insured by the PensionBenefit Guaranty Corporation (PBGC) in the event the companybecomes insolvent and cannot pay the benefits—an arrangementsimilar to federal deposit insurance for bank accounts.Defined benefit plans are becoming increasingly unpopularwith employers and there is increasing pressure on the PBGC assome large companies and even entire industries struggle to makegood on their pension plans.Defined contribution plansDefined contribution plans include profit sharing, money purchase,401(k)s and employee stock ownership plans. Usually, eitherthe employee or the employer makes contributions to the planbased on a percentage of annual earnings. Each participant has aseparate account. The maximum annual contribution is the lesserof $52,000 or 100% of the employee’s annual earnings. Dollar limitsto all defined contribution plans are now indexed to inflation.• Profit-sharing plans are currently the most popular; theyoffer the greatest flexibility and are relatively easy to administer.They encourage companies to set aside money in theemployee’s name when the company shows a profit. Themaximum annual contribution by the employer is the lesserof $52,000 or 25% of compensation for each participant.Moreover, the employer can choose not to contribute.• Money purchase plans require the employer to contributeeven if the company did not realize a profit. Contributionsare determined by a specific percentage of each employee’scompensation and must be made annually.• 401(k) plans allow participants to make contributions toa plan on a before-tax basis. Employees authorize theiremployer to reduce their salary and contribute the differenceto a qualified retirement plan. The employer is also able tomake supplemental contributions on behalf of employees.

ERISA 15.9Generally, participants cannot withdraw funds from a 401(k)prior to age 59½ unless they retire, die, become disabled,change jobs or suffer a financial hardship. Depending on thesituation, employees may be subject to a 10% tax penalty onearly withdrawals.Note: As of Jan. 1, 2012, employers must more clearly spellout—in quarterly statements—the fees charged by their 401(k)plan so employees can comparison-shop among the plan’sinvestment options, say new DOL rules. Read details aboutthe DOL rules and a link to a model investment options chartat www.theHRSpecialist.com/401Kfees.• Employee stock ownership plans are funded by employercontributions of stock in the corporation or allow employeesto buy stock as a plan investment option.• Other types of defined contribution plans (for small businesses)include savings incentive match plans (SIMPLEs),simplified employee pensions (SEPs) and Keoghs.Hybrid plansHybrid benefit plans contain features of both defined benefit anddefined contribution plans. One type is known as a target benefitplan. Rather than contribute straight percentages of earnings,the target benefit plan uses a formula so that ages and years ofservice are factored more heavily. Thus, employees who are olderand have worked for the company longer will receive a higherpercentage of contributions than under a straight profit-sharingplan, for example.Be aware of the employer’s responsibilities regarding changesto pension plans. If an employer gives “serious consideration” toa plan change, it has a fiduciary duty under ERISA not to makeany intentional or negligent misrepresentations. If you are consideringimplementing a plan change, you should communicateall relevant information to employees so as to avoid liability forbreach of fiduciary duty.The 3rd Circuit heard a failure-to-notify issue in Lettrich, etal. v. J.C. Penney Co., Inc., 213 F.3d 765 (3rd Cir.). The plaintiffs,in a class action, sued the employer for failing to notify plan

15.10 Employer’s Practical Legal Guideparticipants that it was terminating severance benefits. Althoughthe employer did provide notice, it was inserted as boilerplate inthe middle of a 62-page document. That action could be construedas an effort to conceal the information, the 3rd Circuit said in rulingagainst the employer.ERISA requirementsPension plans under ERISA are subject to a number of requirements.A plan:• Must contain a detailed procedure for funding the plan.• Must contain a basis on which pension payments are to bemade.• Must contain the rates at which benefits accrue.• Must inform beneficiaries of specific times after whichaccrued benefits are considered nonforfeitable.• Must allow at least 70% of all employees who are not highlycompensated to be eligible to participate..• Must not exclude from participation anyone over age 21 whohas one year of service (at least 1,000 hours in any 12-monthperiod).• Must clearly indicate that temporary employees are excludedfrom the plan.• Must not favor those who are considered “highly compensated”employees (those earning $80,000 or more per year orwho are 5% owners during the current or preceding year). Theplan must provide a benefit to non-highly-paid employeesthat is at least 70% of the benefit provided to the highly-paid.At the same time, the plan must not discriminate against thehighly-paid simply because they are compensated at rateshigher than other employees.• Must file annual reports with the IRS; must maintain theserecords for six years and make them available for inspection.• Must hold plan assets in trust and separate from the assets ofthe sponsoring entity.• Must abide by fiduciary-duty rules.

ERISA 15.11Pension Protection ActIn 2006, Congress passed the Pension Protection Act (PPA),which allows employers to more easily move employees fromdefined benefit plans to defined contribution plans. It alsoestablished tougher standards for employers to meet to ensureexisting pensions’ solvency.The PPA requires employers to evaluate their defined benefitplans weighing a plan’s assets versus its benefit obligations.Plans are then classified as fully funded, overfunded, underfundedor at risk.For single employer plans, the law limits the steps employersmay take if their plans are underfunded. If less than 80% of theplan’s obligations are funded, employers may not:• Amend the plan to increase benefits• Establish completely new benefits• Change the rate of benefit accrual• Change the benefit vesting schedule.If the plan’s funding level is below 60%, employers face twoadditional restrictions: (1.) All benefit accruals are frozen for oneyear. (2.) No benefits may be paid for an “unpredictable contingentevent.”Under the PPA, when calculating assets, employers may usethe corporate bond yield curve to calculate future value of currentassets at the time they are likely to be disbursed. Prior tothe law, employers had to calculate based on the traditionallylower 30-year Treasury bond rate.Employers may now automatically enroll employees in 401(k)plans, although employees may elect not to participate. Additionally,the PPA states that cash-balance or defined contributionplans are not discriminatory. This means employers thatconvert defined benefit plans to defined contribution plans arenot subject to Age Discrimination in Employment Act lawsuits.

15.12 Employer’s Practical Legal Guide• May not allow benefits to be assigned to creditors, and mustbe insulated from claims of creditors.Note: There are two exceptions to the prohibition againstassigning benefits to creditors. Pension assets may be used topay qualified medical child-support orders or qualified domesticrelations orders. These orders, arising in domestic relations cases(divorce), require that benefits be remitted to the participant’sspouse and/or children.ERISA rules also set vesting requirements on employer contributionsto retirement plans. Current guidelines allow com panies toset their vesting in one of two ways: one-to-five-year “cliff” vestingor three-to-seven-year “graded,” or graduated, vesting. Cliff vestingallows employees to be fully vested after a certain number ofyears on the job; graded plans vest employees bit by bit, graduallyrising over time (such as 20% vesting per year to 100% at five years).Reporting and DisclosureERISA’s reporting and disclosure requirements are designed toprotect employees’ rights to benefits. An employer’s benefits packagemust take the form of a Summary Plan Description (SPD),which must be furnished to participants and beneficiaries toadvise them of their rights under the plan.Even though the Taxpayer Relief Act of 1997 eliminated therequirement that employers/plan administrators must file SPDswith the DOL, you must still prepare the SPD in the event of aDOL audit.If you fail to provide the requested information within 30 days,you could be assessed a civil penalty of $100 a day (not to exceed$1,000 per request).The SPD must contain the following information:• Name and type of administration of the plan.• For a group health plan, whether a health insurance issuer isresponsible for the plan’s financing or administration (includingpayment of claims) and, if so, the issuer’s name andaddress.

ERISA 15.13• Name and address of the person designated as agent, uponwhom legal papers can be served (only if this person is notthe administrator).• Description of the relevant provisions of any applicable collectivebargaining agreement.• Requirements with respect to eligibility for participation andbenefits.• Description of the provisions providing for nonforfeitablepension benefits.• Circumstances that may result in disqualification, ineli gibilityor denial or loss of benefits.• Source of the plan’s financing and identity of any organizationthrough which benefits are provided.• Date of the plan’s year end.• Whether the plan’s records are kept on a calendar, policy orfiscal-year basis.• Claims procedures, including the field office of the DOL’sEmployee Benefits Security Administration (EBSA), whereparticipants and beneficiaries may seek information regardingtheir rights under ERISA.• Remedies available for redress of claims that are denied.For more information on the preparation of SPDs, contact theEBSA at (866) 444-3272.Reporting: Form 5500As of 2010, employers that are required to file Form 5500 must doso electronically. Additionally, the form has been revamped andnow requires far more information—in particular, the Schedule Crequirements identifying potential conflicts of interest.For information on the EFAST2 system, including video onelectronic filing, go to www.dol.gov/ebsa.For reporting purposes, Form 5500 divides benefit plansinto six categories: large pension plan, small pension plan, large

15.14 Employer’s Practical Legal Guidewelfare plan, small welfare plan, DFE (direct filing entity) andfringe benefit plan. Each plan has specific filing requirements.Generally, a small plan contains fewer than 100 participantswhile a large plan contains 100 or more participants. An importantexception is the 80-120 rule, which applies when a companyfiles a small plan in one year but then increases the number of itsemployees beyond 99 during the following year. In this situation,the company can still file a small plan as long as the number ofemployees does not exceed 120.Large plans, group insurance arrangements and certain otherentities must file a Schedule C if the service provider received$5,000 or more in direct or indirect compensation. Direct compensationis the amount the plan pays for plan services and feescharged to participant accounts. Indirect compensation is compensationreceived from other sources as a result of plan operation,including any gifts totaling at least $100 from any single sourcethat plan sponsors or managers receive.Any plan that terminated an actuary or accountant must alsofile a Schedule C.Numerous other requirements are part of the new regulations,and employers and pension sponsors should confer with theirattorneys to ensure they meet all the new requirements.Paying Claims: RemediesWhen a participant or beneficiary is denied benefits, the plan isrequired to send a notice of denial that contains the specific reasonfor the denial; describes the additional information necessaryto have the claim paid; and explains the steps required to have aclaim reviewed.Claims procedures should be set forth in writing in everyemployee benefit plan. This procedure is designed to reducethe number of frivolous lawsuits, to provide a nonadversarialframework for claims review and to reduce the costs of resolvingbenefit claim disputes.If the claim is denied wholly or in part, the plan must furnishthe notice to the claimant within 90 days after receiving theclaim. If it is not furnished within a reasonable period of time, it

ERISA 15.15is deemed denied and the claimant is permitted to proceed to thereview stage. The participant must exhaust the appeal proceduresset forth in the plan document.Judicial review of a benefit denial is available under ERISA.Ordinarily, actions under ERISA should be brought in federal courtdue to the fact that a federal statute is involved. State courts alsohave jurisdiction to resolve employee benefits claims matters.The most obvious remedy for a benefit denial is payment ofthe benefits due. ERISA has statutory remedies allowing a beneficiaryto recover the benefits due and allow clarification of futurerights under the plan. Plaintiffs are also able to recover attorney’sfees and costs; however, these are discretionary. Currently, federalcourts are split on the issue of recovering attorney’s fees. The trendis to provide restitution to the plaintiff but to deny any compensatoryand punitive damages.ERISA does not provide a right to a jury trial, and the courtsare divided on whether a jury trial is available to a beneficiary orparticipant who is seeking redress in the courts.Note: In 2001, the U.S. Supreme Court gave payroll administratorsa break under ERISA by ruling that they don’t have to monitorconflicting state laws regarding beneficiaries. Egelhoff v. Egelhoff,121 S.Ct. 1322

Appendix AState LaborAuthoritiesAlabamaDept. of LaborP.O. Box 303500Montgomery, AL 36130-3500(334) 242-8055www.labor.alabama.govAlaskaDept. of Labor and WorkforceDevelopmentP.O. Box 11149Juneau, AK 99811-1149(907) 465-2700www.labor.state.ak.usArizonaIndustrial Commission800 W. Washington St.Phoenix, AZ 85001(602) 542-4515www.ica.state.az.usArkansasDept. of Labor10421 W. MarkhamLittle Rock, AR 72205(501) 682-4500www.labor.ar.govCaliforniaDept. of Industrial Relations455 Golden Gate Ave.10th FloorSan Francisco, CA 94102(415) 703-5444www.dir.CA.govColoradoDept. of Labor andEmployment633 17th St., Suite 201Denver, CO 80202(303) 318-8441www.Coworkforce.comA.1

A.2 Employer’s Practical Legal GuideConnecticutDept. of Labor200 Folly Brook Blvd.Wethersfield, CT 06109(860) 263-6000www.CT.gov/dolDelawareDept. of Labor4425 N. Market St.Wilmington, DE 19802(302) 761-8085www.Delawareworks.comDistrict of ColumbiaDept. of Employment Services4058 Minnesota Ave. NEWashington, DC 20019(202) 724-7000www.DOES.DC.govFloridaDept. of EconomicOpportunityThe Caldwell Bldg.107 E. Madison St., Suite 100Tallahassee, FL 32399(800) 342-3450www.Floridajobs.org/GeorgiaDept. of LaborSussex Place, Room 600148 Andrew YoungInternational Blvd. NEAtlanta, GA 30303(404) 232-7300www.dol.state.GA.usHawaiiDept. of Labor and IndustrialRelations830 Punchbowl St., Room 321Honolulu, HI 96813(808) 586-8844www.Hawaii.gov/labor/IdahoDept. of Labor317 W. Main St.Boise, ID 83735(208) 332-3570www.labor.Idaho.govIllinoisDept. of Labor900 S. Spring St.Springfield, IL 62704(217) 782-6206www.state.IL.us/agency/idolIndianaDept. of Labor402 W. Washington St.Room W195Indianapolis, IN 46204(317) 232-2655www.IN.gov/laborIowaLabor Services Div.1000 E. Grand Ave.Des Moines, IA 50319(515) 281-5387www.Iowaworkforce.org/labor

state Labor Authorities A.3KansasDept. of Labor401 SW Topeka Blvd.Topeka, KS 66603(785) 296-5000www.dol.KS.govKentuckyKentucky Labor Cabinet1047 U.S. Hwy. 127 SouthFrankfort, KY 40601(502) 564-3070www.labor.KY.govLouisianaLouisiana WorkforceCommission1001 N. 23rd St.Baton Rouge, LA 70804(225) 342-3111www.ldol.state.la.usMaineDept. of Labor54 State House Station Dr.Augusta, ME 04333(207) 623-7900www.state.ME.us/laborMarylandDept. of Labor, Licensing &Regulation500 N. Calvert St., Suite 401Baltimore, MD 21202(410) 230-6020www.dllr.state.MD.us/MassachusettsExecutive Office of Labor &Workforce Development1 Ashburton PlaceBoston, MA 02108(617) 626-7122www.Mass.gov/eolwdMichiganDept. of Licensing &Regulatory Affairs611 W. OttawaLansing, MI 48909(517) 373-1820www.Michigan.gov/laraMinnesotaDept. of Labor and Industry443 Lafayette Road N.St. Paul, MN 55155(651) 284-5005www.dli.MN.govMississippiDept. of EmploymentSecurityP.O. Box 1699Jackson, MS 39215(601) 321-6000www.mdes.MS.gov/MissouriLabor and Industrial RelationsCommissionP.O. Box 504421 E. DunklinJefferson City, MO 65102(573) 751-3215www.labor.MO.gov/

A.4 Employer’s Practical Legal GuideMontanaDept. of Labor and IndustryP.O. Box 1728Helena, MT 59624(406) 444-9091www.dli.MT.govNebraskaDept. of Labor550 S. 16th St.Lincoln, NE 68508(402) 471-9000www.dol.nebraska.govNevadaDept. of Business & Industry555 E. Washington Ave.Suite 4100Las Vegas, NV 89101(702) 486-2650www.laborcommissioner.com/New HampshireDept. of Labor95 Pleasant St.Concord, NH 03301(603) 271-3176www.nh.gov/laborNew JerseyDept. of Labor & WorkforceDevelopment1 John Fitch Plaza, 13th FloorP.O. Box 110Trenton, NJ 08625(609) 659-9045lwd.state.nj.us/labor/index.htmlNew MexicoDept. of Workforce Solutions401 Broadway NEAlbuquerque, NM 87102(505) 841-8405www.dws.state.nm.usNew YorkDept. of LaborState Office Building #12W.A. Harriman CampusAlbany, NY 12240(518) 457-2741www.labor.ny.govNorth CarolinaDept. of Labor4 W. Edenton St.Raleigh, NC 27699(919) 807-2796www.nclabor.comNorth DakotaDept. of Labor600 E. Boulevard Ave.Dept. 406Bismarck, ND 58505(701) 328-2660www.nd.gov/labor/OhioDepartment of Commerce77 S. High St., 22nd FloorColumbus, OH 43215(614) 644-2239www.com.state.OH.us/

state Labor Authorities A.5OklahomaDept. of Labor3017 N. Stiles Ave., Suite 100Oklahoma City, OK 73105(405) 521-6100www.ok.gov/odol/OregonBureau of Labor andIndustries800 NE Oregon St., #1045Portland, OR 97232(917) 673-0761www.Oregon.gov/boliPennsylvaniaDept. of Labor and Industry1700 Labor & Industry Bldg.7th and Forster Sts.Harrisburg, PA 17120(717) 787-5279www.dli.state.PA.usRhode IslandDept. of Labor and Training1511 Pontiac Ave.Cranston, RI 02920(401) 462-8000www.dlt.state.RI.usSouth CarolinaDept. of Labor, Licensingand Regulations110 Centerview DriveColumbia, SC 29210(803) 896-4300www.llr.state.SC.usSouth DakotaDept. of Labor & Regulation700 Governors DrivePierre, SD 57501(605) 773-3101www.dlr.sd.govTennesseeDept. of Laborand Workforce Development220 French Landing Dr.Nashville, TN 37243(615) 741-6642www.state.TN.us/labor-wfdTexasWorkforce Commission101 E. 15th St.Austin, TX 78778(512) 463-2829www.twc.state.TX.usUtahLabor Commission160 E. 300 South, Suite 300Salt Lake City, UT 84114(801) 530-6800www.laborcommission.Utah.govVermontDept. of LaborP.O. Box 4885 Green Mountain DriveMontpelier, VT 05601(802) 828-4000www.labor.vermont.gov/

A.6 Employer’s Practical Legal GuideVirginiaDept. of Labor & IndustryMain Street Centre600 E. Main St.Richmond, VA 23219(804) 371-2327www.doli.Virginia.gov/WashingtonDept. of Labor and IndustriesP.O. Box 44000Olympia, WA 98504(360) 902-5800www.lni.WA.govWest VirginiaDivision of LaborState Capitol ComplexBuilding 6, #749-B1900 Kanawha Blvd.Charleston, WV 25305(304) 558-7890www.WVlabor.comWisconsinDept. of WorkforceDevelopment201 E. Washington Ave. #A400Madison, WI 53707(608) 266-3131www.dwd.wisconsin.govWyomingDept. of Workforce Service1510 E. Pershing Blvd.Cheyenne, WY 82002(307) 777-8728www.wyomingworkforce.orgGuamDept. of LaborP.O. Box 9970Tamuning, GU 96931(671) 475-7043www.dol.guam.govPuerto RicoDept. of Labor andHuman Resources505 Munoz Rivera Ave.Hato Rey, PR 00918(787) 754-2120www.dtrh.gobierno.PR/U.S. Virgin IslandsDept. of Labor2203 Church St.St. Croix, U.S. VI 00802(340) 692-9689www.VIdol.gov

FurtherInformationAppendix BABLEDATA8630 Fenton St., Suite 930Silver Spring, MD 20910(800) 227-0216http://abledata.comEEOC131 M St. NEWashington, DC 20507(800) 669-4000(202) 663-4900www.eeoc.govFederal Trade Commission600 Pennsylvania Ave. NWWashington, DC 20580(202) 326-2222www.ftc.govIRS1111 Constitution Ave. NWWashington, DC 20224(800) 829-1040www.irs.govJob Accommodation NetworkWest Virginia University918 Chestnut Ridge Rd.Suite 1P.O. Box 6080Morgantown, WV 26506-6080(800) 526-7234www.askjan.orgNational LaborRelations Board1099 14th St. NWWashington, DC 20570(866) 667-6572www.nlrb.govOSHAU.S. Dept. of Labor200 Constitution Ave. NWRoom N3647Washington, DC 20210(800) 321-6742(202) 693-1999www.osha.govB.1

B.2 Employer’s Practical Legal GuideSocial SecurityAdministration6401 Security Blvd., Suite 760Baltimore, MD 21235(800) 772-6270www.ssa.govU.S. Access Board1331 F St. NW, Suite 1000Washington, DC 20004-1111(800) 872-2253www.access-board.govU.S. Citizenship andImmigration ServicesDept. of Homeland SecurityOffice of Business Liaison20 Massachusetts Ave. NWRoom 2000Washington, DC 20529(800) 375-5283www.uscis.govU.S. Dept. of Labor200 Constitution Ave. NWWashington, DC 20210(866) 4-USA-DOL or(866) 487-2365www.dol.govWage and Hour Division:(866) 4-USWAGE or(866) 487-9243www.dol.gov/whd/Employee Benefits SecurityAdministration:(866) 444-EBSA or(866) 444-3272www.dol.gov/ebsa/Office of DisabilityEmployment Policy:(866) 663-7365www.dol.gov/odepwww.usa.govA centralized directory thatprovides access to all federalgovernment websites anddocuments