Stacy Bruce Partner, Cobb Martinez Woodward PLLC
Former late night television show host David Letterman would jokingly compile a “Top 10 List” as a regular segment of his late night talk show as a way to entertain his audiences. Unlike David Letterman’s popular bit, the top 10 mistakes employers make are not funny and can have costly consequences. Whether one of these mistakes is legally actionable may depend on where an employer is located and where the employees work. Some states’ laws are more favorable to employers than others and may differ from federal law. This article is focused on good business practices, as opposed to what may constitute a legally actionable claim.
10. A different kind of “bad” word. Individuals use many words or phrases that can be offensive or discriminatory to particular classes of employees or applicants. Each protected class has their own set of “bad words.” There are numerous protected classes including race, color, sex/gender, sexual orientation, national origin, citizenship, religion, age, disability, pregnancy, genetic information, and veteran status. Some inappropriate words or phrases for a protected class are obvious and frequently litigated, such as the N word, calling someone a slave master, or telling an employee she has pregnancy brain. Others may not be as obvious, such as grandma or honey. Seemingly neutral words can be discriminatory or harassing based on how and when they are used, or the way they are said.
Discrimination and harassment can be statements, slurs, jokes, photographs, images, emails, voicemails, social media posts, and texts. But discrimination and harassment is not limited to inappropriate words or phrases. Non-verbal behavior can also be discriminatory and harassing such as grabbing a person’s genitals or offensive hand gestures. Harassment also applies to any of the protected classes, not just sex/gender. Sexual harassment does not require any physical contact at all, simply that the harassment be sexual in nature.
Employees’ conduct outside of the office or while an employee is off duty may also create liability for employers. Behavior at holiday parties, happy hours, retreats, or when employees simply get together, especially when alcohol is involved, can create significant exposure. Employers need to recognize what is in appropriate and discipline employees accordingly.
9. Retaliating against employees or applicants. Every federal and state employment laws protecting employees from discrimination and harassment also prohibits retaliation. Once an employee makes a complaint about what they believe is discrimination or harassment, an employer cannot retaliate against him/her, even if the complaint has no merit. Employers cannot take any action that would persuade someone not to bring an issue to the employer’s attention. This includes termination, demotion, reassignment, cut in pay or hours, or anything that would be considered an adverse employment action.
Retaliation can also occur even if the employee or applicant has not made a formal complaint. For example, employers cannot retaliate against an employee or applicant for requesting an accommodation for a disability, for requesting a leave of absence, or being injured at work.
8. Failing to properly complete or retain I-9s. Employers are required to complete I-9s for every employee. Completing the I-9 is more complicated than many realize. The government has the right to inspect I-9s in an audit. When the government conducts an audit, each and every error inflicts a monetary fine. Fines can range from $110-$1,100 per employee. There are numerous mistakes that can lead to a fine. For example, even though the form is clear, many people fail to read the small print. \For dates, the form is specific. Dates must be provided as mm/dd/yyyy, not 1/1/21. Another mistake is how an employer corrects an error. If an employer makes an error when completing an I-9, the employer should simply draw a line through the incorrect information, enter the correct information, initial and date the correction, and explain the error. A different type of mistake involving I-9s is the process for retaining the I-9s, not simply completing them. Employers are required to retain I-9s for either three years after the date of hire or one year after the employee’s last day of employment – whichever is later.
7. Not completing thorough documentation. Prior to terminating an employee, employers should review the employee’s personnel file. Is there written documentation of warnings or counseling that supports the decision to end the employment relationship? Even if the employer is in an “at-will” jurisdiction, inadequate or inconsistent documentation can create exposure. Employers need to balance too much with not enough documentation. An employer may not need prior warnings, depending on why the employee is being fired.
Employers should review their documentation prior to disciplining or terminating an employee. Is the documentation easy to read? Does it sound fair? As an employer, ask yourself “would I feel comfortable showing it to my parents, much less a jury?” What if these notes were posted on social media? Employers should clearly and objectively indicate their expectations. Many times, an employer gives an employee a great performance evaluation, and then wants to fire the employee for the exact same criteria without any new information. The performance evaluation then becomes the fired employee’s example of great performance. Documentation can be an employer’s best friend or worst enemy when defending a claim by a former employee.
6. Not identifying disabilities and possible accommodations. Employers with fifteen or more employees are required to comply with the Americans with Disabilities Act as amended by the ADA Amendments Act of 2008 (collectively “ADA”). Texas state law is consistent with the ADA.
The ADA requires employers to provide a reasonable accommodation for employees or applicants with disabilities. Therefore, the first question is whether an employee or applicant has a disability. This is a fact-specific inquiry. It is not dependent on how someone looks. The ADA defines disability as a physical or mental impairment that substantially limits one or more major life activity. The ADA Amendments Act of 2008 clarified that the word disability should be broadly interpreted. An impairment alone does not necessarily mean an employee or applicant is disabled. Disabilities are also not minor or transitory impairments, and likely lasts six months or more.
If an employee or applicant is disabled, the next question is what constitutes a reasonable accommodation. The ADA only requires an employer to provide a reasonable accommodation that allows the employee or applicant to perform their essential job functions unless the accommodation would create an undue hardship or a direct threat. What constitutes a reasonable accommodation, undue hardship and direct threat are also fact specific inquiries.
The process by which employers and employees/applicants evaluate reasonable accommodations, undue hardship, and direct threat is called the interactive process. An employee or applicant is not required to use any magic language to start the interactive process. Once an employer is aware of an impairment that may need an accommodation, the interactive process begins. Sometimes, this becomes clear by absences, tardiness, declining performance, or doctor’s notes. Doctors’ notes can contain much more information than merely confirming time off. If an employee provides a doctor’s note, employers and supervisors need to read the note, think about it, pass the information along, and evaluate any needed accommodations.
Employers and employees alike often forget it is a process – an exchange of information and ideas. An employer is not required to provide the best accommodation, only a reasonable accommodation to allow the employee/applicant to perform the essential job functions. An employer is also not required to provide the specific accommodation requested by an employee. The JAN website (Job Accommodation Network) is a great resource for identifying possible reasonable accommodations: www.askjan.org.
Despite the fact specific inquiry, the ADA is clear that certain types of accommodations are not reasonable: creating a new job, creating a promotion, lowering production or performance standards, or excusing misconduct.
Once an accommodation has been identified, the employer can evaluate whether the requested accommodation would create an undue hardship on the employer or a direct threat. The Equal Employment Opportunity Commission (EEOC) defines undue hardship on an employer as any accommodation that would be unduly costly, extensive, substantial, disruptive, or fundamentally alter the nature or operation of the business. This is not merely financial difficulty, but also accommodations that are disruptive to business operations. Employers should consider the nature and cost of the accommodation, the business’s overall and financial resources, the number of employees, the effect on the business’s expenses and resources, and the impact on the business.
As for direct threat, the EEOC defines direct threat as a significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by a reasonable accommodation. The EEOC recommends an employer evaluate the individual’s present ability to safely perform the job by considering the following: (i) the duration of the risk; (ii) the nature and severity of the potential harm; (iii) the likelihood that the potential harm will occur; and (iv) the imminence of the potential harm. An employer’s evaluation of a direct threat can place it in a bind as to which law to follow. Depending on the employer’s industry, there may be industry specific departments, organizations or entities that can conflict with the ADA, such as the Department of Transportation or OSHA.
5. Not having accurate job descriptions or a workable employee handbook. Having an accurate job description is critical to evaluating the scope of any needed accommodations for a disability under the ADA. A job description should clearly set forth which job responsibilities are essential. A job description for a specific position can change over time, and employers should not be afraid to do so. A logical time to review the job description is during annual employee evaluations, ensuring the job description reflects what the employee is actually doing or should be doing. It is too late to try and re-write an employee’s job description to avoid providing an accommodation for a disability when you realize that a job function that you consider essential is not even listed. But, even for employers with fewer than fifteen employees, a job description is crucial. A job description helps determine whether an employee is properly classified as an exempt or non-exempt employee (the importance of which is addressed in mistake #4).
Regardless of whether employers call its policies a handbook or a manual, it’s useful to have an employee handbook. A handbook sets forth an employer’s expectations and policies, and should actually reflect the employer’s practices. It does an employer no good to have policies that are not enforced. Some employers are hesitant to create a handbook because they do not want to lose their culture or flexibility. Instead, they have no written policies or a combination of policies gathered from different sources. But employers don’t have to lose their identity as an employer just because they have a handbook. A handbook can clearly set forth expectations, reflect company culture and provide flexibility all at the same time. It can be as long or as short as the employer wants. There are numerous policies that an employer could include, some of which may be dependent on the company’s size, industry or structure. Here is a list of a few critical policies I recommend including in a handbook: 1) prohibition of harassment, discrimination, and retaliation, 2) attendance and PTO/vacation usage, 3) payroll/work week/allowable deductions, 4) electronic communication/social media, 5) drug (including prescription) and alcohol use, 6) workplace safety, 7) confidentiality of employer’s information (including but not limited to trade secrets) and 8) privacy expectations (or lack thereof). It is important these policies comply with local, state and federal law. These policies should also not prevent employees from bargaining for better working conditions; this usually applies to social media policies, confidentiality, and recordings. The Texas Workforce Commission (TWC) provides sample policies that can be a starting place for creating a handbook (https://www.twc.texas.gov/news/efte/table_of_contents-az.html).
4. Misclassifying employees. There are two primary ways employers can misclassify individuals: 1) exempt versus non-exempt, or 2) employee versus independent contractor.
Exempt v. non-exempt: An exempt employee is exempt from receiving overtime pay – regardless of the number of employees that an employer has. So, how dos an employer determine whether an employee is exempt or non-exempt? There are numerous statutory exemptions: Executive, Administrative, Learned Professional, Creative Professionals, Computer, Outside Sales, and Highly Compensated Exempt. Each exemption has its own specific salary requirements and criteria. The Department of Labor has fact sheets that explain each exemption and provides different examples. It also has industry specific fact sheets. Because of the different criteria for each exemption, I recommend double checking the Department of Labor fact sheets to make sure employees are complying with each of the criteria (https://www.dol.gov/agencies/whd/overtime/fact-sheets).
Employee v. independent contractor: Independent contractors are not eligible for overtime, employer provided benefits or unemployment benefits. Employees, on the other hand, are. Employers do not pay taxes for independent contractors. If the Department of Labor concludes an employer improperly classified an employee as an independent contractor, the employer could be responsible for back taxes to the government and back wages to the employee.
3. Failing to properly pay employees. Regardless of whether an employee is exempt or non-exempt, either present unique challenges for paying wages.
Exempt employees: An employee is paid for the full day regardless of the number of hours worked. If an employee has available paid time off, the employee still gets paid for the entire day if he/she is off work. But, if an employee has exhausted all of his/her paid time off or has not yet accrued any paid time off and the employee works at any time during a day off, the employee gets paid for the entire day - regardless of how much or little the employee works. Even a short activity of checking emails or answering a phone call constitutes work requiring the employer to pay the employee for the full day. This places an extra burden on the employer to set forth clear expectations that an employee should not work at all when taking an unpaid day off. In addition to time off, there are limited allowable deductions for an exempt employee. Employers cannot deduct an exempt employee’s pay for jury duty, absences caused by being a witness, military leave, or when the employer closes the business.
Non-exempt employees: Paying non-exempt employees presents an entirely different set of challenges – especially when employees work remotely or have access to email on a smart phone or tablet. Employees need to be paid for all time worked. If an employee does any work at all, he/she is required to be paid. Depending on the circumstances, time worked could include meetings, trainings, travel and on-call time. Employees must be paid for meetings and trainings if they are required and occur during the work day. The Fair Labor Standards Act also requires employees to be paid for any break lasting twenty minutes or less.
An employer needs to keep a record of all time worked. An employer’s payroll and time keeping records will be heavily scrutinized in any claim for unpaid wages. Employers must pay overtime for any hours worked in excess of forty hours in a work week. Therefore, it is critical to establish when a work week starts and ends. Even if employees are paid bi-monthly, employers still must calculate overtime based on each specific work week. Employers cannot offer comp time instead of paying overtime.
Some employers try to avoid paying overtime because it was not authorized. This is not allowed. If an employee works overtime without authorization or approval, an employer can discipline the employee. But, the employer must pay the employee for all time worked, including any overtime. Employers should have clear policies specifying its procedure for when overtime is required and how to get overtime approved.
So, how does an employer calculate overtime? Overtime is not simply time and a half. It is time and a half the employee’s regular rate of pay. The regular rate of pay can be more than the employee’s hourly rate. Non-discretionary bonuses must be included in the employee’s regular rate of pay. Non-discretionary bonuses are bonuses that are expected or promised, such as on-call pay, contest prizes, shift differentials, bonuses for accuracy of work, attendance bonuses, or bonuses based on number of days without a safety incident.
Discretionary bonuses are not included in the regular rate of pay, such as travel expenses, bonuses for overcoming a challenging or stressful situation, bonuses for extraordinary efforts not based on any pre-established criteria, employee of the month, or uniform allowances.
Whether a bonus is discretionary determines the exact calculation for determining the regular rate of pay. The Department of Labor’s fact sheet has numerous examples and calculations based on the type of bonuses (https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses).
2. Failing to act consistently. Treating employees consistently is one of the best ways to avoid legal claims. Employers should apply the same rules for the same circumstance equally each and every time (another reason to have written policies). Obviously, different job positions in various industries may have distinct benefits, salaries, and flexibility. But, within the same particular job position, employers need to treat employees consistently.
1. Not knowing when to ask for help. Employers are the experts with regards to their own industry, but may not be well-versed in human resources or employment law. Companies frequently have someone serving as human resources without any experience, usually in the finance or payroll department. Even if an employer doesn’t want to hire a lawyer, there are numerous resources available for human resources professionals, such as the Society for Human Resource Management. There are also industry specific organizations that may help employers with questions for a particular industry. Be wary of information you may find on the internet. There is not necessarily someone doublechecking or proofing blogs, sample policies, or agreements. Copying and pasting from the internet can lead to its own set of risks. It may not be necessary to consult a lawyer every time there is a question but it’s better to get someone involved on the front end, whether it be for training, creating policies, terminating employees, evaluating accommodations, or conducting investigations. Employers work hard to create and maintain a company. Don’t make an employment law mistake that could lead to its demise.