Archive for the ‘Personnel Policy Fun’ Category

Don’t Be Damned by Your Own Employee Handbook

Posted: May 24, 2016 in Employee Contracts, Lawsuits, Personnel Policy Fun
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I’ve blogged before about the need for drafting and updating your employee handbook: https://damnedif.com/category/personnel-policy-fun/

I know, handbooks are boring. But you know who they are not boring too? That plaintiff’s lawyer who wants to take your company for a million dollars. She’ll do her job and read every word of your employee handbook that you haven’t bothered to read in, what, three years? She’ll find every ambiguity, every outdated policy, every discrepancy with how you do things. And she’ll smack you in the mouth with all of them at deposition or trial.

Here are just some of the ways that you can screw yourself with your employee manual.

  1. You have policies that you don’t follow.

Every employer has policies and provisions in the manual that they do not really follow. They are outdated, irrelevant or ignored. Get rid of them. They serve no purpose other than showing how you don’t follow your own manual, which can be used in a variety of ways to make you look bad in litigation.

  1. You have no or an outdated sexual harassment policy.

Massachusetts is serious about sexual harassment, as it should be. Employers with six or more employees by law must have a sexual harassment policy. You also must provide the policy to new employees, and to all employees yearly. Our diligent plaintiff’s attorney will certainly use it against you if you don’t do these things. They may also use it against you if do not train employees – at least your supervisors (which is recommended, but not required, by Massachusetts law). Your company is automatically liable if a supervisor commits sexual harassment of a subordinate. Training takes about an hour, so just get it done.

  1. You don’t include disclaimers and at-will language.

All the lawyer speak in modern employee manuals are nauseating, but strictly necessary.  Why?  Because the Massachusetts courts have told us so.  If you fail to put them in there, you may have bound yourself to a contract whereby you have all the obligations of performance. If you fire an employee or take other action, you may have breached the “contract.” This would be like winning the Darwin Awards, employer version.

  1. You don’t have a comprehensive leave policy.

There are many types of leave required by federal and state law. You can’t simply stick your head in the sand and give people time off whenever they need it. No good deed goes unpunished. If you give one person leave and not another, you may just have committed discrimination. Unless you are okay with a “come in when you feel like it” policy, you need to address vacation time, military leave, jury duty leave, sick leave, family and medical leave, small necessities leave, maternity leave, domestic violence leave, voting leave, etc.

  1. You restrict NLRA rights.

Even non-union employers now have to worry about the National Labor Relations Act, which historically was thought to apply only to union employees. Employees have rights to engage in “concerted” activities regarding the terms and conditions of employment. Your policies regarding standards of conduct, social media, distribution of materials in the workplace, confidentiality, etc. could inadvertently run afoul of the statutes and land you in hot water.

  1. You have an overly detailed and rigid progressive discipline policy.

This is a rare occasion where non-specific may be better. If you are too rigid, you may create a presumption that employees cannot be fired unless you progress through the stages of discipline. Moreover, if you do not follow your explicit policy to the letter in every occasion, you will open yourself up to claims that you treated employees differently on the basis of gender, race, religion or other protected class. This is not just theoretical. It was a costly lesson for an employer in a recent Massachusetts case.

  1. You have wage and hour policies that violate the law on their face.

If you are going to have wage and hour policies in your handbook, including overtime, comp time, and break polices, make extra sure that they are accurate and up to date. Wage and hour law is very detailed and frequently changes. I often see employers unwittingly put their illegal policies in writing, which will make our hypothetical plaintiff’s lawyer very, very happy.

  1. You inadvertently run afoul of the federal ERISA law.

If you are not careful about how you describe your employee benefits, you could trigger compliance with strict obligations under federal law. Don’t do that.

In summary, dust off your employee handbook in your bottom draw and have your employment lawyer review and update it. Out of sight may be out of mind, but that won’t keep you out of court.

By Adam P. Whitney, Esq.

617-338-7000

You’re Damned if You Assume that the Safe Harbor Provisions of the Massachusetts Sick Leave Law Mean that You Can Ignore the Law.

Posted: June 12, 2015 in Overzealous Government Regulators, Personnel Policy Fun
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As I previously blogged, the Massachusetts Sick Leave Law goes into effect on July 1, 2015.  The law is potentially bad news for employers with respect to productivity, expenses, and legal exposure.  See previous blog.

Recognizing at least some of these issues, the Attorney General issued Safe Harbor provisions for employers who currently provide (by a policy in existence on May 1) at least 30 hours of paid time off/sick leave for 2015, if certain conditions are met.  But don’t just assume that the Safe Harbor applies to your business or that you don’t need to do anything if it does apply.  Among other things, you will have to make provisions for part-time employees and other employees who do not currently earn paid time off.

Have your employment lawyer evaluate your current policies and practices.  For many employers, you will need to make changes before July 1st.  Also, you might as well start getting ready for 2016 even if the Safe Harbor applies to you.  You will also have to post notice of the new law.  The Attorney General has provided a sample poster.

Keep in mind that the new law impacts all employers, even if you have only one employee.  Violating the law, even inadvertently, could get you sued by your employee and/or fined by the Attorney General.

As always, the above is general information, not legal advice.

By Adam P. Whitney, Esq.

You’re Damned if You Don’t Prepare for the New Massachusetts Parental Leave Law

Posted: January 14, 2015 in Discrimination, Personnel Policy Fun
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If you are a Massachusetts employer with six or more employees, effective April 2015 you must provide up to eight weeks of unpaid leave to a full time man or woman for the birth or adoption or court ordered placement of a child (previously, the law applied only to women).  So sharpen your pencils and get ready for yet another change to your employee handbook. There are also new procedures that an employer must follow if the employer wishes to limit the leave to eight weeks and retain the right to terminate the employee who does not return in a timely fashion. Larger employers will need to coordinate with the FMLA.  As an aside, you’ll also have to consider if pregnant employee has a pregnancy-related disability that may require an accommodation.

Governor Patrick signed amendments to the Massachusetts Maternity Leave Act on his way out the door on January 7, 2015, which made these changes to the law.  In addition to including men, the amended law has provisions that provide broad protections for employees, and potential headaches for employers.  Employees will also be protected under the employment discrimination statute, Chapter 151B, which gives the parental leave statute teeth.

Employers will need to change their policies and post notices about the new law. Failure to follow its provision could result in significant liability.  As always, this information is general and not legal advice.

By Adam P. Whitney, Esq.

You’re Damned if You Don’t Prepare for Massachusetts’ New Sick Leave Law

Posted: November 17, 2014 in Disability Liability, Drug Testing, Etc., Hiring and Firing, Personnel Policy Fun, Privacy
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Every private employer in the Commonwealth must be aware of the new Massachusetts law on sick leave. From the employer that already provides paid sick leave, to the employer of a single employee, this new Statute, which will be codified at General Law Chapter 149, Sec. 148C, will affect everyone when it goes into effect on July 1, 2015. Employees will be allowed to start taking sick leave on September 29, 2015 or 90 days after their start date if hired after July 1, 2015.

Ignore the Statute at your peril, as the result could be a claim against your company for triple damages and attorneys’ fees, or an enforcement action by the Attorney General, even if you already provide paid sick leave.

For Employers Under 11 Employees

The good news is that you do not have to provide paid sick time. After July 1st of next year, however, you will have to allow all employees to earn up to 40 hours of unpaid sick leave a year. This includes part-time and temporary employees. No one is excluded.

For Employers with 11 Employees or More

After July 1st of next year, all employees will earn up to 40 hours of paid sick leave a year. Even if you already provide such paid sick leave, your policy will likely need some tweaking because (1) the statutory sick leave is likely broader than your policy, and (2) your certification requirements might be more stringent than allowed under the Statute.

Part-time and temporary employees count towards the 11 employee threshold. The Statute is silent about what happens if you downsize in the middle of the calendar year from 11 employees to 10 employees or less. My best guess would be that employees would not lose sick time that was already accrued, but that they would stop accruing sick time when you downsized. Hopefully, the Attorney General will address this issue before the statute takes effect.

If you have more than 50 employees, you will have to coordinate this leave with the FMLA and the Massachusetts Small Necessities Leave Ace.

How Sick Leave Is Earned?

All employees will earn sick leave at the rate of 1 hour for every 30 hours worked, up to a maximum required 40 hours. Most full-time employees will earn the full 40 hours. Exempt employees paid on salary will normally be presumed to work 40 hours per week. Part-time workers might not earn the full 40 hours, but they may not need to. Sick time must be earned starting with the first day of work, although you need not allow any leave until after 90 days.

For What Can Sick Leave Be Taken?

This is where your current policy may be in conflict with the new statute. Under the new statute, an employee will have a right to take sick leave to care for a child, spouse or parent or parent of a spouse, including to attend the employee’s or family member’s medical appointment. Sick leave is also available for mental illness or preventive medical care. Sick leave may also be used to address the psychological, physical or legal effects of domestic violence, which could include going to court. The term “sick leave” could be a misnomer in many circumstances.

To make matters worse, sick leave can be taken in hourly increments (or smaller, depending on your policy for tracking time). On one hand, this makes sense because sick leave can be taken for a routine medical appointment. On the other hand, it may create a “get out of jail free” card for employees who simply over sleep and are late. The employee could claim that he or she felt ill and take an hour of sick leave. Theoretically, an employee could show up an hour late once a week, claim sickness, and be protected from punishment.

What About a Doctor’s Note Requirement?

This is another issue that may conflict with your current policy. The statute states that an employer “may require certification” when an employee takes more than 24 consecutive hours of earned sick time. A fair reading of this provision is that an employer may not otherwise ask for certification. So if an employee takes 2.5 days of sick time leave, the employer is apparently supposed to just take the employee’s word for it. The employer may not require that the certification explain the nature of the illness or the details of the domestic violence. Even where certification is required, the employer cannot delay providing the leave or paying for the leave on the basis that it has not yet received the certification.

What Penalties Are Available Under the Statute?

Employers are prohibited from interfering with an employee’s rights under the statute, or using the fact that an employee took earned leave as a negative factor in any employment action or otherwise disciplining the employee for using earned sick time. Employers are also prohibited from retaliating against any employee who opposes practices which the employee believes is in violation of the statute or supports another employee’s exercise of his rights under the statute.

The Statute will be enforced by the Massachusetts Attorney General, which has not yet issued any regulations or Advisory. The Attorney General can get an injunction against any employer violating the statute. Penalties, including potential criminal prosecution are available to the Attorney General. Additionally, the Statute has been incorporated into General Law Chapter 149, Section 150, which provides for a private right of action for triple damages and attorneys’ fees. It is not expressly clear if an employee would be entitled to recover for lost backpay in the event of a wrongful termination, or, if so, if the backpay would be tripled.

Other Statutory Provisions.

An employer is not required to pay out unused sick time upon separation of employment. This could get tricky if you combine a policy with paid time off or vacation pay.

Employees can carry over unused, earned sick time from year to year, but may not use more than the maximum 40 hours per year (unless the employer allows).

Employees must give notice if the need for leave is foreseeable.

Employees can make up the sick time by working another shift during the same pay period or the next pay period if both employer and employee agree. In that situation, the employer need not pay for the missed time, and the employee does not need to use earned sick time.

However, an employer cannot require an employee to work additional hours to make up the missed time, or require that the employee to search for or find a replacement employee to cover the hours during which the employee uses earned sick time.

Employers will be required to post notice of the rights under the statute.

Observations

The new Statute will impact all employers, some much more than others. The economic impact is potentially huge. If you have 100 employees earning an average of $40,000 per year, this new Statute potentially just added $80,000 to your yearly expenses, or $80,000 in lost productivity depending on how you look at it. Given the breadth of the statute and the anti-retaliation provisions, there will be little reason for any employee to not use his five days of sick leave a year. The likely result is that some employers will be forced to cut down on paid vacation and personal days. Sick leave will become the new personal day/vacation leave for many employers. In fact, the statute states that if you provide paid time off that meets the same parameters as the statute, you don’t need to provide additional sick time.

Worse yet, the statute arguably prevents an employer from rewarding attendance, as it could be deemed to be a de facto punishment to employees who took leave.

Problem employees will find a lot of room to abuse this statute. Virtually every termination becomes actionable by employees because virtually every employee will have taken sick time in the recent past. It will be the worst employees who will abuse the new law. The result will be that firing these worst employees will become risky. Employers who terminate unreliable or chronically late employees who are adept at gaming the system will risk exposure.

Employers will need to make (sometimes expensive) contingency plans to cover for sick workers. No longer can an employer place the responsibility on the employee to find someone to cover the shift. This will be a big change for some industries, such as the restaurant industry. It is not clear whether an employer can require an employee who is going to use a few hours of leave to be out for the entire shift. Although the statute does not expressly prevent this, it could be considered retaliatory and subject the employer to suit under the statute. The statute arguably requires employers to allow employees to take a few hours off and then show up and work their shift. Some jobs do lend themselves to allowing an employee to take a few hours off, such as a driver, a home health worker, etc. Some employers will face additional costs by being over-staffed to account for being under-staffed (keep in mind that if a replacement employee must report to work, they must be paid at least three hours).

Virtually every term in the statute is defined broadly in favor of the employee, so employers will have to err on the side of caution. For example, a “parent” includes any “person who assumed the responsibilities of parenthood when the employee or employee’s spouse was a child.” Another example is that leave is allowed for “preventive medical care.” Could this include acupuncture? Massage? Dental cleanings? Leave is allowed for medical conditions and mental illness,” so employees who are depressed, have anxiety, or sleep disorders are likely allowed to take leave.

Employers will have the additional burden of calculating sick time earned, especially for part-time, temporary or new employees. You may want to consider simply providing your full time workers the full 40 hours at the beginning of each calendar year, although this creates the possibility that the employee could use days that are not earned.

Be careful about paying people as independent contractors. This is very risky in Massachusetts anyway. Curiously, the sick leave Statute does not use the statutory definition for employee, but simply defines an employee for private employers as “any person who performs services for an employer for wage, remuneration, or other compensation.” Presumably, the Attorney General and the Courts will use the definition contained in the previous section of the Statute, General Law Chapter 149, Section 148B, which is also strict, but which does provide a working definition to distinguish between employees and independent contractors.

As always, the above is not considered legal advice, but is general information only.

By Adam P. Whitney

Using Standard Form Employee Handbooks; Damned if You Do, Damned if You Don’t.

Posted: May 10, 2013 in Choosing a Lawyer, Employee Contracts, Personnel Policy Fun
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Drafting and updating employee manuals, also called personnel manuals or employee handbooks, is a lot like getting your annual medical check up. It’s no fun to do, but we know that it’s an important part of our overall health maintenance. Making sure that your employee handbook is compliant and up to date is an important part of your company’s overall plan to keep good relations with your employees, and to stay out of disputes and lawsuits.

 

There are now many websites, some for free, that allow you to create your own employee manual. Most are actually pretty good. And a dirty little secret of employment lawyers is that many of us use these sites too, either as a starting point, or to find some better language.

 

Can you bypass your lawyer and create your own employee manual? No, at least not completely, because “pretty good” is not always good enough. With some effort, you can probably create an employee handbook yourself that is 80% to maybe even 90% accurate and complete. But it’s that missing/inaccurate 10-20% that will kill you.

 

Here’s why. There is no one-sized fits all handbook. First and foremost, different states have different statutory and common laws. Some of the standard provisions from handbooks created for a national audience would cause direct violations of Massachusetts laws (it’s akin to drinking bland, national beer, when you could be drinking Sam Adams, Harpoon or Pretty Things). Plus, you may be inadvertently placing unnecessary burden’s on your company. For example, you don’t want to obligate your company to comply with the FMLA if you only have 20 employees. There are many different state and federal statutes that apply to different businesses, usually depending on the number of employees.

 

Additionally, every industry and every business is different. There may be different provisions that you absolutely need for your industry. Different statutes you have to follow. There may be other provisions that fit or do not fit with your workplace culture.

 

But you should still benefit from the cost-effectiveness of having free or very reasonably priced personnel manuals readily available on the internet. If you want to manage legal costs, go ahead and create the employee handbook from a reputable site on the web. A good human resources professional could probably create a very good (90% or so) manual in this fashion with a few hours of effort. But don’t stop there. Have your trusted employment attorney spend a few hours to get your manual up to 100%.

 

The above discussion could apply in varying degrees to other employment and business documents, such as non-competes, non-solicitation agreements, confidentiality agreements, service contracts, etc. If you want to save legal dollars, sometimes you can think of the web as a starting point. But unless you see webmd.com as a viable alternative to a visit with your trusted primary care physician, don’t make it your ending point. Saving a few thousand dollars now could cost you tens or hundreds of thousands and a lot of heartache later.

 By Adam P. Whitney 617.338.7000

You’re Damned if You Don’t Have the Right Inclement Weather Policy

Posted: January 22, 2013 in Personnel Policy Fun, Wages, Overtime, Commissions and Pay Issues
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Who would think that something as basic as a snow day policy could land you in trouble with the feds.   But having the wrong inclement weather policy could cause your company to underpay exempt employees, which would be a violation of the Federal Labor Standards Act (“FLSA”).  Generally, a truly exempt employee (a topic for another day), must be paid her weekly salary, even if you send her home early, or close the office for a day due to bad weather.

Massachusetts state law is also implicated for salaried and hourly employees.  If an hourly employee shows up to work, they have to be paid for at least three hours of work.  Even if you decide to close the office, you still must pay the minimum.

The above is obviously just a quick overview of how wage and hour laws can interact with inclement weather policies.  If you need to review this situation for your business, give me a call.  As always, this blog contains general information, not legal advice.

By Adam P. Whitney, 617.338.7000

You Could Be Damned if You Don’t Have Professional H.R.

Posted: December 19, 2011 in Choosing a Lawyer, Hiring and Firing, Personnel Policy Fun
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Let’s hear it for H.R.! There’s a cheer you don’t hear in the office much. H.R. is the butt of many jokes, including a lot of funny ones about Toby on The Office (Michael Scott said on one episode: “If I had a gun, with two bullets, and I was in a room with Hitler, Bin Laden and Toby, I would shoot Toby twice”). But from an outside counsel perspective, I absolutely love dealing with clients who have professional, competent human resources personnel.

Whether you owners of the company know it or not, your H.R. manager is worth his or her weight in gold because they keep your company out of so much trouble. Today’s human resources professionals are just that, professionals. More than ever before, H.R. has to know so much about federal and state laws and regulations on leave issues, disability issues, pay issues, benefits issues, etc., etc. And the laws change all of the time, so they need to continually update their knowledge. Some H.R. professionals are specialized in some of these areas, and probably know as much as many lawyers.

H.R. professionals know how to document what needs to be documented. This may sound tedious or boring, until you are faced with a lawsuit or potential lawsuit. Then, having proper documentation can make all of the difference. We have a saying in my business, “if it’s not in writing, it didn’t happen.”

H.R. professionals keep your legal fees down in two ways. One, as mentioned above, they keep you out of trouble, including lawsuits and government inquiries. Two, they can handle a lot of things themselves without having to call the outside lawyers. Most H.R. professionals I know seem to know the precise time when a situation morphs from an H.R. issue to a legal issue.

I know that H.R. professionals do many other critical things as well. If used correctly, they are strategic partners for management and set the tone for the company culture. I’m simply giving my perspective as outside counsel. This brief post is not meant to give a full overview of the entire profession.

If you’re company is not large enough to have a full-time H.R. staff person, consider a company that will serve as your out-sourced human resources division. There are plenty of outsourcing companies who will do that for you. Here’s a good article on outsourcing: http://humanresources.about.com/cs/strategichr/a/outsourcing.htm

If you are an H.R. professional at a private company in Massachusetts, or if you have taken on those duties by default (as sometimes happens), I would love to work with you. Call me at 617.338.7000.

By Adam P. Whitney

You Could Be Damned if You Fire an Older Worker. You Could Be Damned if You Don’t.

Posted: August 30, 2011 in Disability Liability, Discrimination, Hiring and Firing, Personnel Policy Fun
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If we are being honest we must admit that many of us will eventually get “too old” to do our jobs. This won’t happen to everyone. I have had cases against lawyers in their 90’s who were quite capable. I imagine that Jack LaLanne would have been a fine lifeguard or firefighter even in his 80’s. But most of us could not do those jobs in our 80’s.

Don’t take this post the wrong way; I’m strongly against age discrimination. Although I usually work for employers, I’ve successfully represented older workers who have been real victims of age discrimination. It’s ugly. And the resulting emotional and economic harm to an older worker can be devastating. While racial discrimination is often subtle and covert, age discrimination can be blatant and overt.

This post is aimed at the very real situation of a good employer having an elderly worker who can no longer perform all of the job duties. In this economy with people unable to retire, and because baby boomers are aging, this is a situation that frequently repeats itself. Take this hypothetical “damned if you do; damned if you don’t” situation, which is a mixture of real cases I’ve worked on. Say an employer has a much older worker; elderly, in fact. Far from wanting to discriminate, the company feels great affection for the employee, and has kept him much longer than his performance warrants. Let’s say that the public’s or the client’s safety depends on the employee performing his job duties.

What is the employer to do? By letting the employee slide for years, the employer is in a weak position because it has no record of poor performance. If the employer fires the employee, it exposes itself to an age discrimination claim. If the employer does not fire the employee, clients may be dissatisfied, or someone could be injured. Damned if you do; damned if you don’t. There may also be physical issues that make the employee qualified as disabled under state and federal law, requiring that you provide reasonable accommodations before termination.

There’s no magic bullet to this situation, but if it is a safety issue, you have to err on the side of safety. But it is clear that employers must rely on objective criteria. Well-drafted and honest job descriptions, which are enforced for all employees equally, are your first line of defense. Performance evaluations are your second line of defense. If you routinely evaluate, or even test, all of your employees in an equal, objective, unbiased fashion, and record the evaluations, you will be in a better position (You have to be careful that the evaluations or tests themselves are not biased, which could lead to liability). Also, you should have objective and equal responses to the evaluations/testing. You cannot let some employees slide, because you have then set a precedent that will allow an employee to show bias if you enforce your standards against only some of your employees. Document everything when it happens. Employment lawyers have a saying, “if it’s not in writing, it didn’t happen.”

This will cost you time and money, I get that. But don’t look at it as a waste of time. In addition to helping you avoid liability, won’t it also help you to serve your customers? Won’t it reinforce to your workers that the job description is important and that you take it seriously? Won’t it help you to revise your job descriptions if they are not accurate? Won’t you discover where you need more training? Won’t it help you get valuable feedback from your employees? Won’t you weed out underperforming workers and strengthen your business? Only you can answer these questions, but I’d be surprised if you said “no” to all of them. Maybe this isn’t feasible for every company and every position, but if you put your mind to it, you should be able to come up with some objective ways to evaluate employees.

The other advice here is to be honest with your employees. Of course, don’t say “you’re too old” for the job. Don’t suggest that the employee retire. I said honest, not suicidal. In fact, age really isn’t the issue, in spite of what I wrote above. The issue is the individual’s performance. Some people can suffer early onset dementia at age 60. Some people have their wits about them in their 90’s.

Make it about their performance. Don’t try to soften the blow and tell the employee that you’re eliminating the position when you are not. Don’t tell employees that you are moving in a new direction, or seeking some “new blood,” which is code for hiring younger workers. Just be factual and rely on performance issues. It will still hurt the employee, and they may not want to accept that they cannot perform. But deep down, they will know that you are right. I think it is easier to accept that we all get older and lose some of our abilities than to accept that your employer rejected you just because you are older. If you make an employee feel the latter, you may well buy yourself an expensive lawsuit.

If you have any questions on how to deal with an underperforming worker, call me at 617.338.7000.

By Adam P. Whitney

You’re Damned if Your Supervisor Has “No Bra Thursday” or “Mini Skirt Monday”

Posted: August 15, 2011 in Personnel Policy Fun, Rogue Employees, Sexual Harassment
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Here’s a very interesting read from a fellow blogger, Attorney Jon Hyman, who has an excellent blog on employment law in Ohio: http://www.ohioemployerlawblog.com/2011/08/if-your-workplace-has-no-bra-thursday.html

As you can read from the post and the attached complaint, the employee alleges that her supervisor asked her sign a note agreeing that he could sexually harass her.

It should go without saying that an employee cannot be forced to waive her rights against sexual harassment. In limited circumstances, participation in sexual banter can be a defense to a sexual harassment claim, but it’s really a defense of last resort, because it is an admission of a sexually charged atmosphere. Moreover, even if an employee seems to participate in sexual banter or jokes or whatnot, the employee may feel that there is no choice other than to play along. Or, the employee may be terminated and suddenly find the banter offensive and hostile.

The takeaway is obvious. Don’t tolerate any kind of sexual banter in the workplace, unless you want to try your luck explaining to a government agency, judge or jury why it was okay to do so.

If you have any questions about sexual harassment, call me at 617.338.7000.

By Adam P. Whitney

You’re Damned if You Don’t Understand Employment Contracts Under Massachusetts Law

Posted: June 9, 2011 in Arbitration, Employee Contracts, Hiring and Firing, Personnel Policy Fun, Severance Agreements and Severance Pay, Shareholder Rights, Trade Secrets and Proprietary Business Info., Wages, Overtime, Commissions and Pay Issues
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Much of what you may think you know about employment contractual issues could be wrong. Is your company exposing itself to liability because of misinformation or a lack of information about contracts? Employment law creates traps for unwary employers. For example, you could be damned by a poorly drafted commission plan, which could subject you to triple damages, costs and attorneys’ fees even where you think an employee is owed nothing. You could be damned by your own personnel manual, which inadvertently creates contractual rights in employees. You could be damned by firing a minority owner of your business (stockholder, partner or LLC Member) without legal advice. Here is a brief guide, which just scratches the surface of these complex issues.

Does a Contract Have to Be in Writing?

Yes and no. Ideally, every employment agreement should be in writing to clarify the rights and obligations of both parties. Sometimes, a simple offer letter will do. To some extent, oral contracts can be enforceable if they can be performed within one year. If the contract cannot be performed within one year, then it must be in writing to satisfy the statute of frauds. Like many things in the law, there are exceptions to these rules. For example, if an employee relied on an oral promise of a contract for a term of years, the employee might be able to enforce the oral promise using the court’s equitable powers? Also, a promise of employment for life can be performed within one year because anyone can die within a year. Thus, an oral promise of employment for life can be enforceable.

Does a Partner in a Partnership, a Shareholder in a Small Corporation, or a Member of an LLC Have Rights Against Being Terminated by the Majority Owners?

Yes, to an extent. This is a very complicated area of the law and depends on the specific facts of each case. In general, if the owner-employee has a reasonable expectation of continued employment, he cannot be fired unless there is a business purpose for the firing and no less harmful alternative. This is because the majority owners owe the minority owner the utmost duty of good faith and fair dealing. Thus, majority owners should seek sound legal advice before terminating or taking other action against a minority owner employee.

Can Other Employees Be Fired Without Cause?

The general rule is that, if an employee is “at-will,” which means that the employment is not for a specified period of time and there is no contractual protection to employment, the employer can fire the employee for any reason or for no reason. If an employee has a specific contract (or if a personnel policy creates rights against termination, as set forth below), usually the employer can terminate the employee only if there is “cause” to do so. Well-drafted contracts define the specific “for cause” reasons for termination.

Also, there are dozens of statutory and common law protections which protect employees from discrimination and other matters. Thus, if the employer terminates the employee without cause, the employee may believe that there is a discriminatory or other reason for the termination.

Does the Employee Manual or Personnel Manual Create an Employment Contract Giving Rights to the Employee?

Yes, no, maybe. Typical lawyer answer, I know, but it is the right answer. A well drafted manual usually will not create contractual rights in favor of employees. However, there are reported cases where a poorly drafted manual inadvertently gives rights to employees that prevent their termination without cause. Employers should have their manual reviewed by a qualified employment lawyer to protect themselves from suit.

Can an Offer Letter Create an Employment Contract for a Term?

Yes. Employers can unintentionally create an implied contract for a term by the wording in an offer letter. Employers should have their offer letters reviewed by a qualified employment attorney before sending them.

Should Employees Be Told of the Reason for Termination?

Probably, but it depends on the situation. What employers should not do is lie or tell a half-truth, even to save the employee’s feelings. This does not mean that the employer has to be harsh or intentionally hurt an employee’s feelings, but if you do not tell the truth at termination and you are then sued, it’s hard to change your story later. The employee’s lawyer will accuse you of changing your story and that your real reasons were discriminatory. Also, you should document the reason for the firing. Employment lawyers have a saying – if it is not in writing, it didn’t happen.

Additionally, there are new statutory requirements about what employers must put in an employee’s personnel file and how the employer must inform the employee of any negative information. All employers should review these new requirements with a competent employment attorney.

Can an Employment Contract Control over Statutes and Common Law?

Generally, no. Although parties are free to set forth the terms of the employment in writing, there are limitations. For example, employees must be paid minimum wages and must be paid either weekly or bi-weekly. These rights cannot be contracted away. An employer also could not have an employee waive an employee’s rights under anti-discrimination or other protective statutes, such as the Family and Medical Leave Act. However, unless there is some statutory or public policy prohibition, parties are free to tailor their agreement as they see fit.

Are Contracts Requiring Arbitration Enforceable?

To some extent, yes, if the contract is well-drafted, fair and reasonable. An employee is always allowed to challenge whether there is a valid arbitration provision, which is an issue for a court, not an arbitrator. Arbitration can also be waived by the party seeking to enforce it. Also, arbitration clauses cannot prohibit employees from filing with the Massachusetts Commission Against Discrimination, or from filing wage claims or other claims with the Attorney General or other governmental entities. Arbitration issues are complex, so if you are an employer who seeks to enforce an arbitration clause, make sure you have it reviewed by a competent employment attorney.

Can an Employer Make Sure that a Worker Is Not Classified as an Employee by Entering Into an Independent Contractor Agreement?

No. In Massachusetts, there is a strict three-part test for determining whether someone providing services for your company is an employee or independent contractor. This is a complex legal and factual question, but in general, if the individual is providing services within your line of business, or you have some control over the individual’s work, or if the employee does not have his own business or profession, the individual will likely be deemed to be an employee. There can be severe penalties and liabilities for misclassifying a worker as an independent contractor, so have a competent employment lawyer review this issue for you.

Does an Employee Have any Rights and Remedies if a Contract Has Been Breached?

Usually, but it depends on the wording of the contract and whether the employee has suffered damages. Employees will normally have a duty to mitigate damages. Thus, an employee must seek another comparable job after termination. The normal damages would be the loss of earnings during the contract term, minus amounts earned or which could have been earned in mitigation. There could be other damages, depending on the wording of the contract and the situation.

Does an Employer Have to Provide Severance Pay?

Generally, no, unless there is a contractual right or a specific, enforceable policy to do so. There may be exceptions to this general rule, but the exceptions do not apply to most employers and employees.

Does an Employee Have a Contractual Right to Bonuses and Commissions?

Yes, no, maybe. Commissions and bonuses are creatures of contract, but can potentially be enforced through payment of wages statutes. One must first look at the specific wording of any written contract or compensation plan, and also examine the course of dealing of the parties and the standards in the industry. If an employer has a vague commission plan or one that favors the employee, the employee may have a contractual right to commissions, even after termination. Worse yet, the employee could be entitled to triple damages and attorney’s fees, litigation costs and interest. Thus, any commission or bonus plan must be very carefully crafted by a competent employment attorney. A “bonus” is usually thought of as being wholly discretionary and, thus, not subject to contractual or statutory rights. However, “bonus,” is just a word used and the word itself does not control. Employers can inadvertently create employee rights to a “bonus” by a poorly worded compensation plan or a course of dealing.

Can an Employer Make any Employee a Salaried Employ by Putting that in the Contract?

No. There are specific guidelines under federal and state law regarding who is an “exempt employee” and who is a “non-exempt employee” for overtime purposes. Contrary to the belief of some employers, you cannot simply pay any employee a salary and not expect to keep track of their hours and pay overtime. You must first determine whether the employee meets the exempt guidelines, which can be very complicated. For example, lawyers and doctors are professionals and can be paid on a salaried basis, as can some (but not all) executives, managers and computer programmers.

The above is not meant to be legal advice, but merely general information. Employment law is extremely complex, and legal advice cannot be given without a full review of the facts and the law. The above may or may not apply to any particular employer or employee.

By Adam P. Whitney 617.338.7000.

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