Employment Law Primer
Copyright 2001 Daniel N. Steven
- Introduction
- Hiring
- Initial Screening of Applicants
- Interviewing and Hiring
- ADA Requirements
- Immigration Issues
- Employment Contracts
- Generally
- Restrictive Covenants
- Termination
- Employment at Will Doctrine
- Termination for Cause
- Wrongful Discharge
- Discrimination
- Generally
- Sexual Harassment
- Drug and Alcohol Testing
- Introduction
- Federal Law
- Recordkeeping and Access
- Wage and Hour Compliance
- Exempt vs. Non-Exempt
- Independent Contractors
- Summary of Key Points
-
INTRODUCTION
This article covers many of the laws governing the employment workplace in order to
assist the employer in identifying issues and developing management policies that avoid
liability and improve employee relations.
HIRING
The plethora of laws governing hiring practices in employment can be a minefield for
any small business. Federal and state anti-discrimination laws have chipped away at the
employer's once supreme right to hire - or refuse to hire - an employee.
Initial Screening of Applicants
Screening applicants for positions may be the single most important phase of the
application process. Screening may be performed either over the phone from a
pre-determined list of questions, or in person in conjunction with an application form. If
performed by phone, each phone applicant should be given a separate worksheet and
interviewees can be chosen from a review of these worksheets. If in person, the provider
should design an appropriate application form to be completed by the applicant. In either
event, it is critical that these questions cover only the qualifications of the potential
applicant. All information concerning an applicant's race, religion, gender, national
origin, age, or marital status must be scrupulously avoided. See sample application form.
GUIDANCE
Items which must be avoided in applications:
Race, religion, gender, national origin or age (except that an applicant may be
asked if he/she is over 18);
An applicant's arrest record. Information about convictions may be asked if they are
job related;
The marital status of an applicant, or information that may indirectly lead to that
information, such as "maiden name." In addition, applicants may not be asked
questions regarding family responsibilities, pregnancy, or intent to have children;
Medical questions concerning the applicant's general or specific health, family
health problems, worker's compensation claims history, and the like;
Military service record or lack thereof;
Financial issues, including financial difficulties, garnishment history, liabilities
or credit rating. It is permissible, however, to inquire the amount of the applicant's
present or last salary.
The height and weight of applicant.
Interviewing and Hiring
All hiring decisions should be based on an interview. Unless the applicant is a
present employee or acquaintance of the employer, it is the first opportunity for the
employer to meet the applicant and gauge the applicant's qualifications and interest in
the job. A good interview will also reveal the applicant's general aptitude, general
demeanor, motivation, and work habits.
The most important factor in avoiding legal pitfalls in the interview process is to
make sure that all information sought is "job related."
References. Until recently, solicitation and review of references from
applicants was a major part of the hiring process. Unfortunately, because of perceived
liability issues, many employers are limiting reference information to a mere confirmation
of the applicant's dates and position of employment. Accordingly, employers must
inevitably rely on nonprofessional character references.
CAUTION!
The Employer should not ask applicant's references any questions that would be not be
legal if asked directly of the applicant. Also, employers may not ask character references
of any person that could indirectly reveal an applicant's religion or ethnic background,
such as a member of the clergy.
Negligent Hiring. Legal liability now exists for an employer whose employee
commits a criminal, violent, or negligent act against a patient, where a reasonable
background check would have revealed a history of violent or aberrant behavior.
Unfortunately, the definition of "reasonable" will vary from court to court and
state to state. Employers should thoroughly examine their screening process to make sure,
at a minimum, that all professional licenses are verified; that gaps in employment or
other suspicious or unusual entries are checked; and that all references are requested and
contacted.
ADA Restrictions
Once upon a time, (eleven years ago) employers would require all prospective employees
to complete a medical questionnaire asking, "Do you have or have you ever had heart
trouble, diabetes, epilepsy, back problems, psychiatric or psychological
disorders..." Indeed, some employers required all serious job candidates to be
examined by a company physician. Those days are now gone. Under the Americans With
Disabilities Act of 1990 ("ADA"), all medical questions and examinations prior
to an employment offer are illegal.
On July 26, 1992, employers with 25 or more employees became subject to the ADA. On
July 26, 1994, small employers - those with 15 to 24 employers - also became subject to
the ADA.
Title I of the ADA deals exclusively with discrimination in the employment setting,
and it covers the approximately 43 million Americans workers with disabilities that meet
the definitions of the ADA. These include any person who:
has a physical or mental impairment that substantially limits one or more of the
person's major life activities;
has a record of such an impairment or o is regarded as having such an impairment.
(42 U.S.C.S. §12102(2)).
The ADA prohibits covered employers from using medical questionnaires, taking medical
histories or performing medical examinations on applicants prior to making a job offer to
the applicant. This includes asking whether an applicant has any disability, the nature of
the disability, or the severity of the disability. Furthermore, the Equal Employment
Opportunity Commission (EEOC) has ruled that the law prohibits an employer from asking
about an employee's worker's compensation history.
Nevertheless, the regulations implementing the ADA do permit the employer to ask about
the applicant's ability to perform the job by describing the functions and asking the
applicant how he/she will perform them.
EXAMPLE
An employer may ask whether an applicant has a driver's license but may not ask
whether an applicant has a visual disability that would interfere with his or her ability
to drive.
In the health care office, an employer may state that a nursing position requires
enough physical dexterity to perform common nursing tasks such as giving injections and
manipulating instruments.
AIDS Testing. The issue of whether employers can test applicants for AIDS is
highly controversial. Although the ADA does not specifically prohibit such testing, AIDS
is a covered disability. AIDS testing could therefore not be performed until after a
conditional employment offer were made. If the test was positive, the employment offer
could only be rescinded if the employer could demonstrate that the disability could not be
accommodated
Those employers not covered by the ADA (because the ADA's size threshold is not met)
may still be prohibited from AIDS testing by state and local employment and AIDS laws.
Drug Testing. The ADA provides that it does not encourage, prohibit, or
authorize drug tests, and specifically states that a test for illegal drugs is not
considered a medical examination under the ADA. On the other hand, it is clearly a
violation of the law to ask applicants about previous drug or alcohol use, substance
abuse, or past dependency on drugs. Recovered or rehabilitated drug addicts and alcoholics
are "covered individuals" under the Act's definitions.
Physical Agility. Physical agility tests are also not considered medical
examinations under the regulations, provided that they are uniformly administered to all
applicants regardless of disability. If these tests eliminate a large number of
applicants, however, then the employer has a burden to show that the test is job-related
and part of a business necessity.
Immigration Issues
Under the provisions of the Immigration Reform and Control Act of 1986 (IRCA), all
employers must maintain certain records for all new employees to establish that the
employee is a United States citizen or has a valid work permit. All new employees must
complete an "Employment Eligibility Verification" form (INS Form I-9) provided
by the Immigration and Naturalization Service (INS). Employees must also produce
documentary proof establishing their U.S. citizenship or right to work within three days
of hiring.
The knowing employment of unauthorized workers and the failure to complete Form I-9
can result in penalties known as "employer sanctions."
Many misconceptions exist about the application of the IRCA to the hiring process.
Employers should be aware of the following:
All employees, including U.S. citizens, must complete a Form I-9.
an employer's failure to complete a Form I-9, even if the employee is
"legal," is an independent violation of the IRCA. Under IRCA, the I-9 must be
completed at the time of hiring.
It is a violation of the law for an employer to demand a "green card" or
other official INS document from a foreign-appearing person. An employer must accept any
qualifying documents submitted. Only if the qualifying documents are incomplete or
inconsistent may the employer inquire further.
An employer may not inquire about immigration status before making a job offer. Such
an inquiry could expose the employer to a claim of discrimination. The most an employer
may ask before offering employment, uniformly for all applicants, is whether the applicant
is presently authorized to work in the U.S. on a full-time basis for any employer.
The most common documentation produced by a new employee are a valid driver's license
to prove identity and a birth certificate or Social Security card to meet the
"employment eligibility" requirement.
EMPLOYMENT CONTRACTS
Generally
A contract is a voluntary promise between two or more people to do something (or not
to do something). Most types of contracts don't have to be in writing (a purchase in a
retail store, for instance) although it's obviously difficult to prove the existence of a
contract otherwise. Employment contracts are usually written and specify terms of
employment including term, salary, bonuses, benefits, and incentives. As with other types
of contracts, an employment contract is formed when there is a valid offer, acceptance of
the offer, and consideration (exchange of something of value). The offer is an offer of
employment; acceptance occurs when the employee accepts the job, and the consideration is
the employee's performance of the job in exchange for a salary or pay.
Questions often arise when current employees are offered contracts, and the
consideration they receive for entering into the contract is their continued employment;
providers should consult with legal counsel before entering into such contracts.
NOTE. In most states, the "statute of frauds" requires that any contract of
more than one year must be in writing or it is not enforceable.
In the small business arena, support staff rarely have employment agreements, but most
licensed professionals do. Since the "employment at
will" doctrine is abrogated by an employment agreement, considerable thought and
attention should be given to employment agreements by both employer and employee. In the
event of a dispute between the parties, the courts will settle the dispute by applying
general principles of contract law.
Restrictive Covenants in Employer Contracts
A restrictive covenant (often called a covenant not to compete) is a contract clause
which restricts the employee from soliciting the employer's customers or clients and/or
from competing within a specified geographical area for a specified time. It may be used
in an employment contract, in a buy/sell agreement between partners or between a
corporation and its employees, or in contracts involving the sale of a business. Different
standards of enforceability apply to each type of contract; only restrictive covenants in
employment contracts are discussed here.
Because restrictive covenants are partial restraints of trade, courts have always
construed them strictly, and usually the burden is on the employer to show reasonableness.
Legality of Restrictive Covenants. A restrictive covenant will be enforceable
if there is:
adequate consideration for the covenant;
the covenant is ancillary or related to an employment contract;
the covenant is reasonable as to duration and geographic restriction;
the covenant is reasonably necessary for the protection of the employer, and
the covenant does not impose undue hardship on the employee or disregard the
interests of the public.
Consideration (the price) for the covenant is not usually an issue, as the
commencement or continuation of the employment relationship is deemed sufficient.
Duration. Usually, three to five years is considered the outside time limit for
enforceability of a restrictive covenant, unless the restriction is limited to only those
patients specifically cared for by the departing provider. However, the courts will look
at each situation individually to determine if it is reasonable. Unfortunately, that
determination is necessarily subjective, and one court may enforce a covenant that another
might find objectionable.
Degree of Hardship The courts often hinge their analysis of a covenant on the
degree of hardship imposed upon an employee by the covenant. Does the nature, duration,
and geographic area of the restriction constitute undue hardship? The more onerous the
hardship, the more likely it is that the restriction will be held unenforceable by a
court.
EXAMPLE
In Holloway v. Faw, Casson & Co. (Md 1990), a court ruled that a five year
restriction against servicing any of the employer's clients was unreasonable. Instead of
simply severing and invalidating that portion of the covenant, however, the court, on its
own, revised the employment agreement to provide a three year period instead of five.
Most employers have their attorneys draft these covenants, and devote little thought
to them until they are faced with an objection by a prospective employee. Often, these
covenants become major battlegrounds, costing both sides time, legal expense and ill
feeling at the beginning of the relationship. Accordingly, employers should carefully
analyze the need for a restrictive covenant. What is the primary interest to be protected?
After this analysis, the covenant should be drafted as narrowly as possible.
TERMINATION
Employment at Will Doctrine
Absent a contract between an employee and an employer, all employees are generally
deemed "employees at will." This "at will" doctrine - part of general
contract law - states that any employment for an indefinite period is terminable at will
by either party on notice to the other party, without any reason or cause. Put another
way, this means that for no reason whatever, when an employee comes to work one day, the
employer may fire the employee without explanation. The employee has no right to receive
"severance pay" from the employer, but also has no legal obligation to give
"two weeks notice."
Although this doctrine extends back to colonial times, many employers are unfamiliar
with it and unknowingly waive its benefits by voluntarily creating an employment policy
stating that termination will only be for "just cause" or "for as long as
performance is satisfactory." This employment policy, becomes, in effect, a contract.
The "at will" doctrine is further vitiated by federal and state laws that
restrict the employer's freedom, such as antidiscrimination laws. In addition, the
doctrine has been chipped away in recent years by court decisions carving out exceptions
from the doctrine's application.
Termination for Cause
Although, as noted above, an at-will employee may be terminated by the employer for
any reason without cause, an expanding number of employees now have either written
employment contracts or are protected by voluntary employment policies of the employer. In
such cases, employer usually must justify the discharge of an employee by showing
"good cause," or face a wrongful discharge lawsuit.
The usual reasons for "cause" terminations are employee performance,
conduct, or absenteeism. In any such cases, the employer must:
evaluate the specific reasons for termination, investigate fully, and document the
investigation;
determine whether the employee knew that his or her performance was unacceptable;
verify that the proposed termination is consistent with previous incidents where the
employee's behavior was substantially similar;
ensure that the termination is not in retaliation for the exercise of any of the
employee's civil or legal rights;
ensure that no discriminatory considerations (racial, religious, sexual, or
ADA-related) entered into the decision to terminate;
follow all employer termination and hearing policies, both in letter and spirit.
Wrongful Discharge
Employers may be held liable if the employee's termination resulted from:
a breach of an implied promise made by the employer;
the employee's refusal to perform an illegal act or for exercising a legal right;
"whistle blowing" activities, such as reporting of patient abuse;
the employer's violation of public policy, such as firing an employee for making a
worker's compensation claim.
In general, these types of claims by employees are called "wrongful
discharge" claims if they are brought under contract law, and "retaliatory
discharge" claims if brought under tort law. Either way, they can entitle employees
to significant damage awards.
NOTE. Most discrimination suits are not considered "wrongful discharge"
suits; they are lawsuits filed under the particular provisions or the anti-discrimination
statute. Only if the employer fell below the applicable size threshold for application of
the antidiscrimination laws would a wrongful discharge suit for discrimination be viable.
Often employees will combine several of these grounds in one wrongful discharge suit.
In all events, the employer's best defense against wrongful discharge suits is thorough
documentation of all personnel and termination-related decisions.
DISCRIMINATION
Generally
Every employer in the 21st century is aware that there are numerous state and federal
laws prohibiting employment discrimination on the basis of race, color, national origin,
religion, sex, age, handicap disability and even veteran status. And, although many of the
federal laws do not cover employers of less than 15-20 employees (thus exempting many
small business employers), most states have filled this gap by establishing a lower
threshold of 4-8 employees.
Racial discrimination. A person is considered to be discriminated against on
the basis of race if, due to some "ethnic characteristic," the terms,
conditions, or benefits of employment were affected. The term "race" has been
defined by the courts to include ethnic groups such as Russians, Irish, Arabs and gypsies.
NOTE. Actionable discrimination can occur even without termination; a person is
discriminated against if it can be shown that any term, benefit of condition of employment
was affected.
Religious discrimination. Religious discrimination can fall into two
categories: "because of" religion, and accommodation of religion. The former is
easily understood: an employee may not be discriminated against because of his or her
religious practices or beliefs. The latter, however, often causes more problems. An
employer is obligated to accommodate "legitimate" religious practices and
beliefs as long as such accommodation does not create an unreasonable hardship on the
business. For instance, an Orthodox Jew's request to wear a yarmulke usually must be
accommodated; Judaism is a legitimate religion and the accommodation would not, in most
cases, impose any unreasonable hardship on a business. In contrast, the request by a
Rastafarian to smoke marijuana during working hours would fail on both grounds.
Unfortunately, most such issues fall somewhere between these two extremes.
Sexual discrimination. Gender based sex discrimination occurs when an
employment decision is made based on an individual's sex (the word "gender" has
been increasingly used in this context). Sex discrimination laws apply equally to males as
well as females. See Sexual Harassment.
Sexual discrimination can be either direct or indirect. Refusal to hire or promote an
otherwise qualified female employee solely because of her sex would be direct
discrimination; failure to hire a female employee with small children because of perceived
childcare demands is indirect discrimination.
Age discrimination. The federal Age Discrimination and Employment Act of 1967
(ADEA) protects employees over the age of 40 from discriminatory employment actions on the
basis of age. There are exceptions, however, for (1) "bona fide executives in a high
policy making position," who may be involuntarily retired at 65 upon provision of
certain retirement benefits, and (2) compulsory retirement of tenured employees of
colleges and universities over the age of 70."
Many states have also made age discrimination an integral part of their state
antidiscrimination laws. These state laws usually follow the federal model of the ADEA.
Discrimination Based on Disability
As noted in Section 8:1.3 above, Title I of the ADA prohibits employment
discrimination against qualified applicants. The act also covers all aspects of the
employment relationship after a qualified individual becomes employed, including:
Work assignments
Evaluation
Discipline o Compensation
Training o Promotion
Medical examination
Layoffs and recall
Termination
Leave
Benefits
Social activities
The key to applying the ADA is the concept of the "essential functions" of a
job. The ADA prohibits employment discrimination only against qualified individuals who
can perform the essential functions of the job with or without reasonable accommodation.
The following factors illustrate "essential" functions:
The position exists to perform the function;
the function is highly specialized;
the person was hired for special expertise or ability.
If a qualified individual can perform the essential functions of the job, regardless
of his or her inability to perform marginal functions, then he may not be discriminated
against. In addition, employers have an affirmative obligation to "reasonably
accommodate" the disabilities of qualified individuals. The focus of reasonable
accommodation must be on the ability of the individual, not on the name or the nature of
the disability.
EXAMPLE
An employer might have to make water fountains accessible to wheelchair-bound
employees, but would not be required to lower the existing water fountains or install new
water fountains. Accessibility might be achieved through installation of a paper cup
dispenser. Accommodations that impose an "undue hardship" on the employer's
business are not required under ADA.
SEXUAL HARASSMENT
Federal Law
In a 1986 case, Meritor Savings Bank v. Vinson, the Supreme Court ruled that
sexual harassment is a form of sex discrimination under Title VII of the 1964 Civil Rights
Act. Under the Meritor case definition of harassment, sexual discrimination can be divided
into two categories: (1) "quid pro quo" allegations and (2) allegations of a
"hostile workplace." Both men and women may be victims of sexual harassment.
Quid Pro Quo. Often used as the classic example of sexual harassment,
"quid pro quo" harassment occurs where a manager-supervisor uses his or her
position of authority to gain sexual favors from an employee over whom such authority is
or can be exercised. In such cases, the plaintiff must prove that the plaintiff's reaction
to the harassment affected tangible aspects of the plaintiff's compensation, terms,
conditions, or privileges of employment.
Hostile Workplace. A hostile workplace environment is one where the victim is
subjected unwelcome conduct that may have had no economic effect, but is so pervasive that
it alters the conditions of employment and creates an abusive working environment. In such
cases, the Equal Employment Opportunity Commission (EEOC) considers the following factors:
whether the conduct was verbal or physical, or both;
how frequently the conduct is repeated;
whether the conduct was hostile and offensive;
whether the alleged harasser is a supervisor or a co-worker;
whether the harassment is directed at more than one individual.
Although it is the claimant's burden to prove evidence of harassment, the Supreme
Court has specifically rejected the concept that psychological damage is necessary for a
lawsuit; however, the conduct's impact on an employee's psychological well-being can be a
factor.
GUIDANCE
To minimize legal exposure to sexual harassment claims, small businesses with large
staffs should take the following defensive measures
establish a comprehensive anti-harassment policy and communicate it to all
employees;
investigate all complaints thoroughly and confidentially;
take appropriate action following each and every investigation.
DRUG AND ALCOHOL TESTING
Introduction
Drug and alcohol abuse in the office can pose huge headaches for the employer. There
are, however, numerous legal considerations to consider in deciding whether to initiate a
drug testing program.
Federal Law
No federal laws directly prohibit drug testing by private employers (public employees
come under different rules). In fact, some industries are required by federal law to
perform such testing. For instance, under the authority of the Omnibus Transportation
Employee Testing Act of 1991, the Department of Transportation has issued regulations
requiring companies that employ drivers of commercial vehicles in interstate commerce to
test employees for drugs prior to employment, at any time for cause (good reason),
post-accident, and periodically.
The ADA and Drug Testing. The ADA specifically does not protect an individual
currently engaging in drug abuse, nor does it restrict an employer's right to conduct drug
testing. Although the ADA prohibits all pre-employment medical examinations and medical
questionnaires, the Act does not include drug tests under the definition of "medical
examination." In addition, the Equal Employment Opportunity Commission (EEOC) has
recently changed its position and now allows an employer to ask an applicant about lawful
drug use in connection with the confirmation of a positive test result.
NOTE. As explained in the section on the ADA, however, persons
addicted to drugs and alcohol, not currently using them illegally, either undergoing
treatment or who have been rehabilitated, are protected by the ADA from discrimination on
the basis of the prior usage.
RECORDKEEPING AND ACCESS
In general, employment records should be kept at least for three years. Because of the
multiplicity of federal and state laws and regulations that govern employment, however,
the better practice is to keep all employment records from five to seven years. Employment
records that should be kept include:
employees' applications and general personnel files, including incident reports,
disciplinary proceedings, and correspondence
pay records
work schedules
insurance benefit records
All personnel records should be kept strictly confidential by the employer and should
not be released to third parties without an express written authorization from the
employee. Many states have laws that require the employer to provide the employee with
access to the employee's personnel records. Even where no such requirement exists, it is
good practice to allow the employee such access.
WAGE AND HOUR COMPLIANCE
Exempt v. Non Exempt
The difference between and "exempt" and "non-exempt" employee for
wage and hour purposes frequently causes problems in the small business office. Many small
businesses believe that all their salaried employees are exempt from wage and hour laws
and need not be paid overtime.
Under federal and state wage and hour laws, all non-exempt employees (i.e., employees
who are not exempt from application of these laws) are entitled to overtime pay for all
hours worked in excess of 40 during the regular work week. In addition, the federal
minimum wage applies to such employees.
Who is Exempt. In general, all "professional" employees, as defined by the
law, are exempt. Problems arise, however, with small business employees such as software
engineers and administrative staff who may have professional credentials but are not
necessarily "professionals" in the traditional sense.
Because of these problems, federal and state agencies have issued guidelines to
determine whether employees in such gray areas are exempt or non-exempt.
Administrative employees are exempt only if:
the employee's primary duty is non-manual and directly associated with management;
the employee's job involves the exercise of discretion and independent judgment; and
the employee has a special or technical line of employment (e.g., financial officer)
requiring special training, experience, or knowledge with limited supervision.
INDEPENDENT CONTRACTORS
An independent contractor is a person who performs work for an employer without being
under the direct control and authority of the employer. The definition of an independent
contractor is often different for federal tax purposes than state law, but in general
includes the requirement that the independent contractor be free to come and go as he or
she pleases and control the nature and manner of the work performed. If a person fits the
definition of an independent contractor, then in general the employment laws and
regulations discussed in this chapter do not apply.
SUMMARY OF KEY POINTS RAISED IN THIS ARTICLE
An employer may not include on an application form any questions regarding an
applicant's race, religion, gender, national origin, age, marital status, or health.
All questions asked in an interview must be job-related.
The employer should not ask an applicant's references any questions that would not
be legal if not asked directly of the applicant.
All employers with more than 15 employees are covered by the ADA.
The ADA prohibits employers from using medical questionnaires, taking medical
histories, or performing medical examinations.
Whether a particular employer can test applicants for AIDS or HIV status depends
upon the application of the ADA to the employer, the particular job requirements, and the
requirements of state and local law.
The ADA does not prohibit drug testing by employers.
All new employees must complete an "Employment Eligibility Verification"
form provided by the INS.
An employment contract is an agreement between employer and employee specifying term
of employment, salary, bonuses, benefits, and incentives.
A restrictive covenant is a contract clause that restricts the employee from
soliciting the employer's patients and/or from competing within a specified geographical
area for a specified time.
"Employment at will" is a legal doctrine that any employment for an
indefinite period is terminable at will by either employer or employee.
Employers may be held liable for wrongful discharge of an employee if the
termination resulted from breach of a promise, the employee's refusal to perform an
illegal act, the employee's "whistle blowing" activities, or the employer's
violation of a public policy.
The Americans with Disabilities Act prohibits employment discrimination only against
qualified individuals who can perform the "essential functions" of a job with or
without reasonable accommodation.
Sexual harassment can be either "quid pro quo" conduct by an employer or
the creation of a "hostile workplace."
Employees may be tested for drugs.
Employers should maintain for at least three years an employee's application and
general personnel file, pay records, work schedules, and insurance benefit records.
In general, all "professional employees" are exempt form wage and hour
laws.
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