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Most Employers are Not in Full Legal Compliance. Are You?

By, Marji A. Swanson

Keeping up with employment laws and best practices can be difficult, but costly if ignored.  The Federal Government estimates that anywhere from 70-95% of employers are in violation of employment laws.  Here are ten common mistakes employers make:

1) Misclassifying Employees as “Independent Contractors”

A few years ago, the U.S. Department of Labor and the IRS began combining efforts to enforce this misclassification issue.  Many mistakenly believe that labeling someone an “Independent Contractor” and providing a 1099 is enough.  However, there are multiple factors to consider, not just a label.

2) Permitting “Off-the-Clock” Work, Particularly From Home

This is a growing concern with remote access to email and employer servers.  It may seem harmless, but employees remotely checking email and working from home can result in overtime violations. The fact that the employee didn’t ask to do the work is not a defense.  With liquidated damages, attorney’s fees, and a two-three year statute of limitations, the consequences of ignoring these practices can really add up.

 3) Failing to Document Performance Problems.

I constantly receive calls regarding employees who are described as the worst employee in history and it is imperative that the employee is fired today.  However, when I ask what the employee’s personnel file looks like, the employee has received all good reviews, has routinely received raises, and has never received any discipline.  When you let that person go and they then file a claim against you, or you contest unemployment, you have no documentation to support your legitimate termination of that employee.  For back-logged administrative agencies, it’s easier to find that if it’s not on paper, it didn’t happen:  Document, document, document.

4) Ignoring Employee Complaints

Employees often report harassment or discrimination and then indicate they don’t want anything done about it.  Do not listen.  You do not want to be in a position later on defending a claim that you ignored someone’s complaints, or worse, have a supervisor harass another employee because a problem wasn’t addressed.  Thoroughly investigate all complaints and, again, document, document, document.

5) Using Interns as “Free Labor”

It is a common misconception that a company can save money by hiring a college student for free.  In order to have unpaid interns, there are set standards that must be met to qualify for unpaid status.  Check with counsel before having anyone work for free.

6) Equating “Salary” With “Exempt” From Overtime*

While paying the minimum salary is one factor to qualify as exempt from overtime laws, it is not the only factor. The work the individual performs, how many people he or she supervises, and the amount of discretion the employee has are also important. The Department of Labor just raised the minimum salary for exempt status from $23,600 per year to $47,476 per year, effective December 1, 2016. It also sets a mechanism for automatically updating salary levels every three years.   *UPDATE:  The new U.S. Department of Labor salary basis rule was blocked by a federal court through a preliminary injunction to suspend the December 1, 2016 increase in salary and other requirements while the court determines the underlying case.  Until that matter is resolved, the rule is suspended.  With the advent of the new Trump Administration, the future viability of this rule is uncertain.

7) Deducting From Separating Employees’ Final Pay

The Wage Payment and Collection Act in Illinois does not allow employers to deduct from an employee’s compensation without following certain procedures.  It can seem counterintuitive when an employee owes money to the company, but do not unilaterally deduct from pay when a former employee fails to return company property.  Check with counsel on the best way to recoup money owed from employees and departing employees.

8) Having Satellite Files for Employees Not Contained in a Personnel File.

Many times direct supervisors keep their own files regarding their employees.  This can be a problem when official discipline is not placed in the main personnel file.  The Personnel Records Review Act may prevent an employer from using the prior discipline against an employee if it isn’t contained in the main personnel file.

9) Allowing Employees to Never Use Vacation

That employee may seem like he has a great work ethic, but maybe not.  Employee thefts are often discovered when an employee is out of the office on vacation, so make sure all employees are using at least some of their vacation time.

10) Retaliating For What an Employee Said on Facebook

The National Labor Relations Board may not tolerate discipline of employees for what they say on social media.  The fact that you don’t have a union doesn’t matter.  Communication between employees about working conditions is “protected concerted activity.”  If you are a public employer, you also have the added concern of an employee’s First Amendment rights.   Before disciplining an employee for what he or she said, seek legal advice.  This area is evolving and a minefield of trouble.

In order to make sure you aren’t making these mistakes it is advisable to conduct employment policy and practice audits once a year.  Additionally, make sure your policies do not unintentionally read as an enforceable contract.   Finally, provide training regarding your policies to supervisors and staff.

If you have need a policy manual drafted or reviewed, or need any supervisory or employee legal training, please contact Marji Swanson, a Partner with Mahoney, Silverman & Cross, LLC concentrating in Employment and Municipal Law.

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