8 Ways Business Owners Can Avoid Legal Risk

 In Legal

It’s now or never, business owners and franchise owners alike will need to take the time to reevaluate that employee handbook and avoid getting sued! Now is the time to become proactive and avoid lawsuits from employees or State Departments of Labor audits.

Thanks to FranchiseExpo and Lisa M. Brauner, Esq., employment law partner in the Employment, Employee Benefits, Executive Compensation and Immigration Law group at FisherBroyles LLP, we were able to share the 8 ways to minimize risk in the workplace.

1.Update your employee handbook.

The start of the New Year is an opportune time to review your employee handbook and policies. Ensure they reflect recent legal developments and any operational changes. Having a current employee handbook is a fundamental, necessary tool in minimizing legal risk. New York has recently added new legally protected categories and you will want to include those in the handbook. This includes policies on reasonable accommodation of pregnancy. You may also want to review your electronic communications policies to make sure you are properly protecting your business and assets from cybercrime and other risks, and you will want to review that policy and others to ensure they do not run afoul of the National Labor Relations Board’s (“NLRB”) recent rulings.

As you may know, the NLRB recently found employers–even non-union employers– guilty of violating the National Labor Relations Act by having unlawful handbook policies, including policies on social media, electronic communications/use of email, workplace audio/video- recordings, standards of employee conduct, media relations, at-will disclaimer, and confidentiality, among other standard handbook policies. Additionally, under New York Labor Law Section 194, effective January 19, 2016, employers may not prohibit employees from inquiring about, discussing or revealing compensation, a topic that you may want to address in your handbook or managers’ training. (Employees covered under the NLRA already enjoy that protection).

2. Conduct trainings for managers and employees on preventing sexual harassment and other unlawful discrimination, harassment, and retaliation.

One of the wisest investments you can make in your employees is to train your managers and employees on:

  • your policies prohibiting workplace discrimination, sexual and other unlawful harassment and retaliation
  • what the laws require, and
  • your policies for reporting instances of discrimination, sexual and other unlawful harassment, and retaliation for complaining about discrimination, and for requesting reasonable accommodation for pregnancy, childbirth and related medical conditions, disabilities, religious observance/practices, and individuals undergoing a gender transition.

Employers should train their managers on what recent law requires with respect to reasonable accommodation of pregnancy, disability, religion. You may save your business literally millions of dollars by investing in an effective training program for a fraction of what a litigation would cost you. Last year, a jury awarded more than $17 million to female employees in a sexual harassment and retaliation lawsuit. Equal Employment Opportunity Commission against an employer. See:www.eeoc.gov/eeoc/newsroom/release/9-10-15.cfm.

The New York City Commission on Human Rights can impose civil penalties up to $125,000 for violations of NYC’s Human Rights Law, and up to $250,000 for willful violations, in addition to other legal remedies like back and front pay, and compensatory and punitive damages. This is, of course, in addition to any remedies under federal and State anti-discrimination laws for violation of those laws.

3. Review your pay practices and workplace labor postings.

Gender Equity Laws

Are you paying your female employees fairly? New York and California have recently passed gender pay-equity laws prohibiting employers from paying women less than men for performing the same work. New York’s law takes effect on January 19, 2016. Specifically, New York Labor Law Sec. 194 (1) will prohibit an employee from being paid a lower wage than another employee of the opposite sex “working in the same establishment, when they perform equal work in a job that requires equal skill, effort, and responsibility, and that is performed under similar working conditions.” The amendment to New York’s Labor Law also increases penalties for unpaid wages from 100% of wages due to 300% of wages due where the failure to pay is willful.

In consultation with your employment counsel (to preserve any privileges) when conducting a self-audit of your pay practices, review each position to ensure that men and women performing the same work are being paid equally. What’s more, effective January 19, 2016, employees who sue for sex discrimination and win may recover their attorneys’ fees under New York State’s Human Rights Law. Previously, plaintiffs could not recover their attorneys’ fees under New York’s Human Rights Law. Additionally, in New York now, even if you employ just one employee, you can be sued for sex harassment.

Increases to state minimum wages

Many States have recently raised their State minimum wage. Make sure your required labor postings are up-to-date.

Paid Sick Leave

Employers with 5 or more employees in New York City must provide paid sick leave and written notice of the right to paid sick leave upon hire. Many other jurisdictions outside of New York City also require paid sick leave. Confer with your employment counsel regarding all of the requirements of the law (there are many) and coverage and ensure your sick leave and attendance policies comply with New York City’s Earned Sick Leave Act. Failure to comply with the law can result in large monetary penalties for employers.

Pre-Tax Transit Benefits for NYC Employers

As you may know, New York City employers with 20 or more full-time employees must provide pre-tax transit benefits to their employees, effective January 1, 2016.

Employers should review their current pay practices and workplace postings. Ensure they reflect any State minimum wage increases and other legal developments.

4. Update employment agreements.

When was the last time you reviewed the employment agreements for your high-level executives? It may be time to take a fresh look at the agreements. Ensure they are current and reflect legal developments.

5. Review hiring documents and practices in light of “ban-the-box” laws and laws prohibiting inquiries into credit history.

New York City joins other cities like Philadelphia, Portland, and other States like New Jersey and Oregon, in enacting “ban-the-box” legislation. This prohibits covered employers from inquiring about a job applicant’s criminal history until a job is offered. NYC also passed a law prohibiting covered employers from inquiring about a job applicant’s credit history at any time. Employers should review and update their employment applications and hiring documents, practices and policies, accordingly, to ensure compliance with laws in their jurisdiction.

These laws are in addition to already existing laws like the FCRA or state laws. Such laws require employers using third parties for background checks to adhere to certain procedural requirements and practices. Otherwise, companies may be liable and face monetary damages. Currently, there are several multi-million dollar class action lawsuits pending against employers for allegedly violating the federal FCRA.

6. Update Job Descriptions and Review Worker Classifications.

As an employer in this changing economy, you may be looking for ways to do more with more limited resources. This sometimes means revamping job functions to have employees take on more work, consolidating positions and the like. It is imperative to regularly review and– where needed– update your job descriptions. Why?

  1. Exempt vs. Non-Exempt. Because employers continue to face multi-million dollar lawsuits challenging their classification of workers as “exempt” from overtime pay laws when those workers may, in fact, based on their salary and job duties, be “nonexempt” from overtime pay laws, and thus, entitled to overtime pay.
  2. Independent Contractors. Both the New York State and the U.S. Departments of Labor aggressively pursue employers of all sizes that have allegedly misclassified employees as “independent contractors.”

This trend in both government enforcement in worker misclassification and wage/hour litigation is expected to continue—if not grow– in 2016. Employers with unpaid interns, trainees or volunteers, should also beware. Confer with your employment counsel to ensure all workers are properly classified and properly paid.

7. Consider conducting an internal audit of your Form I-9s.

Form I-9 Employment Eligibility Verification Form is used by employers to verify that employees are authorized to work in the US and to comply with the prohibition under the Immigration and Nationality Act of 1952 (INA) on knowingly hiring unauthorized workers. The penalties for non-compliance with the Form I-9 form or even for completing the form incorrectly can be staggering since each section of the Form I-9 completed incorrectly can bring a separate penalty ranging from $110 per error up to tens of thousands of dollars. A few years ago, ICE fined a New Jersey clothing manufacturer $625,000 for employing illegal aliens. Additionally, employers may face jail time for employing illegal aliens. One former restaurant owner received three years in prison for employing illegal aliens, following an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

In light of the legal risks, you may want to consider conducting a self-audit of your Form I-9s. Employers typically conduct Form I-9 self-audits to assess whether their completion, updating, and storing of Form I-9 complies with the INA. For example, on December 14, 2015, the DOJ’s Civil Rights Division and the Department of Homeland Security (DHS) ICE division announced they had jointly issued guidance for employers conducting internal audits of their Form I-9 Employment Eligibility Verification Form program. The joint guidance intends to ensure that employers conduct Form I-9 audits properly and accurately, and do not discriminate or retaliate against their employees; and create barriers to employment for work-authorized individuals. Accordingly, it may be wise to confer with your employment counsel and/or immigration counsel if you plan to conduct such a self-audit.

8. Restrictive covenants.

More than ever, employers must take proactive steps to protect their trade secrets, confidential information, and the goodwill they have built with their clients. Accordingly, ensure you have enforceable confidentiality agreements, non-solicitation or non-compete agreements, and have taken clear, proactive steps to protect your company’s assets and trade secrets. Confer with your employment counsel regarding best practices for doing so.

Other Legal Resources for Your Small Business:

How to Choose a Collections Agency

Pros and Cons of Turning Your Small Business into a Corporation

Nonprofit Startups Can Use Alternative Corporate Structures

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