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Employment Law PrimerCopyright 2001 Daniel N. Steven
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. 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.
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.
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. 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:
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.
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. 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:
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. 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:
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.
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. 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. 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:
Employers may be held liable if the employee's termination resulted from:
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. 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:
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:
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.
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:
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.
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. 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. 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:
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. 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:
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
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