Feature Stories - June 2007

Employment Law

The Devil is in the Details

by Jeanne Lauf Walpole

When it comes to employment law, naivete is a luxury that Nevada employers cannot afford. Given the ever-changing preponderance of rules that regulate today’s businesses, along with the increasing number of labor lawsuits, it’s no longer prudent to wing it as a nice guy, according to legal experts. Even with the best of intentions, employers can find themselves in legal hot water if they are unaware of the law, or if they don’t follow the letter of it. “There’s quite a need for help out there,” said Mark Ricciardi, an attorney who specializes in labor law at Fisher & Phillips LLP in Las Vegas.

Employers can feel somewhat reassured, however, that in spite of today’s litigious climate they can go a long ways toward protecting themselves through risk management. Risk assessment and protection includes such business nuts and bolts as keeping necessary documentation, conducting investigations and providing training.

“The thing that we see over and over is a failure to document,” said Lyssa Anderson, litigation partner at Kummer Kaempfer Bonner Renshaw & Ferrario in Las Vegas. For example, employers and supervisors may be reluctant to fill out performance evaluations because of their desire to maintain friendly relations with employees. “Everything is fine as long as everyone is getting along,” Anderson said. When a problem arises, however, such as the need to discipline or terminate an employee, the much-needed documentation to support this action either doesn’t exist or is in conflict with actual events. “You can have a series of glowing performance evaluations that don’t reflect the true situation,” she continued. Also, informal discipline, such as a conversation with no formal written record, is useless in terms of building a case for taking action against an employee.

Honesty is the Best Policy

Although it can be difficult in human terms for supervisors to point out negatives in employees with whom they closely work, it’s essential for the evaluation process to be conducted in a professional manner for it to be valuable to the business. “You need to be critically honest,” Anderson explained. “It absolutely has to be exacting.” Honest evaluations not only support employers’ actions and protect against potential legal quagmires, but also enlighten employees about ways to improve their job skills. If an evaluation isn’t accurate, the employee has no opportunity to learn from the mistakes that have been made.

Greg Kamer, a founding partner of Kamer, Zucker & Abbott in Las Vegas, emphasizes the importance of setting up the proper terms and conditions for employment at the time of hiring. “The employment application is critical,” he said. Employers need to ensure that the application is designed to include the relevant information they need and are allowed to have by law. Most importantly, however, is to make sure the application is actually read with a critical eye after it’s submitted by an applicant. Kamer cited a legal situation in which an employer unknowingly hired a person who had just finished serving a prison term for embezzlement. The employee ad included this information on the job application, but nobody in the business had taken the time to read it.

Inattentiveness and failure to document not only cause legal hassles, but can also be extremely costly, according to Ricciardi. He recalls a case of a large company that failed to monitor and document the hours of its workers over a long period of time. Employees were routinely coming in early, leaving late and working through their lunch hours, all of which was not documented by management. It eventually cost the business hundreds of thousands of dollars in overtime when employees asked to be paid for the hours they had worked. “This was preventable had the employer been monitoring the hours,” Ricciardi said.

Although it may seem like a no-brainer, making sure that the company is in compliance with wage and hour laws is absolutely critical, according to Ricciardi. “You need to be sure as an employer that you’re paying everyone properly,” he emphasized. “These are big areas of concern because we’re often seeing employers being sued.” To be in compliance with the minimum wage law, employers must pay $5.15 per hour if health insurance is provided and $6.15 without insurance. Employers must ensure proper breaks are provided, that all hours worked are compensated for and that any overtime hours are also accounted for. Employees considered exempt from overtime include those on salary and who have administrative, supervisory and/or professional duties.

When a complaint is filed by an employee, it is essential to immediately launch a proper investigation to eliminate the inappropriate conduct. If action is delayed or ignored, the situation usually just gets worse. Karyn Taylor, a shareholder in Littler, Mendelson P.C. in Reno, remembers a company who ended up in litigation because it ignored an employee complaint about off-color jokes in the workplace. The employer did nothing, claiming that everybody went along with the jokes. “This attitude doesn’t cut it when you get into court,” Taylor said.

Equally important to a prompt response is the appropriate dissemination of information following an investigation of a complaint. In the case of harassment, it is important to quickly initiate remedial measures. Anderson remembers a complaint situation in which investigators didn’t communicate to upper management that a supervisor had been disciplined for harassing an employee. The investigators believed they were protecting both the employee and supervisor from workplace gossip. The supervisor was subsequently allowed to compose a very negative performance evaluation on that same employee which could have resulted in the employee claiming employer retaliation. Fortunately the employee approached upper management who then disciplined and reassigned the supervisor. The company also implemented harassment training. “Luckily the complaining employee wasn’t litigious,” Anderson said.

Retaliation claims typically originate from an initial discrimination or harassment complaint which results in some kind of negative action against the employee, such as discipline, reduced work hours, a cut in pay, a negative evaluation or even termination. “What makes it very scary is that the underlying complaint of discrimination doesn’t have to be true,” Ricciardi said. The plaintiff can win a retaliation claim in court even if the discrimination claim is investigated and found to be invalid.

Kamer advises his clients to add a layer of protection to their businesses by purchasing Employment Protection Libel Insurance (EPLI). Annual premiums can start as low as $5,000 and typically provide nearly $1 million in defense and $1 million in liability coverage. Costs vary according to such variables as the type and size of business and the history of litigation. Because small businesses are especially vulnerable to being hit hard by litigation costs, they are the most in need of the coverage. “It’s a small price to pay in an extremely litigious world,” he said.

Knowledge is King

According to Taylor, proper training is one of the most important underpinnings to risk management. It teaches employees and employers about what types of conduct are inappropriate and how to deal with them if they should occur. “Training also helps establish a defense in case of a lawsuit,” she said. Although the initial cost of training may seem high, some attorneys recommend that it be a mandatory part of human resource agendas because it pays for itself by helping to keep employers out of court and by reducing or eliminating potential punitive damages. Most attorneys specializing in employment law offer training that can be tailored specifically to the individual client.

Training supervisors in such basic areas as harassment and liability in the workplace is one of the most effective ways to help employers avoid litigation, according to Kamer. “At least 25 to 30 percent of my professional time is spent in training,” he said. Beause supervisors are on the front lines guiding subordinates, it is critical that they be properly trained in the law, as well as how to treat employees with dignity and respect. “A supervisor is a line employee who is elevated to a stage,” he explained. That elevation needs to be accompanied with the appropriate tools for success, which usually involves specific training.

Stan Miller, tort claims manager for the Nevada State Attorney General’s Office, is a big proponent of training. Because of the increase in civil rights claims filed by state employees in recent years, Miller regularly schedules harassment training for directors and administrators, requiring them to take the course every other year. “I think it’s excellent training and it provides an affirmative defense,” he said. Miller deals with around 50 such cases a year, most of which are filed in federal court where there is no cap on the award. Losing the case can be costly to the state, with typical awards of around $50,000, but the largest being $1.7 million several years ago. Prevention is the key. “The more training we can get, the better,” he emphasized.

Going hand-in-hand with training, the employee handbook formally notifies employees about the business practices of the company. “An employer that doesn’t have a handbook is missing the boat,” Kamer said. “We have a stock handbook that clients can use and make revisions to. About 80 percent of every handbook is the same information with 20 percent variations for specific businesses.” Beginning with the template, handbooks can then be crafted for each individual business. Much as a strategic plan describes the unique goals and objectives of a specific business, the handbook should accurately describe how a particular company takes care of its business. “The employee handbook is basically the general rules that the company wants employees to follow,” said Ann Morgan, stockholder in Jones Vargas in Reno. The contents can include company policies on such things as absenteeism, drugs, sick leave, harassment, benefits, diversity and vacations. Attorneys agree that a handbook should preserve an employer’s flexibility and should not create contracts with employees. It’s important to remember that whatever is in the handbook can be enforced in court. The company’s legal counsel can be an invaluable resource in the process of writing the handbook and should, at the very least, examine all policies before they are put in place and conduct an annual review of them from then on. “The handbook should be scrupulously followed,” Ricciardi emphasized. To avoid any confusion about policies, employees should be required to sign a statement indicating they’ve received a current copy.

Employee evaluations are also important – both for the employer and the employee. “Most employment law is driven by what the employers and employees believe is fair,” said Morgan. “People hear different things, so having an employee review in writing is helpful for two reasons. It forces the employer to sit down and give serious thought to the employee’s performance. And it does not allow the employee to reinvent what they heard.” Writing evaluations down measures helps the employee perform better and in the end, saves the employer from the expense of hiring and training new people.

Hiring and Firing is Never Simple

Some of the roughest waters employers navigate are the acts of hiring and firing employees. “Hire smart and hire the right people,” Kamer advised. Many potential employee problems can be avoided initially if employers focus a critical eye on their hiring policies and processes. Because the laws change frequently and the process is ongoing for most companies, it can present a constant challenge. To keep the company out of trouble during the hiring process, in general you must:

• Refrain from illegal discrimination;

• Consider privacy rights;

• Follow rules for hiring immigrants and young workers;

• Avoid making promises that can’t be kept.

“The screening process is extremely important in deciding whether or not someone is a good fit for the job and company,” said Tony Martin, an associate at Lewis & Roca in Las Vegas. Employers can be held liable for negligible hiring, supervision and security. “You hire a person and don’t do a background check. Come to find out, the employee has a criminal background – you have now put your employees at risk,” said Martin. Being thorough in the hiring process helps provide the employer with a better picture of the potential employee’s skills and hidden traits. It is also important to conduct reference checks. There is a qualified privilege in Nevada that allows employers to tell future employers about the employee’s performance, according to Martin. However, most only provide date of hire, last day of employment and job responsibilities.

Although discrimination might seem like a straightforward issue, it’s important to know that the law only prohibits it when it is based upon protected status, which is race, color, religion, national origin, sex, age or disability. It is illegal for an employer to treat an employee differently based upon his or her protected status. To avoid any hint of discrimination during the hiring process it’s best to use a standard application form devoid of irrelevant questions such as age, height or weight. Questions considered appropriate for the interview include those that pertain to the business and the job. Inquiries about an applicant’s personal life could be considered an invasion of privacy and should be avoided. The entire process is more likely to focus on the job and its qualifications if the job description is detailed and clearly understood by applicants.

Immigration is a growing challenge in the workplace. Because it hasn’t been monitored efficiently in the past, many employers are not completing the required I-9 forms which indicate whether an employee is legally authorized to work in the country. “Employers will wink at some employees who may not be working in the U.S. legally,” Ricciardi said. With immigration reform such a hot issue, enforcement of I-9 compliance is likely to increase. Anderson believes that the law could go even further by requiring something other than just an I-9 form in the future. All businesses are subject to audit and fines, whether they employ any illegal aliens or not. The critical factor is having I-9s on file for all employees.

“Many people don’t understand the difference between employment at will and right to work,” said Martin. Because Nevada is an “employment at will” state, employers can terminate employees for any reason as long as it is not illegal. “From a statutory scheme, I, as an employer, can’t terminate someone for race, color, creed, gender, national origin, religion,” said Martin. Exceptions to this are employees who are under an employment contract (which specifies the termination conditions) and workers who are covered by a collective bargaining agreement. It is illegal to fire an employee for reasons relating to protected status described above or for being pregnant. It is also illegal to terminate an employee who:

• Files a discrimination or safety complaint;

• Refuses to break the law;

• Takes leave according to the Family and Medical Leave Act;

• Refuses to take a lie detector test.

Nevada became a right-to-work state when Gov. Charles Russell signed Senate Bill 79 into law inMarch of 1951. The law prohibits employees from receiving or losing their jobs for not joining a union or paying union dues and allows them to resign from a union at their discretion. Also, union membership cannot be used as the criteria for hiring. Right-to-work laws remain under attack in all 22 states where they exist because unions believe they undermine efforts to bargain for the best working conditions. Union members question the fairness of non-union workers receiving the same benefits as union members when they pay no dues and are not involved in the collective bargaining process.

Protecting Data

One of the newest risks that can give employers sleepless nights is the potential for losing company trade secrets and electronic data to departing employees. Since the passage of the Sarbanes-Oxley Act of 2002 and the Federal E-Discovery Rules of 2006, it is no longer possible to use ignorance of technology as an excuse for not safeguarding data. Ricciardi advises having employees sign confidentiality agreements and non-compete clauses upon hiring. Sensitive information should be labeled, locked up and kept truly secret to anaging the mix of generations in today’s workplace can seem like a family reunion gone bad to employers who are bewildered by the eclectic attitudes and needs of each age cohort. With nearly 150 million total workers, the U.S. workforce is comprised of four major age groups, according to Rainmaker Thinking, Inc., which has studied workplace changes since 1993. The four groups are:

• The Silent Generation or Schwarzkopf Generation, born before 1946 – 6.5 percent

• Baby Boomer Generation, born 1946-1964 – 41.5 percent

• Generation X, born 1965-1977 – 29.5 percent

• Generation Y, born 1978-1990 – 22.5 percent

The oldest employees in the workplace, the Schwarzkopfers exhibit their elders’ values of loyalty, dependability and dedication to the job. Born before and during World War II, their careers have showcased long-term goals with an emphasis on security.

Products of child-centered homes and an increasingly youth-oriented culture, baby boomers have prided themselves on being agents of social change. While their distrust of authority caused them to drop out of education early in their lives, many tuned back in to enjoy worthwhile careers later on.

As the first generation to be told they probably won’t be as financially secure as their parents, generation Xers grew up with the attitude that they would need to take care of themselves. With job security a thing of the past, Xers look for short-term goals with immediate gratification.

A highly educated and socially conscious group, generation Yers grew up in a global economy saturated with technology. Their strong self-esteem and entrepreneurial attitudes have led them to have high expectations of overall success.

Over the past decade, Rainmaker has also identified six key changes in the employer-employee relationship which they define as the following:

• Work has become more demanding for employees.

• Employer-employee relationships are less hierarchical.

• Employers are less likely to have long-term employee relationships.

• Employees have less confidence in long-term rewards and greater expectations for short-term rewards.

• Immediate supervisors are the most important people in the workplace.

• Managers need more skill and time to supervise employees.

These changes have been caused in part by an increasingly global market, heavily dependent upon new technologies, which has given rise to a business climate that is risky, fast-paced and frequently unpredictable.

So how can employers stay afloat in such a challenging environment? “Flexibility rather than stability is needed for the future,” said Carolyn A. Martin, Ph.D, principal at Rainmaker. A key skill for employers is the ability to respond quickly to changes in the world, she emphasized. However, Martin has specific words of wisdom for today’s business owners and managers. “One of the biggest challenges is knowledge transfer. Organizations need to get on this bandwagon right away,” she insisted. To accomplish this, she recommends engaging people at every level in transfer programs while retaining and attracting older workers through creative and flexible work opportunities. She also suggests communication training and mentoring to enable the different generations to work more effectively together. Because mid-level managers have become the most important people in most businesses, they should be viewed more as performance coaches and given the training to empower them to respond as such. Although employers may not agree with the changes in today’s business world, if they are to be successful they must learn how to manage their companies within the parameters that exist. Being open to new ideas and ways of doing things can be a big advantage. “In the workplace everybody is a learner and a teacher,” Martin said.

Jeanne Lauf Walpole
Jeanne Lauf Walpole is a freelance writer based in Northern Nevada.