Employing people requires managing a lot of moving parts. Now that you have successfully onboarded your wonderful team, what routine legal maintenance will keep your operation running smoothly?
Inform and Educate
Be sure that you have educated everyone regarding what your rules and policies are. Information can be conveyed in a variety of forms – compilations such as such as employee manuals or operational guides or, alternatively, memos or emails and other free-standing forms. Be sure your employees receive and understand them and that you have documented both. Get those mandatory state and federal postings up!
Proper Employee Classification
Nothing will cause trouble faster than employees believing they are not being paid fully and correctly. Start by taking a clear-eyed look at whether you have properly classified your employees as exempt or non-exempt under the Fair Labor Standards Act. Don’t make the common mistake of thinking that paying someone a salary equates to exempt status.
For exempt employees, be sure you understand when you can dock salaries, as that can be done only in narrow circumstances. Bear in mind that deductions from anyone's paychecks must comply with the Texas Payday Law, which requires written authorization for most deductions. For non-exempt employee, be sure you understand what counts as “compensable time” for which an employee must be paid. This can be tricky if employees work odd hours or have peripheral duties. Also be sure you understand how to calculate an employee’s “regular rate” in determining the correct amount of overtime pay for a given week. It’s not so simple as using their base hourly rate, since other types of compensation must sometimes be counted as well. The statute of limitations for FLSA violations extends back three years, so repetitive errors can add up to quite a chunk of money.
The DOL and Texas Workforce Commission websites are all helpful resources on these topics.
What About Independent Contractors?
While we are on the topic of pay, always be sure that the people you treat as independent contractors really are safely treated as such. The legal tests for independent contractor status vary from law to law and agency to agency, though the heart of the inquiry involves assessment of behavioral control and financial control, as well as the degree of connectivity between the parties.
Simply implementing a contract with a person does not necessarily create independent contractor status. Apply the legal criteria and decide whether your “service-provider’s” circumstances put you comfortably within the realm of independence required. If you are wrong, the person may be coming after you for damages, such as past unpaid wages (including overtime), the value of benefits not made available, and attorney fees. Plus, the taxing authorities may not be far behind trying to collect past unpaid contributions, plus penalties and interest. Again, the IRS, DOL, and Texas Workforce Commission websites provide free, useful information.
What Employment Laws Apply to You?
Be sure you research what laws apply to your business. Some laws apply to every business with even a single employee. For example, Texas law makes sexual harassment illegal for employers who employ only one employee. Under state law, some prohibitions of various kinds of discrimination and retaliation apply to all employers, such as not discriminating against employees who serve on juries or who are absent to comply with a subpoena or a mandatory evacuation order. Every employer must pay its employees in compliance with the Texas Payday Law. Even very small employers often satisfy the thresholds for coverage by the National Labor Relations Act and Fair Labor Standards Act, which consider factors such as involvement in interstate commerce and business volume, not employee headcount. (Plus, under certain circumstances, single employees may be covered by the FLSA even if the business as a whole is not.)
Other laws kick in at irregular intervals. For example, the Immigration Reform and Control Act of 1986 applies to businesses that employ as few as four employees, forbidding discrimination based on national origin and citizenship. Of course, a plethora of anti-discrimination laws apply when an employer hits fifteen employees. Thereafter, additional obligations of many kinds attach as the workforce grows. The bottom line: research what laws wait up the road for you, so you can prepare in advance and, by all means, comply from the start. Many claims develop from situations where the employer has blithely failed to comply with a law simply because it had no idea it was even covered. Don’t drive while asleep at the wheel.
The Texas Workforce Commission website provides a useful chart to help you identify threshold employee counts for a number of laws of broad application. You can use that chart as a starting point. The home page for the Businesses & Employers section provides a plethora of links for federal statutes of broad application.
Accurate Recordkeeping is a Must
Many laws are laden with recordkeeping requirements. Go to school on the types of records the government expects you to maintain and for what period of time. For example, DOL FLSA regulations require keeping fourteen different types of compensation information, some of which must be maintained for two years, some for three. The ADA requires that employee medical records be kept separate from routine personnel records. Some benefit records must be kept six years, while some OSHA exposure records must be kept thirty years. FMLA records must be kept at least three years. You get the picture: the laws are quite specific and taking the time to nail down your obligations can help you be both compliant and have readily available what you need to prove that you did in fact handle things correctly. You can start with the Texas Workforce Commission's summary and hone your research from there for the laws applicable to you.
Prepare for Employee Terminations
We have spent a good bit of time looking at how to bring employees aboard, but you must also be prepared to separate from those employees. This is a sad truth. Needs change; people change; sometimes a hiring decision was a poor choice after all. In most cases, however, termination should not be a surprise to the employee.
During the employment relationship, look for training/coaching opportunities. Try to catch disappointing performance before that performance merits termination. (Remember that failure to provide equal access to training can violate discrimination laws.) Correct instances of minor misconduct before the behavior mushrooms into ugly drama. And, because we live in a litigious world and, on a more human level, have imperfect memories, keep documentation of your efforts (“receipts,” as I am told Gen Z calls documentation). The documentation will take different forms depending on the circumstances: sometimes formal reprimands, performance evaluations, or performance improvement plans or, sometimes, just a quick confirming email or a note for your file, perhaps accompanied by a copy of a key back-up document.
If termination is the solution, despite your efforts, plan how to effectuate the decision in a private manner designed to preserve the employee’s dignity. Taking the time to get organized is worth the trouble, even if you feel compelled to keep the employee offsite until you are ready to proceed. (Threats to the security of confidential material, violent or threatening behavior, or other types of egregious misconduct may require immediate suspension.) Planning should include deciding where, how, and when to convey the news; whether to offer severance (and whether to obtain a release as part of the severance arrangement); final pay issuance details; returning the employee's personal property if the employee won't be allowed to box it up personally; securing return of company property and confidential information; locking in security to prevent concurrent and future misuse; and, how to convey information about any continuation of benefits, etc.
Terminations are never pleasant for either party, but delivering the news in a way that rubs salt in the wound can mean the difference between a simple unhappy parting and an ex-employee vengefully looking for any and every reason to file claims, get the Department of Labor on your tail, and thinking up as many ways as possible to trash your business reputation.
Nothing in this post is legal advice. The content offers only general information directed to Texas employers. Readers should consult qualified legal counsel for advice concerning the best options for your particular situation.