Question: What is the best way to avoid employment litigation?

Answer: Don’t have employees!

Unfortunately, that solution does not work for those who have businesses and want to keep them. Employers can take steps to prevent or at least minimize the risk of being sued. Additionally, these steps will help employers successfully defend against claims by employees. The following are five steps that we recommend employers take to help protect the business and themselves from getting sued.

First, formulate clear policies to be uniformly applied to all employees. One of the easiest ways to end up in a lawsuit is to operate on the fly. By establishing set policies with regard to matters like attendance, work attire, and work expectations, employers can avoid accusations of discrimination. If each employee is required to follow the same policy, regardless of the nature of the policy, then the employee may be unable to successfully claim that he or she has been treated differently because of a “protected characteristic” such as sex, race, age, disability, gender or national origin. If the employer has a clear policy prohibiting harassment and requiring the immediate reporting of any conduct that is perceived as harassing, then the employee may be unable to successfully claim that he or she had no avenue to seek assistance when they were subjected to harassing conduct.

Second, document any problems with employees when the problems arise. If an employer documents misconduct or poor performance at the time it occurs, then the employer will be able to substantiate any disciplinary actions such as suspensions or terminations. If an employee does decide to sue, the employer is able to defend its actions and decisions by providing objective evidence of the basis for the disciplinary action.  An added benefit to performing timely corrective reviews is that the employees may take the suggestions to heart and change their work performance.

Third, review handbooks, employment agreements and policies to make sure they are consistent with the actual business practices of the employer. An easy way for an employer to lose a trial is to have members of management testify that employment situations are handled in a particular manner, which is inconsistent with the actual policies provided to employees.  Likewise, such inconsistencies are frustrating to employees because the employees do not know which set of policies to follow – the ones in the employer’s documents or the verbal instructions of a supervisor.

Fourth, retain your documents and records, including electronic documents and records, such as email, for the required period of time. Many statutes and laws require employers to retain certain documents and records for specific periods of time. Employers need to establish and follow record retention policies that comply with the various laws.  Failing to retain the records and documents may result in fines or worse yet, the loss of a lawsuit.

Fifth, remember the “golden rule” and treat your employees as you would want to be treated. Employees understand that their employer must set guidelines to be followed and that an employer is only going to be able to pay a reasonable wage. Employees do not understand or accept being yelled at, cussed at, threatened or humiliated. Employees who are valued for their contribution to the business and who are treated with respect will understand when hard decisions must be made. Employees who are treated as if they are expendable and as if they are not valued will react poorly when they are laid off or fired.

If a policy is not legally correct, that policy can result in unintended legal ramifications. Consulting with an attorney in establishing employment policies or in reviewing these policies is often the best option. Yes, attorneys fees are an expense that employers prefer not to incur, but remember: “An ounce of prevention is worth a pound of cure” or in other words, a little money up front may save a significant amount of money later.

If you have any questions regarding employee policies and preventing employment litigation, you may contact Judith Sadler at 713-877-8111 713-877-8111 or by email at jsadler@sadlersykes.com.

One of the most frequent misconceptions held by employers about the classification of a worker is that the employer may legally treat the individual as an independent contractor for purposes of wages, benefits and taxes if the individual signs a contract stating he or she is an independent contractor. This belief is incorrect; the contract is not, in and of itself, the controlling factor under the law.

The “Fair Labor Standards Act” (FLSA) and case law interpreting that statute provides that individuals can not legally waive their rights under this law; therefore, the mere fact that an individual signs a contract or agreement stating that he or she is an independent contractor and not an employee DOES NOT determine the status of the worker. The worker’s status depends on a number of factors, including, most importantly, whether the employer exercised control over the individual.

To determine whether an individual who is classified as an independent contractor really is an independent contractor, one must look at the factors that the Department of Labor, the IRS and the courts have identified as being determinative. We recommend that employers conduct this review in conjunction with an attorneys who specializes in the area of employment law because each factor has legal implications. The courts interpret the various factors and how they interact to decide whether the worker really is operating as a separate business entity rather than as an employee.

One of the most important factors that the courts, the IRS and the Department of Labor consider is the degree of control that the company exercises over the worker. Question that are asked in reaching the conclusion as to the status of the worker include: Are the hours of employment set? Canthe worker come and go as he pleases? Must specific procedures be followed? Is the worker required to provide reports on his progress ? Does someone else at the company sign off on the work being performed? How the employer answers these questions will have a direct effect on whether the employer will win a lawsuit or wage claim.

For those employers who think that it is not worth paying an attorney to preemptively determine if there are problems and to correct those problems, consider the following:

1. Last year, the number of FLSA claims filed against employers by individuals claiming they were mis-classified as independent contractors increased.

2. If an employer if found to owe an employee overtime, the employee can seek to recover overtime pay for up to three years before the date the lawsuit was filed. The court MUST award the winning employee attorneys’ fees and these fees may exceed the actual claims in the lawsuit.

3. On February 2, 2010, the Department of Labor asked Congress for an additional $25 million. The request includes $12 million for hiring 90 new investigators and conducting 4,700 investigations of “industries with mis-classification characteristics,” including construction, child care, home health care, grocery stores, business services, and poultry and meat processing; $11.3 million to fund competitive grants to help states focus on mis-classification and reward the states that are most successful at detecting and prosecuting employers that mis-classify; and $1.6 million to help DOL’s Solicitor of Labor sue employers.

If you have any questions regarding wage and hour concerns or the potential mis-classification of your workers, you may contact Judith Sadler at 713-877-8111 or by email at jsadler@sadlersykes.com.