As a faithful reader of this column, I know that most people write in with specific situations that they want you to address. My question is a little different. Given that you advise employers for a living, I am curious if there are certain mistakes that are commonly made by employers. For example, looking back on 2015, what were some of the most common mistakes that you saw?
Hoping to Learn from Others’ Mistakes
Thank you for the interesting question. You are right, there are certain employer mistakes that occur more frequently than others. In no particular order, here are some of them:
Improperly classifying employees as exempt from overtime—this one is a biggie. Just because an employer pays an employee a salary doesn’t mean that the employee is exempt from receiving overtime. Federal and state wage/hour laws require that employees meet both a “salary basis” and “duties” test in order to be exempt from overtime. Application of the tests can be very fact-specific. Many employers either are unaware of these tests or simply ignore them. It also is important to note that the Department of Labor has proposed significant changes to these tests that will expand the availability of overtime to approximately five million additional workers. These changes likely will go into effect later this year, although the exact timing is unknown.
Failing to consider section 7 of the National Labor Relations Act—under section 7 of the Act, employees have the right to engage in concerted activity for their mutual benefit and protection. This means that employees have the right to work together regarding issues that affect their terms and conditions of employment. Section 7 applies to both union and non-union employers. Most often, section 7 issues arise in situations in which an employer tries to discipline employees for saying negative things about the company to each other, whether at work or on social media such as Facebook. Under section 7, employers cannot discipline employees for discussing the terms and conditions of their employment, even if that discussion is negative. Also, many employers have policies that prohibit employees from sharing their wage information with each other. Such a policy clearly violates section 7.
Misclassifying employees as “independent contractors”—unfortunately, this is very common. Employers often hire individuals to perform discrete projects or tasks. While it is certainly much more convenient to treat these individuals as independent contractors (e.g., the employer does not have to worry about payroll deductions, etc.), in most cases the individual is not a true independent contractor. The IRS uses a 20‑factor independent contractor test that, in essence, focuses on the extent to which the employer actually controls the day-to-day activities of the individual doing the work. Employers need to carefully consider that test before reaching the conclusion that an individual is an independent contractor. Also, keep in mind that the mere existence of an independent contractor agreement will not lead to the legal conclusion that the individual is, in fact, an independent contractor. This is a hot button issue for the IRS; they have assigned hundreds of additional investigators just to enforce this misclassification.
Forgetting to consider the ADA after exhaustion of FMLA leave—an individual could have a medical condition that is covered under both the FMLA (and WFMLA) and the ADA (and WFEA). Once an employee’s FMLA leave has been exhausted, many employers fail to consider the duty to accommodate mandated by the ADA. Under the ADA, it may be a reasonable accommodation to allow the employee to extend the leave of absence beyond that which was provided under the FMLA. Many employers fail to consider this.
Inaccurate performance evaluations—let’s face it, no one truly enjoys preparing performance evaluations. Too often, supervisors take the easy way out and either fail to comment on performance issues or, worse, provide praise that is unwarranted. Invariably, this comes back to bite the employer when it later becomes necessary to discipline or terminate the employee.
Improper emails—I cannot tell you how many times I have gone into a case thinking that we have a strong defense only to have my hopes dashed by something stupid that was said in my client’s internal email communications. Please people – – before hitting send consider that, later on, some third-party (a judge, jury, EEOC investigator or arbitrator) may read your email. Be careful.
Responding to administrative charges on their own—many employers try to save a little money by responding to EEOC charges or ERD complaints on their own. While saving a little money on attorneys’ fees may seem like a good idea at the time, it invariably turns out badly. In fact, I just was forced to settle a case in which the client hired us after they already had submitted a response to the EEOC. Because the client was unfamiliar with the area of law, the response essentially admitted liability. It was unfortunate because we actually had a decent defense.
Failing to provide managers and supervisors with basic employment law
training—legally, managers and supervisors are the agents of the employer; their actions can legally bind the employer. Accordingly, it is imperative that these individuals are provided with basic employment law training. In addition, some courts have found that a company’s failure to provide such training may be justification for punitive damages awards (i.e., monetary awards that are designed to punish an employer for egregious violations).
While the above list certainly is not exhaustive, it contains the most common mistakes that are made by many employers. Looking forward to the remainder of 2016, wage and hour compliance promises to be a major issue. The Department of Labor is trying to tighten the overtime exemptions and to apply the Fair Labor Standards Act to “joint employers” (seemingly separate companies that the Department of Labor will consider as one for FLSA purposes). In addition, expect the IRS to continue its crackdown on the misclassification of employees as independent contractors.
Well, Hoping, I hope that helped. If your company can avoid making these common mistakes, you should be off to a good start for 2016.
The “Dear Atty.” column is aimed at answering employers’ legal questions that surround issues in human resources. Attorney Pete Albrecht of Albrecht Backer Labor & Employment Law, S.C. welcomes you to submit questions here for future editions of “Dear Atty.”
If you would like additional information about this topic, please contact Pete Albrecht. He is the president and a shareholder at Albrecht Backer Labor and Employment Law. Pete has represented employers for over 28 years and his law office is located in Madison, Wisconsin.