How to Work with Employment Laws and Regulations
HR professionals must navigate a complex landscape of federal, state, and local laws. The Fair Labor Standards Act (FLSA) provides standards for minimum wage and overtime pay. Businesses with $500,000 or more in annual sales are subject to the FLSA. Although some states have their own minimum wage laws, the FLSA requires a minimum wage of $7.25 per hour as of 2009. States can mandate a higher minimum wage, however. Employers may be subject to overtime requirements for both hourly and salaried employees, and misclassification can be costly .
Employers with 50 or more employees are covered employers under the Family and Medical Leave Act. This law permits eligible employees to take up to 12 weeks of unpaid leave to care for a new child or a family member. Additional FMLA-related regulations require employers to provide certain notices to employees and to maintain records.
The Americans with Disabilities Act (ADA), the Equal Pay Act, the Employee Retirement Income Security Act (ERISA) and other anti-discrimination laws are also key pieces of legislation for HR professionals. Records retention and filing requirements similarly vary by state.
Contracts of Employment: What You Need to Know
Employment contracts are central to any human resources function. Like other legal documentation, they are subject to specific legislation not just on formation but also on the terms of the contract. Thus, there are a number of points that should be borne in mind when entering into a contract of employment. Firstly, it is necessary for an employer to be aware of its anti-criminality policy and ensure that the employee to be appointed does not fall foul of that policy. The legislation allows a certain number of ‘fit and proper person’ considerations to be stated in employment contracts. A breach of an anti-criminality policy constitutes a breach of the contract of employment giving the employer the right to terminate. It is particularly important for employers who work to financial services legislation as many of the provisions of the legislation, which apply to the employee as well as the employer, contain these ‘fit and proper criteria’ which will usually be set out in the employee’s contract of employment.
Second, the terms of the employment contract should be properly detailed. There are three general areas: the main terms and conditions of employment, which must be in writing and given to the employee when they commence; the financial considerations, e.g. salary, bonuses etc and non-financial benefits which are defined in the contract and generally referred to as ‘benefits’. All should be fully detailed to ensure that there are no disputes.
Third, there should be a discussion around the practical implementation of the contract terms and conditions: how is the salary paid; whether any remuneration is discretionary or not and to what extent remote working matters.
If the benefit is dependent on other matters such as assessment, particularly in a bonus situation, this can be detailed in the remuneration or benefits section, but if it is absolutely discretionary, again, that should be stated in the remuneration or benefits section.
Managing Employee Benefits within the Law
As an important part of the total compensation package, employee benefits can include health insurance, retirement plans, paid time off, tuition reimbursement, childcare assistance and more. Internet resources can provide specific information on how to legally set up and administer these benefits. For example, the Department of Labor’s (DOL) website offers model documents for benefit plans that include language which satisfies Internal Revenue Service (IRS) requirements.
Benefit plans fall into two categories: those governed by ERISA and those not subject to ERISA (largely, the government-mandated benefits such as Social Security, Medicare and workers’ compensation). Plans subject to ERISA include employer-provided benefits, such as group health benefits and retirement plans. Those not subject to ERISA include government-mandated benefits (such as Social Security and Medicare), and benefits provided out of a common fund (such as bonuses, certain profit sharing and discretionary leave, such a paid-time off).
Employer-provided benefit plans, such as group health insurance and retirement plans, fall under ERISA. ERISA requires that administrators of such plans provide participants with a summary plan description containing certain information. But it has evolved into a very complex body of law, especially with respect to retirement plans where the IRS and DOL have produced extensive guidance. Typical topics include coverage and participation requirements, and claims and appeals procedures.
The IRS requires businesses that offer health insurance benefits to employees to meet certain requirements. Here’s an overview of the requirements of group health plans, the penalties for failure to comply and the importance of understanding how legal requirements are applied in the real world.
In addition to compliance with federal health insurance laws, all employers with more than five employees must also meet Massachusetts law on employer-sponsored group health plans—G.L. c. 175 §110E—which requires employer-sponsored group health care even if they do not have a federal mandate to do so. But there is no one-size-fits-all solution. Employers can choose the type of coverage they might provide as long as they comply with Massachusetts state law.
Unlike health care benefits, retirement benefits fall under ERISA, which requires employers to provide participants of retirement plans a summary plan description that includes, among other things, due-date for claims and appeals.
Finally, Section 125 of the Internal Revenue Code allows employees to pay for certain benefits with pre-tax dollars. Typically, employee contributions to Section 125 plans are deducted from employees’ taxable income for the current year. This means that employees are essentially using pre-tax dollars to pay for certain benefits, such as employer-provided group health care.
How to Work with Anti-Discrimination Laws
Employers must pay close attention to the various laws prohibiting discrimination in the workplace. Discrimination can take several forms, from employment decisions based on a candidate or employee’s age, sex, race, ethnicity, religious affiliation and/or pregnancy, to other illegal activities.
Discrimination may occur in wages, training opportunities, job assignments and other areas. Several federal antidiscrimination laws apply, all enforced by the U.S. Equal Employment Opportunity Commission (EEOC). They include the Age Discrimination in Employment Act, Title VII of the Civil Rights Act and the Pregnancy Discrimination Act.
Legal implications for employers can be severe and costly, including loss of productivity and morale, low employee engagement, high turnover and the risk of being sued. A workplace that does not provide equal employment opportunities is at risk of violating one or more anti-discrimination laws. If an employer does not comply, it can face up to $300,000 in compensatory damages and up to $50,000 per violation in punitive damages. To prevent any potential lawsuits, employers should take the following actions:
Anti-harassment policies are laws to which employers must comply, as harassment is a form of inappropriate behavior that can create a hostile work environment and can lead to retaliation and litigation. "Employer should seriously consider implementing and training management and staff on workplace harassment policies." (Chapter 11, "Workplace Discrimination," The Essential Legal Guide to Human Resources, First Edition)
Companies that create strict anti-harassment and anti-discrimination policies and are proactive about creating a diverse workplace are far less likely to experience issues within their companies. In addition, they are more likely to attract and retain quality employees.
How to Legally Manage Dismissals
When the time comes to end the relationship with an employee, the decision must be made with legal considerations in mind. Employers should be mindful of at-will employment and the law regarding wrongful termination claims.
All employees are generally considered to be employed "at-will" in the absence of an agreement or contract that specifies otherwise. In at-will employment, the employer has the right to terminate an employee at any time or for any reason, as long as the action does not run afoul of a civil rights statute, contract or other regulation which affords protection to that employee or class of persons.
An employee terminated for a protected reason may have grounds to bring a wrongful termination claim. Sometimes, the employee will allege a wrongful termination when that is not the case , so it’s important to be familiar with all court decisions in the applicable jurisdiction involving the recent dreadful employee who was a horrible fit from day one. A few jurisdictions do not recognize implied covenant claims, and some courts have allowed employers to win cases on summary judgment where there was no written policy but the underlying facts did not support the employee’s position.
A good starting point is the employee handbook. If the handbook states that employment is "at-will" and this is supported by the employee’s acknowledgment, there may be an opportunity to end the employment relationship on the spot. However, the employer should be mindful of other statutory protections and school district or charter requirements that may apply.
Legal Considerations When Employees Work Remotely
Even before the COVID pandemic, many companies were adopting or exploring various remote work arrangements. In the workforce of the future, employees may not physically go to an office every day or even at all, and they are therefore no longer limited by geographic employment issues – which ones will be at the forefront of 2021 and beyond?
As remote work has advantages such as reduced overhead costs, employee flexibility, and improved work-life balance, it is no wonder that many companies are set for an expansion in a remote working culture. However, there are also certain legal hurdles that need to be recognized and dealt with.
Remote Worker Classification Any reference herein to remote workers regarding classification will mean employees who work from home (or any location other than the employer’s office) at least one day per week on a regular basis. It is important to consider whether this will result in issues under applicable tax or labor laws.
For U.S. employers and any employers with physical locations in the United States (which we will call non-U.S.-based employers), are the employees working in the United States, even if only occasionally, or perhaps working remotely from their homes (or perhaps even a different country)? Employers need to check the laws of each state in which their employees work. Some states consider an employee as working in the state if the employee goes to the employer’s office located in that state to perform services for the employer. Other states, including California, treat work performed on behalf of the employer, such as work performed while telecommuting, as being performed in the state, regardless of where the employee is located.
It is important to ensure the correct taxes are remitted for work performed in each state by employees that are working remotely.
If a company has remote workers residing in a state in which the company does not have a location or presence, a great deal of research may be necessary to confirm that the company has no nexus (i.e., no minimum degree of connection with the state such that the company may be acted upon by the state) in that state. Although most states require nexus for state income tax purposes, some state statutes or court decisions significantly reduce or even eliminate the nexus requirements.
Remote Workers from Outside the United States Working in the United States For those non-U.S.-based companies employing people who remotely work in the United States (other than at a physical location of the employer in the United States), there may be immigration concerns. If an employee’s visit or stay in the United States constitutes "work," the employee may be required to obtain a visa that authorizes the employee to work in the United States.
If an employee enters the United States to work without the benefit of a visa authorizing the employee to work, the employee could be barred from the United States for 10 years, be prohibited from adjusting status to that of a permanent resident for 10 years, and even be ordered removed.
Not surprisingly, to avoid these issues, individuals seeking employment-related permissions should ideally obtain a pre-arrival employment authorization document which describes the general parameters of their U.S. employment.
Contract Workers Independent contractor/employee misclassification issues for remote workers will be discussed below. However, it is also important to recognize that contract workers may be engaged in a domestic or international capacity. For contract workers not in the United States, the issue of extension of visas or visa waivers may arise, depending on how long they are in the country.
Tax Issues There may be significant tax issues from hiring employees abroad, so careful planning is needed. Special consideration should be given to non-U.S. tax treaties and, if the employee will be working in the United States, determining visa eligibility.
Managing Risk and Compliance in Employment Law
One of the critical functions of the HR department is managing legal risks within the workplace. Given the plethora of employment laws and the myriad ways those laws can be violated, the potential for non-compliance is huge without a system in place to uphold the law and protect the employees and the employer alike. A human resources department that stays up to date on current employment policies is beyond essential. In addition, HR departments should be vigilant about conducting regular audits on each facet of the workplace including: employee handbooks and manuals; vendor and service provider relationships; employee records; and procedures on how all HR matters are handled including hiring, firing and disciplinary actions.
As previously mentioned, there are a lot of overlapping state and federal laws. Sometimes even minor violations can result in major problems such as exposing the business to a lawsuit . It is important for the HR department to know and understand all of the possible infractions of state and federal laws including but not limited to wage and hour issues, improper termination, retaliation and discrimination.
Training, training, training. One of the primary goals of the human resource department is to avoid litigation, and the best way to do that is to find any potential problems, and fix them. HR departments should conduct regular trainings on topics such as: employee handbooks and managers meetings; sexual harassment and discrimination training for all employees; termination policy; and safety and health training. If the HR department has a comprehensive training program, the employees will have a complete understanding of company policies, thus ensuring that actions and behavior are aligned with their expectations.
