Recently I attended a meeting of HR professionals and listened to the keynote speaker, Ernest Malaspina who specializes in Employment Law.\u00a0 Ernie is with Hopkins & Carley, a Silicon Valley-based law firm and he talked about mistakes organizations make that lead to costly legal action.<\/p>\n
Ernie shared stories about lawsuits filed by employees and former employees which are much more common today than they were 10 or 20 years ago.\u00a0 In this blog and my next blog, I list Ernie\u2019s top six<\/u> HR-related mistakes, aptly called \u201cThe Dirty Half-Dozen<\/em>\u201d.\u00a0 Happily, each mistake is followed by Ernie\u2019s advice on how to minimize the risk of those mistakes.\u00a0 Let\u2019s start with the first three:<\/p>\n <\/p>\n 1. Misclassification of Newly Hired Workers (as Contractors or Exempt Employees)<\/strong>\u00a0<\/strong><\/p>\n Should the new worker be an \u201cemployee\u201d or an \u201cindependent contractor\u201d?<\/p>\n Hiring managers are often tempted to classify workers as independent contractors in order to avoid owing overtime, and to control their benefit costs.\u00a0 They forget that these classifications are determined by legal standards.<\/p>\n Once the decision has been made to classify a worker as an employee, the next question to answer is:\u00a0 should the person be \u201cexempt\u201d or \u201cnon-exempt\u201d?\u00a0 Again, there is a temptation to classify a worker as \u201cexempt\u201d to avoid overtime pay.\u00a0 Some managers do it to appease an employee\u2019s preference \u201cto be exempt\u201d.<\/p>\n <\/p>\n How to avoid these mistakes:<\/strong><\/p>\n a. Make the decision on the basis of applicable legal criteria<\/u> \u2013 not based on convenience or industry norms.<\/p>\n b. Be aware and avoid classifications that raise a \u201cred flag<\/u>\u201d. Examples:\u00a0\u00a0\u00a0 a worker in question is a former employee of the company, or one who is classified as a contractor is doing the same work as another (who is classified as an employee.)<\/p>\n c. Let HR review and control classification decisions<\/u>. Hiring managers often decide based on costs \u2013 e.g. avoiding overtime pay by classifying workers as contractors or exempt employees (even when the facts indicate otherwise).<\/p>\n d. R<\/span>eview<\/u> classifications when there is a change in job title or duties<\/u>.<\/p>\n <\/p>\n 2. Poorly Drafted Offer Letters and Contracts<\/strong><\/p>\n It is good practice to document the terms and conditions of the employment relationship, via a letter or in some cases, a formal employment contract.\u00a0 It allows you to protect yourself as an employer, against possible future claims.\u00a0 \u00a0A common mistake is to include wording that specifies the term of employment<\/u>.\u00a0 This undermines \u201cat-will status\u201d \u2013 that employment is terminable at will.\u00a0 Another common source of controversy are sales commissions and bonus plans.\u00a0 What if an order is cancelled or returned?<\/p>\n <\/p>\n How to avoid these mistakes:<\/strong><\/p>\n a. Draft offer letters and contracts so they are clearly understandable by someone outside the organization<\/p>\n b. Include all provisions necessary to protect the employer against foreseeable claims<\/p>\n 3. Ill-conceived attempts to avoid overtime Some employers try to avoid paying overtime by providing \u201ccomp time\u201d (compensatory time off).\u00a0 However, there are specific conditions when this is allowed.\u00a0 Other attempts to avoid paying overtime are via \u201cmake-up time\u201d and \u201calternative work schedules\u201d.<\/p>\n How to avoid these mistakes:<\/strong><\/p>\n a. If at all possible, do not grant comp time (especially in California).<\/p>\n b. If you must do it, do it right. Be diligent in complying with requirements.<\/p>\n c. Do not permit \u201cinformal\u201d alternative work schedules.<\/p>\n <\/p>\n Let\u2019s take a pause right here and reflect \u2013 which of these mistakes occur in your organization?\u00a0 What will you do about it?<\/p>\n
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