Avoiding Labor & Employment Disputes from Onboarding to Exit. (Mitigating Risk of Liability in the Employee Lifecycle)

Introduction

Now more than ever companies must be on top of staffing and employment issues. It’s always important to properly document onboarding employees and contractors, any issues that arise in the lifecycle of the employment relationship and any exit documentation, but in difficult economic times it is especially important to maintain recordation thereof and any human resources issues. 

Mitigating Labor and Employment Disputes in Difficult Economies

With terminations and layoffs on the rise, related reduced morale of the workforce, employment and labor issues are currently ripe for disputes or other issues not rising to the level of a dispute. There are steps that can help your startup business mitigate the risk of disputes or mitigate the risk of unmet expectations, lack of clarity and other labor and employment issues. Clear contract drafting can help both the employer and employee to understand the employment relationship and expectations more thoroughly, in addition to help with periodic and documented performance review processes in line with such expectations, forecasts and actual results. 

Onboarding

Offer Letters/Employment Agreements

You can help mitigate potential employment disputes by drafting clear offer letters and executive employment agreements that explicitly outline the following:

• appropriate classification as exempt or non-exempt; 
• title; 
• duties and responsibilities; 
• compensation in cash and in equity (if applicable) rates of pay and whether paid by the hour, shift, day, week, salary, commission, or otherwise, including any rates for overtime, as applicable, and the payday schedule designated by the employer (Employees in California whose compensation includes commission must be provided with a written employment agreement stating the method for computing and paying the commission);
• eligibility for benefits (and information regarding paid sick leave and other benefits);
• hours (part time or full time);
• at-will employment (ability to terminate with or without cause) or term of employment, if any; 
• the expected reporting relationship delineating the appropriate superiors or management; 
• start date;
• confirmation of no conflict with another contract for employment
• severance benefits, if applicable;
• bonus compensation and profit-sharing, if applicable;
• equity vesting provisions, if applicable; and
• dispute resolution and governing law provisions.

Tax Forms and Documents

Require each new hire to complete and return an IRS form W-4 designating the appropriate federal tax withholding and retain the same for your records. California hires should also complete a state withholding form (DE 4).

Immigration

Have each new employee complete a form I-9, review original documents to establish employee identity and employment authorization and retain such records.

This is an important employee onboarding step because, first, it ensures that the employer is in compliance with federal immigration laws and avoids potential legal liability for knowingly hiring unauthorized workers. Second, it helps to prevent any misunderstandings or disputes between the employee and employer regarding the employee’s eligibility to work. Finally, it provides a clear and documented record of the employee’s eligibility to work, which can be used to defend against any future claims of discrimination or improper hiring practices. 

Confidential Information and Invention Assignment Agreements

Employers should ensure all hires sign confidential information and invention assignment agreements. By signing confidential information and invention assignment agreements, employees: (i) acknowledge that they understand the importance of protecting and not disclosing or inappropriately using the company’s proprietary information and (ii) employees acknowledge and  assign all intellectual property relevant to the business to the company and provide that inventions are work made for hire to belong to the employer. This agreement is an important step employers that can take to protect their business interests and minimize the risk of future labor and employment disputes.

Cautious Interviewing and Inclusive Recruitment and Hiring Practices

Avoid inquiries into protected class information to avoid the appearance of unlawful discrimination. This includes questions which might lead to information about age; religious preference; status as married, divorced or single; pregnancy status or parenting status; race; political association; medical matters; disability; and other protected class information. You should also ensure that your human resources staff is trained on the same and that related employment and hiring policies are in place to encourage inclusivity in the hiring and recruitment and employment processes (see below regarding “Company Policies and Notices”). Additionally, consider ADA and other requirements for potential candidates and employees, among other important inclusivity requirements (e.g. see:  https://www.eeoc.gov/publications/ada-your-employment-rights-individual-disability).

Insurance

Required Insurance in California: In California, businesses must ensure they have insurance to protect the workforce, including workers compensation; unemployment insurance; and state disability insurance and certain paid family and sick leave.

Other Insurance Policies: The company should also determine whether it will purchase general liability insurance; director and officer insurance; key person insurance; umbrella insurance; property insurance, or other forms of insurance. These insurance policies may help the company in the event of workplace injury, labor or employment disputes, or other disgruntled employee issues.

Preventative Maintenance (Company Policies, Notices and Training)

Employee Handbooks

Companies should put in place robust employee handbooks, appropriate and legally required policies and, as a best practice, standard operating procedures or operational guides. 

Specific Policies Which Can Mitigate Potential Employment Disputes

Employers with five or more employees must put in place an anti-harassment, anti-discrimination and anti-retaliation policy that meets certain requirements, including a clear statement that employees will not be exposed to retaliation because they make a complaint or participate in an investigation. Disability and Religious Accommodations Policies are required with five or more employees. Certain other specific policies are required under law and depending on the jurisdiction of the business.

Materials Distribution/Notices

Companies must distribute legally required sexual harassment fact sheets and post required notices, including California Law Prohibits Workplace Discrimination and Harassment and Transgender Rights in the Workplace. Companies should document employee receipt of employer handbook and agreement to comply with employer handbook, including as such policies may be updated from time-to-time and as required under applicable law.

Sexual Harassment Prevention Training and Other Trainings

Companies must also provide sexual harassment prevention training to employees and supervisors, as required under law. Companies should also provide training on IT protection, privacy and data protection and other related significant responsibilities under law for the business and its employees. 

Other Policies and Notices Which Can Mitigate Employment Disputes

There are several other policies, notices and legally required behaviors under California law and federal law that typically apply, depending on the size and character of the business. Additionally, there are policies that may not be required under law but protect the employer from potential liabilities and clarify the employer’s approach and expectations in the workplace (consider policies around pandemic-related issues- e.g. vaccination and masking; substance abuse; anti-bullying; etc.).

Ongoing Maintenance (Compliance, Review and Documentation)

Compliance

It’s important to periodically conduct human resources auditing to ensure ongoing compliance with appropriate hiring practices, wage and hour and payroll compliance, immigration and eligibility compliance, background check compliance (as applicable), compliance with employee handbook matters and related policies such as discrimination and harassment policies, illness, pregnancy, military service leave policies, social media policies, employee health and safety policies, appropriate disciplinary procedures compliance, investigative procedures and practices and separation and release practices.

Classification

It’s additionally important to continue to ensure that persons working for the business are appropriately classified as employees or contractors. In the State of California, it’s becoming increasingly difficult to classify hires as independent contractors and there are potentially serious penalties that go along with misclassification.

Employers should review the factors used by California courts and state agencies to determine whether a worker is an employee or an independent contractor and should consult with qualified labor and employment legal counsel to ensure that their worker classifications are correct. By properly classifying their workers, employers can help mitigate future labor and employment disputes.

Performance Review and Related Documentation

It is helpful for an offer letter or employment agreement to have some level of specificity regarding duties and responsibilities of the person being hired. This allows for a review of whether those explicit duties and responsibilities or milestones have been met and allows for an evaluation of the employee based on those original expectations. It also provides a framework for providing appropriate feedback and for adjusting the duties and responsibilities as the employer and employee collectively see fit as a role or position expands, grows or is modified. 

In a performance review it is important to not only have an in-person discussion (whether annually or quarterly, as necessary, and whether virtual or live, with employees), but to document the feedback, both positive feedback and areas where there is room for improvement or where the employee has fallen short.

This documentation can serve as evidence in future labor or employment disputes, helping to prevent or mitigate potential conflicts. Additionally, it allows for ongoing communication between employer and employee, promoting transparency and helping to ensure that expectations and goals are aligned.

Exit (Terminations and Separation and Release Agreements)

Employee Terminations/Involuntary Separations

In most cases it is a stressful and difficult thing to involuntarily separate from an employee or service provider. Regardless, businesses need to take care and caution to deliver the separation messaging clearly and appropriately; document employee feedback, improvement plans and ongoing reviews; assess any potentially related legal risks in the context of the termination; protect company assets and intellectual property through the termination; and be able to provide evidence of legitimate grounds for termination.

As part of the lead up to an involuntary separation event, it is important that businesses consistently apply appropriate policies, procedures and handbooks to the employees and consistently approach review and documentation practices among employees in the workforce, in order to eliminate the appearance of disparate or discriminatory treatment or inconsistent treatment among persons in the workforce. This includes documenting any disciplinary or review or performance plan matters in a complete and objective manner and taking the same or similar approach across the workforce, as applicable, in similar events or circumstances. This also involves understanding applicable law as relates to potential liabilities around termination (especially around discrimination, harassment, retaliation, disability, leave, compensation, whistleblowing, and protected classes more generally).

Preparing for Employee Separation

The steps at employee termination or involuntary separation are multiple. Some involve protecting and collecting sensitive business information or assets (whether tangible or intangible); ensuring protection against workplace violence or intense reaction, with attention to workplace safety and security; ensuring protection of customers and clients and seamless transitioning to avoid loss of business or business disruption; being cognizant of damage to employee morale and mitigating damage to employer’s reputation.

Many of these concerns play towards appropriate waivers, separation and release agreements (as addressed below) as well as compliance with any severance or related acceleration of vesting provisions or the like in the original employee documentation (such as offer letters or employment agreements, as applicable). Pointing to the employee’s responsibility to return company sensitive information and company property pursuant to its confidential information and invention assignment agreement (as referenced above) is helpful and removes some of the personal feelings that can come up when an employer requests the employee to return all company property and proprietary information at exit.

Emotions and sensitivities often run high during these times and thus, it is best to be able to point to an existing policy or agreement that pre-conceives these practices and that is signed by the employee or acknowledged by the employee prior to the exit event arising (per the onboarding steps above or per employee handbook policies as discussed above). 

Separation and Release Agreements

Separation and release agreements are important for a number of reasons:

1. they serve as documentation of the time, effective date, and manner of termination;
2. they mitigate risks of liability after execution post-termination;
3. they recap employee obligations under existing policies and agreements; and
4. they may bind the employee to additional restrictions or covenants or non-competes or non-solicits which the employee was not previously subject to. 

However, separation and release agreements can take a variety of forms. For example, for employees 40 and older, there are specific requirements under the ADEA in order to make a release enforceable. Additionally, if there is a live or active dispute between the employee and employer or a complaint which has been filed, a settlement agreement may be more appropriate than a standard separation and release of claims agreement.

It is important to note that certain claims under law that are protected cannot be released regardless of consideration offered in exchange for such release. Also note that some consideration for a release is or may be necessary to ensure the release is enforceable, including compensating the employee in some way other than they were already entitled in exchange for the employee’s release of claims against the employer. 

The separation and release agreement may address topics such as: 

• employee representations and warranties;
• return of company property;
• separation benefits (including options for continuation of health insurance coverage as required under law);
• a general release and waiver of claims;
• waiver of California Civil Code Section 1542;
• post-employment obligations and restrictive covenants;
• remedies;
• dispute resolution; and
• other miscellaneous provisions.

Conclusion

Recap of Key Points

Employment and labor issues arise at all life-stages of the employment relationship. It is important to maintain proper documentation from the beginning of an employment relationship, throughout the relationship and at the end of such a relationship. Clear communication, particularly in the areas of job descriptions, performance expectations, and disciplinary procedures, concrete policies and agreements, and constant documentation should play a crucial role in avoiding misunderstandings and disputes with employees. It’s important to periodically conduct human resources auditing to ensure ongoing compliance with set policies.

Having existing policies or agreements signed by the employee, and acknowledged by the employee prior to their termination, as well as well-crafted separation and release agreements can also help mitigate labor and employment disputes arising during termination.

How Rogoway Law Group Can Assist

At Rogoway Law Group, our attorneys understand the importance of a safe, effective and efficient and satisfied workforce. We also understand that in difficult economic times sensitives may run high, job insecurity and morale issues may arise, and other financial concerns may restrict a company’s ability to maintain broader staffing, requiring downsizing or separation from certain employees or employee roles.  

Our labor and employment attorneys can help deploy critical labor and employment safeguards and practices into action for your business in a cost-efficient and helpful manner. From creating templates for labor and employment onboarding, to drafting customized policies, handbooks, and agreements, we can help you create and maintain a positive environment and process for your workforce.

Please contact us today for a complimentary consultation, so we can discuss how we can help safeguard your business against future or current labor and employment disputes.