5 Tips to Protect Your Company from Wrongful Termination Lawsuits

Most jobs are considered to be “at will” employment, but employees may still be able to sue an employer if the reason for termination is determined to be illegal. Unfortunately, termination is something that nearly every workplace must deal with, so it’s important that this matter be handled with delicacy and professionalism. The following are a few tips that can keep a workplace safe from wrongful termination lawsuits.

1. Communicate Regarding Expectations

Letting employees know what’s expected from day one can help to prevent performance issues and protect an employer if an employee is fired for failing to meet expectations. Of course, regular feedback should be given so that employees know whether or not they’re meeting expectations. If an employee is consistently warned about performance issues, it should be no surprise when termination follows.

2. Keep Great Documentation

Even if an employee is alerted to issues with performance, tardiness, or behavior, it can be difficult to prove that this feedback was given if there’s no documentation. Keeping great records can not only help to protect an employer from wrongful termination, it can also improve transparency and communication regarding ongoing issues. This can in turn improve consistency and organization, preventing problems from several angles.

3. Be Compassionate During Terminations

Being fired has been identified as one of the most stressful things that can happen in a person’s life. When the time comes to terminate someone, no matter what the reasons for the termination, being compassionate can help to ease the inherent tension in the situation. How an employee feels during and after the termination can be a big factor in whether or not the employee feels the need to pursue legal action.

4. Purchase Liability Insurance

Liability insurance is an added expense for the business, but may help to save dollars if an employee sues the company for wrongful termination. Not all liability insurance is the same, however. It may be prudent to make sure the option still exists to defend against a lawsuit and avoid a settlement, even if liability insurance is available to help pay settlements when they are found to be the best course of action.

5. Help Employees with Next Steps

Employees that find new jobs very quickly after termination usually don’t sue for wrongful termination. For this reason, it can be beneficial to assist employees with next steps as part of the termination process. Providing a reference or helping with networking, especially in cases where an employee was let go because of downsizing, can help the employee to move forward fast and prevent stress-inducing downtime.

Termination can be difficult for both employers and employees, so following certain guidelines can ease stress of the situation and prevent the hard feelings that sometimes lead to wrongful termination lawsuits. By detailing expectations and establishing a consistent chain of events that happens prior to termination, employers can protect themselves from liability. Employees may also feel more secure knowing what to expect and seeing that other employees are held accountable.

30 employee handbook do’s and don’ts from the NLRB

To help employers craft handbooks that don’t violate the National Labor Relations Act, the National Labor Relations Board has issued a compilation of rules it has found to be illegal — and rewritten them to illustrate how they can comply with the law.

It was issued as a memorandum by NLRB General Counsel Richard F. Griffin, Jr. to “help employers to review their handbooks and other rules, and conform them, if necessary, to ensure they are lawful.”

Specifically, the memorandum points out employer policies found to violate and conform to Section 7 of the NLRA.

The main area of concern

Section 7 mandates that employees be allowed to participate in “concerted activity” to help improve the terms and conditions of their work.

The NLRB has made it abundantly clear recently that it’s on the lookout for rules that:

  • explicitly restrict protected concerted activity, and/or
  • could be construed to restrict protected Section 7 activity.

One thing the memorandum makes very clear: extremely subtle variations in language could be the difference between having a legal policy in the NLRB’s eyes and having one that’s viewed as violating the NLRA.

What to say, what not to say

Here are many of the dos and don’ts highlighted by the memorandum, separated by topic:

Rules regarding confidentiality

  • Illegal: “Do not discuss ‘customer or employee information’ outside of work, including ‘phone numbers [and] addresses.’” The NLRB said, in addition to the overbroad reference to “employee information,” the blanket ban on discussing employee contact info, without regard for how employees obtain that info, is facially illegal.
  • Illegal: “Never publish or disclose [the Employer’s] or another’s confidential or other proprietary information. Never publish or report on conversations that are meant to be private or internal to [the Employer].” The NLRB said a broad reference to “another’s” information, without clarification, would reasonably be interpreted to include other employees’ wages and other terms and conditions of employment.
  • Illegal: Prohibiting employees from “disclosing … details about the [Employer].” The NLRB said this is a broad restriction that failed to clarify that it doesn’t restrict Section 7 activity.
  • Legal: “No unauthorized disclosure of ‘business “secrets” or other confidential information.’”
  • Legal: “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside [Employer] is cause for disciplinary action, including termination.”
  • Legal: “Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information regarding business partners, vendors or customers.”

The NLRB said the last three rules above were legal because: “1) they do not reference information regarding employees or employee terms and conditions of employment, 2) although they use the general term “confidential,” they do not define it in an overbroad manner, and 3) they do not otherwise contain language that would reasonably be construed to prohibit Section 7 communications.”

Rules regarding conduct toward the company and supervisors

  • Illegal: “Be respectful to the company, other employees, customers, partners, and competitors.”
  • Illegal: “Do ‘not make fun of, denigrate, or defame your co-workers, customers, franchisees, suppliers, the Company, or our competitors.’”
  • Illegal: “Be respectful of others and the Company.”
  • Illegal: “No defamatory, libelous, slanderous or discriminatory comments about [the Company], its customers and/or competitors, its employees or management.’”

The NLRB said the rules above were unlawfully overbroad because: “employees reasonably would construe them to ban protected criticism or protests regarding their supervisors, management, or the employer in general.”

  • Illegal: “Disrespectful conduct or insubordination, including, but not limited to, refusing to follow orders from a supervisor or a designated representative.”
  • Illegal: “‘Chronic resistance to proper work-related orders or discipline, even though not overt insubordination’ will result in discipline.”

The NLRB said the rules above, while banning “insubordination,” also ban “conduct that does not rise to the level of insubordination, which reasonably would be understood as including protected concerted activity.”

  • Illegal: “Refrain from any action that would harm persons or property or cause damage to the Company’s business or reputation.”
  • Illegal: “It is important that employees practice caution and discretion when posting content [on social media] that could affect [the Employer’s] business operation or reputation.”
  • Illegal: “Do not make ‘statements “that damage the company or the company’s reputation or that disrupt or damage the company’s business relationships.”‘”
  • Illegal: “Never engage in behavior that would undermine the reputation of [the Employer], your peers or yourself.”

The NLRB said the rules above “were unlawfully overbroad because they reasonably would be read to require employees to refrain from criticizing the employer in public.

  • Legal: “No ‘rudeness or unprofessional behavior toward a customer, or anyone in contact with’ the company.”
  • Legal: “Employees will not be discourteous or disrespectful to a customer or any member of the public while in the course and scope of [company] business.”

The NLRB said the rules above are legal because they wouldn’t lead an employee to believe they restrict criticism of the company.

  • Legal: “Each employee is expected to work in a cooperative manner with management/supervision, coworkers, customers and vendors.” The NLRB says employees would reasonably understand that this states the employer’s legitimate expectation that employees work together in an atmosphere of civility.
  • Legal: “Each employee is expected to abide by Company policies and to cooperate fully in any investigation that the Company may undertake.” The NLRB said this rule is legal because “employees would reasonably interpret it to apply to employer investigations of workplace misconduct rather than investigations of unfair labor practices or preparations for arbitration.”
  • Legal: “‘Being insubordinate, threatening, intimidating, disrespectful or assaulting a manager/supervisor, coworker, customer or vendor will result in’ discipline.” The NLRB said: “Although a ban on being  disrespectful’ to management, by itself, would ordinarily be found to unlawfully chill Section 7 criticism of the employer, the term here is contained in a larger provision that is clearly focused on serious misconduct, like insubordination, threats, and assault. Viewed in that context, we concluded that employees would not reasonably believe this rule to ban protected criticism.”

Rules regarding conduct between employees

  • Illegal: “‘Don’t pick fights’ online.”
  • Illegal: “Do not make ‘insulting, embarrassing, hurtful or abusive comments about other company employees online,’ and ‘avoid the use of offensive, derogatory, or prejudicial comments.’”
  • Illegal: “Show proper consideration for others’ privacy and for topics that may be considered objectionable or inflammatory, such as politics and religion.”
  • Illegal: “Do not send ‘unwanted, offensive, or inappropriate’ e-mails.”

The NLRB said the rules above were unlawfully overbroad because employees would reasonably construe them to restrict protected discussions with their co-workers.

  • Legal: “[No] ‘Making inappropriate gestures, including visual staring.’”
  • Legal: “Any logos or graphics worn by employees ‘must not reflect any form of violent, discriminatory, abusive, offensive, demeaning, or otherwise unprofessional message.’”
  • Legal: “[No] ‘Threatening, intimidating, coercing, or otherwise interfering with the job performance of fellow employees or visitors.’”
  • Legal: “No ‘harassment of employees, patients or facility visitors.’”
  • Legal: “No ‘use of racial slurs, derogatory comments, or insults.’”

The NLRB said the rules above were legal because: “when an employer’s professionalism rule simply requires employees to be respectful to customers or competitors, or directs employees not to engage in unprofessional conduct, and does not mention the company or its management, employees would not reasonably believe that such a rule prohibits Section 7-protected criticism of the company.

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California Supreme Court Ruling Latest Blow to Independent Contractor Model

The California Supreme Court’s ruling in a case exploring how workers should be classified—either as independent contractors or as employees—means California businesses will have a tougher time justifying independent contractor classifications.

The court ruled on April 30 in the appeal of Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County.Dynamex, a package and document delivery company, had classified drivers as contractors instead of employees, meaning the company was relieved of its obligations under California Industrial Welfare Commission wage orders related to the wages, hours, and other working conditions of the drivers.

The court’s ruling significantly toughens the test used to determine whether a worker can be classified as a contractor. The change is expected to have a big impact on gig economy workers.

“The big takeaway is that even if you exercise no control over a worker, and even if that worker has other clients in an independent business, [she is] still an employee if [she] perform[s] work that is part of your usual business,” says Mark Schickman, the editor of California Employment Law Letter and an attorney with Freeland Cooper & Foreman LLPin San Francisco. “I don’t see how driving businesses like Uber or Lyft could designate a driver as anything but an employee.”

Schickman says other businesses also will be affected, such as retail stores hiring gig workers to sell merchandise and law and accountancy firms that hire independent contract lawyers and accountants. “Independent contract arrangements were always tough to justify and now it is even tougher,” he says.

ABC Test

Todd R. Wulffson, an attorney in the Irvine office of Carothers DiSante & Freudenberger LLP, explains that the Dynamex ruling is significant for California employers because it adopts the “ABC test” to make the determination. Previously, the state used a multifactor test focusing on the level of control the hiring entity had over the worker’s performance of the work.

The ABC test presumes a worker is an employee unless the hiring entity proves the following:

(A)       The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B)       The worker performs work that is outside the usual course of the hiring entity’s business; and

(C)       The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

“Under this new test, the majority, if not the vast majority, of current independent contractors should be reclassified as employees—particularly people driving in the gig economy,” Wulffson says, adding that if a California employer has more than a few independent contractors, it should conduct an audit—with the assistance of counsel to keep it privileged—to determine liability.

Misclassifying independent contractors is a common class action issue, Wulffson says, “and those are very expensive, time-consuming, and painful lawsuits that are almost never covered by insurance.”

In its decision, the court noted that the ABC test is used in other jurisdictions to determine worker status, but Wulffson says it isn’t very prevalent, “most likely because it is so strict.” Thus, the ruling will be a blow to both businesses and contractors.

“California, unfortunately, has proven yet again that but for the weather, no one would want to start a business here,” Wulffson says.

Impact Beyond California

Wulffson doesn’t expect the ruling to have a major impact beyond California since most states don’t follow California’s example on employment laws. He points out that California is one of just three states with daily overtime, plus the state “has a panoply of employment regulations and laws found almost nowhere else.”

The independent contractor test used at the federal level also differs from California’s new test. Wulffson says the U.S. Department of Labor (DOL) uses the economic reality test, which looks primarily at seven factors focused on the level of control the hiring entity has over the contractor.

Wulffson says the DOL also has focused on misclassification in recent years because of concern that businesses are wrongfully avoiding payroll taxes. “It has not, however, gone anywhere near the ABC test,” he says.

ICE Planning Surge of I-9 Audits This Summer

Derek Benner, acting executive associate director for ICE’s Homeland Security Investigations (HSI) told The Associated Press that in addition to the plans for this summer, the agency will continue to focus on criminal cases against employers and deporting employees who are in the country illegally.

ICE has already opened more worksite investigations seven months into fiscal year (FY) 2018 than the agency completed in all of FY 2017. The federal fiscal year runs from Oct. 1 to Sept. 30. Enforcement investigations in FY 2018 have doubled last year’s total, and arrests related to worksite enforcement have nearly quadrupled.

Since October 2017, HSI has opened 3,510 worksite investigations, initiated 2,282 I-9 audits, and made 594 criminal and 610 administrative worksite-related arrests. That’s up from 1,716 investigations, 1,360 I-9 audits, 139 criminal arrests and 172 administrative arrests the previous fiscal year.

If anyone was wondering if the Trump administration was more bark than bite, these numbers indicate a significant increase in enforcement action, noted Muzaffar Chishti, an attorney and director of the Migration Policy Institute’s office at New York University School of Law. “What is not clear is whether any employers are included in the arrests,” he said. “Arrests—both criminal and civil—are almost always workers. For example, no one from management was charged in the high-profile Tennessee raid in April. That seems to be an imbalance.”

The ICE Toolkit

ICE said it uses a three-pronged approach to worksite enforcement:

  • Compliance, via Form I-9 audits, civil fines and debarment from federal contracts.
  • Enforcement, through the criminal arrests of employers and administrative arrests of unauthorized workers.
  • Outreach, by participating in the ICE Mutual Agreement between Government and Employers program, in which ICE certifies organizations for complying with the law. As part of the program, ICE and U.S. Citizenship and Immigration Services provide education and training on proper hiring procedures, fraudulent document detection and use of the E-Verify employment eligibility verification system.

Chishti believes pushing employers to enroll in E-Verify may be the aim of ICE’s more aggressive enforcement actions. “That strategy may work, but it only works for people who are on payroll,” he said.

E-Verify doesn’t enforce compliance for people paid as independent contractors, outsourced workers or those paid off the books, he said, adding that there’s a tendency for employers to explore these alternative hiring methods in response to increased enforcement.

Be Prepared for a New Normal.

Soon, ICE intends to conduct up to 15,000 Form I-9 audits per year, to be completed by electronically scanning documents in a not-yet-created national inspection center, Benner said.

“Investigations most often start with a notice of inspection alerting employers that ICE is going to audit their employment records for compliance with existing law,” said Michael H. Neifach, an attorney in the Washington, D.C., region office of Jackson Lewis. Enforcement actions can begin from a law enforcement tip or from an investigation into another type of violation, such as labor standards violations, and could result in civil penalties and/or criminal charges for employers.

ICE recently changed the way it calculates civil penalties to increase the fines imposed for I-9 violations. In FY 2017, employers were ordered to pay $97.6 million in judicial forfeitures, fines and restitution, and $7.8 million in civil fines.

“Unauthorized employees who are not legally in the U.S. may be detained and, ultimately, deported,” Neifach said. “Given the government’s focus on worksite inspections, preparing for possible inspections by auditing your employment verification processes and records is an essential precaution.”

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