Top 10 business practices that can get an employer sued

June 25, 2017 9:12 PM

Employment lawsuits and class actions are costly, and with aggressive enforcement by plaintiff attorneys and governmental agencies on the rise, all companies should regularly review their business practices to ensure compliance with applicable laws, regulations and guidance.

At SHRM's most recent annual conference and exposition in New Orleans, Pavneet Singh Uppal and Shayna Balch, partners at Fisher & Phillips LLP, explained the top 10 practices that land employers in class action lawsuits.

Overview

Employment lawsuits and class actions are costly, and with aggressive enforcement by plaintiff attorneys and governmental agencies on the rise, all companies should regularly review their business practices to ensure compliance with applicable laws, regulations and guidance.

At SHRM's most recent annual conference and exposition in New Orleans, La., Pavneet Singh Uppal and Shayna Balch, partners at Fisher & Phillips LLP, explained the top 10 practices that land employers in class action lawsuits.

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Incorrectly identifying the employer

Employee handbooks often incorrectly identify the employer. Handbooks are often drafted without proper attention to maintaining strict separation between corporations and this may complicate efforts to defend against employment claims.

Audit agreements and payroll practices to review whether corporate separation is being maintained include employee handbooks, pay checks, W-2 Forms, non-competition agreements, nondisclosure agreements and invention agreements.

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Failing to make individualized determinations on criminal convictions

Arrests versus criminal convictions on an employee's resume or work history can be two separate subjects. Criminal convictions are reliable evidence of criminal conduct, while arrests alone are not evidence of a crime. A criminal conviction requires proof beyond a reasonable doubt and arrests cannot be used to exclude an individual from employment except under very rare circumstances, according to the EEOC.

Many states take the position that an employer cannot automatically exclude an employee or applicant with a criminal conviction.

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Faulty timekeeping practices

An employer must keep records of all time the employer knows about or has reason to know about regardless of the time an employee is required or asked to work. Keeping accurate track of all time a nonexempt employee works each workday and each workweek will deter unpaid work discrepancies.

If off-the-clock work occurs, the employee must be paid for all hours worked. Time records should be corrected to reflect actual hours worked and then employers may enforce policies with disciplinary measures, if appropriate.

Avoid automatic deductions, and editing time punches should only be done by an authorized manager and always double-check with the employee.

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Improper deductions from pay

The salary basis rule requires that exempt employees must receive a predetermined amount of pay for every work week in which they perform any work. Deductions may not be made for absences occasioned by the employer or by the operating requirements of the business.

Improper deductions include deduction for a partial-day absence to attend a family matter, deduction of a day of pay because the employer was closed due to inclement weather, deduction of three days of pay because the employee was absent from work for jury duty and deduction for a two-day absence due to a minor illness when the employer does not provide wage replacement benefits for such absences.

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Overusing independent contractors

There is no bright line rule regarding who is an independent contractor. There are different tests depending on the forum the employer is in to determine if they are using an independent contractor. These tests include the IRS 20-point test, the Economic Realities test and the Right of Control test.

In the event of a case between an employer and an independent contractor, the DOL and courts will consider whether the individual's work is an integral part of an employer's business, the amount of the individual's investment in facilities and equipment, whether the individual has any real opportunities for profit and loss, whether the individual exercises initiative, judgment, foresight, skills and initiative in the business sense, whether the relationship is permanent or indefinite, and meaningful control the individual exercises.

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Marijuana laws and employment practices

At least 26 states and the District of Columbia have legalized marijuana to varying degrees and 53% of Americans support marijuana legalization, according to the Pew Research Center. Marijuana remains a Schedule I substance under the Federal Controlled Substance Act, which criminalizes the possession, manufacture, distribution and sale of the drug.

However, many states have created marijuana-related employment protections such as private causes of action that prohibit employment discrimination or require reasonable accommodation of marijuana users under the Americans with Disabilities Act, and many medical marijuana users can claim to be disabled within the meaning of the ADA.

In states that prohibit employment discrimination or impose a duty to accommodate an employee's use, employers must analyze the specific needs of the job and competing federal laws and regulations. It is no longer safe to assume that marijuana's illegal status under federal law will prevent an employer from being sued or held under state law.

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Light-duty accommodation for pregnancy

The Pregnancy Discrimination Act, or PDA, prohibits pregnancy-based discrimination and requires that pregnant employees be treated the same as other employees who are not so affected but similar in their ability or inability to work.

Pregnancy is not a disability, but the ADA Amendments Act of 2008 broadens the definition of disability, which potentially covers conditions related to pregnancy. These conditions can include pre-labor, hypertension, severe nausea, sciatica, gestational diabetes and certain complications from childbirth or miscarriage.

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The Genetic Information Non-discrimination Act

Title II of the Genetic Information Non-discrimination Act prohibits employers from discriminating against employees, applicants and former employees based on genetic information. Employer can also not deliberately acquire genetic information or disclose genetic information.

Private sector employers with at least 15 employees as well as employment agencies, labor organizations, state and local governments, and the Congress and Executive branches of the Federal Government are covered by this law.

GINA forbids discrimination on the basis of genetic information in any aspect of employment including hiring, firing, pay, job assignment, promotions, layoffs, training, fringe benefits and any other condition of employment.

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Overlooking recent ADA accommodation trends

From 2006 to 2016, ADA charges increased by nearly 75%. Areas of the ADA as enforced by the EEOC that have led employers into lawsuits include inflexible leave policies, transfer and reassignment, working from home and drug testing or medical exams.

Most recent EEOC settlements have ranged from $100,000 in March 2017 due to failure to allow an employee to return to work on a part time basis as an accommodation or additional leave, to $20 million, the largest settlement to date, in July 2011 for an inflexible attendance policy.

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Not reviewing pay practices to eliminate unexplained disparities in pay

Employers shall not discriminate between employees on the basis of sex for equal work, on jobs that require equal skill, effort and responsibility, except where such payment is made pursuant to seniority, merit system, measures earnings by quantity or quality of production; or differential based on any factor other than sex, according to the Equal Pay Act.

There is no clear cause of the gender pay gap, but industry experts have pointed to contributing factors such as women leaving certain industries due to inflexible work schedule or alleged discrimination, women taking unpaid breaks in their career to care for children and women being less likely to negotiate pay, raises and promotions.

The 2017 EEO-Report, due March 31, 2018, includes collection of pay data for employers with 100 or more employees must report pay data by gender breakdowns. The EEOC states that their goal is to track down pay gaps. Eliminating barriers in equal pay and focus on pay discrimination is broadening to disparate impact analysis instead of intentional discrimination.

Best practices employers should be utilizing include equal pay audits, before employees start asking and before the new EEO-Report form is due, look at discrepancies between comparable jobs, look beyond hourly rate and salary, including bonuses and benefits, do not over-rely on the market rate, review hiring practices, review the performance evaluation processes, maintain a consistent compensation system and involve outside counsel for attorney-client privilege protection.