Some Basic Information About U.S. Employment Law.

By Alex Goldman

Some Basic Information About U.S. Employment Law

I recently called Kenneth J. Anand, founder of Anand Law, P.C. to learn about the basic employment law challenges that small businesses face. Anand has helped employers defend employment cases and also helps them design company policies to protect themselves from liability. He has also represented employees.

The information in this article covers the basics -- if it raises any questions, consult a lawyer, perhaps Mr. Anand. The information presented in this article should not be construed to be, or used as a substitute for, formal legal advice.

Hiring Your First Employee

"When a business goes from no employees to some employees, the employer needs to know that they cannot just hire someone and start paying them a salary. With some exceptions, they also need to acquire unemployment and worker's compensation insurance (except for part time employees). It can be onerous to get this insurance, and often discourages employers from doing the right thing."

In order to avoid the rules, some employers try to call their new employees "independent contractors" and give them a 1099 instead of a W-2 form (the W-2 form reports insurance payments and tax deductions).

"Employers can get into trouble when the contractor functions in the same way that an employee would," says Anand.

To test whether a person is working as an independent contractor or an employee, courts examine a number of factors such as: whether they provide their own tools for the job, have discretion about how to perform the work, whether they set their own hours, and where they work. There are additional factors as well. For companies unsure whether or not an employee can be classified as an independent contractor, Anand has performed workplace audits.

Hiring More Employees

Once a business starts to grow, it may become subject to anti-discrimination laws. Every state sets its own size threshold, but New York's can be as low as five employees. Employers that have reached the size can be liable if they discriminate against a protected class, for example by making hiring and promotion decisions based on age, race, or pregnancy.

E-Mail

E-mail use has become a topic of lawsuits, Anand says. "I counsel strict e-mail use policies. Employees should not expect a right to privacy when using company e-mail. Employees should not use e-mail for harassing, offensive, or inappropriate material."

He says that plaintiffs can obtain evidence of e-mail and text messages through electronic discovery and use them in court cases. Deleting the evidence is not the answer to this problem. Instead, companies should have policies to prevent dissemination of inappropriate emails. Companies should also have complaint procedures and anti-harassment policies so that if something bad does happen, an employee has alternatives prior to commencing a lawsuit.

Companies should also have confidentiality policies that protect their data and their customers' data. "Company policies should inform employees that if they work with proprietary data and client lists, they know not to use that data outside the workplace. Employees should not e-mail information from work to their home account. If the employee leaves, they could use that information elsewhere."

Firing Your First Employee

Just as you should plan your first hiring very carefully, you should also plan your first firing carefully. "There should be an exit interview that is short and professional. Do not tell someone why you're firing them, just say that you're letting them go. You may want to compensate an employee who has done well. Severance pay is not required by law. You should have an employee sign a release and waiver giving up any claims, perhaps in consideration for severance pay."

(See, for example, "Understanding Waivers in Discrimination Claims in Employee Severance Agreements," by The U.S. Equal Employment Opportunity Commission at http://www.eeoc.gov/policy/docs/qanda_severance-agreements.html.)

Employers need to ensure that an employee returns all company property. Employers will need to figure out how to protect themselves from a potential breach of privacy and confidentiality.

Employers may want to negotiate a non-compete or non-solicit agreement (non-solicit agreements can prevent former employees from taking other employees with them, and also can prevent employees from taking away your company's customers). Anand warns, however, that non-compete agreements need to be limited in time and geographic scope. "It might be tough to prevent an employee from going to work for an ISP in a non-competing market, or to prevent someone from doing different work for a competitor in an adjoining market."