SPECIAL REPORT
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Encino, CA 91436    
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Five Biggest HR Mistakes An Employer Can Make
Five areas which result in expensive litigation, substantial fines, and big frustration for California employers

BY ERIC W. SWENSON

It can’t happen to me, you say?  Think again.

  • In the United States, 57% of companies have been named as defendants in at least one employment-related lawsuit in the past five years.

  • There are 450 employment lawsuits filed in the United States each day.

  • In California, the increase in median damage awards in employment lawsuits has risen from $45,000 in 1981 to $743,383 in 2002.

  • And 75% of litigation against corporations involves employment disputes.

So what can you do to reduce the likelihood of an employment dispute in your business?  Take a look at five of the most common errors an employer makes, and make sure your business takes immediate steps to implement policies that can reduce the possibility of a dispute from happening, or decrease the severity of that dispute.


1.Not Implementing an Effective Harassment Policy

Harassment – particularly sexual harassment – remains a highly litigious area of employment.  In 2002, California employees won 45% of the lawsuits against employers that went to trial, and there are untold numbers of suits that are settled prior to a trial.  The average win for an employee?  $650,789.  And that doesn’t count the average $80,000 to $100,000 in defense costs the employer must also pay.

Employers can now be held individually liable for their supervisor’s actions, unless complaining employees fail to take advantage of your grievance policy.  Even if an employer doesn’t know about the harassment, the employer can be held personally liable if the employee can prove a hostile work environment.

What are the potential solutions?

  • Implement a non-harassment policy in writing.  Your business must have a comprehensive policy that is signed by employees.

  • Have a written and established grievance procedure for any employee to file any type of complaint.  Every employee who has a complaint should be able to follow a standard procedure.

  • Make sure you follow the grievance procedure and, in case of a complaint, immediately act to thoroughly investigate anything that is brought to your attention.

  • Conduct Non-Harassment Training for all supervisors and employees.  Supervisors need to know your policies and grievance procedures, and employees must know the California DEFH definitions of harassment.

2.Not Following Wage and Hour Laws

Some of the most commonly filed lawsuits in California are filed by employees against employers who aren’t properly following the California Wage & Hour Laws.  The September 9, 2003 issue of Los Angeles Business Journal reported that as many as 100 lawsuits have been filed in the past six to twelve months against employers involving meal and rest periods for hourly paid (non-exempt) employees.

In addition, many businesses are getting in trouble for misclassifying exempt vs. non-exempt workers.  When an employee is not exempt from overtime laws, but not paid for excess hours worked, substantial fines can result.  An employee can be entitled to back overtime pay for the past four years, plus interest.  In addition, an employer can be fined up to triple the wages owed.

What are the potential solutions?

  • Completely familiarize yourself with California Wage & Hour Laws.  Non-exempt (hourly) employees working an 8-hour day are usually entitled to 2 – ten minute rest breaks plus a 30 minute meal break every day.

  • Know the difference between “Exempt” and “Non-Exempt” employees.  If you are in doubt as to what the classification should be, make that employee “non-exempt” and pay them overtime if they are entitled to it.

  • Create specific job descriptions for each employee category.  This will help in a myriad of ways – but will greatly assist you in determining whether an employee is exempt or non-exempt from FLSA Wage & Hour Laws.

3.Failing To Meet I-9 Requirements

Properly completing and documenting the I-9 form is required for all employers in the United States.  However, should the INS audit you, and you do not have a completed I-9 for each employee, you will be subjected to fines.

Recently, a Ventura restaurant was hit with a $5,775 fine, and a Huntington Beach drycleaner was fined over $31,000 for I-9 (IRCA) violations.

What are your obligations?

  • Get the I-9 and employee documentation immediately upon the employee’s first day of employment.  If an employee is unable to provide documentation within 3 days of hire, you may terminate that employee.

  • You are not the “Documentation Police".  It is your obligation to make sure the documentation (driver’s license, social security card, passport, etc.) looks valid.  If you think it is not valid, you should notify the INS.  If it looks valid to you, then you are fine.  You are not required to photocopy employee-produced documents, but even if you do, you must fill out the I-9 in its totality.

  • File all I-9’s in a separate file – not in each employee’s file.  If the INS audits your business, you want to be able to hand over one file with all of your I-9’s.  You don’t want the INS rooting through every employee’s employment file.

4.Improperly Terminating an Employee

When an employee is terminated or fired, there is a huge potential for lawsuits, accusations, and problems on both the employee and employer side.  In 2002, the average verdict for an employee suing for wrongful termination was nearly $1.7 million dollars.

Most employers do not know their legal obligations when terminating an employee.  And most problems in the termination process come from the “surprise” factor – an employee is caught by surprise when the termination occurs.

When you terminate an employee, always make sure:

  • The final paycheck, including every day worked (including the date of termination) must be delivered at the time of termination.

  • If your company offers paid time off, any unused time must also be included in the final paycheck.

  • If your company offers medical benefits, a COBRA notice must be included in the termination paperwork.

  • In addition, the following tips will prove beneficial to mitigate problems in the discipline and discharge process:

  • California remains an “at-will” employment state, but there are important exceptions.  Make sure you and your supervisors are familiar with discrimination laws in California and how to properly terminate an employee.

  • Train your supervisors in “progressive discipline” concepts to prevent a surprise at the time of termination.  Properly managed, progressive discipline can either help improve an employee’s performance, or greatly reduce the likelihood of a big surprise at the time of termination.

5.Not Having An Employee Handbook

Every business that has employees should have an employee handbook that is legally reviewed annually.  Clearly spelled-out procedures and policies in your company’s employee handbook can prevent expensive lawsuits by employees.

The handbook should give a general outline of company policies and clearly disclaim the intent to form a contract. The handbook should avoid promises of severance pay and benefits unless you are firmly committed to providing them.

Make sure to include an “at-will” statement and a receipt page that each employee signs, acknowledging they have received a copy of the handbook.  The handbook should be written with as little “legalese” as possible – you want your employees to actually read the handbook.  Having your policies and procedures in writing:

  * Allows you and your supervisors to treat employees consistently;

  * Provides a resource for employees to get answers to their employment questions;

  * Written policies provide a foundation for supervisors to solve most employment-related disputes.

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You Don’t Have To Go It Alone
At RSJ/Swenson our mission is to support businesses like yours with training, products and services designed to reduce your liability and simplify your life.  We work with you to put together your employee handbook; to ensure you’re compliant with state and federal labor laws and practices and provide non-harassment training.  Give us a call at 818.461.1874 or browse our web site and see how our solutions can benefit your business.

This Special Report, like all materials, training, and services offered by RSJ/Swenson LLC are offered and sold with the understanding that it is not engaged in rendering legal counseling or other professional service.  If legal counseling or other professional assistance is required, the services of a competent practitioner in the relevant area should be sought.