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10+ Tips To Reduce Employment-Related Risk

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Employers – especially those in California – face a constant threat of employment-related claims.  Working hand-in-glove with your insurance broker and your employment-law counsel, here are our Top Ten (and a few more to grow on) recommendations to reduce your risk as an employer:

Domestic Employees – Before we consider your business’ employees, let’s first focus on those individuals who work in your home, e.g., personal attendants and housekeepers.  Federal and California wage-and-hour laws have complicated application to your domestic employees.  This becomes all the more important when these employees are living in your home or caring for the elderly and the disabled, often on a 24/7 cycle.  Too many lawsuits are filed against homeowners and their estates that could have been prevented through prophylactic planning and documentation.  Also, when you do engage domestic employees, careful review of your homeowners insurance policy is advised.

Job Applications & Background Checks – On the business front, let’s start by ensuring that you’re hiring the “right” people for the job.  A detailed job application, comprehensive interview process, detailed litigation and criminal-history background checks, and training for your interviewers are essential tools.  But, these are detailed processes, made all the more complex by federal and California laws, including statutes prohibiting various questions (e.g., “How much do you make at your current job?” is an illegal question in California.), “Ban The Box” laws regulating criminal background checks, and arcane processes for handling negative information learned during background checks.

Arbitration Agreements – Would you rather your employment dispute be heard before a “jackpot jury” of “your peers” or before a single arbitrator, often a retired judge?  If you could use an arbitration agreement to also stop a disgruntled employee from using class-action litigation to threaten your company, why wouldn’t you?  While California’s law prohibiting mandatory arbitration agreements remains under legal challenge, now would be an ideal time to consider how to use arbitration agreements to reduce the threat to your company and reduce the value of many claims.

Protect Your Company’s Trade Secrets – Many companies distribute confidentiality agreements and NDAs believing that they’ve now protected their trade secrets.  But, the NDA is only as good as the paper it’s printed on.  While such agreements, carefully crafted, are a good first step, employers must do more: evaluate what really qualifies as a trade secret, mark and protect their proprietary information, restrict access to this valuable data, and train employees about these measures.

Train & Remain Union Free – For so many employers, their success derives from their ability to deal directly with their employees, responding quickly and decisively to challenges and opportunities ahead of them.  Remaining union-free is a critical component to their values and profitability.  Yet, federal labor law is a daunting, ever-changing and unforgiving beast, especially as administrations change in Washington.  Having the proper union-avoidance policies in place, training your supervisors how to lawfully remain union-free, and knowing how to respond in the event of union organizing are critical to your team’s ongoing success.

Slow To Hire, Quick To Fire – Trust your gut.  That’s why you’re successful.  If that newly hired person just isn’t the right fit, use your company’s Probationary/Introductory Period – as found in your company’s Employee Handbook – to make a decisive move.  The sooner the better, for everyone’s sake.

Up-To-Date Employment Policies – When was the last time you updated your Employee Handbook?  Are your employment policies and procedures and your Employee Handbook in line with California’s newest laws?  (You do have an Employee Handbook, right?)  Have you trained your supervisors and your employees?

Documented Performance Reviews and Discipline – Far too often we hear the tale of the “poor performer” who “must” be fired “today.”  Yet, when we ask to review her personnel file, there is no discipline and no performance review.  Having documented discipline and having documented, regular, direct, truthful (i.e., non-sugar-coated) performance reviews are essential.

Wage & Hour Audits – Plaintiffs’ counsel bring class-action wage-and-hour lawsuits because this is where the money is.  What steps is your organization taking to regularly audit and correct your wage/hour practices, including verifying your compliance with meal-period, rest-period, paystub-data, overtime, regular-rate-of-pay, off-the-clock, and time-clock-rounding rules?

Misclassification No. One – Exempt v. non-exempt employees.  Who in your company is misclassified as an “exempt” employee who should actually be a “non-exempt” employee?  Just because you pay someone a salary doesn’t make them an exempt employee; their primary duties and responsibilities are key, too.  And, if you happen to believe that “everyone” in your organization can be an exempt employee, good luck.

Misclassification No. Two – Independent contractors v. employees.  Through the California Supreme Court and then the California Legislature, the proper classification of someone as being an independent contractor has been significantly reduced.  A careful examination of those persons whom you’re engaging as independent contractors (or, worse yet, that facially unlawful term, “1099 employees”) is warranted.

Safety & Health Compliance – Protecting the safety and health of your employees is paramount.  Having the proper Injury & Illness Prevention Plan, Heat Illness Prevention Plan, and other Cal/OSHA-required safety plans is essential for your legal compliance and, more importantly, for ensuring that your employees can safely return home to their loved ones.

Severance Agreements – Once you’ve decided to separate someone from your employment, consider offering that departing employee a severance package, one that ties payment of some additional money to execution of a Severance & General Release Agreement.  You will receive a release of nearly all claims and much-need peace of mind.

Insurance Programs To Further Mitigate Risk – Despite the best-laid HR programs and counsel, claims will still happen.  You should consider whether an Employment Practice Liability Insurance (“EPLI”) policy is appropriate for your company.  What is the premium cost?  How much is the self-insured retention?  What claims will be covered?  Will you be protected against wage-and-hour lawsuits, both as to indemnity and defense costs?  Will you have the right to continue to use your preferred legal counsel or will the insurance carrier assign the case to their panel counsel?  Careful review of any proposed EPLI policy with your insurance broker and legal counsel is highly recommended.

For more information on reducing employment-related risk, please reach out to David Wimmer at (310) 288-3980 x2801 or [email protected]. David is a management-side, labor-and-employment-law attorney with Swerdlow Florence Sanchez Swerdlow & Wimmer in Beverly Hills.