When you start a business, you must decide

Employer's Legal Handbook:

Personnel Practices

You can avoid most legal problems in the workplace if you respect employees and treat them well. But no matter how caring you are, there will still be misunderstandings you’ll be called upon to handle. Fortunately, the vast majority of job disputes can be resolved within the workplace if you listen patiently to what employees have to say and are prepared to make adjustments when legitimate complaints surface.

However, even though you treat workers fairly, there’s always a chance a dispute will get out of hand and that an employee will sue your business for some perceived abuse of his or her rights. Or an unhappy employee may file a complaint with a government agency alleging that you violated a statute or an administrative regulation. If that happens, you’ll have to prove to a judge, jury, arbitrator or investigator that you met your legal obligations to the employee. That can be harder than you think. Key paperwork may have been lost—or never prepared in the first place. And witnesses may have forgotten what happened or have moved on and not be locatable.

To maintain a solid legal footing, establish good written policies and then maintain a paper trail indicating how they are implemented. Written policies will help you if you have to defend yourself in a legal proceeding—and, equally important, can nip misunderstandings in the bud before they turn into pitched legal battles. They provide a cogent point of reference when you discuss problems with an employee, increasing the likelihood of reaching an amicable resolution.

The first step for most workplaces is to create an employee handbook that clearly explains company policies and employee rights and benefits. Follow up by keeping records of key employee contacts, including periodic evaluations of how employees are performing their jobs.

Actions Speak Loudly, Too. You must start with sensible and fair policies and apply them with an even hand to all employees. A carefully developed paper trail is important, but if you’ve violated an employee’s rights, the mere fact that you’ve created good paperwork won’t normally shield you from the legal consequences.

(top of page)

A. Employee Files

Create a file for each employee in which you keep all job-related information, including:

• Job description

• Job application

• Offer of employment

• INS Form I-9 and supporting documents

• IRS Form W-4

• Receipt for employee handbook

• Periodic performance evaluations

• Sign-up forms for employee benefits

• Complaints from customers and co-workers

• Awards or citations for excellent performance

• Warnings and disciplinary actions, and

• Notes on an employee’s attendance or tardiness.

Employee files can be a two-edged sword. They can provide valuable documentation to support a firing, demotion or other action that’s adverse to the employee—but the employee, in turn, can point to indiscreet entries and use them against you. It would be a mistake, for example, to include unsubstantiated criticism of an employee in the file or comments about the employee that are unrelated to job performance and qualifications.

1. Correcting Mistakes

To err is human. To leave an error uncorrected is dumb. It can lead people to conclude that you’re callous or unfair or both—not a good impression to leave on those empowered to levy a damage award or penalties against you. And to knowingly keep false information on hand increases the risk of a libel case being brought against you.

Example: Joe doesn’t show up for work a week after his paid vacation has ended. You put a note in his file documenting this fact. Then you learn that on the last day of his vacation he was in a serious car accident and wound up in intensive care. Put these additional facts in Joe’s file. If you don’t, Joe will have good reason to be angry with you, and other people who later look at the file won’t put much stock in anything else they find there.

2. Confidentiality

Keep employee files locked up. Make them available only to people in your company who have a legitimate business need to have access to the files—managers, for example, who must make decisions about promotions and discipline. Inform company personnel that the information in the files must remain confidential. While an employee or former employee may have a legal right to see his or her file, no one else does unless they have a subpoena.

3. Medical Information

Special guidelines apply to medical information gathered in the workplace. The Americans With Disabilities Act (ADA) imposes very strict limitations on how you must handle information obtained from postoffer medical examinations and inquiries. You must keep the information in medical files separate from nonmedical records, and you must store the medical files in a separate locked cabinet. To further guarantee the confidentiality of medical files, designate a specific person to have access to those files.

The ADA allows very limited disclosure of medical information. Under the ADA, you may:

• inform supervisors about necessary restrictions on an employee’s duties and about necessary accommodations

• inform first aid and safety workers about a disability that may require emergency treatment and about specific procedures that are needed if the workplace must be evacuated, and

• provide medical information required by government officials and by insurance companies that require a medical exam for health or life insurance.

Otherwise, don’t disclose medical information about employees. Although the confidentiality provisions of the ADA protect only some disabled workers, the best policy is to treat all medical information about all employees as confidential.

4. Access by Employees

Many states have laws giving employees—and former employees—access to their own personnel files. How much access varies from state to state. Typically, if your state allows employees to see their files, you can insist that you or another supervisor be present to make sure nothing is taken, added or changed. Some state laws allow employees to obtain copies of items in their files, but not necessarily all items. A state law, for example, may limit the employee to copies of documents that he or she has signed, such as a job application. If an employee is entitled to a copy of an item in the file or if you’re inclined to let the employee have a copy of any document in the file, you—rather than the employee—should make the copy.

Usually, you won’t have to let the employee see sensitive items such as information assembled for a criminal investigation, reference letters and information that might violate the privacy of other people. In a few states, employees may insert rebuttals of information in their personnel files with which they disagree.

5. Informing Employees

Generally, the law doesn’t require you to voluntarily tell employees what’s in their employee files. You need only disclose information when an employee makes an appropriate request under an employee access law. About the only exception is that laws in some states require you to tell employees if you’re taking adverse action against them because of information in a consumer credit report.

Still, it may be good practice to keep employees informed about what’s going into their files. Otherwise, borderline employees may think they’re doing fine and be justifiably surprised by a disciplinary action or firing. Admittedly, some employees can get demoralized if they’re overwhelmed with negative information about their work, so some discretion is necessary in giving them feedback. But basically, letting employees know where they stand prevents surprises and can lead to improved performance. And if the employee doesn’t shape up and winds up being fired, anyone reviewing the facts—a judge or jury, for example—will be more likely to side with you if you’ve given the employee fair warning about what was wrong.

(top of page)

B. Employee Performance Reviews

Most large companies review and evaluate their employees periodically. This is a sound management practice and one which even small companies should consider—especially for new employees.

1. Benefits of Evaluations

Evaluating employees periodically gives them a chance to improve if they’re not performing well. If you later find it necessary to discipline or fire an employee, it won’t come as a surprise to the employee.

By putting your evaluations in writing and saving them in the employee’s file, you normally have a credible history of documented problems you can use if an employee claims that he or she was fired for an illegal reason. Legally, you don’t have to have a good reason or any reason to fire an at will employee, and you don’t have to give notice in advance or afford the employee a chance to improve. However, an employee who is fired may claim, for example, that the firing was based on illegal discrimination, so it’s not wise to rely solely on your legal right to fire an employee.

You want to stand ready to rebut any possible claim that you fired an employee for an illegal reason such as discrimination based on race or sex. The best way to do this is to preserve in written evaluations and other documents the good reasons you relied on to fire the employee.

Example: Charlotte works at the counter of Parts Plus, a retailer of auto parts. Parts Plus fires Charlotte after she’s been there for 18 months. Charlotte sues, claiming that Parts Plus fired her in retaliation for complaining to a state agency about photos of nude women that were posted in the back room where she had to go to retrieve auto parts for customers. At trial, Parts Plus produces copies of written evaluations from Charlotte’s file.

Eight months before the firing, Charlotte’s supervisor had written: “You must become more familiar with our inventory of parts for imported cars. Also, you need to make fewer errors on the computer system.”

Two months before the firing, the supervisor had written: “You’re still having problems with imports. We will arrange for you to attend a computer training seminar at the community college at company expense, but you must improve your performance.”

Company records separately show that Charlotte attended only one of the six training sessions and that two days before the firing, she mixed up orders for three good customers. The upshot: Because of its thorough documentation of Charlotte’s ongoing problems, the judge dismisses Charlotte’s case against Parts Plus.

Evaluations have two common purposes—to help employees improve their performances and to protect employers from false claims by former employees. To achieve both ends, thoroughly and objectively evaluate each employee at least twice a year—and more often if an employee is experiencing serious problems. Take the evaluation process seriously and do a careful, conscientious job. In some states, employees have successfully sued employers who used poor evaluation procedures for “negligent evaluation”—the failure of the employer to review employees’ work fully and honestly and to warn employees that they faced discipline or discharge if they failed to improve.

2. The Evaluation Process

To keep the evaluation process as consistent and objective as possible, devise an evaluation form that you can use with all employees in the same job category. The form should focus on how well the employee has performed the various duties of the job.

Fill in the form before you meet with the employee. Consider these guidelines.

• Give a balanced picture of the employee’s strengths and weaknesses.

• Use specific examples of where the employee has met expectations or has exceeded or fallen short of expectations.

• Let the employee know the areas in which he or she must improve. Set objective goals for the employee to meet.

• Where an employee’s performance is substantially below par, set a date to meet again with the employee to review his or her progress.

• If the employee’s failure to improve may lead to disciplinary measures or discharge, state this clearly in the evaluation.

Leave space on the form for the employee to comment on the evaluation and to acknowledge receiving a copy of it.

Once you’ve completed the written evaluation, meet with the employee to go over it and to make sure the employee understands it. If you cringe at confronting an employee with criticism, try the sandwich approach: say something positive, something negative, then something positive.

Remember, too, that employees will find it easier to accept criticism—and try to improve their behavior—if you focus on workplace performance and not on the employee’s personality. The overall tone of the evaluation should, of course, be as positive as possible because you want the employee to feel motivated rather than resentful.

Whatever your approach, you must tell it like it is. Should you later have legal trouble initiated by a fired employee, a judge or jury won’t look at your evaluations in a vacuum. For example, they’ll sense that something is wrong if you consistently rate a worker’s performance as poor or mediocre—but continue to hand out generous raises or perhaps even promote the person. The logical conclusion: You didn’t take seriously the criticisms in your evaluation report, so you shouldn’t expect the employee to take them seriously, either.

Just as damaging is to give an employee glowing praise in report after report—perhaps to make the employee feel good—and then to fire the employee for a single infraction. That strikes most people as unfair. And unfair employers often lose court fights, especially in situations where a sympathetic employee appears to have been treated harshly.

If your system is working, employees with excellent evaluations should not need to be fired for poor performance. And employees with poor performance shouldn’t be getting big raises.

Once Is Not Enough. Feedback should be an ongoing process. The written evaluation should be a culmination of the feedback you’ve given throughout the year. Your goal is to have no surprises about how an employee is doing. It’s perfectly appropriate, too, to give an employee a written warning between evaluations if the employee is in jeopardy of being disciplined or fired. A copy, of course, should go in the employee’s file.

Some employers encourage employees to give their own evaluation of how they’re doing—and may also ask employees to rate their supervisors. You’ll benefit by making the evaluation process a two-way street. Listen carefully to what the employees say. You’ll likely learn a thing or two.

Developing an EMail Policy:

If you provide employees with computers that allow for electronic mail, or email communication, it’s smart to develop a written policy so everyone knows the rules. For one thing, you may be assuming that you have the right to see all email messages sent on your equipment, while employees may be assuming they have a degree of privacy. For another thing, you may be assuming that employees are to use your email system only for company purposes, while employees may be assuming they can use it for unlimited personal purposes as well.

You’re the sole judge of what to put into your email policy. The important thing is to make the rules clear so that employees can’t create legal problems for you by claiming they were taken by surprise. Email, of course, is a relatively new means of communication, so the workplace norms are just starting to emerge. Here are some statements to consider when you develop an email policy:

• Our computers and email system are intended to facilitate business communications.

• Our management has access at all times to email communications sent or received on our computers and email system.

• All communications sent or received on our computers or email system are the property of our company.

• Employee privacy doesn’t extend to such communications—whether intended for business or personal purposes.

• Employees must provide our management with all passwords and encryption keys.

• Employees may not use our computers or email system for commercial purposes unrelated to our company, or for sending offensive, harassing or defamatory messages.

• Employees who violate these policies may be subject to disciplinary action and may be discharged.

Excerpted from the “The Employer’s Legal Handbook”, by Fred S. Steingold