Longer Arm of the Law

Keeping up with labor and employment laws is a daunting task, but it’s not Mission Impossible.

Wishful thinking – it’s perhaps the most common business compliance mistake because it’s the one that leads to all others. Whether it’s the attitude that “everybody does it,” even though “it” is illegal, or a dismissive approach to labor and employment law – “that’s a stupid rule” is a common refrain – organizations that don’t stay current with the laws that affect them, or don’t respect those laws enough to align their policies with them, run the risk of landing in court.

That’s an expensive way to operate, especially when there is a more affordable alternative known as preventive law. It requires ongoing relationships with an attorney and other professionals, and the constant churn of policy review and management training, but staying out of trouble is still less expensive than troubleshooting itself. 

Jon Anderson, an attorney with Godfrey & Kahn, said one frustration for lawyers is that many business owners tend to view them as hired guns who need to be called only after problems arise. He believes this attitude is starting to change as more executives see the business value of proactively preventing lawsuits – a pay-me-now versus a really pay-me-later proposition. 

“I think it’s critical to develop a relationship with an attorney before you need one,” Anderson stated. “Having a lawyer you are comfortable with as issues arise, rather than running to get one when you need one, makes all the difference in the world.”

On top of it

Viewing lawyers as trusted advisors rather than hired guns can be invaluable in remaining up to date with the ever-changing legal landscape. In the past couple of years alone, employers have seen dramatic changes due to laws like Wisconsin’s new concealed carry statute, employee-friendly interpretations of social media policies, and mandates and regulations associated with the Affordable Care Act and other laws. 

Such change can come at a bewildering pace, but Wisconsin employers already should have a working knowledge of employment and labor law, particularly the Americans With Disabilities Act, the Fair Credit Reporting Act, the Family Medical Leave Act (both the Wisconsin and federal versions), immigration laws, wage and hour issues under the Fair Labor Standards Act, and various laws affecting employee benefits. Examples of the latter include the Health Insurance Portability and Accountability Act, the Employee Retirement Income Security Act, and COBRA (Consolidated Omnibus Budget Reconciliation Act). 

William Morgan, an attorney with Murphy Desmond, noted that smaller employers should be familiar with the following: labor laws covering union organizing; WARN Act issues, which involve the notices required in the closures of plants of larger employers; affirmative action laws, which federal contractors must comply with; and whistleblower laws, such as the Sarbanes-Oxley Act, which applies to publicly traded or held companies.

Attorney Robert Gregg, a partner with Boardman & Clark, cited the confidentiality requirements of the Electronic Communications Privacy Act as another area of law that employers should know, especially if they want to control and monitor their own electronic communications or head off trouble with employment practices related to electronic record-keeping.

Other reasons employers should have their head on a swivel include the possibility of civil suits related to defamation, invasion of privacy, or negligent supervision, and the intricacies of contract law, especially if they have people entering contracts as employees, or if they want to negotiate things like no-compete and confidentiality agreements.

Gregg indicated that with respect to potential risk, numbers count when it comes to which government jurisdictions to pay attention to. When a company gets to one employee in Wisconsin, several state laws apply. At 50 employers, it is subject to federal discrimination laws, FMLA, and a few others. “They need to know when they are getting close to those lines because that creates additional levels of expensive compliance,” he said. “The Fair Labor Standards Act (the wage and hour law), the discrimination laws, and the National Labor Relations Act, which most non-unionized employers don’t think covers them but it does, those are the big ones you should be aware of.”

Fortunately, there are a number of resources to help employers keep up. Given their role in protecting employers from liability, insurance brokers also track new developments in employment law. 

Depending on the sophistication of an accounting firm, accountants are good resources for employee benefits and the wage-and-hourly requirements.

Companies large enough to have a full-time human resources manager probably belong to the Madison chapter of the Society of Human Resource Management, or SHRM, which has a website with national practice models that serve as a guide. Gregg advises employers who don’t have an HR function to have their office managers join SHRM because of its access to employment law information.

Trade associations are another resource that requires membership, but they exist to serve members on matters like legislative changes or court interpretations of laws. 

State and federal agencies like the Wisconsin Department of Workforce Development and the federal EEOC.gov websites offer helpful information on recent developments and guidelines. 

Simply following the news might prompt a business owner to pursue an audit, especially if a well-publicized legal dispute results in a clarification of employer requirements. 

Attorneys and law firms publish legal updates, blogs, and white papers on a frequent basis, covering everything from legislative revisions to the ramifications of court rulings. Local attorneys are among the best resources for writing an employee handbook from scratch, or revising an existing one, because so much of it is geared to your state’s statutes.

“Nearly every law firm has white papers and blogs posted on their sites about trends, new cases, and new regulations,” noted attorney Meg Vergeront, a partner with the Stafford Rosenbaum law firm. “It depends in part on the focus of the firm. A litigation firm might not because it’s not necessarily substance specific. Others absolutely do.” 

Policy wonks

Since it’s not uncommon to find a policy that is not in compliance with state or federal law, business attorneys remain busy. According to Morgan, one of the most important things that an employer can do is have written policies, follow them, and have them reviewed on a periodic basis. “Oftentimes, employers haphazardly put together policies or handbooks, cobbled together from various Internet sites, and then forget about them,” he said. “Not only might the policy be inaccurate for an employer’s local jurisdiction, it quickly can become out of date.”

The most common compliance mistake, and a potentially costly one, is putting in place a policy and not following it, not communicating it to staff, and not evenly enforcing it. “This is particularly dangerous because it opens you up to claims of discrimination,” Vergeront stated. “If you enforce it unevenly, and one person is in a protected class and another is not, they might think the reason you did this is because I’m over 40 or I’m a woman.”

 

A newer source of trouble can be found in social media regulation. Employers want to control what is written about their companies on Facebook and Twitter, but that might violate employee rights to engage in protected, concerted activity about working conditions. “The National Labor Relations Board has been very active in this area of late, and an unwary employer may find itself afoul of the NLRB’s rulings, even if it is not a unionized shop,” Morgan noted. “One of the things that employment counsel or a good HR person will do is to periodically review or audit these policies for completeness, accuracy, and conformity with current law.” 

According to Anderson, one of the key things employers need to be aware of when forming their policies is that the National Labor Relations Act applies to employers with and without unions. “The misconception is there because you have the word ‘labor’ in the applicable agency’s description,” he noted. “The National Labor Relations Board is going out of its way to shield employees engaged in such protected, concerted activity, and you are seeing employer policies on confidentiality being struck down as overly broad because they might restrict employees from communicating with each other about workplace issues such as salaries.”

Gregg said the situation with the NLRB has reached the point where it’s difficult to even draft such policies. “Right now, I’m telling employers to not have a policy of what your employers can and can’t do with their social networking,” he said. “Let’s take a look at what they do, and then review what they have actually done, and then we can decide if it’s work-related and abusive enough and improper enough or violating our trade secrets enough to take action. So instead of having a policy that might run afoul of the law, just wait and see what people do and take action.”

Comply or die

When the subject of employee training is raised, it usually has to do with job skills, but one of those skills involves the ability to relate to other employees. This is especially important for employees who are in management and supervisory positions. Such employees must receive training in how to hire and fire, and in how to handle sensitive employee files and data, because one of the biggest pitfalls for most employers is the termination of employees.

It begins with shaping the corporate culture and making sure a place of employment operates in a way that is free of harassment or hostility. Vergeront recommends that once a year, employers conduct training on anti-harassment policy and complaint procedures, employing the use of hypothetical but plausible workplace scenarios. 

“When somebody is bumped up to manager, you need more in-depth training because they have a greater responsibility,” Vergeront advised. “The employer’s liability is significantly affected by how management responds and how management behaves when an employee engages in unlawful behavior.

“In-depth training is warranted when someone has supervisory duties, not only on the law, but the company’s own policies.”

Morgan advises having a mechanism and policy to respond to such allegations. Not only is this important if there is an ongoing problem, but it’s critical in responding to allegations that first occur after a termination. “If the employer can show that it has a policy that it zealously follows, which the employee did not avail themselves of, the employer may be able to largely immunize themselves against the claim, even if it had merit,” Morgan stated. “Of course, if they knew, or should have known that violations were occurring but did nothing, they will not get the benefit of any safe harbor.”

Gregg has written extensively about employee training, which not only should guard against sexual harassment or racial and ethnic discrimination, but any abusive behavior like overt incivility and office gossip, because they all are manifestations of the same thing and they all can lead to escalation and violence. 

He also noted that courts take a dim view of negligence in this area. “The courts have said it’s an extraordinary mistake to not give training,” Gregg stated. “One of our federal courts here in Wisconsin said it’s no longer considered excusable negligence to fail to give training, especially to managers. It is seen as an intentional act of disregarding the law.

“The failure to train is fatal. That’s where the courts will assess additional punitive damages for intentional disregard of the law and your obligations.”

Training should cover the basics of fair discipline, hiring and firing, discrimination avoidance, documentation, and related issues. Gregg said a full day’s worth of training is ideal, especially for managers, and occasional follow-up is necessary not only because of changes in the law, but also because of employee turnover. “I call it supervisory survival in employment law,” he said. “Within the legal framework, employers have got a lot of power, but how do you stay within those boundaries?”

Courting trouble

When asked which key court rulings from the past year, or now on the docket, employers should be tracking, attorneys gave several answers, but one forthcoming case stood out: Vance v. Ball State University, which is now before the U.S. Supreme Court. At issue is whether the supervisor liability rule applies to harassment committed by those with whom the employer vests authority to direct and oversee the employee’s daily work or, instead, is limited to harassers who have the power to “hire, fire, demote, promote, transfer, or discipline” their victim. 

The court’s decision in this case will be particularly important to businesses with large workforces because, as Morgan notes, “it has the potential to expand dramatically the types of workplace harassment claims that can survive summary judgment.”

Vergeront noted the courts have ruled that if a co-worker harasses an employee, the employer is not liable absent proof of negligence. In other words, there is no absolute liability when the harassment is by a co-worker, but there is absolute liability when harassment is by a supervisor. “The question becomes, what is a supervisor?” Vergeront said. “Is it sufficient to oversee someone? Or is it the ability to take some action, some disciplinary action or termination necessary for absolute liability? If it turns out it only has to be a supervisor with day-to-day control over what the person does, that expands the pool of employees whose actions can trigger absolute liability, which really makes training of that broader scope of employees very important to help limit that absolute liability.”

Gregg was even more blunt. “How far down do we dip, because there are a lot of people who have lead responsibility, but they are not supervisors in any way, shape, or form,” he said. “That is what the Supreme Court will decide, and if they decide, as some federal lower courts have ruled, that these people qualify as management, even though they are in a union, we’re going to have a huge issue. Employers are going to have to do a lot more training.”

Among cases from the past year, Gregg cited Pippins v. KPMG, LLC in the Eastern District of New York. The case involved allegations that KPMG misclassified employees as exempt administrative or professional workers and denied them overtime pay in violation of the federal Fair Labor Standards Act and New York State labor law.

Gregg, noting that all wage and hourly records must be kept for at least two years, said another business lesson in this case was about record-keeping because the defendant got rid of its records too soon. “The court essentially said, ‘You should have known better, and we will not allow you to present any defense because if you got rid of some records, we will presume you got rid of ones against you, and so therefore we won’t let you present ones in your favor, either.’ The court really said, ‘Sorry, you can’t defend this case at all.’”

Another ruling from the past year caught Vergeront’s eye. It was a case in the Seventh Circuit (the federal appeals court that governs Wisconsin) that pertained to the Americans With Disabilities Act. The court ruled that transferring a disabled employee to a vacant position, even when the disabled employee is not as qualified as other applicants, would be a reasonable accommodation under the ADA. Under the previous court interpretation, if a business had a vacant position and a disabled applicant was not the most qualified, the employer did not have to transfer him or her. 

“Now the court says under the right circumstances, which of course they don’t define, you do have to transfer them,” Vergeront said. “I think that’s significant because managers do have to give people careful consideration to all the positions available for potential transfer, including the vacant positions, and not advertise to fill vacant positions if you have a disabled employee who wants to apply for that position. They are supposed to be qualified for it, so they must have the basic qualifications, but they don’t have to be the best qualified in order to be entitled to that.”

Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click hereIf you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.