Avoiding Employee Lawsuits and Surviving Audits

1. Northeast Regional Carwash Convention Avoiding Employee Lawsuits and Surviving Audits Presented by:Alvaro Hasani, Esq.Phone: (908) 516-1058ahasani@fisherphillips.com

2. Best Practices in Hiring and Firing Processes

3. Goals for Hiring • Select the best possible candidate • Conduct the selection process in compliance with law • Anti-discrimination laws • Laws protecting other employers • Maintain the right of the Company to terminate at-will

4. Potential Risks • Lawsuit by an unsuccessful applicant • Hiring manager may be sued • Claims by a competitor • Raiding employees • Confidential Information • Future claim for breach of contract • Wrongful termination

5. The Best Defense • Know the requirements of the job • Make hiring decisions based upon qualifications for the job • Know the law and avoid improper questions and discussions • Carefully document decisions

6. Review the Qualifications • Review and update job description • Job description are used as the standard for measuring qualifications and determining whether the rationale for the hiring decision is credible • Review all job descriptions and ads with HR to be sure that it accurately reflects requirements of the job

7. EEOC v. Wal-Mart Stores, Inc. • Court held that a jury trial was required to determine whether Wal-Mart failed to hire an applicant with mobility limitations caused by cerebral palsy. • The EEOC established that Bradley was “qualified” for the positions of greeter and cashier because job description stated: “no experience or qualifications is required.”

8. Alawi v. Sprint Nextel Corp. National origin and religious discrimination claims required a jury trial because it appeared that Sprint’s reasons for not hiring her were a pretext. • Sprint claimed Alawi lacked B2B sales experience required for the Account Executive position. However, job description did not require B2B sales experience. • Sprint claimed Alawi lacked qualifications. She had a B.S. and seven years of experience in the wireless industry, and the job description only required a B.S. and one to three years of related experience.

9. Application • Ban-the Box Restrictions • Remove inquiries that review membership in protected class • Authority to work in United States • Agreements with prior employer • Prior experience and reason for termination • At-will employment statement • Certification that true and complete • FCRA as stand-alone Document

10. The ADA and Applicants Possible reasonable accommodations during hiring process • providing written materials in accessible formats, such as large print, Braille, or audiotape • providing readers or sign language interpreters • ensuring that recruitment, interviews, tests, and other components of the application process are held in accessible locations • providing or modifying equipment or devices • adjusting or modifying application policies and procedures

11. Have I Got A Question For You • Questions should be: • Direct – Was your last job with a private company? • Open-ended – What were your job duties? • Situational – Provide an example of a time you were challenged by a new task at work? • Problem-solving – How would you solve…? • Include follow-up - Explain what you mean by flexible, team player, goal oriented…?

12. Have I Got A Question For You

13. Have I Got A Question For You • You may not ask the applicant directly about these topics, nor can you obtain such information from previous employers: • Disabilities • Illnesses • Workers’ compensation history • Healthcare claims • Any other questions that the employer may not ask the applicant

14. Mistakes to Avoid • Doing all the talking • Applicant should do 80% of the talking • Asking questions that call for a yes of no answer • Allowing the applicant to distract you from your script • Not exploring reasons for frequent job changes and gaps in employment • Basing decision on impermissible basis • Recording observations that suggest there is an impermissible basis for decision

15. Making the Decision • Review documents carefully • Apply legal, consistent, job-related selection criteria • Document those criteria • Could you explain the reason for your decision to a judge and jury? • Is it supported by the documents? • Would it seem credible? • Monitor disproportionate exclusion of any protected group

16. Breach of Contract and Fraud Claims • Terminated employee claims that general rule of “at will” employment does not apply • promises made at interview either • created a binding contract • prompted employee to forego other opportunity and created an implied contract • Offer letters should contain “at-will” language • Former employee claims that quit job or declined another opportunity based upon misrepresentations made during hiring process

17. Potential “Raiding” Claims • Unfair Competition • Tortious Interference • Contractual Relations • Business Relations • Misappropriation of Trade Secrets • Conversion of property or information • Breach of Duty of Loyalty

18. Potential “Raiding” Claims

19. Customers and Other Employees • Do not ask the candidate to ask clients or other employees whether they will follow him or her to Employer • Even if there is not a no-solicitation agreement, it is a breach of common law duty of loyalty to solicit clients and other employees prior to terminating employment

20. Rightful Termination

21. The At-Will Doctrine • “At will” means an employee can be let go with or without “cause.” • “At will” does NOT mean employees can be let go for illegal reasons such as discrimination or retaliation.

22. Exceptions to At-Will Employment • There are many laws that limit the employer’s decision to terminate an employee, including: • Title VII of the Civil Rights Act of 1964 • Age Discrimination in Employment Act • Americans with Disabilities Act • Family and Medical Leave Act • Employee Polygraph Protection Act • Occupational Safety and Health Act • Common Law Wrongful Termination in Violation of Public Policy • New Jersey Law Against Discrimination • Conscientious Employee Protection Act

23. Common Red Flags • “Reduction of Force of 1.” • Termination for singular poor performance without analysis of similar treatment. • Usage of non-objective criteria. • Job not available upon return for leave. • Performance evaluations/raises. • Protected categories. • Protected activity.

24. The “CLEAN” Doctrine • Consider the facts behind discipline. • Learn what managers, witnesses, and documents have to say. • Evaluate what disciplinary action has been taken in the past. • Analyze risk. • Narrow down potential options and decide.

25. Termination Documentation

26. Describe the Reason for Termination • Needs to be detailed; checking a box is not enough. • Refer to warnings and use the same language as before if possible.

27. Describe the Reason for Termination • Be truthful! • Don’t sugarcoat it. • Don’t say it was a downsizing if it wasn’t. • Don’t say anything you wouldn’t testify to in court. • Make Sure Immediate Supervisor Understands Reason for Decision • Danger of a Supervisor Commiserating With “Wronged” Employee • Make Reasons Broad Enough To Cover All Possible Factors • Choose Least Inflammatory Wording • Understand that you might have to “prove” that conduct matches reason

28. Termination Meeting • Recommendations: • Have someone other than the employee’s supervisor conduct the meeting to minimize conflict. • Have at least two people attend the meeting so there are multiple witnesses. • Briefly state the performance issues or conduct that lead to the discharge decision. • Be matter of fact and not argumentative. • Be brief. • Provide required termination information (i.e. exit interview, benefits). • Be mindful of wage concerns - payment due and payable immediately.

29. Complying with Wage & Hour Laws

30. FLSA Lawsuits

31. Betting the Company? • 90% - employment class action lawsuits involve wage and hour claims • Potential Individual Liability • Unpredictability

32. Four Main FLSA Requirements • A minimum wage. • Premium pay for overtime work (at a rate of 1.5 times the "regular rate" of pay for over 40 hours worked in a single workweek). • Certain recordkeeping, including accurate time records. • Limitations on the employment of minors under 18.

33. Non-Compliance Consequences Pay Plaintiff's "Reasonable" Attorney's Fees, Costs Civil Money Penalties Up To $1,100 Per Person Possible Individual Management Liability Possible Criminal Penalties Diversion, Distraction, Disruption Bad Publicity

34. Non-exempt employees • Paid at least minimum wage for all hours worked • Federal minimum wage is $7.25/hour but NJ/NY is higher • All working time must be included in hours worked • Paid overtime time rate of 1.5 times regular rate for all hours worked in a week over 40 hours

35. Hours Worked • Any time the employee is “suffered or permitted to work.” • Work not requested but “suffered or permitted” is hours worked. • If the employer knows or has reason to know that the employee is working, then it can be “hours worked.”

36. Timekeeping • All non-exempt employees must keep time records that: • Accurately record beginning and end of shift • Accurately record beginning and end of meal periods • No exceptions • Failure to follow timekeeping policy is a disciplinary issue • Supervisors should review employee time cards on weekly basis and immediately address issues

37. What Are "Exemptions"? • "Exempt": Not subject to FLSA or NYLL minimum wage or overtime requirements • Default rule: Everybody is non-exempt, unless an exemption clearly applies • Exemptions are defined by law, not by agreement, job descriptions, or either party’s intention

38. Most Common Exemptions • White Collar exemptions • Professional, Executive, Administrative • Outside sales

39. Avoid Misclassification • Regularly Reconsider Exemption Status: • Work Evolves Over Time – Sometimes Away From Exempt Status, Sometimes Towards It. • New Positions Continually Introduced – No Assumptions About Exemption Status! •Don't Fall For "Conventional Wisdom": • "Everybody Treats These Jobs As Exempt." • "The Employees Want To Be Exempt." • "The Employee Agreed To Be Exempt.“ • Quickly Consider What To Do To Correct Any Problems • Be Careful About How You Implement The Changes • Compliance Does Not Necessarily Mean Higher Wage Costs

40. DOL AUDITS

41. DOL Audits • Most triggered by complaints • Scope of audit not limited to complaint • Targeted industries • Low paying • Dangerous • Tips • Coordination with ICE and OSHA • Random

42. DOL Audits • Audit scheduling letter sent • Not to HR but typically to CEO or President • Immediate follow-up by investigator • Very short time-frame • Require the compilation payroll information going back 2 (can go back 3 years) • Respond quickly but control situation

43. DOL Audits • Once letter received – involve senior management and legal counsel • Contact investigator and select a mutually-agreeable time • Investigations are conducted on the job-site • Always check and copy government credentials • It is okay to ask what the investigation is about or will focus upon

44. DOL Audits • Review and carefully consider all documents before providing them to the DOL • Be cooperative throughout the investigation • Make sure that all required posters are displayed • Respond to questions but do not feel the need to provide information that is not requested

45. DOL Audits • Information accessible to investigator • Payroll records • Time records • Sales records and financial statements • Work schedules

46. DOL Audits • Interviews • Current and former employees • Management and non-management • Counsel can be present for management interviews • Prepare witnesses when appropriate • Retaliation prohibited • Ask for copies of signed statements

47. DOL Audits • Request a meeting at closure of on-site • Inquire about preliminary findings • Confirm additional documents requested and time-frame to provide them • Determine whether a formal closing conference will be held • Do not provide any explanations at this point • Avoid making any admissions of liability

48. DOL Audits • Closing conference • Investigator will reveal findings to employer • Ask about conclusions in detail • Ask investigator to walk you through calculations • Avoid agreeing to anything before talking to legal counsel • No written report is generally prepared by the investigator – consider a letter confirming discussion

49. DOL Audits • Administrative settlement/litigation • Most DOL audits are resolved at the completion of investigation • Payment of back pay • Assurance that issues will be corrected • FLSA restricts settlements for less than amount owed • Receipt form – signed by employee – restricts right to sue in court • Civil money penalties

50. DOL Audits • Litigation • If no administrative settlement reached – matter is referred to Solicitor’s Office for litigation in federal court