Employer Best Practices – Part 3 – Common Compliance Issues Facing Employers

Posted on August 20, 2015 by mboxerman

Throughout August, Marcus & Boxerman has published a series exploring employer best practices. First, we discussed creating employee handbooks and adopting uniform employment policies, and earlier this week, we detailed best practices employers should use in maintaining employee personnel files. Our final installment highlights some of employers’ most common compliance issues.

best practices, employment law, complianceCompliance begins with the hiring process. Compliance issues can arise even before an applicant is hired. For example, Illinois recently adopted a “Ban the Box” law, making it unlawful for employers to ask job applicants about their criminal history until the applicant is deemed qualified for the position and extended an interview opportunity or conditional job offer.

Similarly, Illinois employers should not ask about an applicant’s credit history or obtain a credit history report for an applicant, a practice Illinois outlawed in 2011.  Employers must verify employment eligibility by requiring employees to fill out a federal I-9 form and state/federal W-4 forms, and need to classify workers correctly as either employees or independent contractors in compliance with the Fair Labor Standards Act.

Minimum Wage Laws and the Illinois Wage Payment and Collection Act. Illinois employers must pay adult employees a minimum wage of $8.25 per hour, with limited exceptions for under-18 workers, tipped employees, and employees with certain mental or physical limitations. Some municipalities have adopted a higher minimum wage; the City of Chicago recently increased its minimum wage to $10.00 per hour.

The Illinois Wage Payment and Collection Act also contains requirements for when, where, and how often wages must be paid, as well as requirements for compensating terminated employees for unused paid vacation time, earned commissions, bonuses and other benefits.

Recent Federal Regulations. In the last 25 years, the federal government has enacted a series of new regulations to accommodate employees with mental or physical limitations (Americans with Disabilities Act of 1990), to provide job security to employees on leave for family or medical reasons (Family and Medical Leave Act of 1993), and to increase employee access to health care (Patient Protection and Affordable Care Act of 2010). To comply with each in turn, employers must reasonably accommodate employees with physical or mental limitations that impact major life activities; provide job-protected leave for certain family and medical situations; and provide health insurance to at least 95% of the employer’s full-time employees.

Moreover, federal civil rights laws prohibit discrimination in employment decisions based on a number of protected characteristics, as discussed in Part 1 of our Employer Best Practice series. The State of Illinois and many other jurisdictions, including Cook County and the City of Chicago, have expanded protections, and employers should be aware of those well.

While many regulations and standards are common to all employers, appropriate compliance is unique to each employer and often depends on the number of employees and the industry in which the employer operates. For more information on the compliance concerns unique to your business, contact us at (312) 216-2720.

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Employer Best Practices – Part 2 – Maintaining Personnel Files

Posted on August 17, 2015 by mboxerman

Earlier this month, Marcus & Boxerman published the first in a three-part series highlighting employer best practices. In case you missed it, click here to learn about best practices for employee handbooks and uniform enforcement of employment policies. This installment details best practices employers should use in maintaining employee personnel files.

best practices, employee screening, employee personnel files, employment lawKeep personnel files confidential and secure. Employee personnel files contain sensitive information and should be carefully maintained to protect employee privacy, especially as more employers shift to digital recordkeeping. Only management should have access to personnel files, and they must take care that when reviewing the file, its contents are not visible to other employees.

Document the employment screening and hiring process, including the reasons for hiring or not hiring each applicant. Employers should track all job postings and all applicants, which applicants were screened in or out and why, how the employer assessed each candidate, the bases for the hiring decision, and records of all job offers made and accepted.

Conduct regular and informative employee reviews and evaluations. Employers should conduct written performance reviews at least once per year to monitor employee performance, motivate employees, and set new goals for employee performance. Of course, employers should also provide feedback throughout the year as necessary, but as we explained in our last installment in reference to promotion criteria and employment policies, reviews and feedback should be based on objective performance-based criteria. Employers should bear in mind that employee reviews are not simply a reactionary mechanism for correcting employee behavior, but a valuable opportunity to reinforce performance goals and teach employees how they can improve and advance.

Catalog employee performance and behavioral issues. After conducting a thorough investigation of the events giving rise to employee discipline, employers should record their findings on an employee discipline form. Each form should contain the employee’s basic information, the time and date of the incident, a clear and objective description of the facts of the incident leading to discipline, the specific policy or rule that the employee violated, and the action the employer has taken and will take in response. Employers should ensure the employee acknowledges he or she had an opportunity to review the form by having the employee sign it before taking disciplinary action.

Chronicle all instances of employee separation, whether voluntary or involuntary. Employers should conduct exit interviews with all separating employees, regardless of whether the employee resigns or is terminated. Exit interviews often provide employers with important feedback they can translate into an improved work environment, higher employee morale, and increased productivity. Questions should focus on the employee’s experience working for the employer, their relations with management and co-workers, and what areas the employee thinks the employer can improve in. If the employee is resigning, employers should obtain an official letter of resignation. If the employee is being terminated, the employer should document the events giving rise to termination according to the employer’s stated disciplinary procedures.

We’ll wind up our Employer Best Practices Series later this week with a discussion of best practices for common employment compliance issues. For more information on creating and maintaining water-tight employee personnel files, contact us at (312) 216-2720.

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Employer Best Practices – Part 1 – Employee Handbooks and Uniform Employment Policies

Posted on August 4, 2015 by mboxerman

Over the next few weeks, Marcus & Boxerman will publish a three-part series discussing employer best practices. Part One focuses on the practices all employers should adhere to in creating, developing, and enforcing employment policies and workplace conditions. Part Two will suggest best practices for maintaining employee personnel files. Part Three will discuss regulatory compliance issues and employer best practices for resolving them.

employee handbook, employer best practices, employment lawMaintain an employee handbook and keep it updated. A good employee handbook effectively communicates an employer’s workplace expectations, policies and procedures, and can provide an employer’s best defense against many employee claims. Employers should distribute the handbook to all employees upon hire, and should review and update the handbook as often as necessary. Employers should require a signed and dated receipt for the handbook from each employee and save the receipt to the employee’s personnel file. A strong employee handbook helps ensure that uniform policies are in place, that the policies are communicated to all employees in writing, and that employees are aware of the employer’s expectations for their employment.

Enforce employment policies and conditions uniformly. A clear and thorough handbook will not protect an employers who doesn’t enforce its policies uniformly among all employees. Making employment decisions or favoring/disfavoring employees because of their race, color, religion, sex, national origin, age, disability, or genetic information is unlawful, and may result in complaints or lawsuits filed with state and federal regulatory agencies. In many states, including Illinois, it is also illegal to discriminate based on an employee’s sexual orientation, ancestry, marital status, pregnancy status or military status. In the City of Chicago, moreover, it is unlawful for an employer to discriminate based on an employee’s parental status, source of income, or credit history. Employment policies must be absolutely neutral when it comes to the protected characteristics above. Employers must apply and enforce all policies equally and consistently among all employees.

Use measurable and meaningful promotion criteria. Making promotion decisions according to measurable, meaningful criteria communicated to all eligible employees serves two purposes: (1) it protects employers from claims of bias or discrimination and (2) it ensures that only the highest-performing candidates get promoted. Promotion decisions should be made based on criteria relevant to job performance, not favoritism or bias.

Handle all employee-related issues, especially harassment and discrimination complaints, thoroughly, respectfully and professionally. When an employee notifies management of discrimination or harassment in the workplace, employers must treat the employee’s grievance seriously. Employees should have a clear avenue for reporting their concerns and employers should reassure employees reporting concerns will not be met with retaliation. Inform the employee that management will conduct a thorough and impartial investigation, and that, if appropriate, management will take corrective action to ensure that the employee feels comfortable and safe in the workplace. Most importantly, employers must FOLLOW THROUGH by conducting a thorough investigation, finding out what happened, and taking appropriate disciplinary measures if necessary. The employee handbook should spell out these procedures – remember, it is important that the employee perceiving harassment and the accused employee both know the policy and know that management will follow it.

Check back next week for Part Two of our Employer Best Practices Series for guidance on maintaining a clean and protective personnel file. Meanwhile, if you have questions about employment policies or your employee handbooks, contact us at (312) 216-2720.

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U.S. Department of Labor: Most Workers are Employees, Not Independent Contractors

Posted on July 23, 2015 by mboxerman

On July 15, 2015, Administrator David Weil, of the Wage and Hour Division of the U.S. Department of Labor (“DOL”), issued an Administrator’s Interpretation (“Interpretation”) making clear that the vast majority of workers are employees, not independent contractors, regardless of how explicit an agreement between a worker and business defines the relationship as one of an independent contractor.

Click HERE to read the DOL’s Administrative Interpretation.

According to the Interpretation, “misclassification of employees as independent contractors is found in an increasing number of workplaces” and is done by employers to skirt labor laws, because workers misclassified as independent contractors may not receive minimum wage, overtime compensation, unemployment insurance, and worker’s compensation benefits.

Before the Fair Labor Standards Act (“FLSA”), an employment relationship was defined by the degree of control the business asserted over the worker. The more control the business retained over the worker, the more likely the worker was found to be an employee of the business. The FLSA intended to provide a broader scope of employment than found under the “control” test. As a result, according to the DOL, the vast majority of workers are properly classified as employees under the FLSA, rather than independent contractors.

The FLSA broadly defines “employ” as “to suffer or permit to work,” and an “employee” is “any individual employed by an employer, which is “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C § 203 (emphasis added). Clarity is rarely the forté of legislation.

To clear up the definition of an employee under the FLSA, courts introduced the “economic realities” test. Unlike the previously used “control” test, which hinged the classification of a worker as an employee solely on the degree to which the business controlled how an employee went about doing his or her job, the economic realities test uses multiple factors to distinguish employees and independent contractors in a way that should be consistent with the “FLSA’s statutory directive that the scope of the employment relationship is very broad,” according to the DOL. Under the economic realities test, the DOL posits that a worker is an employee, rather than an independent contractor, if the worker is economically dependent on the business (in contrast to a worker who is economically independent and operating a business of its own) after analyzing the totality of the following factors:

  • worker classification, employment law, independent contractorsIs the work performed by the worker an integral part of the putative employer’s business? The more important the worker’s produce is to the alleged employer’s business, the more likely that worker is an employee. That doesn’t mean the worker’s work must be unique or performed at the employer’s premises. In fact, even work capable of being recreated by a multitude of other workers, or performed from the comfort of one’s home, may be integral to the employer’s business.
  • Does the worker’s opportunity for profit or loss depend on his or her managerial skill? The DOL likens independent contractors to those who operate their own businesses. Usually, that means the possibility of experiencing not only profits, but losses as well, based on the owner’s managerial skill. Employees, on the other hand, usually don’t face a risk of loss, but derive more profit from working more or having more work available to them, not from the managerial skill used by independent contractors to eschew losses in favor of profits.
  • How does the investment of the worker compare to that of the putative employer? A worker who makes some investment, incurring a risk of loss, is more likely to be an independent contractor than an employee. But not all investments are equal. A worker who invests only in the tools needed to complete a task is likely an employee, since that investment isn’t in furtherance of any business beyond the given task. An independent contractor’s investment would put her on more equal footing compared to the investment of the alleged employer.
  • Does the work performed by the worker require special skills and initiative? Specialized or technical skills alone do not indicate independent contractor status, but a worker’s business skills, judgment, and initiative will bear on determining whether the worker is economically independent of the employer.
  • Is the relationship between the worker and employer permanent or temporary? Usually, permanency or indefiniteness (such as an at-will relationship) indicates that a worker is an employee. Conversely, a worker brought on to perform one project is more likely an independent contractor.
  • How much control does the employer exert over the worker? A worker who controls meaningful aspects of his or her work is more likely an independent contractor than an employee. Workers subject to employer’s control over his or her work schedules, his or her attire, and the tasks the worker carries out are more likely to be employees. An employer that exerts control in the name of regulatory requirements, customer satisfaction, or the nature of its business is still exerting the type of control typical of the employee-employer relationship.

In light of the DOL’s interpretation that most workers are employees, employers should review their non-employee classifications and make adjustments as necessary. To learn more about the Fair Labor Standards Act or your particular employment circumstances, contact us at (312) 216-2720.

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NLRB Provides “Fresh” Guidance on Joint Employment

Posted on June 30, 2015 by mboxerman

joint employment, employer liabilityOn April 28, 2015 the National Labor Relations Board (“NLRB”) issued an advisory opinion to the NLRB Chicago Region regarding joint employment.  The NLRB concluded that neither Freshii Development, L.L.C. (“Freshii”), a fast-casual restaurant franchisor with over 100 franchised locations, nor its area development agent, is a joint employer with one of its Chicago-area franchisees.

In the summer of 2014, Nutrionality, Inc. (“Nutrionality”), a Chicago-area Freshii franchisee, terminated an employee for attempting to unionize fellow employees. The OGC was called to render an opinion as to whether Nutrionality and Freshii were joint employers, such that Freshii would be liable for any unfair labor practices committed by Nutrionality.

Click HERE to read the OGC’s advisory opinion.

Under the current NLRB standard, franchisors are considered joint employers of their franchisees’ employees only when they “share or codetermine those matters governing the essential terms and conditions of employment,” such as hiring, firing, discipline, supervision and direction, determining wages and benefits, setting work hours and ongoing training of franchisee employees.

The OGC, however, recently proposed that the NLRB revert to a previous joint-employer standard, where a franchisor could be considered a joint employer even where the franchisor did not assert any direct or indirect control over terms and conditions of employment. Rather, the totality of the circumstances would be considered, and if “industrial realities” made the franchisor’s participation necessary in the collective bargaining process, the franchisor would be considered a joint employer with the franchisee.

In this case, the OGC found that Freshii played no role in its franchisees’ decisions regarding hiring, firing, discipline, supervision, wages, hours, benefits, and labor relations, and has never terminated a franchise agreement for “non-brand related reasons.” The opinion noted that Freshii would not be considered a joint employer under either the current standard or the previous standard.

If the NLRB chooses to revert to the previous standard as the OGC advises, franchisors will once again be left a bit uncertain as to how to protect themselves from joint employer liability, but, for now, employers can best protect themselves by doing the following:

  • Define the franchisor/franchisee paradigm. Make sure your franchise agreements clearly state that franchisees alone are responsible for decisions related to personnel matters. Franchise agreements that dictate policies for day-to-day employee conduct scream joint employer status. Franchisors can still suggest policies, but they need to make it clear in the franchise agreement and related documentation that the franchisee is free to deviate from suggested policies and that the franchisee alone governs personnel matters of franchisee employees.
  • Maintain separation of powers. Now that you’ve defined which decisions lie exclusively with the franchisee, you need to follow through. Decisions related to hiring, firing, disciplining employees, setting wages, giving raises and employee scheduling are all essential terms and conditions of employment, and franchisors that impose on their franchisees decision-making open themselves up to a finding of joint employer status. Franchisors should heed to a hands-off tack when it comes to personnel matters.
  • Protect your brand image and customer experience. Although getting involved in personnel matters should be avoided at all costs, franchisors must retain discretion to set requirements for franchise standards, design, decoration, employee uniforms, and store hours because these are essential to maintaining a standardized product and customer experience.
  • Look but don’t touch. Most franchisors periodically audit their franchisee-owned establishments, and well they should. But franchisor agents who perform the audits should refrain from directing or attempting to give guidance directly to a franchisee’s employees. Instead, the franchisor’s agents should direct their reviews and advice to the franchisee itself.
  • Sunshine is the best disinfectant. Make sure customers know they are patronizing an independent franchisee-owned business and make sure franchisee employees know they work for the franchisee, not the franchisor. Franchisors should require their franchisees to post clear notice, visible to both customers and employees, identifying the location as an independently owned and operated business.

Franchisors should take some comfort in the Freshii opinion, as it reaffirms a franchisor’s right to set requirements for its franchisees that preserve the franchise image and brand, standardize franchise products, and ensure a consistent customer experience. To learn more about joint employment and to find out how your business may be impacted, contact us at (312) 216-2720.

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Update: Chicago Employers Must Provide Employees Notice of the New Minimum Wage Ordinance

Posted on June 29, 2015 by mboxerman

minimum wage, wage and hour laws, employment lawAs a follow up to our last blog entry, “Chicago’s New Minimum Wage Ordinance Takes Effect July 1st,” employers who maintain a business facility within the City of Chicago or are required to obtain a business license to operate in the City, must post the Notice of Minimum Wage Increases and Employees’ Rights in their business facilities.  Click here to get a copy of the Notice for your business.

Employers must also provide the Notice with each covered employee’s first paycheck after the wage increases go into effect, as well as in the first paycheck given to new employees hired after the minimum wage increase goes into effect.

For any questions, contact us at (312) 216-2720 or info@marcusboxerman.com

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Chicago’s New Minimum Wage Ordinance Takes Effect July 1st

Posted on June 10, 2015 by mboxerman

Chicago minimum wage, wage and hour laws, employment lawBeginning July 1, 2015, Chicago’s minimum wage increases to $10.00 per hour, an increase of $1.75 per hour. This increase represents the first of a series of incremental minimum wage increases scheduled through 2019 and beyond.  The new ordinance applies to any employer who (i) maintains a business facility within the geographic boundaries of the City or (ii) is subject to one or more of Chicago’s Municipal Code license requirements.  You can find out more by viewing and downloading the new ordinance here.

Employers must pay covered employees the new minimum wage for each hour worked while physically present within the geographic boundaries of the City, provided the employee works at least two hours within City limits over the course of any two-week period. Under the new ordinance, business activity that constitutes work while physically present in the City includes (but is not limited to) deliveries, sales calls and travel related to other business activity within the City. Non-compensable commuting time is not counted for purposes of determining whether an employee is covered by the ordinance.

Employers based outside of the City must be sure to monitor the time an employee spends within City limits to comply with the ordinance. An employer who violates the ordinance will be subject to a fine of between $500.00 and $1,000.00 for each offense. Each day the violation continues constitutes a new and separate offense. The ordinance provides that covered employees may institute a private cause of action for violations of the ordinance. The ordinance permits covered employees to recover up to three times the amount of any underpayment plus attorneys’ fees.

In addition, the minimum wage for employees who work in jobs where gratuities customarily and usually constitute part of compensation (currently $4.95 per hour) will increase to $5.45 per hour beginning July 1st, and $5.95 per hour beginning July 1, 2016.

It is critical that employers begin preparing for the new ordinance to make a seamless transition and to avoid being subjected to potential fines and civil lawsuits.

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Franchisors and Franchisees Possible Joint Employers

Posted on June 10, 2015 by mboxerman

joint employers, employer liability, joint employmentOn December 19, 2014, the National Labor Relations Board (including a regional office in Chicago)  filed 13 complaints against McDonald’s for alleged violations of federal labor laws by its franchisees. The complaints allege that the franchisees and the company punished workers for participating in fast food protests by reducing the workers’ hours or even firing them. Against 50 years of precedent, the NLRB ruled that McDonald’s is a joint employer of the employees of its franchisees, making McDonald’s potentially liable for employment laws broken by more than 3,000 U.S. franchises. The NLRB’s general counsel explained that McDonald’s “wields such extensive influence over the business operations of its franchisees that individual franchise operators have little autonomy in setting or controlling workplace conditions.”

Read the NLRB’s Press Release Here

The NLRB’s action is particularly noteworthy because McDonalds’ franchisees operate under contracts that explicitly relieve McDonald’s from any responsibility for hiring, firing and supervising restaurant employees. Currently, federal anti-discrimination statutes reject the joint employer status of franchisors like McDonald’s, but in wake of this recent NLRB action, other federal agencies may follow suit.

It is unclear whether the courts will accept the NLRB’s ruling, and assuming a settlement is not reached, the 13 cases will be brought before administrative law judges beginning March 30 in Chicago, Manhattan, and Los Angeles.

Impact on Franchise Law

Considering the NLRB’s controversial decision, franchising may be a less attractive business model for the franchisors, as they would become liable for personnel (and potentially other) decisions made by their franchisees, who are traditionally seen as independent business owners.

And franchisees may lose more independence over how they operate their business, while labor unions would be easier to form and could consequently subject more franchisees to the Affordable Care Act’s employer mandate. To read more about the employer mandate, click here.

To learn more about this decision and its implications, contact us at (312) 216-2720.

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