The Manager's Legal Handbook
The comprehensive resource
Amy DelPo, Attorney and Lisa Guerin, J.D.
November 2011, 6th Edition
The quick reference to employment law for anyone who oversees workers.
Whether you're managing workers or working in the HR department, The Manager's Legal Handbook is the perfect introduction to supervising employees and independent contractors safely and legally.
Need some information about overtime? Want some useful ideas on workplace policies? Have a question about trade secrets and need the answer now? This one-of-a-kind book provides everything you need to stay within the bounds of the law, including:
- frequently asked questions
- concise articles
- helpful tips
- "lessons from the real world"
- dozens of resources, online and off
Designed for managers and supervisors who need answers quickly, as well as professionals pursuing a career in human resources, The Manager's Legal Handbook covers hiring, firing and everything in between.
The 6th edition incorporates the latest legal changes to the Americans with Disabilities Act and the Family Medical Leave Act, and covers recent Supreme Court decisions on retaliation. It also includes more detailed information about layoffs, setting pay and communicating with employees.
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I. Introduction: Navigating the Maze of Employment Law
- How to Use This Book
- Additional Resources
- Making Promises
- Applicants With Disabilities
- Testing Applicants
- Background Checks
- Young Workers
- Offer Letters
- Written Employment Contracts
2. Compensation and Hours
- The Fair Labor Standards Act
- Deciding What to Pay People
- The Minimum Wage
- Meal and Rest Breaks
- Travel Time
- On-Call Time
- Flexible Work Schedules
- Pay Docking and Unpaid Suspensions
- Equal Pay
- Record-Keeping Requirements
- Antidiscrimination Laws
- Race and National Origin
- Gender, Pregnancy, and Sexual Harassment
- Genetic Information
- Sexual Orientation
- Expression of Religious Beliefs
4. Personnel Basics
- Personnel Policies and the Law
- At-Will Employment
- Employee Handbooks
- Preventing Sexual Harassment
- Communicating With Employees Effectively
- Performance Appraisal
- Creating and Maintaining Personnel Files
- Family-Friendly Workplace Policies
5. Time Off
- Vacation and Sick Leave
- Family and Medical Leave
- Pregnancy and Parental Leave
- Jury Duty and Voting
- Military Leave
- Other Types of Leave
- The Right to Privacy
- Testing Current Employees
- Electronic Monitoring
- Off-Duty Conduct
- Workplace Searches
7. Health and Safety
- Health and Safety Laws
- Workers’ Compensation
- Cell Phones and Driving
- Drugs and Alcohol
- The National Labor Relations Act
- Representation Elections and Organizing Campaigns
- Election Statements
- Shop Talk
- Union Shops and Union Dues
- Collective Bargaining
- Company Unions and Employee Committees
9. Independent Contractors
- Classifying Workers
- Benefits and Drawbacks of Using Independent Contractors
- Important Documents When Hiring Independent Contractors
- Written Agreements With Independent Contractors
- Copyright Ownership
10. Trade Secrets
- The Law of Trade Secrets
- Protecting Trade Secrets
- Nondisclosure Agreements
- Noncompete Agreements
- Nonsolicitation Agreements
- Hiring From Competitors
11. Handling Workplace Problems
- Disciplining Workers
- Investigating Complaints
- Workplace Violence
- Liability for an Employee’s Actions
12. Firing Employees
- Illegal Reasons for Firing Employees
- Firing Employees With Employment Contracts
- Making the Decision to Fire
- How to Fire
- Before Conducting a Layoff
- Alternatives to Layoffs
- Making the Cut
- Conducting a Layoff
- Notice Requirements for Layoffs
14. Departing Workers
- What to Tell Coworkers When an Employee Leaves
- Health Insurance
- Unemployment Benefits
- Federal Agencies
- State Agencies
Making Promises............................................................................. 11
Applicants With Disabilities.............................................................. 13
Testing Applicants........................................................................... 14
Avoiding Disability Discrimination..................................................... 14
Skills Tests...................................................................................... 15
Aptitude, Psychological, and Personality Tests.................................. 15
Lie Detector and Honesty Tests......................................................... 16
Medical Tests................................................................................... 16
Drug Tests....................................................................................... 17
Background Checks......................................................................... 17
Running Credit Checks..................................................................... 20
State Law Restrictions...................................................................... 20
Following the FCRA.......................................................................... 20
Get Written Consent.......................................................................... 21
Send a Pre-Adverse-Action Disclosure.............................................. 21
Send an Adverse Action Notice......................................................... 21
Young Workers................................................................................ 21
Hazardous Jobs............................................................................... 22
Agricultural Jobs.............................................................................. 23
Nonagricultural Jobs......................................................................... 23
Offer Letters.................................................................................... 23
Written Employment Contracts.......................................................... 24
Hiring can be a tough task for managers. It’s challenging enough to find the right hire for the job, with the skills, attitude, personality, and other important qualities to be a success at your company. When you add legal concerns to the mix, hiring can seem like a truly daunting responsibility.
But you cannot ignore your legal obligations when hiring new employees. Federal and state employment laws reach beyond current employees; many also protect those who apply for jobs by, for example, prohibiting discriminatory job postings, putting limits on the information you can gather in a background check, or outlawing certain kinds of applicant screening tests. What’s more, the things you say and do during the hiring process could come back to haunt you and your company later, particularly if an employee claims that you offered a job contract or promised job security.
The good news is that following sensible and careful hiring practices will keep your company out of immediate legal trouble, help you find the most qualified employees, and—by screening out problem employees from the get-go—help prevent management headaches and possible lawsuits down the road.
This chapter explains the legal ins and outs of hiring, including practical advice on how to find, interview, and seal the deal with your lucky new hire.
Frequently Asked Questions About Hiring
Do I have to advertise open positions?
No. Although federal, state, and local governments typically have to post openings, private companies don’t. Nonetheless, there are some very good reasons to advertise:
You can choose from a larger pool of applicants, which increases your odds of finding a great person for the job.
You avoid unintentional discrimination. (For example, if you rely solely on word of mouth when looking for applicants and you only know people of your race or ethnicity, then your hiring process may be discriminatory.)
You can avoid the appearance of nepotism or favoritism. If you hire your friends, family members, or neighbors to come work for you, the employees who currently report to you may think you’ll play favorites. By posting open positions and choosing your hires from a broad range of applicants, you can show your reports that you hire—and manage—on merit alone. (For advice on effective and legal job advertisements, see “Advertisements,” below.)
Are there questions I cannot ask during a job interview?
Yes. For example, you may not ask whether an applicant has a disability, what country an applicant comes from, and, in some states, whether an applicant has ever been arrested. (To learn what questions you can and cannot ask an applicant during an interview, see “Interviews,” below.)
Are there things I shouldn’t say when I’m trying to convince a really strong applicant to take a job?
Absolutely. Although you’ll be tempted to sell your company during a job interview with a hot prospect, don’t overdo it. If you exaggerate—or out-and-out lie—about the position, the company’s future, or other important facts, and the applicant takes the job based on your statements, that employee can sue the company if your statements turn out to be false. (For more information on statements to avoid when hiring, see “Making Promises,” below.)
Can I ask whether an applicant has a disability?
No. The Americans with Disabilities Act (ADA) prohibits you from asking whether an applicant has a disability. Instead, you should focus your interview questions on the applicant’s abilities—for example, you may ask whether and how an applicant would perform each essential job function. If you know that an applicant has a disability (because it is obvious or the applicant has told you about it), you may ask whether the applicant will need an accommodation to perform the job. (For more on avoiding disability discrimination when hiring, see “Applicants With Disabilities,” below.)
Can I ask every applicant to take a lie detector test?
No. The Employee Polygraph Protection Act (EPPA) prohibits lie detector tests by all but a few types of employers—those that provide certain types of security services or manufacture pharmaceuticals, for example. (For more information on what tests you can—and can’t—ask applicants to take, see “Testing Applicants,” below.)
Can I run background checks on applicants?
It depends on the information you plan to collect. You can check information that is relevant to the job for which you are hiring. However, state and federal laws restrict you from gathering or using certain types of records. If you are considering running a background check, you should ask applicants to consent to the check in advance, in writing. (See “Background Checks,” below, for more information.)
Can I hire teenagers to do clerical work?
Generally, yes. Teenagers who are at least 16 years old may work unlimited hours in any profession that the government has not deemed hazardous. You can also hire younger teens, although the law restricts how many hours they may work and the types of jobs they may do. (For more information, see “Young Workers,” below.)
If I want to offer someone a job, do I have to do it in writing?
There is no law that governs how you offer someone a job. You can do it in person, over the phone, or with a formal letter. However, you should probably send written offer letters just to make sure potential hires understand exactly what you are offering. Offer letters aren’t without their pitfalls, however, so be careful what you write. (To learn more, see “Offer Letters,” below.)
When I hire someone, should I use a written contract?
It depends on the circumstances. The law does not require you to use a written employment contract and, for the most part, you probably won’t want to. However, there may be times when writing a contract is a good idea, such as when you want the employee to make a long-term commitment to the company. (To learn about when you should and should not use an employment contract, see “Written Employment Contracts,” below.)
What forms or paperwork do new employees have to complete?
In addition to paperwork your company requires—such as signing an acknowledgment form for the employee handbook, completing benefits registration forms, or naming someone to call in case of emergency—you should also ask employees to complete the following documents:
IRS Form W-4, Withholding Allowance Certificate. Employees use this form to tell you how many allowances they are claiming for tax purposes and, therefore, how much you should withhold from their paychecks.
USCIS Form I-9, Employee Eligibility Verification. You and the employee each complete a portion of this form to verify that the employee is eligible to work in the United States.
New Hire Reporting Form. The new hire reporting program requires employers to report basic identifying information on all new employees to a state agency, to be used to locate parents who owe child support.
(For more on these requirements, see “Checklist: First-Day Paperwork,” below.)
Although most “help wanted” ads contain only a handful of words, using the wrong words can land your company in legal trouble. Any job requirement that discriminates against applicants based on a characteristic protected by law (for example, race or gender) violates federal law and the laws of many states. (To learn which characteristics are protected by federal and state law, see Chapter 3.)
Some off-limits topics are obvious: Most managers know that an ad can’t state “only white males need apply.” But companies can get into trouble by posting an ad that discriminates on a more subtle level, even if they don’t intend to.
For example, let’s say you want to hire a technician for your company’s information systems department. Almost all of the technician’s day would be spent at a computer. On occasion, however, technicians at your company have to install new equipment, which might require them to carry computers, monitors, printers, and so on. Should you write an ad saying that you are looking for someone who can lift at least 50 pounds? Well, that kind of requirement would screen out applicants with certain disabilities, as well as disproportionate numbers of women. Because the lifting is only occasional and could be accomplished by other means—using machinery, for example—including such a requirement in your ad could be discriminatory.
Similarly, watch for words or descriptions that imply you have a discriminatory preference. For example, let’s say you are looking for a sales representative. If you use the term, “salesman” in your ad, it implies that you are only looking for men—and therefore that you would discriminate against female applicants. The same precaution applies to terms like “handyman” or “waiter.”
So what can you say? If you follow two basic rules, you should steer clear of trouble:
Focus on the essential functions of the job. In other words, advertise only for the skills or characteristics that the job absolutely requires. For example, if you are looking for someone to proofread magazine articles, you probably don’t need someone with a college science degree unless your magazine is a professional scientific journal. If there is an up-to-date job description for the position, you can use it to focus the ad appropriately.
Pay attention to the literal meaning of the words you use. This is particularly important with the suffix “-man”—as in “salesman,” “repairman,” and so on (try “salesperson” and “general repair person” instead), or gendered positions such as “waiter” (use “server” or “wait staff” instead). It is also important to be cautious when using words that refer to age. For example, if you want someone who is energetic, has a lot of fresh ideas, and is up-to-date on current trends, you might want to shorthand that in your ad by stating that you’re “looking for worker with a youthful attitude.” But if you do, you are expressing an age preference, which is discriminatory and illegal.
The spontaneous and unpredictable nature of the job interview makes it rife with traps, even for managers with the best of intentions. Well-meaning, innocent comments could be construed by an applicant as prejudicial or used as the basis of a discrimination lawsuit.
For example, let’s say an applicant speaks with an accent you’ve never heard before. You might be curious about where the applicant is from. However, if you ask about the applicant’s national origin, and the applicant doesn’t get the job, your question could become part of a discrimination claim against your company.
On the other hand, you don’t want to get so hung up on every word you say that you defeat the purpose of the interview: to learn about the applicant’s skills and experience so you can choose the best-qualified candidate for the position.
Here are some tips that will help you stay out of legal trouble while also getting the information you need to make the right choice:
Don’t ask about any characteristic that the law prohibits you from considering in making your decision. (To learn about these protected characteristics, see Chapter 3.) For example, you can’t base your hiring decisions on an applicant’s religious beliefs or race, so you shouldn’t be asking about those things in your interviews. In “Preemployment Inquiries,” at the end of this chapter, we give you some ideas on how to get information while staying within the bounds of the federal law.
Respect the applicant’s privacy. Although federal law does not require you to do so, many state laws and rules of etiquette do. For example, asking applicants in California about their sexual fantasies (yes, that actually happened in a real life case) violates their state-protected right to privacy. (For more information on privacy in the workplace, see Chapter 6.)
If an applicant raises a delicate subject, it’s usually best to skirt the issue. Unless the topic is directly related to the position—for example, the applicant reveals that he or she has a disability and will need an accommodation to perform the job—politely steer the conversation in another direction. Although it might seem a bit awkward, you’ll be better off in the long run if you don’t take the applicant’s comments as an invitation to start a long conversation about, for example, relationship troubles or political beliefs.
Ask open-ended questions to get the candidate talking. There’s a big difference between a closed question—such as “How many supervisory positions have you held?”—and an open one—such as “Tell me about your most recent experience supervising others.” The more open your questions, the more you invite the candidate to talk. This will not only give you the factual information you need to make a decision, but will also let you see how well applicants express themselves, think on their feet, and so on.
Ask behavioral questions, if possible. It can be tough to find out whether applicants have important, yet somewhat intangible qualifications, such as problem-solving skills or the ability to work well as part of a team. If you just come out and ask, all but the most dim-witted applicants are going to know the correct answer. (“Are you good at solving problems?” “You bet!”) On the other hand, if you ask about specific instances in which the applicant had to use that skill, you’re more likely to get a helpful response. To find out about a candidate’s problem-solving skills, for example, you could say, “Tell me about a problem you recently faced in your current position and how you handled it.”
Focus on what the job really requires. Use the job description for the position (if you have one) to script some interview questions that will help you find out whether the applicant has the necessary skills and experience. If you don’t have a job description, create a list of the essential tasks the employee you hire will have to perform, then craft questions that will help you figure out whether the applicant can meet these requirements. Remember, the law absolutely allows you to ask questions that directly relate to the requirements of the job you are trying to fill.
Cover similar ground with each applicant. You can’t ask exactly the same questions of each applicant, nor should you. After all, you don’t want to miss the opportunity an interview offers to ask follow-up questions spontaneously or delve more deeply into particular topics. On the other hand, you should try to cover the same basic topics and general questions with each applicant. This will help you compare candidates when it’s time to choose your hire; it will also help you avoid claims of discrimination by applicants who don’t get the job.
A common mistake managers make during hiring is to exaggerate about the prospects of the business (“We’re expanding like wildfire —those stock options will be worth millions in no time!”) or about the security of the job (“As long as you do good work, you won’t lose your job”). Lots of companies and managers embellish when they’re trying to sell an especially desirable applicant on a job. No harm in that, right?
Wrong. If you tell a prospective employee something about a job, you’d better be able to back it up. If the employee takes the job in part because of what you said, then that employee may be allowed to sue if your promises or statements later prove false. Courts sometimes decide that a promise or statement you make to a prospective employee turns into a contract if the employee accepts the job offer because of what you said. If the position doesn’t live up to your statements, your company has broken the contract and might have to pay damages to the employee.
It’s easy to avoid making inflated promises if you follow one simple rule: Tell the truth. After all, job applicants are trying to figure out whether the job will fit with their career goals, skills, and lives outside the workplace. They deserve to know the truth so they can make the right decision.
This strategy will not only keep you out of legal trouble, but also increase your chances of finding an employee who is right for the job and for your business. No one wants a disgruntled employee on the payroll. If you’ve told the applicant the truth and he or she still wants the job, then you’ve probably found a good fit.
Here are a few rules that will help you avoid common promise pitfalls:
Don’t make predictions about your company’s financial future. Even if you honestly believe that your company is headed for the Fortune 500, keep your optimism to yourself. If the applicant asks about the company’s prospects, stick to the facts. If you make any statements about what the future might bring, clearly identify them as hopes, not predictions. For example, you might say, “Our business has continued to grow despite the economic downturn, and w’re hoping that trend will continue,” but you shouldn’t say, “We’ll be the industry leader by this time next year.”
Don’t estimate the future value of stock options. Let’s face it: You simply can’t know what your company’s stock options will be worth in the future. It’s fine to explain the stock option program to applicants and to tell them that you hope the options will be valuable, but don’t say things like, “When these options vest, we’ll all be millionaires!”
Don’t say anything that might limit your right to make personnel decisions in the future. If you tell an applicant that your company fires workers only for poor performance, this will limit your ability to terminate that person for any other reason—such as personality conflicts or economic downturns—if he or she accepts the job. Similarly, if you promise pay increases at regular intervals, the employee could hold you to that promise, even if the flagging economy or the employee’s performance don’t warrant a raise.
If layoffs are likely, say so. If your company is considering staff reductions and there is even a remote chance that the applicant you are interviewing might lose that new job as a result, disclose this before the applicant accepts the job. Otherwise, you may find your company slapped with a lawsuit, especially if the employee left a secure job elsewhere to come work for your company. Of course, this strategy might make it difficult to find new employees, but it really isn’t fair (or legal) to hire people on false pretenses.
Be accurate in describing the position. Don’t exaggerate to land an applicant, and don’t play bait and switch by offering an applicant one job, then placing him or her in another. It may not matter much to you who does what, but it will matter a lot to the employee. An employee who accepts the position based on statements that turn out to be false may have grounds for a lawsuit.
Lessons From the Real World
A California company paid the price for intensely recruiting an employee with promises it couldn’t keep. Rykoff-Sexton, Inc., promised Andrew Lazar job security, significant pay increases, an eventual executive position, and a bright future with a company that was financially strong. Lazar took the bait and left a lucrative job in New York City, his home of 40 years.
Although Lazar excelled in his new job, the pay increases and bonuses never came. Eventually, Rykoff fired Lazar because of a “reorganization.”
Lazar sued and won. He argued to the California Supreme Court that Rykoff should have to keep the promises it used to recruit him, and the court agreed. The court decided that Rykoff’s broken promises amounted to fraud because it knew the promises were untrue when it made them.
Lazar v. Rykoff-Sexton, Inc., 12 Cal.4th 631 (1996).
Applicants With Disabilities
Of all the antidiscrimination laws, perhaps none confuses managers more than the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101–12213, especially when it comes to hiring. Managers want to find out if the person they hire can actually perform the job but often aren’t sure how to explore this issue without running afoul of the law. (For information on how the ADA applies to employees, see “Disability” in Chapter 3.)
If you remember one simple rule, you’ll be in good shape: You can ask candidates about their abilities, but not about their disabilities. This means that you can ask how an applicant plans to perform each function of the job, but you cannot ask whether the applicant has any disabilities that will prevent him or her from performing each function of the job.
One way to ensure that you stay within the rules is to attach a detailed job description to the application or describe the job duties to applicants during the job interview. Then ask how the applicant plans to perform the job. This approach gives applicants an opportunity to talk about their qualifications and strengths. It also gives them a chance to let you know whether they might need reasonable accommodations to do the job.
If you choose to ask applicants how they would perform the job duties, you should ask these questions of all applicants. Don’t single out those you suspect may have a disability. If an applicant has a “known” disability—a disability that the applicant has disclosed or that is obvious (for example, if the applicant uses a wheelchair)—of a type that makes it reasonable to believe the applicant might not be able to perform the job’s functions, the employer may ask how the applicant would perform those functions or whether the applicant would need an accommodation to do so.
Generally, you may not ask an applicant questions, on an application or during a job interview, that are likely to require the applicant to reveal a disability. The Equal Employment Opportunity Commission (EEOC), the federal agency that interprets and enforces the ADA, gives the following examples of questions you should not ask:
Do you have a disability that would interfere with your ability to do the job?
How many days were you sick last year?
Have you ever filed for workers’ compensation? Have you ever been injured on the job?
Have you ever been treated for mental health problems?
What prescription drugs are you currently taking?
You may ask questions like these:
Can you perform all of the functions of this job?
How would you perform each of the job functions?
What certifications and licenses do you hold?
Tell me about your education and work history.
Can you meet the attendance requirements of this job?
If you have no reason to believe that the applicant has a disability, you may not ask whether the applicant will need an accommodation to perform the job. If, however, you know that the applicant has a disability—because it is obvious, for example, or the applicant has told you about it—you may ask about accommodations.
Many companies like to use preemployment tests as a way to screen out applicants who are not suitable for a job. These tests include skills tests, aptitude tests, psychological tests, personality tests, honesty tests, medical tests, and drug tests.
Although you are allowed to do some testing of applicants, both state and federal law impose numerous restrictions on what you can do. Because these restrictions are often vague and open to contradictory interpretations, you should use only tests that are absolutely necessary. You should also consider consulting with a lawyer before administering the test to make sure that it will pass legal muster in your state.
Avoiding Disability Discrimination
For all tests—including those described below—you must take care to avoid discriminating against applicants who are protected by the Americans with Disabilities Act (ADA). (For information on the ADA, see Chapter 3.) To ensure that a test does not unfairly screen out people with disabilities, it must accurately measure people’s skills, not their disabilities. For example:
Avoid testing mental, sensory, manual, or speaking skills unless they are job-related. For example, even though a typing test is a manual test that will screen out people who have particular impairments, it is acceptable if you are filling a job for a typist. However, if the job could be done using voice-activated software, you should make that option available for the test, too.
Accommodate people with disabilities by giving them a test that is “disability neutral” whenever possible. For example, if you are giving a written test to applicants for a sales position to test their knowledge of sales techniques, you can offer to read the test to a blind applicant. This is a reasonable accommodation because sight is not required for the job, but it is required to take the test.
Skills tests range from something as simple as a typing test to something as complicated as an architectural drafting test. Generally speaking, these tests are legal as long as they genuinely test a skill necessary to perform the job, don’t violate the ADA (see above), and don’t unfairly exclude anyone based on a protected characteristic.
Aptitude, Psychological, and Personality Tests
Some companies use written tests—often in a multiple choice format—to learn about an applicant’s general abilities, personality, and/or work style. However, using these tests leaves you vulnerable to various types of lawsuits. For example:
A multiple-choice aptitude test may discriminate against minority applicants or female applicants because it really reflects test-taking ability rather than actual job skills. (Studies have shown that some aptitude tests are biased against women and minority test-takers.)
A personality test can be even riskier. Such a test may invade a person’s privacy by inquiring into topics that are personal in nature, such as sexual preferences or religious beliefs. (Many states specifically protect a person’s right to privacy—even from inquiries by employers.) In addition, these tests can lead to a discrimination lawsuit. For example, if you decide not to hire someone based on his or her answers to questions dealing with religious issues, the applicant could argue that you discriminated based on his or her religion. (For more about discrimination, see Chapter 3.)
Psychological and personality tests are treated like medical tests (see below) when they ask for answers that would indicate whether the applicant has a mental disorder or impairment. If they do, they will be governed by the Americans with Disabilities Act (ADA) and all of its restrictions. (For more on hiring and the ADA, see “Applicants With Disabilities,” above.)
If you decide to use one of these types of tests, proceed with extreme caution. Make sure that the test has been screened scientifically for validity and that it genuinely correlates to necessary job skills. Review the test carefully for any questions that may intrude into an applicant’s privacy. And, depending on the complexity and purpose of the test you use, your company may need to hire an expert to interpret the results.
Lessons From the Real World
Rent-A-Center, Inc., a company that offers furniture and other household goods on a rent-to-own basis, required applicants for certain management positions to take the Minnesota Multiphasic Personality Inventory test (MMPI), answering questions such as:
I see things or animals or people around me that others do not see.
My soul sometimes leaves my body.
At times I have fits of laughing and crying that I cannot control.
I have a habit of counting things that are not important such as bulbs on electric signs, and so forth.
Applicants who were required to take the test sued, arguing (among other things) that the test violated the ADA because it was a medical examination designed to reveal mental impairments. Although the trial court rejected this argument, the federal Court of Appeals agreed with the applicants. Rent-A-Center stopped using the MMPI, and was ordered to destroy all test results in its possession; it also had to pay the plaintiff class’s attorney fees.
Karraker v. Rent-A-Center, 492 F.3d 896 (7th Cir. 2007); Karraker v. Rent-A-Center, 411 F.3d 831 (7th Cir. 2005).
Lie Detector and Honesty Tests
The federal Employee Polygraph Protection Act, 29 U.S.C. §§ 2001 and following, generally prohibits employers from requiring applicants to take a lie detector test or from asking applicants about the results of previous lie detector tests. The law contains a few narrowly defined exceptions for certain types of employers, including those that provide armored car, alarm, or guard services, and those that manufacture, distribute, or dispense pharmaceuticals.
Even though no federal law specifically outlaws written honesty tests, these tests sometimes violate federal and state laws that protect against discrimination and violations of privacy. Plus, the tests can be unreliable.
Some states have adopted their own rules about polygraph tests—and some of these rules are even stricter than the federal law. To find out what your state requires, see “Employee Polygraph Examination Laws,” at the end of this chapter.
Medical testing is tricky. To avoid violating the Americans with Disabilities Act, you shouldn’t ask for an applicant’s medical history or conduct any medical exam before you make a job offer.
However, once you decide to offer the applicant a job, you can make the offer conditional on the applicant passing a medical exam. You must require the exam for all entering employees doing the same job. If you only require people whom you believe or know to have disabilities to take the exam, you will be violating the Americans with Disabilities Act. If the exam screens out disproportionately large numbers of applicants with disabilities, you may administer it only if it is job-related and correlates to necessary job skills.
The Genetic Information Nondiscrimination Act (GINA) prohibits employers from requesting or requiring that applicants provide genetic information, including through genetic tests. Even though the ADA allows employers to require a post-offer medical exam, as described above, that exam may not include genetic testing, nor may it include the collection of family medical history. Employers must tell its health care providers not to collect genetic information as part of any employment-related medical exam. If an employer discovers that a health care provider is nonetheless requesting this information, it must take reasonable steps to put a stop to it by, for example, no longer using that provider.
The laws on drug testing vary widely from state to state. Some states allow these tests only for jobs involving public safety; some states allow them only for drivers; some states allow them for any occupation; some states don’t allow them at all. Consult “State Drug and Alcohol Testing Laws,” at the end of this chapter, for information on your state’s rules.
When you are making hiring decisions, you might need a bit more information than applicants provide. After all, some folks—surveys estimate between 30% and 40% of applicants—give false or incomplete information in employment applications. And workers probably don’t want you to know certain facts about their past that might disqualify them from getting a job. Generally, it’s good policy to do a little checking before making a job offer.
However, you do not have an unfettered right to dig into applicants’ personal affairs. Workers have a right to privacy in certain personal matters, a right they can enforce by suing your company if you pry too deeply. How can you avoid crossing this line? Here are a few tips to keep in mind:
Make sure your inquiries are related to the job. If you decide to do a background check, stick to information that is relevant to the job for which you are considering the worker. For example, if you are hiring a security guard who will carry a weapon and be responsible for large amounts of cash, you might reasonably check for past criminal convictions.
Ask for consent. You are on safest legal ground if you ask the applicant, in writing, to consent to a background check. Explain clearly what you plan to check and how you will gather information. This gives applicants a chance to take themselves out of the running if there are things they don’t want you to know. It also prevents applicants from later claiming invasion of privacy. If an applicant refuses to consent to a reasonable request for information, you may legally decide not to consider that applicant for the position.
Be reasonable. Managers can get their employers into legal trouble if they engage in background check overkill. You will not need to perform an extensive background check on every applicant. Even if you decide to check, you probably won’t need to get into excessive detail for every position. If you find yourself questioning neighbors, ordering credit checks, and performing exhaustive searches of public records every time you hire a clerk or counterperson, you need to scale your efforts back.
In addition to these general considerations, specific rules apply to certain types of information:
School records. Under federal law and the law of some states, educational records—including transcripts, recommendations, and financial information—are confidential. Because of these laws, most schools will not release records without the consent of the student. And some schools will only release records directly to the student.
Credit reports. Under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, employers must get written consent to check an applicant’s credit report. Many companies routinely include a request for such consent along with their employment applications. If you decide not to hire or promote someone based on information in the credit report, you must provide a copy of the report and let the applicant know how to challenge the report under the FCRA. Some states have more stringent rules limiting the use of credit reports; some prohibit employers from considering credit reports in making hiring decisions period. (See “Running Credit Checks,” below, for more information.).
Bankruptcies. Federal law prohibits discriminating against applicants because they have filed for bankruptcy. This means that you cannot decide not to hire someone simply because he or she has declared bankruptcy in the past.
Criminal records. The law varies from state to state on whether, and to what extent, a private employer may consider an applicant’s criminal history in making hiring decisions. Some states don’t allow you to ask about arrests (as opposed to convictions), convictions that occurred well in the past, juvenile crimes, or sealed records. Some states allow you to consider convictions only if the crimes are relevant to the job. And some states allow you to consider criminal history only for certain positions: nurses, child care workers, private detectives, and other jobs requiring licenses, for example. Because of this variation among the states, you should consult with a lawyer or do further legal research on the law of your state before digging into an applicant’s criminal past.
Workers’ compensation records. You may consider information contained in the public record from a workers’ compensation appeal in making a job decision only if the applicant’s injury might interfere with his or her ability to perform required duties.
Other medical records. Under the Americans with Disabilities Act, you may inquire about an applicant’s ability to perform specific job duties only; you may not request medical records. Companies cannot make job decisions (on hiring or promotion, for example) based on an applicant’s disability, as long as the employee can do the job, with or without a reasonable accommodation. Employers also can’t discriminate on the basis of genetic information. Nor may they request or require that applicants provide such information. Some states also have laws protecting the confidentiality of medical records.
Records of military service. Members and former members of the armed forces have a right to privacy in their service records. These records may be released only under limited circumstances, and consent is generally required. However, the military may disclose name, rank, salary, duty assignments, awards, and duty status without the member’s consent.
Driving records. You should check the driving record of any employee whose job will require large amounts of driving (delivery persons or bus drivers, for example). These records are available, sometimes for a small fee, from the state’s motor vehicles department.
Lessons From the Real World
After a handful of interviews and long-distance communications, including half a dozen phone calls and 20 email exchanges, Microsoft’s Associate General Counsel, Michele Gammer, offered Mitchell Schley a job as a senior attorney. The offer letter, which Schley signed and returned, said that the job was at will, and that his employment was contingent on the successful completion of a background and reference check, among other things.
Gammer encouraged Schley to give notice to his current employer, recommended a real estate agent, and helped facilitate his purchase of a home in Washington from someone she knew. (Schley lived in New Jersey when he accepted the job.) After Schley put down a deposit of $30,000 on the new home, put his New Jersey home on the market, and began to relocate, Gammer told him that his start date would have to be delayed while the company investigated a felony charge that came up in his background check. Schley told Gammer
that the charge was frivolous and the complaint had been dropped; he also sent Gammer documents supporting his claims. A few days later, Gammer again contacted Schley to tell him that Microsoft was revoking the job offer. Schley had to immediately resell the home he purchased in Washington and was out of work for two years afterwards. He sued Microsoft.
The court threw out Schley’s claim that Microsoft broke an employment contract, because the job was to be at will. Because Microsoft had reserved the right to fire him at any time, the company had the legal right to revoke the offer. However, the court allowed Schley to bring his claim of promissory estoppel: Because he was promised the job and was encouraged to quit his job and buy a new home based on that promise, Microsoft might be legally liable for the damages he suffered as a result.
Schley v. Microsoft, Civ. No. 08-3589 (D. New Jersey, 2008).
Running Credit Checks
If an employer checks credit reports when hiring employees, it must follow the legal rules set out in the federal Fair Credit Reporting Act (FCRA). The FCRA requires employers to:
get the applicant’s consent before pulling the report
give the applicant a warning (along with a copy of the report received) if the employer plans to reject the applicant on the basis of the report, and
give the applicant an official adverse action notice if the employer does not hire him or her because of the contents of the report.
State Law Restrictions
The economic downturn of the last few years —and the resulting damage to credit reports and scores—have led many politicians to reconsider whether it’s really appropriate for employers to use credit reports in making hiring decisions. At least four states (Hawaii, Illinois, Oregon, and Washington) have passed laws prohibiting employers from pulling credit reports and/or using them to make hiring or other job decisions in most circumstances. According to the National Conference of State Legislatures (NCSL), about 20 states are currently considering similar legislation. To find out whether your state is among them, go to the NCSL’s detailed chart at www.ncsl.org.
If your state prohibits you from checking applicants’ credit reports or using their credit histories in your hiring decisions, you can’t do it. Even though the federal FCRA allows employers to consider credit reports, state laws that are more protective of employee rights trump the federal law.
Following the FCRA
If your state allows you to consider an applicant’s credit report in the hiring process, and you plan to do so, you must abide by the FCRA by getting the applicant’s consent, warning the applicant if you plan to reject him or her based on the report, and giving the applicant a final notice if you ultimately follow through with those plans.
The purpose of these rules is to ensure the accuracy of credit reports by letting consumers know when these reports are checked, whether the reports include disqualifying information, and how consumers can challenge incorrect entries. Investigations by public interest groups reveal that one-quarter to one-third of all credit reports include significant errors. Given these numbers—and how often credit reports are consulted by lenders, employers, and landlords—it makes sense that the law builds in a few consumer protections.
Get Written Consent
Before you request an applicant’s credit report, you must notify the applicant that you plan to do so and get the applicant’s written authorization. This notice and authorization must be set forth in a separate document that doesn’t include other information. In other words, it can’t be a section of your employment application.
Send a Pre-Adverse-Action Disclosure
Once you get the report, you may decide not to hire the applicant based on something in the report. In this situation, you must first send the applicant a notice stating that you plan to take this “adverse action” (deciding not to hire him or her). With your notice, you must include two documents: (1) a copy of the credit report, and (2) a copy of a notice from the Federal Trade Commission entitled “A Summary of Your Rights Under the Fair Credit Reporting Act,” which tells the applicant how to challenge any incorrect information in the report, among other things.
(The credit reporting agency that sent you the report should also give you a copy of the FTC’s Summary of Rights; if it doesn’t, you can find a copy at the FTC’s website, www.ftc.gov.)
Send an Adverse Action Notice
Once you have made a final decision not to hire the applicant based on information contained in the credit report, you must send the applicant another document called an “adverse action notice.” This notice explains that you are not hiring the applicant and provides some information on the applicant’s rights, including the right to dispute the accuracy of the report and the right to obtain an additional copy.
Many jobs around an office and in a business are perfect for younger workers. For example, if you need someone to photocopy documents for an hour or two a day, a high school student who comes in after school might be just what you are looking for. The student gets experience and extra pocket money, and your company gets someone who is willing to work just a few hours a week on the cheap.
The history of child labor in this country isn’t quite so benign, however. Children once worked long hours in hazardous jobs—such as manufacturing and mining—for very little money. They didn’t attend school, and they often suffered serious—even fatal—health problems.
To protect child workers, the federal and state governments passed laws regulating the type of work children can do, the number of hours they can work, and the types of businesses that can employ them.
Before you hire any worker younger than 18, you should check both federal and state law. We describe the federal law here. To find out about your state child labor law, contact your state department of labor.
The Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 2201 and following, is the federal law that governs child labor. Virtually all employees and businesses must follow the FLSA, although a handful of businesses, including small farms, are not required to. To find out about exceptions to FLSA requirements, refer to the website of the U.S. Department of Labor—the federal agency that enforces the FLSA—at www.dol.gov.
According to the U.S. Department of Labor, workers younger than 18 may never perform the following types of hazardous jobs (some exceptions are made for apprentices and students):
manufacturing or storing explosives
being an outside helper on a motor vehicle
coal or other mining
logging and sawmilling
anything involving power-driven, wood-working machines
anything involving exposure to radioactive substances and ionizing radiations
anything involving power-driven hoisting equipment
anything involving power-driven metal-forming, punching, and shearing machines
meat packing or processing (including anything involving power-driven meat slicing machines)
anything involving power-driven bakery machines
anything involving power-driven paper products machines
manufacturing brick, tile, and related products
anything involving power-driven circular saws, band saws, and guillotine shears
wrecking, demolition, and shipbreaking operations
roofing and work performed on or near roofs, including installing or working on antennas and rooftop appliances, and
Special rules apply to jobs that involve driving. As noted above, employees younger than 18 may not work as outside helpers on a vehicle. Employees who are not yet 17 also may not drive on public roads as part of their jobs. An employee who is at least 17 may drive on public roads as part of a job only if all of the following are true:
The driving takes place during daylight hours only.
The minor has a valid state driver’s license for the type of driving involved.
The minor has completed a driver education course and has no moving violations.
The vehicle weighs no more than 6,000 pounds.
The vehicle is equipped with seat belts (and the employer has told employees to use them when driving).
The driving is only occasional and incidental to the job, defined as taking up no more than a third of the workday and 20% of the minor’s total weekly hours.
Even if all of the above conditions are met, a 17-year-old is legally prohibited from driving:
a towing vehicle
any vehicle other than a car or truck
route deliveries or sales
to transport property, goods, or passengers for hire
to make urgent, time-sensitive deliveries (including pizza)
with more than three passengers, even if they are also employees
beyond a 30-mile radius from the workplace, or
more than two trips per day to deliver goods to customers or to transport passengers (other than other employees).
If you own or operate a farm or other type of agricultural business, the following child labor rules apply to you:
You may hire a worker who is 16 years or older for any work, whether hazardous or not, for unlimited hours.
You may hire a worker who is 14 or 15 years old for any nonhazardous work outside of school hours.
You may hire a worker who is 12 or 13 years old for any nonhazardous work outside of school hours if the child’s parents work on the same farm or if you have their written consent.
You may hire a worker who is ten or 11 years old if you’ve been granted a waiver by the U.S. Department of Labor to employ the youngster as a hand-harvest laborer for no more than eight weeks in any calendar year.
If you own or operate the farm, you can hire your own children to do any kind of work on the farm, regardless of their ages.
If you seek to hire a youngster for work that is nonagricultural, the following rules apply:
You may hire a worker who is 18 years or older for any job, hazardous or not, for unlimited hours.
A worker who will do job-related driving on public roads must be at least 17 years old, must have a valid driver’s license, and must not have any moving violations.
You may hire a worker who is 16 or 17 years old for any nonhazardous job, for unlimited hours.
You may hire a worker who is 14 or 15 years old outside school hours in various nonmanufacturing, nonmining, and nonhazardous jobs, but some restrictions apply. The teen cannot work more than three hours on a school day, 18 hours in a school week, eight hours on a nonschool day, or 40 hours in a nonschool week. Also, the work cannot begin before 7 a.m. or end after 7 p.m., except from June 1 through Labor Day, when evening hours are extended to 9 p.m.
When it comes to offer letters, keep them short and sweet. The same rules that apply to job interviews apply to offer letters: Stick to the facts and don’t make promises you can’t keep. Applicants might some day try to turn an offer letter into a contract that sets the terms and conditions of the job or limits your company’s right to fire or discipline them.
Avoid using language that makes promises or assurances about the employment relationship. For example, if you tell the applicant “We look forward to a long and happy relationship with you” or “We think you have a bright future at this company,” the applicant might assume that you’re offering more than the normal “at-will” employment—and that you won’t end the employment relationship without a good reason. If you want to fire the employee in the future, these words might come back to haunt you.
Similarly, don’t specify job duties, benefits, pay schedules, vacation/sick leave, or any other benefit you might want to change in the future. The employee might argue that your letter created a contract and try to hold the company to it.
So what can you say? You might want to:
congratulate the applicant
confirm the job title
name the applicant’s supervisor
state the starting salary, and
establish a start date.
In addition, if you haven’t or won’t offer the applicant a written contract for employment (the vast majority of employees don’t have written employment contracts), confirm in writing that employment is at will, meaning that there is no employment contract and you can fire the employee at any time for any reason that isn’t illegal.
For more about written employment contracts, see “Written Employment Contracts,” below. For more about at-will employment, see “At-Will Employment” in Chapter 4.
Written Employment Contracts
A written employment contract is a document that an employer and an employee sign, setting forth the terms of their relationship with each other. In addition to clearly describing what the employee is going to do for the employer (the job) and what the employer is going to do for the employee (the salary), the contract can address many other issues, including:
the duration of the job (for example, one year, two years, or indefinitely)
the specifics of the employee’s responsibilities
the employee’s benefits (for example, health insurance, vacation leave, or disability leave)
grounds for termination
limitations on the employee’s ability to compete with your company once the employee leaves
protection of company trade secrets and client lists
who will own the employee’s work product (for example, if the employee writes books or invents gadgets for your company), and
a method for resolving any disputes between the employee and the company.
Written employment contracts have distinct advantages and disadvantages that you should consider carefully before committing your company.
Employment contracts can make sense if you want or need to control the employee’s ability to quit. For example, if the employee is a high-level manager or executive, or if the employee is especially valuable to the company (such as the administrator who is the organizational backbone of the office), then a contract can protect the company against the sudden, unexpected loss of the employee. It can lock the employee into a specific term (for example, two years), or it can require the employee to provide enough notice to allow your company to find and train a suitable replacement.
Employment contracts can also protect your company if the employee will learn or have access to confidential and sensitive business information. You can insert confidentiality clauses into the contract that prevent the employee from disclosing this information or using it for personal gain. (For more on this topic, see “Nondisclosure Agreements” in Chapter 10.)
Similarly, a contract can prevent employees from competing against your company after they move on to other pursuits, at least in some states. (For more on this topic, see “Noncompete Agreements” in Chapter 10.)
Sometimes, you can use an employment contract as a way to entice a highly skilled individual to accept a job offer. Job security and beneficial terms often sweeten the deal enough for a highly desirable applicant who is on the fence to join your team.
Finally, an employment contract can give the company greater control over the employee. If you specify the standards for the employee’s performance and grounds for termination, you may have an easier time terminating an employee who doesn’t live up to those standards.
An employment contract is a two-way street: Just as the contract requires the worker to stay for a certain period of time, it limits your company’s right to fire the worker for the same period. Your company won’t have the ability to alter the terms of the employment as its business needs change. To alter the terms, you’ll have to renegotiate the contract and offer the employee some new benefit in exchange for the alteration to make the new agreement binding. And, no matter what you offer, the employee is free to reject any proposed new terms. These factors can make the renegotiation process time-consuming and complicated.
For example, let’s say you sign a two-year contract with a new employee. If, six months later, you decide you don’t need the employee after all, you can’t terminate the relationship. If you do, you will set your company up for a breach of contract lawsuit. Similarly, if you promised benefits in the contract, the company can’t stop paying for them before the term is up without breaching the contract and risking a lawsuit.
Another disadvantage of employment contracts is that they always contain an unwritten obligation, imposed by law, to deal fairly with the employee. In legal terms, this is called the “covenant of good faith and fair dealing.” If you treat an employee with whom you have signed a contract in a way that seems unfair, your company may end up in court.
Checklist: First-Day Paperwork
When your new hire shows up on the first day of work, there will be lots