August 10, 2005

A proactive approach to employment issues can pay substantial dividends in reduced legal challenges and associated costs. Many employers find that the best time to review and revise their employment practices is before a potentially costly and disruptive issue arises.

The following list highlights a few of the important issues employers should review as part of a comprehensive employment relations audit.

• Prohibition of Harassment and Discrimination
Ensure that an anti-harassment policy includes all forms of harassment, not just sexual harassment, and that the policy contains effective reporting and investigative procedures. The policy should also include a clear and direct anti-retaliation provision. The policy should be distributed to all employees upon hire and at periodic intervals thereafter, included in the employee handbook, and posted in prominent places.

• Exempt/Non-Exempt Status
Paying an employee a salary is not, by itself, enough to meet the exempt status tests under federal or state overtime laws. The regulations interpreting the Fair Labor Standards Act’s overtime exemption provisions were revised last year, as were the rules governing deductions from the salary of exempt employees. Employers should review the actual duties of all salaried employees to determine if they are appropriately classified as exempt. Further, employers should implement a policy which limits the types of deductions that can be made from an exempt employee’s salary. An employer should also have a procedure by which an exempt employee can challenge what he/she believes is an inappropriate deduction. Implementation of such a policy and procedure will enable an employer to take advantage of a “safe harbor” protection provided for in the new regulations.

• Independent Contractors
Merely paying an individual on a contract basis, or issuing a 1099, does not make the individual an independent contractor for purposes of state or federal law. The IRS and/or the Department of Labor may determine that an “independent contractor” is actually an employee subject to withholdings, overtime, etc. Further, Michigan’s workers’ compensation and unemployment laws apply different tests for determining if an individual is, in fact, an employee. Employers should therefore review the nature and scope of services rendered by “independent contractors” under the criteria established by for each of these areas.

• Employees with Disabilities
An employer is required to accommodate the disabilities of applicants and employees if doing so does not pose an undue hardship. An employer should ensure that it has, and follows, an appropriate policy that requires an interactive process with the employee to attempt to meet the employee’s needs. Employers with no-fault attendance policies must consider whether allowing employees time off may be a reasonable accommodation under certain circumstances.

• Separating Medical and Personnel Records
An employer is required to keep employee medical records separate from other personnel records. Employers should review personnel files and remove records relating to disabilities and accommodations, work-related injuries, fitness for duty examinations, physician notes or any other documents pertaining to an employee’s medical condition. An employer must maintain a separate file for each employee’s medical records.

• Pre-employment Inquiries
Whether in an interview or on an employment application, employers are prohibited from asking applicants particular questions. Application forms should be reviewed, and where necessary, revised. An employer should also ensure that all individuals responsible for interviewing applicants know what interview questions are prohibited.

• Notice Posting Requirements
Both federal and state regulations require employers to post notices in conspicuous places on a wide variety of state and federal laws (including the Uniformed Services Employment and Reemployment Rights Act (USERRA) discussed above. Employers should ensure that the proper notices are posted and updated as needed.

• FMLA
An employer’s obligations under the Family and Medical Leave Act begin before a leave commences and continue after an employee returns to work. Employers subject to the FMLA should ensure that they have a proper FMLA policy and understand and implement the corresponding procedural requirements. Employers with no-fault attendance policies must make an exception for FMLA related absences.

• Employee Handbooks
If the employer has adopted an employee handbook, it should be reviewed and revised as necessary to meet evolving business needs and to comply with changes in state and federal law. The revised handbook should be reissued and employees should be required to sign an acknowledgement of receipt. If the employer has not adopted an employee handbook, it should consider whether doing so would be beneficial to the company.

• Agreements with Employees
Employment contracts, confidentiality agreements, and non-compete agreements with employees should be reviewed and updated to address changing legal requirements, business practices, technology, and means of communication.

• Military Leave
With the extensive use of National Guard members and reservists in the active service, employers should review their policies and practices to ensure compliance with state and federal law with respect to military service (including the Uniformed Services Employment and Reemployment Rights Act (USERRA) discussed above). In general, an employee is entitled to a leave of absence for up to five years while engaged in military service, to reinstatement to the position he/she would have held if his/her employment was not interrupted by military service and to certain protection from termination after returning to work

• Verification of Eligibility for Employment
Employers are required to verify that their employees are either U.S. citizens or authorized for employment in the United States. The verification process requires employers complete an Immigration and Naturalization Services (INS) Form I-9 for every employee hired, based upon documents that establish both the employee’s identity and employment authorization. The documents that an employer can rely upon are listed on the form. The employee portion of the form must be completed when the employee starts work. The employer must complete the eligibility verification section within three business days of the employee’s start date, and must retain the completed forms for a specified period of time.

Dykema’s labor and employment attorneys are experienced in conducting comprehensive and cost-effective employment relations audits that help employers comply with both state and federal law and institute best practices in the areas of labor relations and human resource management. Please contact one of our attorneys to discuss the role an employment relations audit can play in your human resources department.