Professionals as Employers
PRESUMPTION OF EMPLOYMENT AT WILL
Unless you provide an employee with an employment contract that states otherwise, they are an “employee-at-will” under New York law. You may terminate an employee at will for ANY reason, NO reason, GOOD reason or BAD reason. There is NO WRONGFUL TERMINATION in New York.
STATUTORY EXCEPTIONS TO EMPLOYMENT AT WILL
Employment Discrimination Laws.
Employment discrimination is illegal under federal and state law. You are NOT subject to federal law unless you employ 15 or more people.
You may NOT take adverse action against an employee because of one or more protected classes including race (color), religion, sex (including pregnancy), national origin, age (NY law protects 18+; Federal law protects 40+), disability, marital status (NY law only), military status, sexual orientation/gender identity (NY law only), predisposing genetic characteristic, domestic violence victim or familial status. You also may NOT retaliate against any employee who makes a good faith complaint that they have been discriminated against because of any of these protected classes.
If you employ 15 or more people and your employee elects to proceed under federal law, he must file a charge of discrimination with the federal law enforcement agency (United States Equal Employment Opportunity Commission or EEOC) within 300 days from the date of the event that they want to challenge. The employee CANNOT file a lawsuit directly in federal court without receiving permission (known as a “right-to-sue” letter) from the EEOC.
If you are served with a charge of discrimination from the EEOC, get assistance from a qualified lawyer. Moreover, notify your general liability insurance carrier.
Remedies under federal law include back pay, reinstatement or front pay, compensatory damages (including emotional distress damages), punitive damages and attorneys’ fees. The amount of emotional distress and punitive damages are capped depending on the number of people you employ.
If you employ at least four people, but less than 15 people, you are covered by New York law. Employers who employ as few as one person can be liable for unlawful sexual harassment. Your employee can enforce New York law in one of two ways.
Your employee can file a charge of discrimination with the state law enforcement agency (New York State Division of Human Rights or DHR) within 365 days from the date of the event that they want to challenge; OR
Your employee can file a lawsuit in State Supreme Court within three years from the date of the event that they want to challenge.
If you are served with a charge of discrimination from the DHR, or are sued in State Supreme Court, get assistance from an experienced lawyer. Moreover, notify your general liability insurance carrier.
Remedies under New York law include back pay, reinstatement or front pay and compensatory damages (including emotional distress damages). Punitive damages are NOT permitted under New York law. Attorneys fees are NOT permitted except in cases where the employer is found liable for unlawful discrimination on account of sex. There is no cap on any damage award under New York law.
Other Selected New York Statutory Exceptions.
Whistleblower Law (Labor Law §740). Prohibits retaliation against an employee who discloses or threatens to disclose to his supervisor or to a public body an activity, policy or practice of the employer that is in violation of law, rule or regulation, which violation creates a present and substantial and specific danger to the public health or safety; or provides information to or testifies before any public body conducting an investigation, hearing or inquiry into such violation by such employer; or objects to or refuses to participate in any such activity policy or practice.
Legal Activities Law (N.Y. Labor Law §201-d). Prohibits discrimination against employees engaged in lawful recreational and political activities, or for using legal consumable products outside work hours (e.g., smoking cigarettes), off work premises and without using the employer’s equipment.
Labor Law §201-c. Forbids discrimination in matters connected with child care. It does not require employers to provide specific leave periods, but it does require that employees who need child care leave be treated equally under the employer’s leave policies. In addition, employers who provide leave for sickness or disability or for the birth of a child must allow their male and female employees to take leave for the adoption of a child.
CPLR §5252. Forbids adverse action against an employee because one or more wage assignments or income executions have been served upon the employer or because of pendency of any action or judgment against the employee for non-payment of any alleged contractual obligation.
Civil Rights Law §47-a. Forbids an employer to deny equal opportunity employment to a blind or deaf person unless it can be clearly shown that the disability prevents such person from performing the particular job. Equal opportunity may also not be denied because a person is accompanied by a guide dog.
Judiciary Law §519. Forbids an employer to take adverse action against any person summoned to serve as a juror if the employee notifies his or her employer of the duty prior to the commencement of the term of jury service.
Labor Law §215. Forbids an employer to take adverse action against any employee who reports a labor law violation.
Labor Law §662. Forbids an employer from taking adverse action against an employee for complaining that he or she has not been paid in accordance with the minimum wage act or for testifying in a proceeding under the act or for causing such a proceeding to be instituted.
Military Law §§251-252. Forbids a person from willfully depriving a member of the military of his employment or prospective employment. It also forbids a person to dissuade anyone from enlisting in the military by threat of injury in respect to his employment. Forbids discrimination against members of an organized militia.
Penal Law §215.14. Forbids an employer from taking adverse action against an employee who is summoned to appear as a witness in a criminal trial or who must testify as a victim in a criminal trial, if the employee gives the employer advance notice of his absence.
Workers Compensation Law §120. Forbids an employer to take adverse action against an employee for filing a compensation claim or for testifying in a compensation proceeding.
Workers Compensation Law §241. Makes this section also applicable to disability benefits claim.
COMMON LAW EXCEPTIONS TO EMPLOYMENT AT WILL
Exception Implied by Certain Facts (Weiner v. McGraw Hill, 57 N.Y.2d 458 ) such as a poorly written Employee Handbook/Manual.
Exception Implied by Law (Weider v. Skala, 80 N.Y.2d 628 )
“At-will” associate attorney sued his law firm after he was fired. He claimed that he was fired because he asked the partners of his firm to report the misconduct of a fellow associate to the Disciplinary Committee. He cited his obligation under the Disciplinary Rules [“DR”] to report conduct “that raises a substantial question as to another lawyer’s honesty, trustworthiness or fitness” (DR 1-103 [A]).
Court carved out “implied by law” exception to the employment at will rule. Court noted that Weider and the firm were engaged in a “common enterprise,” that is, the practice of law and BOTH were bound by the DR. The very reason for Weider’s association with the firm was to provide legal services to the firm’s clients. The Court noted that Weider risked suspension and disbarment by NOT complying with the DR.
MANDATORY NOTICES & RECORD KEEPING REQUIREMENTS
Notices Concerning Pay and Required Employee Benefits
Rate of Pay and Regular Pay Day. Employers must notify an employee at the time of hiring of the rate of pay and of the regular pay day designated by the employer. The employer must notify his employees of any changes in the pay days before the time of such changes. The employer must furnish each employee with a statement with every payment of wages, listing gross wages, deductions and net wages, and upon the request of an employee furnish an explanation of how such wages were computed (Labor Law § 195 -)
Workers’ Compensation [“WC”]. You must cover all employees. If you are an owner, you may be permitted to exempt yourself. You must post a notice confirming you have WC coverage.
Short Term Disability [“STD”]. STD benefit is 50% of the employee’s usual weekly wage but NOT more than $170/week. This benefit lasts for 26 weeks after a one week waiting period and is taxable. You must post a notice confirming you have STD coverage.
Unemployment Insurance. This is required by state law. There is no notice that you need to post.
Social Security Contribution. This is required by federal law. There is no notice that you must post.
Upon termination of employment, an employer MUST notify an employee, in writing, of the exact date of such termination and the exact date of cancellation of employee benefits connected with such termination. The notice must be provided NOT LATER THAN five working days after the date of termination (Labor Law § 195 ).
Notices Concerning Voluntary Employee Benefits
Health Insurance. Employers are NOT required to provide health insurance coverage. If they do so, they do not have to pay the entire cost for the coverage. If you require an employee to contribute to the cost for this insurance, be careful about how you handle deductions from their wages. NEW YORK LAW IS VERY STRICT ABOUT WHETHER, EVEN WITH YOUR EMPLOYEE’S CONSENT, YOU CAN MAKE ANY WITHHOLDING FROM AN EMPLOYEE’S WAGES.
If health insurance coverage is provided, the carrier ordinarily provides the required notices. Upon termination of employment, check with the carrier to see whether the employee may have the opportunity to continue coverage, AT THEIR COST, under COBRA.
Some departing employees are eligible for “affordable” health insurance coverage under a federal law known as the Affordable Care Act. Residents of New York can learn more by visiting http://nystateofhealth.ny.gov
There is an open enrollment period for this type of health insurance. An employee who loses employer provided health insurance because, for example, they were not able to return to work due to disability, they may be able to secure health insurance coverage in a 60 day “special enrollment period” even if the general enrollment period is over.
You should counsel your employees about accepting continued health insurance coverage from you under COBRA. If they accept continued health insurance from you under COBRA, they might not be able to get heath insurance under the Affordable Care Act when the COBRA payments end if it is not in an open enrollment period.
Long Term Disability [“LTD”] Insurance. Employers are NOT required to provide LTD coverage to your employees.
Paid Time Off (Vacation, Sick, Holidays). Employers are NOT required to provide paid time off for their employees. If you do, you MUST have a written policy and MUST follow that policy consistently. The Department of Labor and courts generally frown on any policy which results in a forfeiture of “accrued” time off.
Upon termination of employment, an employer MUST notify an employee, in writing, of the exact date of such termination and the exact date of cancellation of employee benefits connected with such termination. The notice must be provided NOT LATER THAN five working days after the date of termination.
Record Keeping Requirements
Labor Law § 195 provides that every employer must “establish, maintain and preserve for not less than three years payroll records showing the hours worked, gross wages, deductions and net wages for each employee” (Labor Law 195 ).
Federal law requires that you verify the identity of all employees and that they are authorized to work in the United States (better known as immigration form I-9). Every employer must maintain copies of the I-9 form for at least three years after the employee is hired or one year after the employee separates from employment, whichever period is longer (8 U.S.C. § 1324a [b]).
Workers’ Compensation Law § 110 (1) requires all employers to maintain injury report forms (better known as Employer Injury Report C-2) for 18 years from the date of the work-related injury.
WAGE & HOUR ISSUES: EXEMPT v. NON-EXEMPT
The Rules Have Changed
On August 23, 2004, new regulations interpreting the overtime provisions of the Fair Labor Standards Act [“FLSA”] took effect. The FLSA applies to an employer engaged in “interstate commerce” (that means YOU, remember law school . . .) AND whose “annual gross volume of . . . business done is not less than $500,000” (let’s hope that applies to you).
There has been a FLOOD of litigation about whether employers, including professional service providers, have properly characterized one or more of their employees as exempt from the minimum wage and overtime protections contained in the FLSA.
Stated simply, employers are EXEMPT from complying with the minimum wage and overtime protections contained in the FLSA for employees who are employed in a bona fide:
- Professional; or
- Outside Sales Capacity.
Salary Level Test. As a general rule, any employee whom you pay less than a certain amount identified in state and federal law is AUTOMATICALLY entitled to be paid for all hours worked more than 40 at the rate of one and one-half times their usual rate. As a general rule, any employee whom you pay $100K or MORE is NOT entitled to overtime protection.
Salary Basis Test. As a general rule, any “salaried” employee will be entitled to overtime protection if the employer treats them like an “hourly” employee by making one or more unlawful deductions from their usual salary (e.g., deduction of a day of pay when the employer’s office was closed for part of a day due to inclement weather).
Duties Test. For each of the recognized “white collar” exemptions found in the FLSA (Executive, Administrative, Professional or Outside Sales Capacity) there is a specific duties “test” to determine whether the employee qualifies for the exemption.
SOME VALUABLE WRITTEN POLICIES TO IMPLEMENT
Anti-Harassment Policy. This policy is critical if there is alleged sexual or other form of unlawful harassment (e.g., religious based).
Client/Patient Confidentiality. You cannot remind your employees enough about the importance of client confidentiality.
Internet, Social Media & E-Mail Usage. Improper use of the internet, social media or e-mail can harm your credibility, disclose client confidences or subject you to liability.
Confirmation of Employment at Will/Standards of Conduct/Equal Employment Opportunity. Employment at will is an employer’s best friend. It never hurts to confirm it clearly.
HOW TO REDUCE THE RISK OF A LAWSUIT BEFORE TERMINATION
Performance appraisals are essential to properly evaluate and compensate your employees. Further, they provide the documentary basis to defend discrimination lawsuits.
Common Problems Involving Performance Appraisals.
Inflation. Too complimentary to be of any use. In fact, they may make defending your employment decisions even more difficult.
Generalizations. Subjective vs. Objective Criticisms. Stereotypes.
Communication. Must communicate to the employee the results of the performance appraisal. Employees should read and sign their performance appraisals.
Promises. Be careful concerning what if any promises are made at review time.
Personnel Decisions Cannot be Ignored or Delayed. Make tough personnel decision when they need to be made. Tough decisions do not get easier with time, they only get harder. Do not delay the inevitable. Problems do not go away.
Personnel Files. You must be prepared to prove objectively, by testimony and written documentation, the reasons for every personnel decision you make. Personnel file should provide a history documenting all problems with the employee.
Oral reprimands. Supervisors should make notes to file with dates.
Written reprimands. Factual and specific. Who, what, when, where and why. Should be reviewed by someone other than the supervisor. Should discuss what the employees past performance was, is now and what is expected in the future. Employees must see written reprimand and be given an opportunity to respond and sign. If the employee refuses to sign the reprimand it should be noted on the form.
Unwritten Progressive Discipline Policy. Progressive discipline is the most successful basis upon which to terminate; however, formal written progressive discipline policies should not be required as part of personnel procedures.
Questions to Ask Before Terminating an Employee.
- Why is the employee being terminated?
- What did the employee do or not do?
- Could the employee’s conduct be classified as serious misconduct?
- Was it a violation of a rule or policy?
- Was the employee aware of the rule or policy?
- If it is a failure of performance, can management explain the level of performance expected?
- Was the employee aware that his or her performance was not meeting the required standards?
- Was the employee given the opportunity to correct his or her performance?
- Do you have all the necessary information to make an informed decision?
- Have those facts been reduced to writing?
- Has the employee in question been interviewed and given an opportunity to provide an explanation?
- Is the supervisor reporting the information reliable?
- Is the supervisor considered to be fair and objective?
- Does the employer have documentary proof and witnesses to support its reasons for discharging the employee?
- Is the employee’s personnel file complete?
- Does the employee’s personnel file reveal the complaint, infraction or unsatisfactory job performance?
- Is the termination or disciplinary action proposed fair and reasonable?
- Are the reasons advanced by management for the termination free of taint of unlawful discriminatory motives or reasons that would otherwise violate an applicable law?
- Does the rule violated, although neutral on its face, impact in a disproportionate way, on a group because of its age, sex, race or national origin?
- Is the individual receiving the same treatment as others in similar circumstances?
- Do you have examples of other employees who have been treated similarly?
- Are their extenuating circumstances in the case?
- What is the employee’s prior employment record and length of service?
- Has progressive discipline been used where applicable?
- Are there any contracts involved?
- Is there an employee handbook or manual that was given to the employee which creates any obligations for the employer?
- Are there any smoking guns or issues presenting a particularly difficult problem for the employer?
- Is the employee a member of a protected class or are there other circumstances which would create serious questions involving discrimination?
- Have any other employees or supervisors been involved in disputes with this employee which would create a problem for the employer?
THE RIGHT WAY TO DISCHARGE AN EMPLOYEE.
Discharge From Employment is a Process, Not Just an Event. Have an unwritten progressive discipline procedure in place and use it.
Document the Personnel File. Do so in an objective manner. The personal feelings of the writer whether antagonistic or sympathetic should not be apparent or even suggested by a reading of the personnel file.
Plan for the Discharge Meeting. Prepare an agenda for the discharge meeting and stick to it. Prepare for the notification meeting and coordinate the logistics. Time, location, and person who will notify employee designated. Private office, room prepared. Severance agreement, if appropriate, prepared in advance in writing. Scripts prepared (to deliver to employee to be terminated/other employees). Transition of work responsibilities determined. Decision whether to controvert unemployment insurance claim.
Meeting With the Employee
Advise the employee of the decision and the terms of severance and conclude the meeting. Have at least one other person present. Don’t allow the meeting to degenerate into an argument over the grounds for termination. Don’t give false reasons (e.g., our revenues are down) for the termination in an effort to be “nice.”
In appropriate circumstances, you may consider providing some severance in exchange for a written release from the employee.
Consider whether the employer should advise other employees of the discharge. If so, only employees who need to know should be advised of the termination to minimize the risk of defamation lawsuits.
Treat the discharged employee with courtesy and respect. However, you should not permit the discharged employee to have free access to his or her office or work area following termination.
ISSUES INVOLVING THE USE OF A WAIVER & RELEASE
When should a Waiver and Release be used? When the employer anticipates a potential claim of discrimination or an individual is in a protected class and the circumstances
resulting in the employee’s termination would create sympathy for the employee with the jury. However, the employer must be willing to offer sufficient consideration to entice
the employee to sign the release.
What Elements Must it Contain to be Enforceable? Best practice is to give the employee at least 21 days to consider the Release and seven days to revoke the Release after signing. You should advise the employee that they should consult with an attorney before signing the Release. You must provide consideration for the Release beyond what you are legally obligated to do (e.g., you cannot require the employee to sign a Release as a condition to receiving accrued vacation time).
What other provisions should the Release address to protect the employer?
- It should specify the payments which will be made to the employee regardless of whether he or she signs the Release.
- It should discuss the effect the termination will have on the employee’s benefits.
- It should prohibit the employee from thereafter seeking or applying for employment with the company.
- It should contain a non-disclosure provision, especially as related to client information and confidences.
- It should require that the employee return all company property and materials.
- It should address the reference policy of the company.
- It should require the employee to pay back to the company the severance pay if the employee attempts to overturn the release and is unsuccessful.
Those other employees who need to know, should be told the truth. If different reasons are given for an employee’s termination it will appear as though the employer fabricated the reasons for the employee’s termination or is trying to hide something.
What About Job References? There is no such thing as an off the record conversation. For reference purposes an employer should only inform the prospective employer of the dates of employment and position held. Defamation actions are a real possibility if more than this essential information is shared.
What do you tell the Department of Labor & do you contest the unemployment insurance [“UI”] claim?
An employee is generally entitled to UI unless he or she: (1) left employment voluntarily; or (2) was fired for misconduct within the meaning of the law.
Misconduct means intentional bad behavior. It does NOT mean a simple failure to perform the job properly. As UI is generally limited to 26 weeks, most Judges are employee oriented.
Challenging a UI claim often creates more ill will than it is worth. If you go to a hearing to challenge the application, you will have to testify under oath. This sworn testimony could be used against you later. DO NOT controvert unless there is a compelling reason to do so.