Common HR nightmares employers can avoid


Human resources can seem rather simple on the surface, but errors like misclassifying workers and mishandling overtime wages can lead to a host of legal nightmares. (Melina Mara/THE WASHINGTON POST)
January 12, 2012

Hirings and firings, classifications and investigations — while they may not be the most exciting parts of the job, they’re among the most critical responsibilities for any business owner. Unfortunately, human resources can also create a ton of headaches for employers.

“HR is about more than a manual, more than classes and training,” Chas Rampenthal, general counsel for online legal services firm LegalZoom, said in an interview. “We think of it as a living, breathing organism that works inside the culture of the company. Business owners need to have the proper policies in place, and they have to manage and enforce those policies.”

But that can prove difficult, as the rules and regulations governing employers are typically complex and constantly evolving. HR laws can also vary widely from state to state, so what works in Wisconsin may not necessarily fly in Florida or New York.

Still, the legal problems most business owners encounter tend to fit into one of five areas, no matter where their companies call home, according to Rampenthal. In order to minimize headaches and keep their firms running smoothly, he advises employers to avoid these common HR mistakes.

Worker misclassification: Employee or independent contractor? On the surface, the question seems rather simple, but it represents one the “stickiest issues” for business owners across the country, Rampenthal said. “Employers who improperly classify workers can run into serious penalties with regards to taxes, withholdings and overtime wages,” he said. The good news is the federal government has set national standards, and some of the key factors to consider are whether the employer has control over the individual’s work and provides him or her with the materials or tools needed to complete that work. If so, the worker will likely be deemed an employee, rather than a contractor.

Overtime pay problems: One of the areas in which the rules vary greatly from state-to-state is overtime pay. In California, for instance, employees must receive overtime pay not only when they work more than 40 hours per week, but also when they work more than eight hours per day. Most states, on the other hand, set their limits solely on a weekly basis. “One of my friends runs an auto shop in California, and his employees asked if they could work 10 hours a day for four days a week, giving them a 40-hour workweek but a long weekend,” Rampenthal said. “He told them sure, and then three years later, he got sued by one of those employees and had to pay back a ton of overtime for making them work more than eight hours a day. That’s where you have to be careful with HR laws.”

Break mistakes: Employers can actually run into trouble if employees choose to stick around the workplace during their breaks. “I knew a manager at the Gap who would force employees to leave the store during their breaks,” Rampenthal said. “Some would want to shop for those 15 minutes, but when customers came up to them with questions, naturally, they would help them find what they needed. Well, employers can get in trouble for that, because their workers aren’t taking proper breaks.” The same rule applies to workers who prefer to eat lunch at their desks while browsing the Web, as they could later claim to have been working during their scheduled breaks. Conservative solutions to the problem include creating break rooms where no work is allowed or, like at the Gap, requiring employees to leave the premises for their entire break.

Firing foul-ups: “Many business owners have firing procedures, but most don’t actually follow them,” Rampenthal said. “And if you’re not going to follow them, it’s almost better not to have a procedure at all.” He added that employers sometimes make firing decisions based on gut reactions or emotions; however, employment lawyers can look back to see whether policies that business owners themselves put in place were carried out appropriately before a firing was executed. “You can’t put an evaluation and review process in place and then just fire someone despite the fact they have A-pluses across the board on recent performance reviews,” he said, noting that extraordinary circumstances like employee theft make for exceptions. “Generally, you must have a firing process and you must follow that process equally for all employers.”

Discrimination and harassment unpreparedness: Harassment problems can spring up in just about any workplace, and it’s vital that business owners prepare for such situations before they happen, not afterward. According to Rampenthal, internal investigations can prove sufficient for certain small companies and for relatively less serious complaints, but once a company grows beyond 50 or so employees, or once a serious accusation has been made, business owners should seek outside help from HR professionals to sort out the problem. Employers also need to familiarize themselves with which classes of individuals have certain discrimination protections under the law, which on a federal level includes gender and racial classes. However, there is some variation from state to state, for instance, additional classes have been established in several states to protect against discrimination or harassment based on sexual orientation.

Follow On Small Business and J.D. Harrison .

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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