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Talent Management Perspectives

Published March 2010

Guidelines to Help Your Company Avoid Legal Troubles

  Christa Rapoport

Forced to do more with less in these difficult financial times, HR managers must cope with issues such as layoffs and wage and hiring freezes. This environment makes it easy for smaller companies or those with lean HR staffs to take their eye off the ball where proper legal employment practices are concerned.

When it comes to employment law compliance, there can be a lot of moving parts. But if companies take the right steps to stay on top of regulation changes and are mindful of the following tips, they can avoid messy legal troubles. Here are some areas that create the greatest potential legal problems for HR managers.

Uptick in government enforcement activity: The Obama administration has upped the ante on compliance for all businesses. In January 2009, President Obama signed the first piece of legislation of his administration: the Lilly Ledbetter Fair Pay Act of 2009. The EEOC's enforcement position is now to vigorously enforce the act and, as a consequence, it has reopened more than 1,000 closed cases.

The EEOC position asserts that each paycheck that contains discriminatory compensation is a separate violation regardless of when the discrimination began. The act contains an explicit retroactivity provision allowing claims based on events that may have occurred many years ago.

The first step every HR manager should take is to spend time examining the revised EEOC Compliance Manual .

Discrimination: Discrimination in the workplace does not have to result from an active action; it applies in certain passive cases too. For example, diversity is a positive force, but it can lead to discomfort when a person differs substantially from their fellow employees. It's then possible for some employees to subconsciously avoid the "odd" person, which can then lead to that person failing to receive deserved pay increases or promotions. To avoid falling into that trap, HR managers should take a look at merit increases and promotion requests from a 50,000-foot level.

Expensive lawsuits may be filed against a company for discrimination claims based on a broad spectrum of assertions, including when people are systemically passed up in favor of their counterparts of another race, religion or gender. At one company, persons of Middle Eastern decent complained of this to senior management and were ignored. A jury awarded the plaintiffs $50 million in punitive damages and $11 million in compensatory damages.

Job descriptions: Job descriptions present a less obvious — but equally dangerous — hazard. The problem here is that companies often fail to set proper expectations for employees.

In one case, an accounting firm expected that all employees would work overtime during the tax season. The job description for these employees listed specific educational and experience requirements, but was completely silent about the tax season time commitment. For example, if that firm hired a pregnant woman who gave birth during the tax season and then refused to work more than 40 hours a week after her maternity leave, and the firm fired the woman due to inadequate hours, it would create a significant legal problem: pregnancy discrimination exacerbated by improper termination.

Putting this in numerical context, a major liability insurance company reported that nearly 50 percent of claims arise out of improper reassignments and terminations.

Fair Labor Standards Act status: Class actions in the Fair Labor Standards Act (FLSA) arena continue to grow. Companies with 500 to 2,000 employees may be vulnerable. The FLSA sets basic standards for minimum wage and overtime pay and requires employers to pay non-exempt employees at least minimum wage and overtime pay of 1.5 times the regular rate.      

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