Legal compliance in HR issues should be a top priority for every business.
Whether it is not providing an employee handbook, taking the proper precautions to protect employees' personal data, or following proper protocol during the hiring and firing processes, businesses that don't follow the letter of the law are opening themselves up to a mountain of trouble.
As LegalZoom's general counsel since 2003, Chas Rampenthal has a unique insight into what businesses face from an HR and legal standpoint. In his role, Rampenthal leads LegalZoom's initiatives for legal, government relations and corporate development (such as contracts, mergers and acquisitions), and investment projects. He also oversees the company's portfolio of legal products, with a focus on product quality.
Before joining LegalZoom, Rampenthal was a partner at Belanger and Rampenthal LLC, as well as an associate at Testa, Hurwitz & Thibeault LLP and Thelen Reid & Priest LLP.
We recently had a chance to speak with Rampenthal about a variety of HR issues, including why employee handbooks are important, what should be included in them, and how to ensure you don't open yourself up to a legal issue when hiring and firing employees. In addition, we asked him some rapid-fire questions about technology, his career and advice he has received over the years.
Q: Why do small businesses need an employee handbook? What benefits does it provide?
A: Employers of any size should have an employee handbook, whether they're a company with a handful of employees or thousands. A comprehensive document of company policies and expected codes of conduct can resolve disputes before they arise and protect not only the company but also employees from any legal issues. If an employer does find themselves in a lawsuit with an employee, a handbook can be an effective piece of evidence to submit.
Aside from protection from legal issues, handbooks can showcase a company's overall mission, values and culture, while also serving as a guide for what's expected of employees and the different benefits offered to them by the company and government. Recent research from LegalZoom uncovered that as many as 1 in 13 people don't know what resources are available to them in their current job. Employee handbooks can provide that information and more all in one place.
Handbooks also let employees know who they can turn to with concerns or questions, and how to safely and confidentially report any sensitive issues. The same LegalZoom research report found that less than a quarter (24 percent) of employees have a way to anonymously submit a complaint. A well-crafted employee handbook should include the course of action for reporting complaints and help alleviate any employee uncertainty.
It's important for every business to have an employee handbook to not only provide clear and accessible company information to their employees, but also protect themselves from potential legal issues.
Q: When creating an employee handbook, what are the key items it must contain to ensure you aren't putting your business in any type of legal jeopardy?
A: The key items are:
- Rights and obligations under federal, state, and local employment laws. It's critical to sufficiently detail the applicable rights and obligations of the employee and company, pursuant to federal, state and local employment laws. If a business has employees in more than one state, handbooks will likely need to be adjusted for each state with employees.
Important handbook information includes equal employment and nondiscrimination policies, workers' compensation, and unemployment insurance. The Department of Labor provides a comprehensive federal resource for these specific laws.
- PTO policy. Not only should a handbook outline a company's vacation policy, including how vacation time is earned and whether unused days carry over into new fiscal years, but it should also explain how to schedule time off and vacation days.
A section covering paid time off policies is also a good place to discuss related topics like sick leave, holidays observed by the company, and less common instances like parental leave, family medical leave and leave for military service.
- Employee behavior. There are basics to cover here, like an attendance policy and meal breaks or rest periods, but handbook policies around employee behavior can also describe everything from dress codes to expectations about keeping your personal desk area clean.
Maybe most importantly when defining proper employee behavior is addressing company policies around harassment and anti-discrimination. Outlining clear policies for issues such as office harassment or discrimination can help protect an employer from the actions of any offending employees and provide those on the receiving end of such behavior with guidance to help them alert the company. Be sure to include guidance on conflict resolution and information about where to seek help or file a complaint should the harassment persist.
- Payroll information. It's important to spell out the payment cycle for employees. This includes whether they're paid on a weekly or biweekly basis, direct deposit options, and other items like overtime eligibility and pay grade structure.
Employers should make it clear that the employee handbook is not an employment contract and does not guarantee employment for any set amount of time. Employers should also specify that their policies are subject to change due to changes in the law or changed company procedures or benefits.
Q: How do you go about ensuring your employees understand what is in the employee handbook?
A: It's tough to make sure an employee actually remembers everything in the handbook. A new employee may read an employee handbook on their first day and never think about it again unless a problem arises.
It's smart for employers to obtain a written agreement to handbook policies by requiring a signature on an employee acknowledgment page. The signature proves an employee has read and understands the policies outlined within the handbook.
The acknowledgment should state that the employee understands it is their responsibility to follow the outlined policies. In addition, important employee policies should be reinforced with in-person or online training – some of which is mandated by law.
Q: Employers keep a lot of records on their employees. What steps should small businesses be taking to protect their employees' privacy?
A: Employers have a huge responsibility to protect their employees' personal information. This can be a challenge for a small business that doesn't have the same resources as a large company. Doing nothing is not an option – even very small employers should plan to take it one step at a time and follow a reasonable plan.
At a minimum, employers should have a system in place in the form of password-protected software for electronic data. From there, employers must limit who has access to those e-files. Privacy laws, including employee privacy, are complicated and changing rapidly, and employers may want to consult an attorney on the topic.
As an added benefit to protect employees' personal information, some businesses are offering financial wellness programs that include credit monitoring and identity theft protection.
Q: What are the legal pitfalls that small business can run into when interviewing and hiring new employees?
A: First and most importantly, a business must have an Employer Identification Number (EIN) before hiring any employees. The IRS requires the unique nine-digit number for tax purposes.
Also important is an accurate job description laying out all expectations. Companies should make sure all participants in the hiring process are trained on appropriate questions. No hiring decisions should be made based on discriminatory criteria, and interviewers should avoid questions that would elicit information about a person's race, health, religion, gender, etc.
Once a hire is made, employers will need to report the new hire to their state's labor agency. From there, businesses must require any new hires to fill out all the required federal legal and tax documents like I-9, W-4 and other forms. There also may be tax withholding forms from the local government in which a business operates. It's important to look into those as well when onboarding a new employee. To protect both employer and employee, businesses should have an employment contract listing the exact terms of employment.
Something else to keep in mind is obtaining workers' compensation insurance. Requirements vary from state to state, but most states require insurance.
Another technicality that can trip up business owners is properly classifying employees for purposes of overtime laws. Improper classification is one of the biggest issues plaguing companies across the country. Misclassification not only puts businesses in potential legal hot water but opens them up to financial consequences.
Q: When firing an employee, what steps should small businesses take to make sure they are protected from a legal standpoint?
A: There are some situations that call for immediate termination, like stealing company assets for personal gain or a safety issue like a physically abusive employee. It is in instances like these where employee handbooks are helpful in avoiding wrongful termination lawsuits.
If you are a bit behind on your handbook, be sure to speak with a good lawyer before making a knee-jerk decision to fire. When it is necessary, be sure to gather all your facts and create a record that you can access in case of a lawsuit. If law enforcement is involved, or should be, make sure that you cooperate fully with any investigation.
In other instances of termination, like for attendance or performance, it is good practice to take additional steps before letting an employee go. First, employers must document any policy violations or poor performance. When it comes to not meeting sales quotas or lacking attention to detail, a conversation will not suffice. Any issues should be in writing and acknowledged by the employee in question. It can also be helpful to provide employees with improvement plans or put them on notice. This can eliminate any claims from terminated employees that they didn't know they were doing anything wrong.
Finally, set up a private termination meeting and be brief. It is best to make it as painless as possible for both parties. Be sure to touch upon final pay and benefits information in this meeting too.
Q: Should small businesses conduct HR compliance audits to ensure they aren't missing any key policies? How often should these audits be conducted?
A: Routine HR compliance audits can help business avoid HR headaches, but for small businesses, this may not be an option. That doesn't mean they are exempt from conducting them. There are plenty of steps small businesses can take to complete audits on their own, like adjusting the scope of the audit to tackle different aspects of HR compliance, such as payroll and tax documents or nondiscriminatory hiring practices.
When looking for very specific points, an audit for a small business can take as little as a couple of hours. Small companies can also get by with sharing their audit results in a meeting with owners, top managers and HR, whereas large companies typically compile HR audits into large reports.
Q: What piece of technology could you not live without?
A: Personally, it is a smartphone. It might seem obvious, but being able to access email, files, my calendar and other important information allows us all to be more effective and efficient wherever we happen to be.
I tend to travel a lot, so having that in the palm of my hand changes the game. It also lets me keep in touch with my family when I am away. With video chat capability, I can talk to my children, ask about their day and connect with my family even when I am away, or things are hectic.
Q: What is the best piece of career advice you have ever been given?
A: Before I became a lawyer, when I was in Aviation Officer Candidate School in the Navy, the head drill instructor, a salty Marine master gunnery sergeant, told me and several of my classmates, "Don't worry about getting everything perfect. It all won't be. Worry about the things that might keep the sun from coming up for you tomorrow – that's worth your worry. That's worth perfection."
At the time, I don't think I got it. Later, when I was flying, it started to make sense. Even later, as a new lawyer, the pressure to make everything perfect is enormous. But it shouldn't be. What we do is extremely important and deserves our best efforts. But it can't be perfect, so killing yourself chasing that dragon is almost never necessary.
A close second was when a friend told me to enjoy law school; to make friends and build relationships. Sure, grades are important, but once you are out of school, your class friends will end up being the foundation of your professional career. In general, this is true; being able to get along with people goes a long way to building trust, whether with a potential client, your CEO, a partner or a junior associate.
Q: What's the best book or blog you've read recently?
A: I don't really focus on one particular blog. I do end up on a few legal blogs through Twitter. Jae Um's Twitter feed is particularly insightful, as are her musings on her Six Parsecs site (not really a blog, though).
I like Mark Cohen's Legal Mosaic, Jordan Furlong's Law21 and a few others. I tend to take "legal futurists" with a grain of salt and focus on – I guess you would call them "present-ists" – the people that are talking about what the legal profession should be doing now, not in 10 years. It is a lot more fun talking about next month than a few years from now.
Q: What's the biggest risk you've taken professionally? Did it pay off?
A: I really liked being a pilot. It had a great balance of science and art. When I decided to change it up and go to law school in my late 20s, it was a gamble. Lawyers tend to be risk-averse, so jumping from firm life to LegalZoom was a risk, even if it was calculated.
When I joined in 2003, the company only had 40 employees. We had no idea that it would take off like it did. Fifteen years later and I am a part of a company I love, with a mission I care deeply about. I feel extremely fortunate for sure. Payoff? I guess I'll have to let you know, but it's looking pretty amazing so far.