Texas Employer Handbook

Insight on Employment Law for Texas Businesses

Should I Give References After Separation?

Posted in Quick Questions

Periodically, an employer will ask about giving references for an employee.  Some feel compelled to provide at least a neutral review, others feel that they have to protect the world from making the same bad decision they did.  Still others think it is the “law” to provide the dates of employment and whether the person was eligible for rehire.

Bad ReferenceSo, what is the best advice?  Don’t return the call.  Or, if you happen to get stuck on the phone with someone asking for a reference, simply say “We do not provide references” and hang up.

Why?  Well, that’s a different question.  It is all about managing risk.  If you provide a reference and it is not sufficiently glowing, your former employee may sue you.  You could have told the absolute truth, but who, other than you and this stranger on the phone, really knows what you said?

And, what if that stranger is really the friend of a former employee with a recorder?  Think about it.  If you left a job under questionable circumstances, or even good circumstances, you may want to know what kind of a reference your former boss will provide.  Wouldn’t it make sense to have a friend call from “Vandalay Industries” (hopefully you get the Seinfeld reference) and ask for a reference?  Sure.  And, if you suspect your former boss has a particularly hateful view of you that is not necessarily accurate, wouldn’t you record it?  Darn right.  In fact, this exact situation happened to one of my clients.  They got sued and spent thousands having me defend a basically meritless claim only to settle for a few thousand dollars to cut off the legal expense.  Ouch!

If you don’t provide a reference, you have zero risk of this type of claim.  Given that the reward for providing a reference is basically nothing, this seems like the smart path.

Now, what if you want to be really sneaky?  Give that poor performing employee a glowing reference to get them a job quick so they will get off the unemployment rolls.  This path is also fraught with danger.  A Texas medical group did just that with a former nurse that provided dangerously poor patient care.  She was given a glowing recommendation and quickly snatched up by the new group.  Then she darn near killed a patient.

During the medical malpractice lawsuit against the nurse’s new employer, the injured patient obtained the personnel file for her from the original medical group.  As part of the legal process the file was provided to the new employer who went through the roof!  Then, they filed a cross-claim against the former employer for fraud and negligent misrepresentation.  I guess that approach doesn’t work either.

I realize it is counter to the system of cooperation between employers, but maybe my advice isn’t so bad after all.  If you tell the truth, you can get sued.  If you tell a lie, you can get sued.  If you say nothing – ah ha - you can’t get sued.

That said, if you still insist on providing references, at least control the situation.  Limit references to one supervisory employee who is trained to appreciate the risks and knows what to say.  Even if they did not work with the employee, they can get the scoop and sanitize it for the prospective employer.

P.S. In case you were still wondering at this point – there is no law about references.  The approach of reporting dates of employment and rehire status has been adopted by many very large corporations to limit their risk.  The idea is now so pervasive that it has effectively become a “law” in the minds of many.

New I-9 Form Released

Posted in In the News

New form I-9The U.S. Citizenship and Immigration Services (“USCIS”) have released a new form I-9.  This is the first change in almost 25 years according to the Society for Human Resource Management.  The new form incorporates new fields and has been reformatted.  USCIS hopes this will reduce errors in completion.

Employers may begin using the new form as of March 8, 2013, but have a 60 day window until May 7, 2013, to continue using the old form.  The form is also available in Spanish, but the Spanish form is for use in Puerto Rico only.  Businesses in the 50 states may use the new Spanish form for reference but must complete the English language form for all employees.

Employers are not required to complete new I-9 forms on existing employees and should only use the new form for employees starting after March 8, 2013.

The new form is easily recognizable because it is 2 pages as opposed to the former 1 page form.  It adds areas for an employee’s foreign passport information (if applicable), email address, and telephone number.

As noted in my recent handbook editions on Recordkeeping, employers must keep the I-9 forms for their employees as long as they are employed and the latter of 3 years after the employee’s start date or 1 year after the employee leaves the company.

Employment Law 101: Recordkeeping Guide Part I

Posted in Handbook Articles

Who, What, Why . . .

Who does it apply to: In this edition, it varies according to the requirements of the particular law identified below. I am taking a short two-part break from my regular format to bring you the record keeping requirements under Texas and Federal law.

Fair Labor Standards Act (FLSA): The FLSA is applicable to virtually all employers. It requires retention for three years of payroll records, specifically including:

• Employee’s full name and social security number;

• Address, including zip code;

• Sex and occupation;

• Time and day of week when employee’s workweek begins;

• Hours worked each day (not required for employees exempt from overtime – See the prior edition on Exemptions from Overtime for more information);

• Total hours worked each workweek (not required for exempt employees);

• Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”); (not required for exempt employees);

• Regular hourly pay rate (not required for exempt employees);

• Total daily or weekly straight-time earnings (not required for exempt employees);

• Total overtime earnings for the workweek;

• All additions to or deductions from the employee’s wages;

• Total wages paid each pay period;

• Date of payment and the pay period covered by the payment; and

• Records of all sales and purchases of the business, i.e. dollar volume of sales or business, total volume of goods purchased or received, in the form usually kept by the employer.

And two years of:

• Time and earning cards or sheets;

• Records regarding the amount of work accomplished by the employees;

• Wage rate schedules, including those for straight and overtime calculations and piece rates;

• Originals or copies of all customer orders, shipping, billing and delivery records, but not including individual sales slips or register tapes; and

• Records supporting all deductions from pay or reflecting the dates, amounts, and nature of any deductions.

Equal Pay Act: The Equal Pay Act is applicable to virtually all employers and has the same requirements as the FLSA, but also requires records be kept for two years which describe or explain the basis for payment of a wage differential for persons of the opposite sex, including: wage rates, job evaluations, job descriptions, merit systems, seniority systems, collective bargaining agreements, and description of practices.

Family Medical Leave Act (FMLA): FMLA has limited applicability to Employers with 50 or more employees for 20 or more work weeks in the current or past calendar year. Employers must provide benefits, but only to employees: (1) with at least 1250 hours (including overtime) in the past 12 months, and (2) who work within 75 miles of a location with 50 or more employees. It requires employers keep all the records required under the FLSA for two and three years (see above), plus the following records for three years:

• Dates FMLA leave is taken (or hours if less than a full day);

• Records indicating leave is designated as FMLA leave;

• Notices furnished to employee by employer regarding FMLA leave;

• Documents reflecting all employee benefits, policies or practices regarding the taking of unpaid leave;

• Premium payments of employee benefits;

• Records of disputes between employees and employers regarding FMLA leave including all investigative documents; and

• Records and documents kept regarding certification, recertification or medical histories of employees or their family members created for purposes of documenting FMLA leave (such records must be maintained in a separate file as a confidential medical record).

Title VII (anti-discrimination), Americans with Disabilities Act, and Genetic Information Protection Act: Employers with 15 or more employees are required to keep all personnel or employment records, including but not limited to, requests for reasonable accommodation, forms submitted by applicants for employment and other records having to do with hiring, promotion, demotion, transfer, lay-off or termination, rates of pay or other terms of compensation, and selection for training or apprenticeship for one year, and one year from termination for all employees involuntarily terminated. Employers with more than 100 employees are also required to keep the most recently filed EEO-1 report provided to the EEOC for one year.

Age Discrimination in Employment Act: Employers with 20 or more employees are required to maintain the following information regarding employees for three years: name, address, date of birth, occupation within the organization, rate of pay and compensation earned which is already required under the FLSA. Additionally, these employers are required to keep the following items for one year from the date they are created:

• Job applications, resumes, or any other form of employment inquiry whenever submitted in response to an advertisement or other notice of existing or anticipated job opening, including records pertaining to the failure or refusal to hire any individual;

• Promotion, demotion, transfer, selection for training, layoff, recall, or discharge of any employee;

• Job orders submitted to an employment agency for recruitment of employees;

• Test papers and results of any aptitude or other test considered by the employer in connection with any personnel action;

• Results of any physical examination considered by the employer in connection with any personnel action; and

• Any advertisements or notices to the public or to employees relating to job openings, promotions, training programs, or opportunities for overtime work.

The following must be kept in place for one year after termination: documents regarding any employee benefit plans such as pension and insurance plans, as well as copies of any seniority systems and merit systems which are in writing. Note, if the plan is not in writing, a memorandum fully outlining the terms of such plan or system and the manner in which it has been communicated to the affected employees, together with notations relating to any changes or revisions thereto, shall be kept on file.

Employee Polygraph Protection Act: See the previous edition on the EPPA for the limited circumstances where a test can be administered. When properly administered the following information must be kept for three years from the later of the date the test is requested or conducted:

• The statement setting forth the specific activity under investigation and the basis for testing that particular employee;

• Records identifying the loss in question and the nature of the employee’s access to the person or property subject to the investigation, if the test is related to the manufacture, distribution, or dispensing of controlled substances;

• The written statement setting forth the time and place of the examination and the examinee’s right to consult with counsel;

• The written notice to the examiner identifying the person to be examined; and

• All opinions, reports or other records furnished by the examiner related to the examination.

Note: Employers in a union environment may have different or additional record-keeping requirements.

What should I do:

Simplified retention guidelines will follow at the end of the Recordkeeping Part II edition.

Are “Working Interviews” Legal?

Posted in Quick Questions

One of my dental practice clients called this week to inquire about an idea he heard of recently called a “working interview.”  The idea is to have an hygienist come in for a couple of days to find out whether they are good at their job without officially hiring them.   What is better, my client said, “you don’t have to pay the person for their time.”

I don’t know how the idea of working interviews became so pervasive in the dental world.  It was probably a topic of discussion at one of those dental practice building seminars.  From there I imagine it spread like wild fire.  And, like the game we used to play in my kindergarten class passing some phrase down the line, the details of what was said at the seminar got lost in the translation.  Dentists everywhere got the idea that a working interview is a way to find out if a prospective employee will work for you without having to follow any of the employment law rules in the process.

It is time to put out the straight dope on the subject and shatter a few myths in the process:

1.  Pay – The theories on pay for a working interview are all over the map.  Some, like my client are led to believe that you don’t have to pay the person for their time.  Others are told that you can just issue a check without proper withholding and 1099 the payment.  Wrong. Wrong.  If you bring someone in for a working interview you must pay them for their time in compliance with state and federal law and make appropriate withholding.

2. Paperwork – Some believe that since they are only going to be there for a few days, you don’t have to do new-hire paperwork.  Just skip the I-9, background check, application, and W-2.  Wrong again.  If you hire anyone – for 1 day or 1,000, you have to do new hire paperwork.

3. Unemployment – Still others believe that you are not responsible for unemployment if you choose not to hire the person. Wrong, yet again.  Unemployment tax is tied to the prospect’s wages during the preceding year, not the employer.  That said, the shorter period the person is employed by you the less they will draw from your unemployment account.

Yes, I’m a kill-joy.  My client was looking forward to the free time from a prospect employee and the ability to learn whether someone will be a good fit without having to go through all the motions.  Unfortunately, most of what he was hoping for is not legal.

But is there anything that can be done?  Yes there is.  Depending on how long you would like to conduct your interview, we can create a day contract or a week contract for the prospective employee.  This will limit your exposure under unemployment compensation laws, and you can even reduce the amount you pay.  Where you might pay a good hygienist $20 per hour or more as a full time wage, you can pay them minimum wage during a working interview.  You might also forego the background check, etc, during this brief period having the person only complete a W-4 and an I-9.

Changes to FMLA Service Member Leave Become Effective March 8, 2013

Posted in In the News

On February 5, 2013, the Department of Labor announced the final rules for changes to the Family and Medical Leave Act (FMLA) permitted under the National Defense Authorization Act of 2010.  From the time the act was passed until now, there has not been any final guidance for employers on the DOL’s position with respect to the changes to the law.  Now, final rules which become effective March 8, 2013, are available to assist employers to properly handle service member leave.

Highlights to the changes are:

1. Putting more meat on the bone regarding coverage for “covered veterans” which previously were not protected under the act.

2. Providing guidance on what is considered a serious injury or illness for a covered veteran.  Serious injury will include:

  • A continuation of a serious injury or illness that was incurred or aggravated when the covered veteran was a member of the Armed Forces and rendered the service member unable to perform the duties of the service member’s office, grade, rank, or rating;
  • A physical or mental condition for which the covered veteran has received a VA Service Related Disability Rating (VASRD) of 50 percent or greater and such VASRD rating is based, in whole or in part, on the condition precipitating the need for caregiver leave;
  •  A physical or mental condition that substantially impairs the veteran’s ability to secure or follow a substantially gainful occupation by reason of a disability or disabilities related to military service or would do so absent treatment; or
  • An injury, including a psychological injury, on the basis of which the covered veteran has been enrolled in the Department of Veterans Affairs Program of Comprehensive Assistance for Family Caregivers.

3. Permitting eligible employees to obtain certification of a service member’s serious injury or illness (both current service members and veterans) from any health care provider as defined in the FMLA regulations, not only those affiliated with the DOD, VA, or TRICARE networks.

4. Extending “qualifying exigency” leave to eligible employees who are family members of members of the Regular Armed Forces (previously limited to National Guard and Reserves) and adding the requirement for all military members to be deployed to a foreign country (not previously required) in order for service member leave to apply under the FMLA.

5. Increasing the amount of time an employee may take for qualifying exigency leave related to the military member’s Rest and Recuperation (R&R) leave from five days to up to 15 days.

6. Creating an additional qualifying exigency leave category for parental care leave to provide care necessitated by the covered active duty of the military member for the military member’s parent who is incapable of self-care.

And, finally, outside the service member revisions, the new rules create a unique method of calculation of leave for airline flight crew employees.

What does this mean for employers?  You need to update your policies and your thinking.  If your FMLA policy in your handbook is specific enough to list the details of service member leave, it now will be out of date.

Employment Law 101: Up In Smoke – A Smoking Discrimination Guide

Posted in Handbook Articles

Who does it apply to: All employers who have employees or prospective employees that smoke.

What is the issue: According to recent statistics 18.5% of the adult population in Texas smokes. Smoking affects productivity of the smoker and can affect the health of all employees. A lot of publicity has come to ideas regarding charging higher healthcare premiums for smokers, requiring employees not smoke at all, and offering health programs to stop smoking. Employers want to know what options are legally available to them for regulation of smoking among employees.

What is the law: Smoking at work implicates a variety of laws, but most importantly the Americans with Disabilities Act (“ADA”) and the Health Insurance Portability and Accountability Act (“HIPAA”).

Smoking and nicotine addiction were not disabilities under the ADA before the amendments of 2009. After 2009, the question has been reopened and there have not yet been any determinative cases to provide a clear cut answer. Employers may still be required to accommodate employees who suffer consequences of smoking. That said, the act of smoking still should not be protected. Employees claiming difficulty breathing or emphysema will have their condition improved if an employer restricts their ability to smoke in the workplace. An employee who claims a nicotine addiction can be reasonably accommodated in a no-smoking workplace by using a nicotine patch or chewing nicotine gum. In fact, the ADA may be used to prohibit smoking. Employees with asthma or allergies to smoke may require a smoke-free environment.

HIPAA comes into play in two areas – charging different pricing for healthcare and the use of wellness programs. Under the law, an employer cannot discriminate against or charge certain employees more for health coverage due to “health factors” which include smoking and nicotine addiction. Employers and health plans cannot require an individual to pass a physical examination for eligibility for coverage or use a questionnaire to exclude coverage (a questionnaire can be used to determine overall, but not individual premiums). Nor can employers charge a higher premium to employees with a higher risk or incidence of claims.

When it comes to wellness plans, HIPAA requires that programs with a reward component meet certain criteria. These requirements include: (1) limitations on reward size; (2) purpose of plan to promote overall health; (3) eligibility to qualify once a year; (4) rewards available to all employees; and (5) offer a reasonable alternative for employees who cannot qualify under the primary program. When it comes to smoking in particular, all efforts geared at stopping smoking must be voluntary. Employers cannot force smokers to participate in a program to stop smoking. (Wellness programs will be covered in a later EH piece).

Are smoke breaks required: Businesses are not required to offer employees breaks of any kind during the work-day. Employers who do allow employees to take short breaks during the day on company premises can regulate where\whether the employees smoke by regulating smoking on the company’s premises. Employees on a lunch break who are free to leave company premises are generally free to engage in whatever conduct they choose during that time.

What about union businesses: Smoking policies are generally a mandatory subject of bargaining under a collective bargaining arrangement. Be sure to consider this issue before implementing any smoking related policy.

Common Situations:

This is the 5th degree: Angie’s Ashtrays decides to become proactive about the smoking issues in all phases of her relationship with employees. Angie begins asking potential hires whether they smoke or are addicted to nicotine and starts a pre-hire health screening to find out if applicants are lying about smoking. Has the company stepped on any laws? Yes and maybe. The ADA prohibits employers from asking questions about disabilities in advance of an employment offer. It could be interpreted that the company wants to find out about smokers to avoid dealing with nicotine addicts and people who may have other health issues. So, Angie cannot ask the question before an offer of employment. Pre-hire screenings are also illegal under the ADA except under certain circumstances. If Angie can provide a legitimate business and position related reason for the screening, she may do so after a conditional offer of employment is made.

Residual what: Red, the owner of Red’s BBQ Pit, simply cannot stand the smell of smoke. Of course he has a rule that employees may not smoke during work hours, but Red wants to take it a step further and institute a regulation that employees may not come to work with “tobacco residuals” on their clothing, i.e. they cannot smell of smoke. Has Red gone too far? Nope. There is no law preventing an employer from requiring that employees present to work free of tobacco smells. In fact, in a workplace with a particularly sensitive asthmatic, it may be a reasonable accommodation for that person to implement such a rule.

Smoking away from work: Cancer Hospital decides that regulating smoking is not enough to promote its image as a cancer fighting organization. The Hospital decides to require employees not to smoke in their off-duty hours. Is this legal? If it is very clearly to promote an image, the restriction is probably legal in Texas. A number of states have adopted laws ranging from preventing discrimination based on lawful off duty activities to specific prohibition of discrimination based on smoking. Texas is not one of those states, having no laws at the state level regulating smoking. The risk will be that the restriction is a HIPPAA violation, so Cancer Hospital must be careful. As long as the hospital’s goal is to promote its image and not to drive down its insurance premiums, there is not anything preventing Hospital from creating such a rule.

What should I do:

Good: Not everyone has a problem with employees smoking in the workplace. If you don’t, you simply have to watch out for the complaint of a disability, like asthma aggravated by smoking, and reasonably accommodate the employee if a claim is made. If you want to stamp out smoking in your workplace, institute no-smoking policies on company premises to clear out the atmosphere. Don’t connect these policies to reducing healthcare costs or claims.

Better: If a clear atmosphere is not enough, consider stepping the policy up to prohibit tobacco residual so that smokers are not allowed to have the smell of smoke on their clothes, hair, or breath. Again, avoid connecting the policies to reducing healthcare costs or claims. Consider also, eliminating the availability of smoking breaks during the day.

Best: Institute a workplace wellness program where voluntary information is made available to all employees regarding smoking with the hope that some of the smokers will make their own decision to stop smoking.

Will Texas Prohibit Employers from Asking for Social Media Passwords?

Posted in In the News

Please enjoy this guest post from Travis Crabtree, my colleague in Houston whose practice focuses on internet law.  Visit Travis’ blog at www.emedialaw.com

Democratic Texas State Representative Helen Giddings filed a bill prohibiting employers in Texas from asking for social media passwords from applicants and current employees. Texas joins a long list of states that have either passed or proposed similar legislation.

On December 21, 2012, HB 318 was pre-filed. Democratic State Senator Chuy Hinojosa filed the exact bill with the Senate as SB 118. The bills read:

(b) An employer commits an unlawful employment practice if the employer requires or requests that an employee or applicant for employment disclose a user name, password, or other means for accessing a personal account of the employee or applicant, including a personal e-mail account or a social networking website account or profile, through an electronic communication device.

(c) This section does not prohibit an employer from:

(1) maintaining lawful workplace policies governing:

(A) employee usage of employer-provided electronic communication devices, including employee access to personal accounts on those devices; or

(B) employee usage of personal electronic communication devices during working hours;

(2) monitoring employee usage of employer-provided electronic communication devices or employer-provided e-mail accounts; or

(3) obtaining information about an employee or applicant for employment that is in the public domain or that is otherwise lawfully obtained.

Six states already have similar laws and many others are considering similar legislation. The National Conference of State Legislatures has a good resource that tracks what all of the states are doing in this area.

Here are a couple of issues I see with the Texas version.

1. There is no exemption for employers to investigate wrongdoing.

For example, Michigan lays out some exceptions that exclude “Disciplining or discharging an employee for transferring the employer’s proprietary or confidential information or financial data to an employee’s personal internet account without the employer’s authorization”; and “conducting an investigation or requiring an employee to cooperate in an investigation . . .”

2. There is no exemption for highly-regulated industries like securities.

The Michigan law exempts employers “if there is specific information about activity on the employee’s personal internet account, for the purpose of ensuring compliance with applicable laws, regulatory requirements, or prohibitions against work-related employee misconduct.”

3. What about shoulder-surfing?

The statute forbids employers from using “other means for accessing a personal account” but there is a qualifier at the end that seems to limit the employer’s access to the account ”through an electronic communication device.” So, can an employer tell an applicant or employee to log-in to Facebook while I look over your shoulder? It is certainly not clear. Other states take a more direct approach. The California law expressly forbids requiring an employee to “access personal social media in the presence of the employer” which would prevent shoulder surfing.

4. Immunity for employers who can no longer access social media accounts.

I normally advise companies not to use social media to screen applicants unless you have and follow a specific plan. I could foresee, however, that a mishap could happen at work and a creative plaintiff’s lawyer could argue negligent hiring because a social media search would have revealed the employee was racist, sexist, violent, etc. It would make sense then that if employers are prohibited from doing thorough social media research, they should not be held liable for failing to do so if something went wrong. Michigan has addressed this in its version by stating:

Sec. 7. (1) This act does not create a duty for an employer or educational institution to search or monitor the activity of a personal internet account.

(2) An employer or educational institution is not liable under this act for failure to request or require that an employee, a student, an applicant for employment, or a prospective student grant access to, allow observation of, or disclose information that allows access to or observation of the employee’s, student’s, applicant for employment’s, or prospective student’s personal internet account.

5. What about students?

Many of the bills apply the same rules to secondary school, colleges and universities. If we care about privacy, shouldn’t we apply it to them as well. These are just a few issues and I still question whether this a fix in search of a problem. Yes, there have been one or two publicized incidents of employers demanding access to social media accounts. But, I’m not the only one that questions whether laws forbidding requests for social media accounts are necessary. As the economy recovers, I would think this is something the market will handle. Besides, I see certain positions where such requests would be encouraged such as youth camp counselors or mental health providers, security personnel and employees for religious institutions.

This is the second part of our Texas Leg Watch 2013. The Texas Legislature meets every odd year, so we will monitor any bills of interest to the online media, marketing and start-up community. Our first post looked at a proposal that would allow civil lawsuits to be brought against internet online advertisements that resulted in human trafficking perhaps usurping the federal Communications Decency Act protections.

Too Sexy To Work Here: Fired for Being Attractive

Posted in In the News

Melissa Nelson is “devastated” according to ABC News.  She was fired from her job as a dental assistant after 10 years of service because her male employer found her attractive and felt termination necessary to protect his marriage.

Nelson was hired in 1999 at the age of 21 to be a dental assistant in the office of James Knight, DDS in Webster County, Iowa.  Over the next 10 years, she worked side by side with Dr. Knight and thought of him as a father figure.  During the last six months of Nelson’s employ, she and Dr. Knight began texting one another about mostly benign personal matters.  Dr. Knight’s wife discovered the texting and demanded her husband terminate Ms. Nelson.  After talking with their priest, Ms. Nelson was called in and terminated with the priest present as a witness.

Shortly after termination, Nelson made a sex discrimination claim on the basis that Dr. Knight would not have terminated her if she were a male.  The Iowa Supreme Court, did not agree with Ms. Nelson and commentators everywhere seem to have an opinion.  When the issue was discussed on Good Morning America, the female hosts both commented how wrong it was for an employer to fire a woman for being attractive.  Ms. Nelson, when interviewed, stated that it signals that men can do whatever they want in the workplace.

It is a sad situation and I am sorry Ms. Nelson lost her job, but I agree with the court – not just on the law, but on the facts as well.  I can’t speak for Iowa, but in Texas where employment is at-will, the employer can terminate an employee at any time and the employee can quit at any time.  Both parties are generally permitted to terminate the relationship for no reason at all.  If Dr. Knight felt his marriage was at risk, who should say that he could not fire the employee?

Would Ms. Nelson say that she should not be able to quit if her husband wanted her to because Dr. Knight was young, rich, and handsome?  And, what about the female business owner that terminates the attractive male employee to protect her marriage?

In this case, the evidence showed that Dr. Knight never harassed or propositioned Ms. Nelson.  He met his obligation to be respectful of her.  The fact that she was a female was not the deciding point.  Should Dr. Knight be forced to continue to work in an intolerable environment – which he is supposed to have total control over – just because it might be unfair to Ms. Nelson?

No, he should not.

Employment Law 101: How to Manage Unpaid Interns, Volunteers, and Trainees

Posted in Handbook Articles

Who, What, Why . . .

Who does it apply to: Every employer who has or intends to hire unpaid interns.

When must an intern be paid: All “employees” of a business must be paid at least minimum wage unless they are a “trainee” under the law, regardless of whether they are called an “intern.”  So, what makes a trainee? The United States Department of Labor (DOL) has established a six-factor test couched in terms of – you guessed it – training – to determine whether an unpaid intern should be considered an employee or trainee under the Fair Labor Standards Act (FLSA):

  • the training is similar to that which would be given in a vocational school (even though it includes actual operation of the facilities of the employer);
  • the training is for the benefit of the trainees;
  • the trainees do not displace regular employees, but work under their close observation;
  • the employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion operations may actually be impeded;
  • the trainees are not necessarily entitled to a job at the conclusion of the training period; and
  • the employer and the trainees understand that the trainees are not entitled to wages for the time spent training.

When can I hire an unpaid intern or volunteer: The six-factor test is primarily used in the, “for profit,” private sector. State and local government agencies and non-profit organizations can generally utilize interns or volunteers without an obligation to pay them under the FLSA. It is important, though, that the volunteers understand they are not to be paid for their time. Volunteer work at non-profit, religious, charitable, and civic organizations have specifically been cleared by the Texas Workforce Commission.

What about true student interns: Student interns are not evaluated differently by the DOL. They should easily meet the trainee test. That said, there are special rules for individuals who have completed a professional degree like physicians, attorneys, and therapists, generally allowing them to volunteer their time as they choose.

What do these factors really mean: The more an internship program can be structured around a classroom or academic type experience the better. It is better if the employer can provide the individuals with skills applicable to various employment settings, not just skills particular to the employer’s business. Essentially, the employer needs to provide the intern or volunteer with valuable training. Ideally, the training would make them more marketable in the open job market. The employer must pay any intern or volunteer that is used as a replacement for a regular employee or to reduce their workload. The intern or volunteer should receive more supervision than a regular employee.  If the employer would have to hire additional employees if the intern or volunteer were not performing certain work, the intern or volunteer would be considered an employee. Don’t rely on unpaid interns to do work of any real significance to your business. The work done by an unpaid intern should be secondary to their training. An intern that is hired by an employer on a trial basis with the expectation that they will eventually be hired full time will likely be considered an employee under the FLSA. Employers should indicate prior to the start of the internship that there is no guarantee or expectation of hiring the interns upon completing the internship. A written agreement indicating this is advisable. Employers should indicate prior to the start of the internship that there is no intention to pay the intern. A written agreement indicating that the intern will not be paid and does not expect to be paid is advisable.

What happens if I don’t follow the test: An employer violating the rule is subject to the same damages available to an employee who is not paid all of the wages they are owed. This may include minimum wage and overtime for all hours worked, plus an equal amount in liquidated damages for all interns over the past two or three years.

What about discrimination laws: It depends on whether the person in question receives “significant remuneration” for their efforts. The EEOC has stated that things like a pension, group life insurance, workers’ compensation, or access to professional certifications constitute significant remuneration. However, Courts have determined that things like academic credit, practical experience, and scholarly research do not constitute significant remuneration. Because this point is subject to interpretation, however it is best to treat all interns and volunteers as though they are employees with respect to discrimination laws.

Common Situations:

Required training: Safety First is ready to hire a new class of security guards.  The company requires that security guard trainees receive 40 hours of training prior to performing any regular work under their service contract.  According to their contract, the training is focused on “company practices, policies, and rules.” Does Safety First have to pay the trainee security guards even though they are not yet performing regular work?  Yes. These trainees would be considered employees because: (1) the employer is directly benefiting from their training, (2) the training is given to security guards who will work on contract, and (3) Safety First can only employ specifically trained guards.

Homegrown hiring: Maverick Finance hires interns each summer.  Maverick’s intern program is structured much like an academic program.  The interns do not do the work of regular employees and are heavily supervised.  The interns are not paid and are aware there is no guaranty of employment.  However, Maverick hires its first year analysts almost exclusively from the unpaid interns it has each summer. Does the FLSA require Maverick to pay these interns at least minimum wage? Probably.  Although Maverick substantially satisfies the six factor test, its practice of hiring analysts from the intern pool is likely enough to tip the balance against the company in the face of a DOL audit.

What should I do:

Good: Paying minimum wage to all interns probably is the safest bet. You avoid the risk of an audit of all your employment practices because of one dissatisfied intern that calls the DOL.  If you go the trainee route, be sure to meet all the factors.

Better: If you have true “trainees” taking into consideration all the factors, it makes sense to put that understanding in writing in a short half-page agreement outlining the factors. If you use volunteers, it makes sense to have them sign a one-paragraph agreement acknowledging their status as a volunteer without expectation of pay or other “significant remuneration” to avoid the possibility of an EEOC complaint.

Best: In addition to the items above, require that the trainees keep track of their hours so you have a record of how much they might be entitled to if the DOL audits and rules them employees. Be sure they do not work more than 40 hours to avoid increasing the risk to include overtime. Have the trainees and their supervisors keep a log of their activities so that there is no confusion regarding the type of work they did.

Are “90 Day Probationary Periods” for New-Hires Required By law?

Posted in Quick Questions

Many of my clients put new-hires on a 90 day probationary period.  They do this either for their own convenience or because they mistakenly believe the law requires it.  The idea that it is “required” by a law is a myth.

Now that we have that out of the way, is there a reason one to still have one?  It is debatable.  The main reason that employers want to have a probationary period is to make themselves feel less guilty if the new-hire doesn’t fit or can’t do the job.  Texas is an at-will state.  From a purely logical standpoint, employers don’t need to feel guilty when then let any employee go regardless of their tenure.

The only legal reason to even consider one is that it might set better with a jury if you let someone go during the probationary period.  It might be easier for the jury to believe an employer’s explanation that the employee was not a good fit for the culture of the business or that the employee simply could not meet the tasks of the job.  At the same time, a jury should be able to appreciate that for a new employee within 90 days of employment even without the use of a probationary period.

Is there a downside to having a probationary period?  In my opinion, yes.  If an employee is told that they are on probation for 90 days, how will they feel after the 90 days is up?  I think they will feel like they have some sort of tenure – as if they can only be let go “for cause.”   To make matters worse, the employee is likely to act on their best behavior for the first 90 days and then show you how they really act!

At that point, a jury would be less likely to believe that the employee was not a good fit and that the employer may have acted with some type of bad motive if there were litigation.

If you do decide to have a probationary period.  Be very clear about what it means.  I would recommend putting the information in your employee handbook with a clear explanation that the 90 day period is probationary but that they can be let go for the same reasons or any other reason after the probationary period is over.  This may somewhat defeat the purpose of the probationary period, but it protects your business.