Top Five Employment Mistakes Made by Employers and How to Avoid Them
By: Chrys Martin – Partner at Davis Wright Tremaine
Mistake One – Hiring Independent Contractors
All workers are presumed to be employees. Only if someone truly meets the legal test for contractor status can they be classified as an independent contractor. The basic test requires them to have a business actually set up, all business required licenses, insurance on their work. They must be free from direction and control by the company hiring them, use their own space and equipment and normally be paid by project or segment instead of by the hour. There are significant consequences of non-compliance including expensive wage and hour law violations, work comp back premiums, unemployment taxes and other tax withholdings and matches.
Mistake Two – Not Having a Confidentiality/Non-Disclosure Agreement
Key employees should be required to sign a Non-Disclosure or Confidentiality Agreement (NDA). In that agreement (or the employee handbook) employers should define confidential information in detail and in compliance with new complicated NLRB rulings that govern such confidentiality agreements. The NDA needs no time limit and should be “forever.” The employer must then treat confidential information carefully to be sure it is protected.
Mistake Three – Failing to Have a Non-Compete or Non-Solicitation Agreement
Many states have few restrictions on such agreements. But California bans them and Oregon law severely restricts them. In Oregon, non-competition agreements are only valid for certain executives and professionals making more than the median income of a family of four (approx. $75,000). It must be provided to the employee two weeks in advance of hire or upon bona fide advancement (not just a raise or bonus). Such agreements are limited to an eighteen (18) month maximum. However, employers can require any type of employee to sign a non-solicitation agreement. But be sure to carefully define the terms of any type of restrictive covenant and have legal counsel draft.
Mistake Four – Hiring/Keeping Bad Employees
A “warm body” is not better than NO body at all in a job. Employers should establish a broadly focused recruiting plan to get the most diverse and best qualified applicant pool. Employers should provide an accurate job description make sure that their interviewers are trained on interview skills such as behavioral interviewing and know what are illegal questions! Many states or cities have restrictions on asking for criminal convictions or limitations on when such questions can be asked. In Portland, not until a conditional job offer is made.
Mistake Five – Violations of Wage and Hour Law
Is your employee “exempt” or “non-exempt”? Executives, professionals, certain administrative staff, true outside salespersons and certain computer professionals are the only positions that can be paid a salary and not receive overtime. State and federal laws narrowly define the duties of each of these potentially exempt positions and define what is payment on a bona fide “salary basis.” All others must be paid hourly and time and a half for overtime. In certain industries, daily overtime rules also apply. Wage and hour violations are costly to defend and can include penalties that far exceed the amounts owed due to wrongly classifying employees. So be careful!