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Dealing with problem employees: A legal guide for employers
Business Horizons (2010) 53, 607—618
www.elsevier.com/locate/bushor
Dealing with problem employees: A legal guide for employers Carolyn M. Plump Mitts Milavec, LLC, Two Logan Square, 12th Floor, 18th & Arch Streets, Philadelphia, PA 19103, U.S.A.
KEYWORDS Discrimination; Termination; Discipline; Performance; Employment laws
Abstract One of the more difficult responsibilities of employers is dealing with problem employees. Employee misconduct and poor performance can lead to productivity issues, morale problems, and inferior quality products. For these reasons, it behooves employers to address performance issues rather than allow them to fester. By understanding which federal employment laws can be triggered when making employment decisions, avoiding common mistakes in applying these laws, and implementing key policies, employers can provide structures in the workplace that allow them to address problems effectively and minimize their legal exposure. # 2010 Kelley School of Business, Indiana University. All rights reserved.
1. The lawful handling of problem employees There are numerous ways in which employees can cause problems for their employers. In general, such employee misconduct is divisible into criminal acts and non-criminal acts. Some examples of criminal acts by employees include theft of company property, embezzlement, accessing child pornography via company equipment, and assault. Some common examples of non-criminal misbehavior in the workplace include insubordination, harassment, safety infractions, unauthorized use of company equipment, abuse of leave, and violations of confidentiality or fiduciary responsibilities.
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One of the most prevalent issues that businesses experience is chronic absenteeism and the related problem of habitual tardiness. As the following examples from actual practice demonstrate, however, there can be a vast difference in the impact of such conduct based on how each company addresses the problem. In the first example, a receptionist at Company ABC often arrived 10 minutes late to work 2-3 times per week. After months of habitual lateness, other employees became resentful and began talking about her. When she learned about the criticism, she retaliated against the employees who criticized her by not giving them messages and intentionally misdirecting their calls. After several more months, the receptionist started calling in sick approximately 1-2 times per week. These absences, along with the related discord in the workplace, affected productivity, impaired morale, and caused two highly valued employees to leave. After
0007-6813/$ — see front matter # 2010 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2010.07.003
608 more than a year of this behavior, management disciplined the receptionist (an African-American). At the same time, management disciplined a recently hired clerk (Caucasian) who had been late twice since she started. Several months later, both employees were fired. The clerk filed suit for race discrimination under Title VII, alleging she was treated worse than other employees with respect to her tardy arrivals because of her race. The receptionist also filed suit for race discrimination under Title VII, due to her discharge. In the second example, a machinist at Company XYZ was late on four occasions over the course of a month. Employees of Company XYZ were required to punch in and out on a time clock. Each month, Company XYZ would review the time cards. During this review, Company XYZ noted the machinist’s late arrivals and met with him regarding his late arrivals. The employee tried to dispute the late arrivals until Company XYZ produced the time cards. Company XYZ prepared a written statement documenting the meeting for the employee’s file. The next month, the employee did not clock in at all one day. Company XYZ met with him again and advised him that if he failed to punch in or out, he would be fired. Company XYZ also advised him that several eyewitnesses told management that he arrived late and intentionally did not punch in to avoid detection. Although the employee was on time for 2 months, he arrived late on two occasions the third month after his second disciplinary meeting. Company XYZ fired him for failure to comply with time/attendance requirements. The machinist never sued Company XYZ, several employees thanked management for ensuring everyone was held to the same standard, and the company experienced no time/attendance infractions for the next 18 months. The difference between these two vastly different outcomes was as simple as putting a policy in place and enforcing it. There will always be employees that cause problems. However, as the proffered examples illustrate, different approaches can have a different financial and operational impact. Thus, one of the challenges employers face when dealing with problem employees is how to address workplace deficiencies and misbehavior without running afoul of the law. This article provides a guide for employers to manage their workforces effectively while minimizing their legal exposure. Specifically, it presents an overview of the applicable employment laws that may be at issue, addresses common mistakes and misconceptions in the application of such laws, and enumerates steps employers should take to minimize legal exposure.
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2. An overview of select federal discrimination, leave, and wage laws To ensure businesses make informed employment decisions, it is vital that they understand the applicable laws. Without this fundamental background, employers can unwittingly and unnecessarily expose themselves to legal liability even though they have a legitimate, nondiscriminatory reason for taking certain employment actions. The financial cost for employers to defend discrimination lawsuits is staggering. In 2009, employers spent $120 million to litigate Title VII cases alone, which is just one of the many federal employment laws that regulate workplace conduct (Lipman, 2010). This section addresses the most significant federal employment laws so employers can navigate effectively through decisions regarding all aspects of the employment process. Employers should also be aware of applicable state and local employment laws, as state law can be the source of additional classes of protected individuals (e.g., sexual orientation) or more stringent requirements for already protected classes (e.g., New York’s age discrimination statute applies to employees at age 18).
2.1. The Civil Rights Act of 1964 The Civil Rights Act of 1964 (Title VII) prohibits employment discrimination based on race, color, religion, sex–—including pregnancy–—and national origin. Specifically, under Title VII (1991, §§ 2000e-2, 2000e-3) it is illegal to:
Discriminate in any aspect of employment, including hiring and firing, compensation, leave, promotions, recruitment, testing, use of company facilities, or other terms and conditions of employment;
Harass an individual on the basis of race, color, religion, sex, or national origin;
Retaliate against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;
Base employment decisions on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain race, color, religion, sex, or nationality;
Deny employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, or national origin; or
Dealing with problem employees: A legal guide for employers
Employ practices that, even though not intentional, have the effect of discriminating against individuals because of their race, color, religion, sex, or national origin. To be subject to liability under Title VII, an employer must have 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. For purposes of Title VII, an employer includes private employers, state and local governments, educational institutions, private and public employment agencies, labor organizations, and joint labor-management committees controlling apprenticeship and training.
2.2. The Age Discrimination in Employment Act of 1967 The Age Discrimination in Employment Act of 1967 (ADEA) prohibits employment discrimination on the basis of age against individuals 40 or older. The ADEA’s (1967, § 623) broad ban against age discrimination also more specifically prohibits:
Statements or specifications in job notices or advertisements of age preference and limitations, unless an age limit has been proven to be a bona fide occupational qualification;
Discrimination on the basis of age by apprenticeship programs, including joint labor-management apprenticeship programs; and
Denial of benefits to older employees. To be subject to liability under the ADEA, an entity must have 20 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. The ADEA applies to the same entities as discussed with respect to Title VII.
2.3. The Americans with Disabilities Act of 1990 The Americans with Disabilities Act of 1990 (ADA) is divided into five titles. This article addresses only the employment provisions contained in Title I of the ADA. Title I of the ADA prohibits private employers, state and local governments, employment agencies, and labor unions from discriminating against qualified individuals on the basis of disability in all aspects of the employment relationship, including job application procedures, hiring or discharging of employees, employee compensation, advancement, job training, leave, benefits, and
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other terms, conditions, and privileges of employment (ADA, 2009, §§ 12111(2), 12112(a)). The ADA covers employers with 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. To fully understand who is protected by the ADA and what constitutes illegal discrimination under the ADA, it is necessary to define certain key terms. Some of these terms have changed due to recent amendments to the ADA contained in the Americans with Disabilities Act Amendments Act of 2009 (ADAAA) and the corresponding proposed regulations issued by the Equal Employment Opportunity Commission (EEOC) on September 23, 2009. These definitions remain subject to further change when the EEOC issues its final regulations and those regulations, along with the ADAAA, are interpreted by the courts. 2.3.1. Disability The definition of an individual with a disability is a person who has a physical or mental impairment that substantially limits a major life activity, has a record of such impairment, or is regarded as having such impairment. The ADAAA (2008, § 2(b)) explicitly rejected several Supreme Court ‘‘ decisions that had narrowly interpreted the term disability’’ and directed courts to construe the definition in favor of broad coverage of individuals. Further, the proposed regulations interpret the ADAAA as shifting the focus of ADA cases away from whether an individual meets ‘‘ the definition of disability’’ to the question of whether discrimination occurred (ADA Proposed Regulations, 2009, pp. 48446-48448). 2.3.2. Major life activity The ADAAA expanded the definition of the term major life activity to include caring for oneself, performing manual tasks, walking, breathing, seeing, hearing, speaking, reading, learning, thinking, concentrating, eating, sleeping, standing, lifting, bending, working, the operation of major bodily functions, such as functions of the immune system, cell growth, digestive, bladder, and bowel functions, brain and neurological functions, respiratory and circulatory functions, reproductive functions, and endocrine functions. 2.3.3. Substantially limits The ADA provides that an impairment is a disability if it substantially limits an individual’s ability to perform a major life activity. The proposed regulations state that the relevant inquiry is how a major life activity is substantially limited, rather than what an individual can do in spite of an impairment.
610 2.3.4. Qualified An individual with a disability is qualified if he or she satisfies skill, experience, education, and other jobrelated requirements of the position held or desired, and who, with or without reasonable accommodation, can perform the essential functions of that position. 2.3.5. Reasonable accommodation The ADA requires an employer to provide a reasonable accommodation to an employee or job applicant with a disability,‘‘unless doing so would cause an undue hardship. A reasonable accommodation’’ may include, but is not limited to, making existing facilities used by employees readily accessible to and usable by persons with disabilities, job restructuring, modification of work schedules, providing additional unpaid leave, reassignment to a vacant position, acquiring or modifying equipment or devices, providing qualified readers or interpreters, and modifying examinations, training materials, or policies. Although employers are not obligated to provide the precise accommodation requested by an employee, they are required to engage in an interactive process with the employee to determine a reasonable accommodation. Employers are not, however, required to lower production standards to make an accommodation or to provide personal use items such as eyeglasses or hearing aids. 2.3.6. Undue hardship The term undue hardship means an action that requires significant difficulty or expense when considered in relation to factors such as the size, financial resources, and the nature and structure of an employer’s operation. Employers have the burden of proving an undue hardship. As stipulated by Lovejoy-Wilson v. NOCO Motor Fuel, Inc. (2001, p. 221), the burden is on the employer to engage in a cost/benefit analysis and determine that an action requires significant difficulty and ‘‘ expense to succeed with an undue hardship’’ defense.
2.4. The Family and Medical Leave Act of 1993 The Family and Medical Leave Act of 1993 (FMLA) requires covered employers to allow eligible employees to take up to 12 weeks of unpaid leave in any 12-month period:
For the birth or care of a newborn child; For the placement of an adopted or foster child;
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To care for a spouse, child, or parent who has a serious health condition; or
Because of the employee’s serious health condition (FMLA, 2009, § 2612). The FMLA covers employers engaged in commerce, or in any industry involved in or affecting commerce, who employ 50 or more employees for a minimum of 20 weeks during the current calendar year or the preceding calendar year. An eligible employee is any employee who has been employed by a covered employer for at least 12 months–— the months do not have to be consecutive–—and at least 1,250 hours during the previous 12 months. For purposes of FMLA, a serious health condition exists in any of the following situations:
Inpatient care; A period of incapacity of more than 3 full consecutive calendar days;
An in-person visit with a healthcare provider at least once within 7 days of the first day of incapacity, and either a regimen of continuing treatment initiated by a healthcare provider after the first treatment or a second in-person visit for treatment within 30 days of the first day of incapacity;
Pregnancy or pre-natal care; A chronic serious health condition which requires treatment by a healthcare provider at least twice a year, continues over an extended period of time, and can cause episodic periods of incapacity;
Incapacity which is permanent or long-term for which treatment may not be effective; or
Any period of absence to receive multiple treatments, either for restorative surgery after an accident or other injury, or for a condition that would likely result in more than 3 days of incapacity if not treated. Routine physical exams, dental exams, eye exams, and cosmetic treatments generally do not qualify for FMLA leave. Absences due to substance abuse, as opposed to treatment for substance abuse, do not qualify for FMLA leave (FMLA Regulations, 2009, § 825.119). On January 28, 2008, former U.S. President George W. Bush signed into law the National Defense
Dealing with problem employees: A legal guide for employers Authorization Act for Fiscal Year 2008 (NDAA 2008), which expanded the FMLA to assist military members and their families. On October 28, 2009, President Obama signed into law the National Defense Authorization Act for Fiscal Year 2010 (NDAA 2010)–— collectively, the NDAA 2008 and NDAA 2010 are referred to as FMLA Amendments–—which further expanded the FMLA provisions. The FMLA Amendments provide two additional types of leave for military reasons. The first type of leave, referred to as military exigency leave, entitles employees who are the spouse, child, or parent of a military member on active duty or call to active duty status to take 12 weeks of leave for one or more qualifying exigencies (FMLA, 2009, §2612(a)(1)(E)). Qualifying exigencies include short-notice deployment, military events and related activities, certain childcare and related activities, financial and legal arrangements, counseling, rest and recuperation, postdeployment activities, and any other events that the employer and the employee agree constitute a qualifying exigency (FMLA Regulations, 2009, § 825.126). The second type of leave, referred to as military caregiver leave, entitles employees who are the spouse, child, parent, or next of kin of a covered service member to 26 weeks of unpaid leave in a 12-month period–—measured forward from the first time an employee takes FMLA leave for this particular purpose–—to care for a covered service member with a serious illness or injury (FMLA, 2009, § 2612(a)(3)). Upon return from FMLA leave, an employee has the right to the same position or an equivalent position to the one he or she had before his or her leave, with the same or equivalent benefits, pay, and other terms and conditions of employment. The position must involve the same duties and responsibilities, perquisites, and status as before the employee took FMLA leave. An employee is entitled to all benefits provided when leave began and any changes to those benefits that occurred while on leave. Upon reinstatement the employee cannot be required to re-qualify for any benefits he or she previously enjoyed. Finally, FMLA leave cannot be treated as a break in service for purposes of vesting and eligibility with respect to a pension or retirement plan.
2.5. The Fair Labor Standards Act of 1938 The Fair Labor Standards Act of 1938 (FLSA) establishes minimum wage, overtime pay, record keeping, and youth employment standards for full-time and part-time workers in the private sector and in federal, state, and local governments. The Equal
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Pay Act (EPA), which is part of the FLSA, also prohibits discrimination on the basis of gender in the payment of wages or benefits for employees who perform work of similar skill, effort, and responsibility for the same employer under similar working conditions (EPA, 2007). The FLSA does not require extra pay for weekend or night work, pay for time not worked (e.g., vacations, sick leave, holidays), severance pay or fringe benefits, or pay for breaks and meal periods. FLSA coverage is broad and encompasses most employees who perform work in the United States or a United States possession or territory. The FLSA establishes the federal minimum wage, which is currently $7.25 per hour. There are certain exceptions to the federal minimum wage requirements, including exceptions for workers with disabilities, full-time students, student learners, employees under age 20 during their first 90 consecutive calendar days of employment, and tipped employees. Before paying sub-minimum wages, however, employers must obtain an authorizing certificate from the U.S. Department of Labor. The FLSA also contains provisions regarding when overtime is due. Covered nonexempt workers are entitled to overtime pay at a rate of one and onehalf times their regular rate of pay for all hours worked over 40 hours in a work week. Further, the FLSA regulations require employers to maintain accurate records of the hours nonexempt employees work each work day. No particular method for keeping the required records is prescribed, so long as the total hours worked each work day can be derived from the information. Employees that meet certain requirements are exempt from the minimum wage and overtime provisions of the FLSA. Neither an employee’s title nor classification of an employee as ‘‘ an employer’s ‘‘ exempt’’ or nonexempt’’ is relevant. Rather, an employee is exempt from the overtime and minimum wage requirements if the employee’s salary and duties meet the requirements of the Department of Labor’s regulations. To qualify for an exemption, all of the requirements for a particular exemption must be met. The main exemptions are executive employees, administrative employees, professional employees, creative professionals, computer employees, outside salespersons, and highly compensated employees (FLSA, 2009, § 213). Finally, employers should consult state wage laws to ensure compliance with any additional or different wage provisions required by such laws. For example, California law requires overtime pay if a nonexempt employee works more than 8 hours per day.
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3. Common mistakes for businesses to avoid 3.1. Title VII: Lessons learned 3.1.1. Verification of authority to work in the United States The Immigration Reform and Control Act of 1986 (IRCA) requires employers to ensure that employees hired are legally authorized to work in the United States (IRCA, 2009, § 1324a(b)). However, an employer who requests employment verification only for individuals of a particular national origin, or individuals who appear to be or sound foreign, may violate Title VII prohibition on national origin discrimination. Similarly, employers should not wait until an employee exhibits performance issues to require verification of authority to work in the United States, in the hope that failure to provide such verification will provide a justification for terminating employment. Although failure to provide verification could be a reason not to hire an employee, it will appear that the employer singled out an individual on the basis of a protected trait. To avoid any inconsistency or perceived bias, employers should require that at the time of hire all employees must provide appropriate documentation verifying authorization to work in the United States. 3.1.2. Customer or manager preference Employees hiring or making decisions regarding assignments or promotions sometimes feel pressure to engage in discrimination because of the perception or reality that customers or managers desire or demand it. Employers must not allow customer preferences or manager demands to influence employment decisions. Such preferences have repeatedly been rejected by the courts as justification for discrimination (Cain v. Hyatt, 1990, p. 681). A related issue involves unfavorable performance reviews due to feedback from customers or biased managers. If the customers’ or managers’ views are based on discriminatory considerations, the company may not make employment decisions based on such views. Employers should review all performance appraisals to ensure the criteria are not discriminatory and there are no discriminatory comments. 3.1.3. Family caregiver responsibility A relatively new category of cases being brought under Title VII involves family caregiver responsibility discrimination (FRD). FRD claims arise in situations where preconceived ideas of gender, parenthood, or other caregiver responsibilities affect employment decisions; consider Lust v. Sealy (2004, p. 580) where-
C.M. Plump by a female sales representative successfully sued for gender discrimination when she was not promoted because a male supervisor did not consider her for the position, under the assumption that she would not want to relocate because she had children. FRD claims may also be based on facially neutral employment policies that treat one gender more favorably than another. For example, employers often deny male employees’ requests for reduced work hours or leave to care for their children even though they grant similar requests made by female employees. Accordingly, when making employment decisions, employers must ensure they base such decisions on neutral and objective criteria rather than subjective assumptions or preconceptions.
3.2. ADEA: Lessons learned 3.2.1. Substantial age difference Age discrimination cases are not only limited to cases involving applicants or employees age 40 or older and individuals under age 40. In‘‘1996, the United States Supreme Court ruled that a substantial difference’’ in ages involving individuals both of protected age could be age discrimination; O’Connor v. Consolidated Coin Caterers Corp. (1996, p. 313) cited that a replacement is substantially younger than the plaintiff is a far more reliable indicator of age discrimination than is the fact that the plaintiff was replaced by someone outside the protected class. 3.2.2. Reductions in force When employers conduct reductions in force (RIF), they must take care to ensure the proposed RIF complies with applicable law. When defending a RIF that disparately impacts employees at or over age 40, employers have several statutory defenses available:
The RIF basis was on reasonable factors other than age;
The RIF basis was a bona fide seniority system (e.g., last hired, first fired);
Employers can require laid-off employees to abide by a voluntary early retirement incentive plan, so long as such plans do not exclude other employees on the basis of a maximum age (ADEA, 1967, § 623(f)).
3.3. ADA: Lessons learned 3.3.1. Drug and alcohol use Employees and applicants currently engaged in the illegal use of drugs are not protected by the ADA.
Dealing with problem employees: A legal guide for employers Accordingly, an employer can terminate an employee for current illegal drug use without violating the ADA. Alcoholics and recovering or recovered drug addicts do qualify as disabled persons under the ADA. However, an employer may require employees not be under the influence of alcohol or illegal drugs in the workplace, and discipline or terminate them for failure to abide by such a policy. Similarly, in evaluating performance, an employer may hold an employee who is an alcoholic or a recovering or recovered drug addict to the same qualification standards as other employees regarding employment, job performance, and behavior. 3.3.2. New position Employers are not required to create a new position or transform a temporary light duty position into a permanent position in order to accommodate an employee with a disability (Buskirk v. Apollo Metals, 2002, p. 169).
3.4. FMLA: Lessons learned 3.4.1. Requests for FMLA leave An employee does not have to specifically request FMLA leave. If an employer knows that an employee needs leave for an FMLA qualifying reason or knows enough information to ask whether the leave is for an FMLA qualifying reason, the employer must make further inquires rather than allege the employee did not explicitly request FMLA leave. Once an employer is on notice of an employee’s need for FMLA leave, the employer should use caution before disciplining or terminating such an employee. Although employees cannot avoid legitimate discipline and termination decisions due to FMLA leave, courts will scrutinize the timing of any such decision to ensure it was not made in retaliation for the employee taking or requesting medical leave. 3.4.2. Total amount of leave Excepting the aforementioned military caregiver leave, employees are entitled to an aggregate of 12 weeks of unpaid leave during any 12-month period, regardless of whether the 12 weeks are taken for one type of FMLA leave or more than one type of FMLA leave. For example, if an eligible employee takes 6 weeks of FMLA leave to care for a newborn child and 6 weeks of FMLA leave for his or her own serious health condition, the employee is not entitled to any additional FMLA leave–—except military caregiver leave–—within the same 12-month period. Employers should consistently enforce this policy to avoid the appearance of discriminatory treatment of a certain class of employees.
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3.4.3. Intermittent leave/Reduced leave Managers are often given responsibility for determining the time, schedule, and attendance requirements for employees under their supervision. This can lead to different and inconsistent treatment among employees, especially in the context of medical leave. To avoid this situation, employers must understand when the FMLA requires employees to be given intermittent leave or reduced leave schedules. Intermittent leave is leave taken in separate blocks of time due to a single qualifying reason (e.g., 2 hours taken off for a medical appointment related to a serious health condition). Reduced leave is a schedule that reduces an employee’s usual number of work hours per week or per day. Eligible employees may take intermittent or reduced leave only if medically necessary and related to the serious health condition of the employee or the employee’s spouse, child, or parent. Of course, employers can allow employees to take intermittent leave or reduced leave after the birth or placement of a child, but they are not required to do so. Regardless of how the leave is taken, only the actual leave taken is counted toward the employee’s FMLA entitlement. For example, if an employee leaves 2 hours early on four different days, he or she has used only 8 hours of leave (or one day) rather than four full days of leave.
3.5. FLSA: Lessons learned 3.5.1. Record keeping Pursuant to the FLSA, employers must keep records for nonexempt workers that contain certain information, including but not limited to the employee’s birth date (if younger than 19), gender, hours worked each day and total hours worked per work week, and total wages paid each pay period, including date of payment and the pay period covered by the payment. Employers must keep payroll records, collective bargaining agreements, and sales and purchase records for at least 3 years. Although not required by the FLSA, employers should consider keeping the same records for exempt employees so that if an employee later challenges his or her classification, or it is determined that the employee is misclassified, the employer will have the necessary documentation to establish the hours worked. Also, employers should have employees sign their timesheets. This will serve to verify the accuracy of the information. 3.5.2. Compensation and deductions Employers must not make deductions to an exempt employee’s pay for less than a full day of absence or the employer may lose the exemption for that employee and all other exempt employees in the same job classification. For the same reason,
614 employers should avoid pay deductions to exempt employees’ salaries for disciplinary reasons. The FLSA does, however, provide a safe harbor provision if an employer makes an illegal deduction from an exempt employee’s pay. Employers can avail themselves of this safe harbor provision by:
Establishing a clearly communicated policy prohibiting improper deductions and including a complaint mechanism;
Reimbursing the employee for any improper deductions in a reasonable time frame; and
Making a good-faith commitment to comply in the future. 3.5.3. Hours worked Employers ‘‘ are obligated to pay for all hours employees are suffered or permitted’’ to work, including work done at home, if the employer knows or has reason to believe that the work is being performed. Accordingly, employers need to be vigilant in requiring employees to record work performed remotely, including checking email on handheld devices, because such time will be considered work time even when it is not performed on work premises or during business hours. Although employers may discipline employees for failing to comply with any requirements regarding work hours (e.g., must obtain approval before working overtime hours), employers are obligated to pay employees for such time. 3.5.4. EPA Under the EPA, employers may not reduce wages of either sex to equalize pay between men and women. Similarly, a violation of the EPA may occur if a different wage was/is paid to a person who worked in the same job before or after an employee of the opposite sex.
4. How to position companies to handle problem employees 4.1. Establish policies Employers should establish personnel policies to provide guidance and notice to employees, ensure consistent and fair application of workplace rules by management, and minimize legal liability. There are two key concepts employers should consider when developing their policies. First, policies must be realistic. For example, it may be unrealistic to have a policy that prohibits all personal use of workplace equipment, such as checking news online or
C.M. Plump calling home on work telephones. When companies fail to balance their business needs with pragmatic expectations for their workplace environment, it can lead to inconsistent enforcement, lack of enforcement, or discontent employees, all of which can cause legal problems. Second, while policies must be general enough to capture a broad spectrum of behavior, they also must be specific enough to put employees on notice of expectations and allow supervisors to interpret and to enforce them in a uniform manner. The policies delineated next can, by providing parameters for measuring such behavior, assist employers when they must address an employee’s inadequate performance or inappropriate conduct. Further, situations involving discipline and termination are often emotional events. When employers have objective policies in place, it can help alleviate the difficulty in articulating the problem and lends credence to the disciplinary process; this, in turn, may discourage employees from filing frivolous lawsuits. Table 1 offers a summary of Do’s and Don’ts regarding employment policies and procedures. 4.1.1. At-will employment In the majority of states, ‘‘ employment relationships are presumed to be at-will’’ unless there is a written agreement to the contrary, such as a collective bargaining agreement or an employment agreement. The term at-will means that either the employer or the employee may terminate the employment relationship for any reason, or no reason, so long as the termination is not for an illegal reason. Courts are, however, increasingly finding that employers alter this at-will status by promising employment for a certain time period or placing restrictions on the ability to terminate employment ‘‘ (e.g., termination only for cause’’). To guard against inadvertently changing an employee’s atwill status, and thereby making it more difficult to terminate poorly performing employees, employers should reaffirm the at-will nature of‘‘employment in their handbooks via statement that nothing in the handbook alters an employee’s status as an at-will employee.’’ In addition, all offer letters should contain a statement that employment is at-will. 4.1.2. Acknowledgment of receipt Employers are strongly advised to have their employees verify receipt of any policies or handbooks, and that they have been advised to seek assistance if they have any questions, by signing a page or sending an email confirmation. This is supported by Hudyka v. Sunoco, Inc. (2007) whereby an ambiguous arbitration agreement sent to employees via email
Dealing with problem employees: A legal guide for employers Table 1.
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The do’s and don’ts of dealing with problem employees in the workplace Do’s
Don’ts
Potential pitfalls to avoid
Job Notices/Applications: Include a statement that the company complies with all applicable federal, state, and local employment laws
Do ‘‘not include statements such as ‘‘ recent graduates’’ or young and energetic’’ in job notices
Helps avoid discrimination claims, including age discrimination
Job Descriptions: Prepare written descriptions that include duties and essential functions, responsibilities, required qualifications, and reporting relationships
Do not allow descriptions to become outdated by failing to update them as needs change or positions evolve
Job descriptions establish work expectations, assist with determinations of whether an employee is exempt from overtime pay, and help in defending discrimination cases
Evaluations: Provide annual written evaluations that are job-specific
Do not provide inaccurate information in an‘‘ effort ‘‘ to be nice’’ or soften the blow’’ ‘‘ Do not use probationary’’ periods of employment either for the initial part of employment or in connection with discipline
Evaluations provide an objective basis for salary and promotion decisions and aid in discipline and termination decisions
Handbook: Include an acknowledgment of receipt in the handbook for employees to sign and return
Send out mass emails with attached policies or handbooks without any record of receipt
This helps avoid an argument that the employee did not receive the handbook or was unaware of a certain policy
Establish Policies: Include policies on attendance, hours, and leave
Do not allow managers to determine what to do on a case-by-case basis
Ensures consistent treatment and avoids appearance of favoritism or discrimination
Training: Provide annual training on company policies and procedures; Require employees to sign and date attendance sheets
Do not assume employees and managers will know what constitutes appropriate and legal workplace behavior
When an employer takes steps to prevent harassment, such as training, it can help in the defense of harassment claims
Documentation: Engage in uniform and consistent documentation of discipline issues
Do not single out one employee to document and not document other similar violations by other employees
Helps ensure consistent business decisions, justify discipline and termination, and avoid claims of discrimination
EPLI: Consider purchasing employment practices liability insurance
Do not assume because you have not had any employment cases that you do not need insurance
Allows employers to manage and insure against certain expenses of discrimination cases
Employment Agreement/Handbook: Include a statement in any employment agreement or handbook that says employment is at will
was deemed unenforceable, as there was no evidence the employee either received or read the email. An acknowledgment can assist a company in a lawsuit by providing evidence that an employee had notice of a particular policy.
This helps avoid an argument that an employee is entitled to continued employment
4.1.3. Employee classifications and pay Employees must be told at the time of hire what their rate of pay will be and whether they are entitled to overtime pay if they work more than 40 hours in a work week. In addition to being required
616 by law, this notice provides employers with an opportunity to communicate work hour expectations. For example, exempt employees not subject to overtime requirements may be expected to work whatever hours are necessary to perform their jobs, while nonexempt employees may be required to obtain approval before working overtime. If an exempt employee later fails to meet performance expectations because he or she is working too few hours or a nonexempt employee fails to obtain approval before working overtime, the employer will find it easier to take disciplinary action up to and including termination. In the latter situation, however, even if a nonexempt employee works unauthorized overtime hours, the FLSA requires the employer to pay that employee for such overtime hours even though the employee can be disciplined or fired for failing for follow company procedures. 4.1.4. Anti-harassment policy Employers can significantly reduce, and in some cases avoid, liability for sexual harassment and other forms of harassment and retaliation if they implement a strong policy against harassment and a procedure that employees must follow to report harassment; and take immediate steps to investigate and stop harassment if it does occur. Accordingly, employers should implement anti-harassment policies. 4.1.5. Confidentiality Employers should have a policy regarding employees’ obligations to maintain the confidentiality of information they learn during their employment. Such a policy should contain a definition of confidential information with examples provided, guidelines on the use and dissemination of such information, and procedures for retaining and destroying such information. This type of policy is becoming increasingly useful to employers seeking to discipline or terminate employees for comments made on the Internet. 4.1.6. Equal employment policy Employee handbooks should include a statement indicating that the employer is an equal opportunity employer, in accordance with the requirements of all applicable federal, state, and local laws. Similarly, employers should consider including an equal employment policy statement on all advertisements and employment applications. 4.1.7. Attendance and hours of operation High absenteeism (for reasons other than medically approved leave), late arrival, and early departure are common problems for employers. To help alleviate such issues, employers are well advised to
C.M. Plump have written guidelines in their handbooks regarding the company’s hours of operation and when employees are expected to be in the office. 4.1.8. Vacation and sick leave It is useful to have procedures regarding approval, notice, and taking of sick leave and vacation time. Without such policies, some employees may take advantage of the situation, resulting in discord in the workplace, inconsistent treatment, and the perception of discrimination. 4.1.9. Evaluations Employers should prepare a standard evaluation form for each job type and train supervisors regarding completion of such evaluations to ensure they apply the same criteria and do so in a consistent manner. Evaluations should honestly, accurately, and consistently appraise an employee’s performance, conduct, attitude, skills, and qualifications. Employers should not take the easy way out by labeling an employee as satisfactory if this is not the case. By being accurate, employers alert employees to performance deficiencies and unacceptable workplace conduct. If the employee is later disciplined or terminated, evaluations can have legal significance if the employer has to defend such action. On the other hand, failure to indicate a performance problem on an evaluation can give rise to an inference that the conduct did not happen or that the employer created the reason after the fact as a pretext to cover up discrimination. 4.1.10. Safe harbor provision Companies should implement safe harbor provisions that communicate their intention to avoid improper pay deductions. Safe harbor provisions should require employees to notify their employer of improper deductions, and contain an assurance that improper deductions will be reimbursed. Such provisions can provide a defense in FLSA litigation and allay employees’ concerns about raising such issues.
4.2. Train employees Employers should ensure that their supervisors know the organization’s policies so they can communicate and report information as needed, make informed and consistent employment decisions, and take appropriate action to discipline or terminate employees when necessary. The best way to educate management is to train them. Simply providing a handbook containing policies does not ensure such information is read or understood, and lacks the interactive quality that can be critical in developing effective policies. Training can be done by an
Dealing with problem employees: A legal guide for employers in-house manager, an outside organization, or a law firm. Companies should offer training on an annual basis, for several reasons. First, comprehensive and routine training can assist a company with its legal defense in litigation. Second, it provides an opportunity to discuss and to revise policies based on actual experience, and thereby avoid stale or unenforced procedures. Third, even when policies do not change, technology or circumstances can affect how such policies are administered, interpreted, or enforced. In addition to training supervisors, employers should train non-supervisory employees. Employers often avoid training non-supervisory employees because they fear it will encourage claims. Instead, statistics and cases demonstrate that putting employees on notice of policies through training makes employees more accountable for their actions, encourages them to participate effectively in the process before issues become lawsuits, alleviates concerns about fair treatment, and assists in the efficient and effective resolution of workplace concerns such as requests for leave and accommodation. Moreover, an effective policy that is communicated to employees and consistently enforced can provide a defense to a legal claim or a basis for settling a matter before litigation.
4.3. Consistent enforcement of policies Having policies in place and providing annual training will be rendered meaningless if employers fail to apply their rules consistently. By ensuring that policies are applied consistently, employers establish a practice and record of uniformity, which is critical in defending employment cases. Similarly, uniform treatment imbues the process with a sense of fairness. There are, however, situations that may require a departure from the typical action. If this occurs, employers should have a legitimate, business-related reason for taking different action and document the reason for such action.
4.4. Documentation In the absence of a written agreement or collective bargaining agreement to the contrary, employers generally are not required to document misconduct, to record requests for accommodation and responses thereto, or to engage in any type of progressive warning system before disciplining or terminating an employee. Nonetheless, employers that document such issues:
Place employees on notice, which can stave off lawsuits;
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Increase credibility and uniformity by providing a reference point for future employment decisions based on such conduct; and
Ensure written records in the event the individual with knowledge of the misconduct no longer works for the company or forgets the specific facts of the incident. When documenting an incident, the company should have a standard form for recording issues, discuss the information with the employee, and retain the form in the employee’s personnel file. Progressive discipline tends to be a matter of employer preference and often depends on the particular violation. Some situations may dictate immediate dismissal, such as workplace violence, theft of company property, or viewing of pornographic material on workplace equipment. Other instances may be too minor to warrant discipline or termination, such as an employee’s late arrival on one occasion. Because of the broad spectrum of conduct that occurs in the workplace, it can be impractical to have a one-size-fits-all progressive discipline policy. It is often more pragmatic to assess the applicable facts and then decide how to address the matter. Even in such case-by-case situations, however, employers should maintain consistent treatment.
5. Summary The question of how best to deal with performance issues and other employee workplace problems requires a detailed inquiry into which laws may be implicated by an adverse employment action, whether the employee has an employment contract or is subject to a collective bargaining agreement, whether there is documentation or other evidence to support a claim, and how the business has handled similar issues in the past. Although there is no single answer for how to handle problem employees, understanding the most common federal employment laws implicated by employment decisions, recognizing mistakes to avoid during the employment relationship, and knowing what workplace procedures to implement will help businesses address problem employees while complying with employment laws.
Acknowledgment The author wishes to thank Christina Michael, Esquire, of Mitts Milavec, LLC for her invaluable assistance with the research for this article.
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References ADA. (2009). The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. § 12111. ADAAA. (2008). The Americans with Disabilities Act Amendments Act of 2008, Pub. L. No. 110-325, 112 Stat. 3353.(codified as amended at 42 U.S.C. § 12111). ADA Proposed Regulations. (2009). Regulations to implement the Equal Employment Provisions of the Americans with Disabilities Act, as amended, 74 Fed. Reg. 48431. ADEA. (1967). The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621. Buskirk v. Apollo Metals, 307 F.3d 160 (3d. Cir. 2002). Cain v. Hyatt, 734 F. Supp. 671 (E.D. Pa. 1990). EPA. (2007). The Equal Pay Act of 1963, as amended, 29 U.S.C. § 206 (d). FLSA. (2009). The Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201.
C.M. Plump FMLA Regulations. (2009). Regulations relating to the Family and Medical Leave Act of 1993, 29 C.F.R. § 825.100. FMLA. (2009). The Family and Medical Leave Act of 1993, as amended, 29 U.S.C. § 2601. Hudyka v. Sunoco, Inc., No. 06-2891, 2007 WL 208516 (E.D. Pa. 2007). IRCA. (2009). The Immigration Reform and Control Act of 1986, as amended, 8 U.S.C. § 1324a. Lipman, M. (2010). New strategies lead to big Title VII payouts. Employment Law 360. Retrieved January 28, 2010, from http://www.law360.com/articles/144257 Lovejoy-Wilson v. NOCO Motor Fuel, Inc., 263 F.3d 208 (2d Cir. 2001). Lust v. Sealy, 383 F.3d 580 (7th Cir. 2004). O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996). Title VII. (1991). The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e.
www.elsevier.com/locate/bushor
Dealing with problem employees: A legal guide for employers Carolyn M. Plump Mitts Milavec, LLC, Two Logan Square, 12th Floor, 18th & Arch Streets, Philadelphia, PA 19103, U.S.A.
KEYWORDS Discrimination; Termination; Discipline; Performance; Employment laws
Abstract One of the more difficult responsibilities of employers is dealing with problem employees. Employee misconduct and poor performance can lead to productivity issues, morale problems, and inferior quality products. For these reasons, it behooves employers to address performance issues rather than allow them to fester. By understanding which federal employment laws can be triggered when making employment decisions, avoiding common mistakes in applying these laws, and implementing key policies, employers can provide structures in the workplace that allow them to address problems effectively and minimize their legal exposure. # 2010 Kelley School of Business, Indiana University. All rights reserved.
1. The lawful handling of problem employees There are numerous ways in which employees can cause problems for their employers. In general, such employee misconduct is divisible into criminal acts and non-criminal acts. Some examples of criminal acts by employees include theft of company property, embezzlement, accessing child pornography via company equipment, and assault. Some common examples of non-criminal misbehavior in the workplace include insubordination, harassment, safety infractions, unauthorized use of company equipment, abuse of leave, and violations of confidentiality or fiduciary responsibilities.
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One of the most prevalent issues that businesses experience is chronic absenteeism and the related problem of habitual tardiness. As the following examples from actual practice demonstrate, however, there can be a vast difference in the impact of such conduct based on how each company addresses the problem. In the first example, a receptionist at Company ABC often arrived 10 minutes late to work 2-3 times per week. After months of habitual lateness, other employees became resentful and began talking about her. When she learned about the criticism, she retaliated against the employees who criticized her by not giving them messages and intentionally misdirecting their calls. After several more months, the receptionist started calling in sick approximately 1-2 times per week. These absences, along with the related discord in the workplace, affected productivity, impaired morale, and caused two highly valued employees to leave. After
0007-6813/$ — see front matter # 2010 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2010.07.003
608 more than a year of this behavior, management disciplined the receptionist (an African-American). At the same time, management disciplined a recently hired clerk (Caucasian) who had been late twice since she started. Several months later, both employees were fired. The clerk filed suit for race discrimination under Title VII, alleging she was treated worse than other employees with respect to her tardy arrivals because of her race. The receptionist also filed suit for race discrimination under Title VII, due to her discharge. In the second example, a machinist at Company XYZ was late on four occasions over the course of a month. Employees of Company XYZ were required to punch in and out on a time clock. Each month, Company XYZ would review the time cards. During this review, Company XYZ noted the machinist’s late arrivals and met with him regarding his late arrivals. The employee tried to dispute the late arrivals until Company XYZ produced the time cards. Company XYZ prepared a written statement documenting the meeting for the employee’s file. The next month, the employee did not clock in at all one day. Company XYZ met with him again and advised him that if he failed to punch in or out, he would be fired. Company XYZ also advised him that several eyewitnesses told management that he arrived late and intentionally did not punch in to avoid detection. Although the employee was on time for 2 months, he arrived late on two occasions the third month after his second disciplinary meeting. Company XYZ fired him for failure to comply with time/attendance requirements. The machinist never sued Company XYZ, several employees thanked management for ensuring everyone was held to the same standard, and the company experienced no time/attendance infractions for the next 18 months. The difference between these two vastly different outcomes was as simple as putting a policy in place and enforcing it. There will always be employees that cause problems. However, as the proffered examples illustrate, different approaches can have a different financial and operational impact. Thus, one of the challenges employers face when dealing with problem employees is how to address workplace deficiencies and misbehavior without running afoul of the law. This article provides a guide for employers to manage their workforces effectively while minimizing their legal exposure. Specifically, it presents an overview of the applicable employment laws that may be at issue, addresses common mistakes and misconceptions in the application of such laws, and enumerates steps employers should take to minimize legal exposure.
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2. An overview of select federal discrimination, leave, and wage laws To ensure businesses make informed employment decisions, it is vital that they understand the applicable laws. Without this fundamental background, employers can unwittingly and unnecessarily expose themselves to legal liability even though they have a legitimate, nondiscriminatory reason for taking certain employment actions. The financial cost for employers to defend discrimination lawsuits is staggering. In 2009, employers spent $120 million to litigate Title VII cases alone, which is just one of the many federal employment laws that regulate workplace conduct (Lipman, 2010). This section addresses the most significant federal employment laws so employers can navigate effectively through decisions regarding all aspects of the employment process. Employers should also be aware of applicable state and local employment laws, as state law can be the source of additional classes of protected individuals (e.g., sexual orientation) or more stringent requirements for already protected classes (e.g., New York’s age discrimination statute applies to employees at age 18).
2.1. The Civil Rights Act of 1964 The Civil Rights Act of 1964 (Title VII) prohibits employment discrimination based on race, color, religion, sex–—including pregnancy–—and national origin. Specifically, under Title VII (1991, §§ 2000e-2, 2000e-3) it is illegal to:
Discriminate in any aspect of employment, including hiring and firing, compensation, leave, promotions, recruitment, testing, use of company facilities, or other terms and conditions of employment;
Harass an individual on the basis of race, color, religion, sex, or national origin;
Retaliate against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;
Base employment decisions on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain race, color, religion, sex, or nationality;
Deny employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, or national origin; or
Dealing with problem employees: A legal guide for employers
Employ practices that, even though not intentional, have the effect of discriminating against individuals because of their race, color, religion, sex, or national origin. To be subject to liability under Title VII, an employer must have 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. For purposes of Title VII, an employer includes private employers, state and local governments, educational institutions, private and public employment agencies, labor organizations, and joint labor-management committees controlling apprenticeship and training.
2.2. The Age Discrimination in Employment Act of 1967 The Age Discrimination in Employment Act of 1967 (ADEA) prohibits employment discrimination on the basis of age against individuals 40 or older. The ADEA’s (1967, § 623) broad ban against age discrimination also more specifically prohibits:
Statements or specifications in job notices or advertisements of age preference and limitations, unless an age limit has been proven to be a bona fide occupational qualification;
Discrimination on the basis of age by apprenticeship programs, including joint labor-management apprenticeship programs; and
Denial of benefits to older employees. To be subject to liability under the ADEA, an entity must have 20 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. The ADEA applies to the same entities as discussed with respect to Title VII.
2.3. The Americans with Disabilities Act of 1990 The Americans with Disabilities Act of 1990 (ADA) is divided into five titles. This article addresses only the employment provisions contained in Title I of the ADA. Title I of the ADA prohibits private employers, state and local governments, employment agencies, and labor unions from discriminating against qualified individuals on the basis of disability in all aspects of the employment relationship, including job application procedures, hiring or discharging of employees, employee compensation, advancement, job training, leave, benefits, and
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other terms, conditions, and privileges of employment (ADA, 2009, §§ 12111(2), 12112(a)). The ADA covers employers with 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. To fully understand who is protected by the ADA and what constitutes illegal discrimination under the ADA, it is necessary to define certain key terms. Some of these terms have changed due to recent amendments to the ADA contained in the Americans with Disabilities Act Amendments Act of 2009 (ADAAA) and the corresponding proposed regulations issued by the Equal Employment Opportunity Commission (EEOC) on September 23, 2009. These definitions remain subject to further change when the EEOC issues its final regulations and those regulations, along with the ADAAA, are interpreted by the courts. 2.3.1. Disability The definition of an individual with a disability is a person who has a physical or mental impairment that substantially limits a major life activity, has a record of such impairment, or is regarded as having such impairment. The ADAAA (2008, § 2(b)) explicitly rejected several Supreme Court ‘‘ decisions that had narrowly interpreted the term disability’’ and directed courts to construe the definition in favor of broad coverage of individuals. Further, the proposed regulations interpret the ADAAA as shifting the focus of ADA cases away from whether an individual meets ‘‘ the definition of disability’’ to the question of whether discrimination occurred (ADA Proposed Regulations, 2009, pp. 48446-48448). 2.3.2. Major life activity The ADAAA expanded the definition of the term major life activity to include caring for oneself, performing manual tasks, walking, breathing, seeing, hearing, speaking, reading, learning, thinking, concentrating, eating, sleeping, standing, lifting, bending, working, the operation of major bodily functions, such as functions of the immune system, cell growth, digestive, bladder, and bowel functions, brain and neurological functions, respiratory and circulatory functions, reproductive functions, and endocrine functions. 2.3.3. Substantially limits The ADA provides that an impairment is a disability if it substantially limits an individual’s ability to perform a major life activity. The proposed regulations state that the relevant inquiry is how a major life activity is substantially limited, rather than what an individual can do in spite of an impairment.
610 2.3.4. Qualified An individual with a disability is qualified if he or she satisfies skill, experience, education, and other jobrelated requirements of the position held or desired, and who, with or without reasonable accommodation, can perform the essential functions of that position. 2.3.5. Reasonable accommodation The ADA requires an employer to provide a reasonable accommodation to an employee or job applicant with a disability,‘‘unless doing so would cause an undue hardship. A reasonable accommodation’’ may include, but is not limited to, making existing facilities used by employees readily accessible to and usable by persons with disabilities, job restructuring, modification of work schedules, providing additional unpaid leave, reassignment to a vacant position, acquiring or modifying equipment or devices, providing qualified readers or interpreters, and modifying examinations, training materials, or policies. Although employers are not obligated to provide the precise accommodation requested by an employee, they are required to engage in an interactive process with the employee to determine a reasonable accommodation. Employers are not, however, required to lower production standards to make an accommodation or to provide personal use items such as eyeglasses or hearing aids. 2.3.6. Undue hardship The term undue hardship means an action that requires significant difficulty or expense when considered in relation to factors such as the size, financial resources, and the nature and structure of an employer’s operation. Employers have the burden of proving an undue hardship. As stipulated by Lovejoy-Wilson v. NOCO Motor Fuel, Inc. (2001, p. 221), the burden is on the employer to engage in a cost/benefit analysis and determine that an action requires significant difficulty and ‘‘ expense to succeed with an undue hardship’’ defense.
2.4. The Family and Medical Leave Act of 1993 The Family and Medical Leave Act of 1993 (FMLA) requires covered employers to allow eligible employees to take up to 12 weeks of unpaid leave in any 12-month period:
For the birth or care of a newborn child; For the placement of an adopted or foster child;
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To care for a spouse, child, or parent who has a serious health condition; or
Because of the employee’s serious health condition (FMLA, 2009, § 2612). The FMLA covers employers engaged in commerce, or in any industry involved in or affecting commerce, who employ 50 or more employees for a minimum of 20 weeks during the current calendar year or the preceding calendar year. An eligible employee is any employee who has been employed by a covered employer for at least 12 months–— the months do not have to be consecutive–—and at least 1,250 hours during the previous 12 months. For purposes of FMLA, a serious health condition exists in any of the following situations:
Inpatient care; A period of incapacity of more than 3 full consecutive calendar days;
An in-person visit with a healthcare provider at least once within 7 days of the first day of incapacity, and either a regimen of continuing treatment initiated by a healthcare provider after the first treatment or a second in-person visit for treatment within 30 days of the first day of incapacity;
Pregnancy or pre-natal care; A chronic serious health condition which requires treatment by a healthcare provider at least twice a year, continues over an extended period of time, and can cause episodic periods of incapacity;
Incapacity which is permanent or long-term for which treatment may not be effective; or
Any period of absence to receive multiple treatments, either for restorative surgery after an accident or other injury, or for a condition that would likely result in more than 3 days of incapacity if not treated. Routine physical exams, dental exams, eye exams, and cosmetic treatments generally do not qualify for FMLA leave. Absences due to substance abuse, as opposed to treatment for substance abuse, do not qualify for FMLA leave (FMLA Regulations, 2009, § 825.119). On January 28, 2008, former U.S. President George W. Bush signed into law the National Defense
Dealing with problem employees: A legal guide for employers Authorization Act for Fiscal Year 2008 (NDAA 2008), which expanded the FMLA to assist military members and their families. On October 28, 2009, President Obama signed into law the National Defense Authorization Act for Fiscal Year 2010 (NDAA 2010)–— collectively, the NDAA 2008 and NDAA 2010 are referred to as FMLA Amendments–—which further expanded the FMLA provisions. The FMLA Amendments provide two additional types of leave for military reasons. The first type of leave, referred to as military exigency leave, entitles employees who are the spouse, child, or parent of a military member on active duty or call to active duty status to take 12 weeks of leave for one or more qualifying exigencies (FMLA, 2009, §2612(a)(1)(E)). Qualifying exigencies include short-notice deployment, military events and related activities, certain childcare and related activities, financial and legal arrangements, counseling, rest and recuperation, postdeployment activities, and any other events that the employer and the employee agree constitute a qualifying exigency (FMLA Regulations, 2009, § 825.126). The second type of leave, referred to as military caregiver leave, entitles employees who are the spouse, child, parent, or next of kin of a covered service member to 26 weeks of unpaid leave in a 12-month period–—measured forward from the first time an employee takes FMLA leave for this particular purpose–—to care for a covered service member with a serious illness or injury (FMLA, 2009, § 2612(a)(3)). Upon return from FMLA leave, an employee has the right to the same position or an equivalent position to the one he or she had before his or her leave, with the same or equivalent benefits, pay, and other terms and conditions of employment. The position must involve the same duties and responsibilities, perquisites, and status as before the employee took FMLA leave. An employee is entitled to all benefits provided when leave began and any changes to those benefits that occurred while on leave. Upon reinstatement the employee cannot be required to re-qualify for any benefits he or she previously enjoyed. Finally, FMLA leave cannot be treated as a break in service for purposes of vesting and eligibility with respect to a pension or retirement plan.
2.5. The Fair Labor Standards Act of 1938 The Fair Labor Standards Act of 1938 (FLSA) establishes minimum wage, overtime pay, record keeping, and youth employment standards for full-time and part-time workers in the private sector and in federal, state, and local governments. The Equal
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Pay Act (EPA), which is part of the FLSA, also prohibits discrimination on the basis of gender in the payment of wages or benefits for employees who perform work of similar skill, effort, and responsibility for the same employer under similar working conditions (EPA, 2007). The FLSA does not require extra pay for weekend or night work, pay for time not worked (e.g., vacations, sick leave, holidays), severance pay or fringe benefits, or pay for breaks and meal periods. FLSA coverage is broad and encompasses most employees who perform work in the United States or a United States possession or territory. The FLSA establishes the federal minimum wage, which is currently $7.25 per hour. There are certain exceptions to the federal minimum wage requirements, including exceptions for workers with disabilities, full-time students, student learners, employees under age 20 during their first 90 consecutive calendar days of employment, and tipped employees. Before paying sub-minimum wages, however, employers must obtain an authorizing certificate from the U.S. Department of Labor. The FLSA also contains provisions regarding when overtime is due. Covered nonexempt workers are entitled to overtime pay at a rate of one and onehalf times their regular rate of pay for all hours worked over 40 hours in a work week. Further, the FLSA regulations require employers to maintain accurate records of the hours nonexempt employees work each work day. No particular method for keeping the required records is prescribed, so long as the total hours worked each work day can be derived from the information. Employees that meet certain requirements are exempt from the minimum wage and overtime provisions of the FLSA. Neither an employee’s title nor classification of an employee as ‘‘ an employer’s ‘‘ exempt’’ or nonexempt’’ is relevant. Rather, an employee is exempt from the overtime and minimum wage requirements if the employee’s salary and duties meet the requirements of the Department of Labor’s regulations. To qualify for an exemption, all of the requirements for a particular exemption must be met. The main exemptions are executive employees, administrative employees, professional employees, creative professionals, computer employees, outside salespersons, and highly compensated employees (FLSA, 2009, § 213). Finally, employers should consult state wage laws to ensure compliance with any additional or different wage provisions required by such laws. For example, California law requires overtime pay if a nonexempt employee works more than 8 hours per day.
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3. Common mistakes for businesses to avoid 3.1. Title VII: Lessons learned 3.1.1. Verification of authority to work in the United States The Immigration Reform and Control Act of 1986 (IRCA) requires employers to ensure that employees hired are legally authorized to work in the United States (IRCA, 2009, § 1324a(b)). However, an employer who requests employment verification only for individuals of a particular national origin, or individuals who appear to be or sound foreign, may violate Title VII prohibition on national origin discrimination. Similarly, employers should not wait until an employee exhibits performance issues to require verification of authority to work in the United States, in the hope that failure to provide such verification will provide a justification for terminating employment. Although failure to provide verification could be a reason not to hire an employee, it will appear that the employer singled out an individual on the basis of a protected trait. To avoid any inconsistency or perceived bias, employers should require that at the time of hire all employees must provide appropriate documentation verifying authorization to work in the United States. 3.1.2. Customer or manager preference Employees hiring or making decisions regarding assignments or promotions sometimes feel pressure to engage in discrimination because of the perception or reality that customers or managers desire or demand it. Employers must not allow customer preferences or manager demands to influence employment decisions. Such preferences have repeatedly been rejected by the courts as justification for discrimination (Cain v. Hyatt, 1990, p. 681). A related issue involves unfavorable performance reviews due to feedback from customers or biased managers. If the customers’ or managers’ views are based on discriminatory considerations, the company may not make employment decisions based on such views. Employers should review all performance appraisals to ensure the criteria are not discriminatory and there are no discriminatory comments. 3.1.3. Family caregiver responsibility A relatively new category of cases being brought under Title VII involves family caregiver responsibility discrimination (FRD). FRD claims arise in situations where preconceived ideas of gender, parenthood, or other caregiver responsibilities affect employment decisions; consider Lust v. Sealy (2004, p. 580) where-
C.M. Plump by a female sales representative successfully sued for gender discrimination when she was not promoted because a male supervisor did not consider her for the position, under the assumption that she would not want to relocate because she had children. FRD claims may also be based on facially neutral employment policies that treat one gender more favorably than another. For example, employers often deny male employees’ requests for reduced work hours or leave to care for their children even though they grant similar requests made by female employees. Accordingly, when making employment decisions, employers must ensure they base such decisions on neutral and objective criteria rather than subjective assumptions or preconceptions.
3.2. ADEA: Lessons learned 3.2.1. Substantial age difference Age discrimination cases are not only limited to cases involving applicants or employees age 40 or older and individuals under age 40. In‘‘1996, the United States Supreme Court ruled that a substantial difference’’ in ages involving individuals both of protected age could be age discrimination; O’Connor v. Consolidated Coin Caterers Corp. (1996, p. 313) cited that a replacement is substantially younger than the plaintiff is a far more reliable indicator of age discrimination than is the fact that the plaintiff was replaced by someone outside the protected class. 3.2.2. Reductions in force When employers conduct reductions in force (RIF), they must take care to ensure the proposed RIF complies with applicable law. When defending a RIF that disparately impacts employees at or over age 40, employers have several statutory defenses available:
The RIF basis was on reasonable factors other than age;
The RIF basis was a bona fide seniority system (e.g., last hired, first fired);
Employers can require laid-off employees to abide by a voluntary early retirement incentive plan, so long as such plans do not exclude other employees on the basis of a maximum age (ADEA, 1967, § 623(f)).
3.3. ADA: Lessons learned 3.3.1. Drug and alcohol use Employees and applicants currently engaged in the illegal use of drugs are not protected by the ADA.
Dealing with problem employees: A legal guide for employers Accordingly, an employer can terminate an employee for current illegal drug use without violating the ADA. Alcoholics and recovering or recovered drug addicts do qualify as disabled persons under the ADA. However, an employer may require employees not be under the influence of alcohol or illegal drugs in the workplace, and discipline or terminate them for failure to abide by such a policy. Similarly, in evaluating performance, an employer may hold an employee who is an alcoholic or a recovering or recovered drug addict to the same qualification standards as other employees regarding employment, job performance, and behavior. 3.3.2. New position Employers are not required to create a new position or transform a temporary light duty position into a permanent position in order to accommodate an employee with a disability (Buskirk v. Apollo Metals, 2002, p. 169).
3.4. FMLA: Lessons learned 3.4.1. Requests for FMLA leave An employee does not have to specifically request FMLA leave. If an employer knows that an employee needs leave for an FMLA qualifying reason or knows enough information to ask whether the leave is for an FMLA qualifying reason, the employer must make further inquires rather than allege the employee did not explicitly request FMLA leave. Once an employer is on notice of an employee’s need for FMLA leave, the employer should use caution before disciplining or terminating such an employee. Although employees cannot avoid legitimate discipline and termination decisions due to FMLA leave, courts will scrutinize the timing of any such decision to ensure it was not made in retaliation for the employee taking or requesting medical leave. 3.4.2. Total amount of leave Excepting the aforementioned military caregiver leave, employees are entitled to an aggregate of 12 weeks of unpaid leave during any 12-month period, regardless of whether the 12 weeks are taken for one type of FMLA leave or more than one type of FMLA leave. For example, if an eligible employee takes 6 weeks of FMLA leave to care for a newborn child and 6 weeks of FMLA leave for his or her own serious health condition, the employee is not entitled to any additional FMLA leave–—except military caregiver leave–—within the same 12-month period. Employers should consistently enforce this policy to avoid the appearance of discriminatory treatment of a certain class of employees.
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3.4.3. Intermittent leave/Reduced leave Managers are often given responsibility for determining the time, schedule, and attendance requirements for employees under their supervision. This can lead to different and inconsistent treatment among employees, especially in the context of medical leave. To avoid this situation, employers must understand when the FMLA requires employees to be given intermittent leave or reduced leave schedules. Intermittent leave is leave taken in separate blocks of time due to a single qualifying reason (e.g., 2 hours taken off for a medical appointment related to a serious health condition). Reduced leave is a schedule that reduces an employee’s usual number of work hours per week or per day. Eligible employees may take intermittent or reduced leave only if medically necessary and related to the serious health condition of the employee or the employee’s spouse, child, or parent. Of course, employers can allow employees to take intermittent leave or reduced leave after the birth or placement of a child, but they are not required to do so. Regardless of how the leave is taken, only the actual leave taken is counted toward the employee’s FMLA entitlement. For example, if an employee leaves 2 hours early on four different days, he or she has used only 8 hours of leave (or one day) rather than four full days of leave.
3.5. FLSA: Lessons learned 3.5.1. Record keeping Pursuant to the FLSA, employers must keep records for nonexempt workers that contain certain information, including but not limited to the employee’s birth date (if younger than 19), gender, hours worked each day and total hours worked per work week, and total wages paid each pay period, including date of payment and the pay period covered by the payment. Employers must keep payroll records, collective bargaining agreements, and sales and purchase records for at least 3 years. Although not required by the FLSA, employers should consider keeping the same records for exempt employees so that if an employee later challenges his or her classification, or it is determined that the employee is misclassified, the employer will have the necessary documentation to establish the hours worked. Also, employers should have employees sign their timesheets. This will serve to verify the accuracy of the information. 3.5.2. Compensation and deductions Employers must not make deductions to an exempt employee’s pay for less than a full day of absence or the employer may lose the exemption for that employee and all other exempt employees in the same job classification. For the same reason,
614 employers should avoid pay deductions to exempt employees’ salaries for disciplinary reasons. The FLSA does, however, provide a safe harbor provision if an employer makes an illegal deduction from an exempt employee’s pay. Employers can avail themselves of this safe harbor provision by:
Establishing a clearly communicated policy prohibiting improper deductions and including a complaint mechanism;
Reimbursing the employee for any improper deductions in a reasonable time frame; and
Making a good-faith commitment to comply in the future. 3.5.3. Hours worked Employers ‘‘ are obligated to pay for all hours employees are suffered or permitted’’ to work, including work done at home, if the employer knows or has reason to believe that the work is being performed. Accordingly, employers need to be vigilant in requiring employees to record work performed remotely, including checking email on handheld devices, because such time will be considered work time even when it is not performed on work premises or during business hours. Although employers may discipline employees for failing to comply with any requirements regarding work hours (e.g., must obtain approval before working overtime hours), employers are obligated to pay employees for such time. 3.5.4. EPA Under the EPA, employers may not reduce wages of either sex to equalize pay between men and women. Similarly, a violation of the EPA may occur if a different wage was/is paid to a person who worked in the same job before or after an employee of the opposite sex.
4. How to position companies to handle problem employees 4.1. Establish policies Employers should establish personnel policies to provide guidance and notice to employees, ensure consistent and fair application of workplace rules by management, and minimize legal liability. There are two key concepts employers should consider when developing their policies. First, policies must be realistic. For example, it may be unrealistic to have a policy that prohibits all personal use of workplace equipment, such as checking news online or
C.M. Plump calling home on work telephones. When companies fail to balance their business needs with pragmatic expectations for their workplace environment, it can lead to inconsistent enforcement, lack of enforcement, or discontent employees, all of which can cause legal problems. Second, while policies must be general enough to capture a broad spectrum of behavior, they also must be specific enough to put employees on notice of expectations and allow supervisors to interpret and to enforce them in a uniform manner. The policies delineated next can, by providing parameters for measuring such behavior, assist employers when they must address an employee’s inadequate performance or inappropriate conduct. Further, situations involving discipline and termination are often emotional events. When employers have objective policies in place, it can help alleviate the difficulty in articulating the problem and lends credence to the disciplinary process; this, in turn, may discourage employees from filing frivolous lawsuits. Table 1 offers a summary of Do’s and Don’ts regarding employment policies and procedures. 4.1.1. At-will employment In the majority of states, ‘‘ employment relationships are presumed to be at-will’’ unless there is a written agreement to the contrary, such as a collective bargaining agreement or an employment agreement. The term at-will means that either the employer or the employee may terminate the employment relationship for any reason, or no reason, so long as the termination is not for an illegal reason. Courts are, however, increasingly finding that employers alter this at-will status by promising employment for a certain time period or placing restrictions on the ability to terminate employment ‘‘ (e.g., termination only for cause’’). To guard against inadvertently changing an employee’s atwill status, and thereby making it more difficult to terminate poorly performing employees, employers should reaffirm the at-will nature of‘‘employment in their handbooks via statement that nothing in the handbook alters an employee’s status as an at-will employee.’’ In addition, all offer letters should contain a statement that employment is at-will. 4.1.2. Acknowledgment of receipt Employers are strongly advised to have their employees verify receipt of any policies or handbooks, and that they have been advised to seek assistance if they have any questions, by signing a page or sending an email confirmation. This is supported by Hudyka v. Sunoco, Inc. (2007) whereby an ambiguous arbitration agreement sent to employees via email
Dealing with problem employees: A legal guide for employers Table 1.
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The do’s and don’ts of dealing with problem employees in the workplace Do’s
Don’ts
Potential pitfalls to avoid
Job Notices/Applications: Include a statement that the company complies with all applicable federal, state, and local employment laws
Do ‘‘not include statements such as ‘‘ recent graduates’’ or young and energetic’’ in job notices
Helps avoid discrimination claims, including age discrimination
Job Descriptions: Prepare written descriptions that include duties and essential functions, responsibilities, required qualifications, and reporting relationships
Do not allow descriptions to become outdated by failing to update them as needs change or positions evolve
Job descriptions establish work expectations, assist with determinations of whether an employee is exempt from overtime pay, and help in defending discrimination cases
Evaluations: Provide annual written evaluations that are job-specific
Do not provide inaccurate information in an‘‘ effort ‘‘ to be nice’’ or soften the blow’’ ‘‘ Do not use probationary’’ periods of employment either for the initial part of employment or in connection with discipline
Evaluations provide an objective basis for salary and promotion decisions and aid in discipline and termination decisions
Handbook: Include an acknowledgment of receipt in the handbook for employees to sign and return
Send out mass emails with attached policies or handbooks without any record of receipt
This helps avoid an argument that the employee did not receive the handbook or was unaware of a certain policy
Establish Policies: Include policies on attendance, hours, and leave
Do not allow managers to determine what to do on a case-by-case basis
Ensures consistent treatment and avoids appearance of favoritism or discrimination
Training: Provide annual training on company policies and procedures; Require employees to sign and date attendance sheets
Do not assume employees and managers will know what constitutes appropriate and legal workplace behavior
When an employer takes steps to prevent harassment, such as training, it can help in the defense of harassment claims
Documentation: Engage in uniform and consistent documentation of discipline issues
Do not single out one employee to document and not document other similar violations by other employees
Helps ensure consistent business decisions, justify discipline and termination, and avoid claims of discrimination
EPLI: Consider purchasing employment practices liability insurance
Do not assume because you have not had any employment cases that you do not need insurance
Allows employers to manage and insure against certain expenses of discrimination cases
Employment Agreement/Handbook: Include a statement in any employment agreement or handbook that says employment is at will
was deemed unenforceable, as there was no evidence the employee either received or read the email. An acknowledgment can assist a company in a lawsuit by providing evidence that an employee had notice of a particular policy.
This helps avoid an argument that an employee is entitled to continued employment
4.1.3. Employee classifications and pay Employees must be told at the time of hire what their rate of pay will be and whether they are entitled to overtime pay if they work more than 40 hours in a work week. In addition to being required
616 by law, this notice provides employers with an opportunity to communicate work hour expectations. For example, exempt employees not subject to overtime requirements may be expected to work whatever hours are necessary to perform their jobs, while nonexempt employees may be required to obtain approval before working overtime. If an exempt employee later fails to meet performance expectations because he or she is working too few hours or a nonexempt employee fails to obtain approval before working overtime, the employer will find it easier to take disciplinary action up to and including termination. In the latter situation, however, even if a nonexempt employee works unauthorized overtime hours, the FLSA requires the employer to pay that employee for such overtime hours even though the employee can be disciplined or fired for failing for follow company procedures. 4.1.4. Anti-harassment policy Employers can significantly reduce, and in some cases avoid, liability for sexual harassment and other forms of harassment and retaliation if they implement a strong policy against harassment and a procedure that employees must follow to report harassment; and take immediate steps to investigate and stop harassment if it does occur. Accordingly, employers should implement anti-harassment policies. 4.1.5. Confidentiality Employers should have a policy regarding employees’ obligations to maintain the confidentiality of information they learn during their employment. Such a policy should contain a definition of confidential information with examples provided, guidelines on the use and dissemination of such information, and procedures for retaining and destroying such information. This type of policy is becoming increasingly useful to employers seeking to discipline or terminate employees for comments made on the Internet. 4.1.6. Equal employment policy Employee handbooks should include a statement indicating that the employer is an equal opportunity employer, in accordance with the requirements of all applicable federal, state, and local laws. Similarly, employers should consider including an equal employment policy statement on all advertisements and employment applications. 4.1.7. Attendance and hours of operation High absenteeism (for reasons other than medically approved leave), late arrival, and early departure are common problems for employers. To help alleviate such issues, employers are well advised to
C.M. Plump have written guidelines in their handbooks regarding the company’s hours of operation and when employees are expected to be in the office. 4.1.8. Vacation and sick leave It is useful to have procedures regarding approval, notice, and taking of sick leave and vacation time. Without such policies, some employees may take advantage of the situation, resulting in discord in the workplace, inconsistent treatment, and the perception of discrimination. 4.1.9. Evaluations Employers should prepare a standard evaluation form for each job type and train supervisors regarding completion of such evaluations to ensure they apply the same criteria and do so in a consistent manner. Evaluations should honestly, accurately, and consistently appraise an employee’s performance, conduct, attitude, skills, and qualifications. Employers should not take the easy way out by labeling an employee as satisfactory if this is not the case. By being accurate, employers alert employees to performance deficiencies and unacceptable workplace conduct. If the employee is later disciplined or terminated, evaluations can have legal significance if the employer has to defend such action. On the other hand, failure to indicate a performance problem on an evaluation can give rise to an inference that the conduct did not happen or that the employer created the reason after the fact as a pretext to cover up discrimination. 4.1.10. Safe harbor provision Companies should implement safe harbor provisions that communicate their intention to avoid improper pay deductions. Safe harbor provisions should require employees to notify their employer of improper deductions, and contain an assurance that improper deductions will be reimbursed. Such provisions can provide a defense in FLSA litigation and allay employees’ concerns about raising such issues.
4.2. Train employees Employers should ensure that their supervisors know the organization’s policies so they can communicate and report information as needed, make informed and consistent employment decisions, and take appropriate action to discipline or terminate employees when necessary. The best way to educate management is to train them. Simply providing a handbook containing policies does not ensure such information is read or understood, and lacks the interactive quality that can be critical in developing effective policies. Training can be done by an
Dealing with problem employees: A legal guide for employers in-house manager, an outside organization, or a law firm. Companies should offer training on an annual basis, for several reasons. First, comprehensive and routine training can assist a company with its legal defense in litigation. Second, it provides an opportunity to discuss and to revise policies based on actual experience, and thereby avoid stale or unenforced procedures. Third, even when policies do not change, technology or circumstances can affect how such policies are administered, interpreted, or enforced. In addition to training supervisors, employers should train non-supervisory employees. Employers often avoid training non-supervisory employees because they fear it will encourage claims. Instead, statistics and cases demonstrate that putting employees on notice of policies through training makes employees more accountable for their actions, encourages them to participate effectively in the process before issues become lawsuits, alleviates concerns about fair treatment, and assists in the efficient and effective resolution of workplace concerns such as requests for leave and accommodation. Moreover, an effective policy that is communicated to employees and consistently enforced can provide a defense to a legal claim or a basis for settling a matter before litigation.
4.3. Consistent enforcement of policies Having policies in place and providing annual training will be rendered meaningless if employers fail to apply their rules consistently. By ensuring that policies are applied consistently, employers establish a practice and record of uniformity, which is critical in defending employment cases. Similarly, uniform treatment imbues the process with a sense of fairness. There are, however, situations that may require a departure from the typical action. If this occurs, employers should have a legitimate, business-related reason for taking different action and document the reason for such action.
4.4. Documentation In the absence of a written agreement or collective bargaining agreement to the contrary, employers generally are not required to document misconduct, to record requests for accommodation and responses thereto, or to engage in any type of progressive warning system before disciplining or terminating an employee. Nonetheless, employers that document such issues:
Place employees on notice, which can stave off lawsuits;
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Increase credibility and uniformity by providing a reference point for future employment decisions based on such conduct; and
Ensure written records in the event the individual with knowledge of the misconduct no longer works for the company or forgets the specific facts of the incident. When documenting an incident, the company should have a standard form for recording issues, discuss the information with the employee, and retain the form in the employee’s personnel file. Progressive discipline tends to be a matter of employer preference and often depends on the particular violation. Some situations may dictate immediate dismissal, such as workplace violence, theft of company property, or viewing of pornographic material on workplace equipment. Other instances may be too minor to warrant discipline or termination, such as an employee’s late arrival on one occasion. Because of the broad spectrum of conduct that occurs in the workplace, it can be impractical to have a one-size-fits-all progressive discipline policy. It is often more pragmatic to assess the applicable facts and then decide how to address the matter. Even in such case-by-case situations, however, employers should maintain consistent treatment.
5. Summary The question of how best to deal with performance issues and other employee workplace problems requires a detailed inquiry into which laws may be implicated by an adverse employment action, whether the employee has an employment contract or is subject to a collective bargaining agreement, whether there is documentation or other evidence to support a claim, and how the business has handled similar issues in the past. Although there is no single answer for how to handle problem employees, understanding the most common federal employment laws implicated by employment decisions, recognizing mistakes to avoid during the employment relationship, and knowing what workplace procedures to implement will help businesses address problem employees while complying with employment laws.
Acknowledgment The author wishes to thank Christina Michael, Esquire, of Mitts Milavec, LLC for her invaluable assistance with the research for this article.
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