Ignoring HR liabilities can cost your business money. HR liabilities arise through employment or termination of any employee by the company. Employees can sue employers for many different situations. Businesses might complain that nothing is off limits, but the fact of the matter is that employees can sue because their employee rights have been violated. The United States Department of Labor works hard to protect employees from employment discrimination, retaliation, and more. Based on these laws, employees are entitled to pursue their employee rights.
Employment laws are meant to protect employees — not necessarily business owners. Over the years, the protections have multiplied and people are taking note. In fact, some are becoming more litigious as a result. So, in addition to the human aspect of managing people, policies and procedures, HR also involves managing risk.
Learn about these HR liabilities that could be detrimental to your business.
1. Punitive Employment Actions
Anytime you are considering taking punitive action against an employee — whether it’s a demotion, pay reduction, disciplinary action or termination — it can pose a risk to your organization. Although there’s nothing employers can do to avoid lawsuits or allegations of wrongful employment acts, there are ways to manage HR risk.
To do that, an employer must fast forward and consider the potential consequences of his or her actions before those actions are put into motion. An employer’s focus should not be on how to avoid being sued for terminating an employee, as that really can’t be avoided. Rather, if an employee is terminated and that employee sues, will the employer have a defense?
To protect your business, be sure to document everything. Writing things down is the key to avoiding HR mistakes and defending your actions if needed. Not only will handbooks, policies, procedures and forms help your case, but written accounts of any issues or incidents you had with a troublesome employee will go a long way.
In HR, we say, “If it isn’t written down, it didn’t happen.” Simply put, if an employee alleges punitive action was taken against him or her for an unlawful reason, employers want to have sufficient evidence that indicates the legitimate (non-discriminatory) reason for his or her decision to take the action.
2. Wage and Hour Issues
Things can get sticky when you’re dealing with an employee’s money and something goes wrong. So when employers are making decisions about paychecks or pay rates, it’s best to consult with an HR professional. If employers don’t make sure their pay practices are in line with federal and state regulations, it could lead to violations and major fines.
As you are probably aware, wage and hour laws are developed to protect the wages that employees earn for the work they perform. Therefore, there are additional laws that dictate when employers can deduct from those wages.
For both exempt and nonexempt employees, permissible deductions typically include those required by law (taxes), or by court order (garnishments) and those at the request and for the benefit of the employee (benefits premiums, 401(k) deposits).
Here are some of the most common wage and hour mistakes employers make:
- Misclassifying employees as exempt (from overtime) when they really are not (resulting in unpaid wages)
- Assuming that paying someone a “salary” means they are not entitled to overtime (a non-exempt employee can be paid a salary but still be entitled to overtime)
- Not counting all work as “hours worked” to calculate weekly totals (drive time is sometimes considered work)
- Making improper deductions from an employee’s pay (there are many state and federal guidelines regarding deductions from pay)
The bottom line is this: Know your HR liabilities. Ignoring the rules, or not understanding them, can lead to major problems. If you have specific questions on making deductions from employee pay or covering your back when it comes to adverse employment actions, we’re here to help.