One of the most important internal relationships for an in-house Legal Department is with the Human Resources team. Much of the HR department’s day-to-day work directly involves legal issues and analysis. Likewise, some of the nastiest and “headline-grabbing” litigation involves employees and their claims alleging mistreatment, discrimination, malfeasance, etc. Regardless of whether there is any merit to such claims, these disputes tend to be very public and can negatively impact your company’s brand and reputation (along with economic consequences in the event the company pays a settlement or loses in court). That’s why it is very important that Legal and HR closely cooperate and align on how to best protect the company from employment-related issues. Working together, one plus one can add up to three.
As general counsel, one of the things I focused on was ensuring that my team (including myself) and HR met regularly to discuss a wide variety of issues and how best to work together to manage them. I was fortunate to work with real professionals both on the legal side and the HR side. Each group brought different viewpoints and skills to the table, which was very valuable. Over time we met frequently to discuss different issues, from policy updates and training to cutting-edge legal risks. You and/or your team should consider setting up regularly scheduled meetings with HR throughout the course of the year to stay close on key legal/HR issues. This edition of Ten Things sets out some important areas that Legal and HR should discuss on a regular basis (though focused on the U.S., these topics easily apply across borders):
- Employee Training Program. Most companies have some form of online, live, or combination thereof program to train employees on a wide variety of issues, including things like sexual harassment, compliance, business ethics, and data security. Legal and HR should meet once a year to go through the training program and materials to make sure they are relevant, effective, and updated to capture new issues. There may also be additional training for supervisors (which can substantially reduce liability risks in key areas) and you should review this additional layer as part of any overall process. New hire orientation can be a great place to reach employees and discuss important policies and issues. Work with HR to get Legal a “seat at the orientation table” or, if the chairs are full, let you help prepare materials for such sessions. Doing so will pay-off down the road through a more savvy workforce.
- Employee Classification. The process of properly classifying workers as “Exempt”/”Non-Exempt” under the Fair Labor Standards Act is very important. Basically, the classification tells you which employees are hourly and which employees can be salaried. Misclassification of hourly employees as “exempt” can set the company up for severe legal problems and potential big damages with respect to back wages and overtime. You need easy to understand guidelines and processes as to when an employee is exempt or not, and you should train all supervisors in this area. Additionally, work with HR to regularly review job descriptions and do periodic auditing of employees earning below a certain threshold (say below $75,000) to ensure they are properly classified — as there is less risk of misclassification at the higher end of the pay scale.
- Interns. Another area of risk revolves around the use of interns. In particular, “free” interns. The bottom-line is that unless you can meet some pretty rigid standards, there is no such thing as a “free” intern. For example, I was approached regularly by colleagues or law school students inquiring as to whether I would be interested in hiring a student intern over the summer months. The intern was not expecting any payment, just the opportunity to get some experience and flesh out a resume. At first, I thought it was a great idea and everyone wins — and I was frustrated when HR said “no.” But, I quickly came to learn they were right and that despite everyone’s willingness to go with such an arrangement, the law was clear that the type of work we had for an intern would not qualify for “free.” Given the potential for high penalties, tax exposure, etc., be sure you and HR have a process to vet any and all internships at your company and that you regularly police this area.
- Key Employee Agreements/Clauses. In my experience, Legal would draft employee agreements (e.g., confidentiality, non-compete, non-solicitation, IP ownership, arbitration clauses) and HR would administer them. Over time, agreements were modified in a non-uniform manner or older versions of an agreement/clause were used when newer state-of-the-art versions existed. Additionally, when it came time to enforce one of these agreements, we would sometimes find that we could not locate the agreement or, if we did find it, it was not signed by the employee. HR and Legal should meet to discuss the preparation and administration of these agreements, including a process to maintain version control and to discuss changes that may be needed given new circumstances or changes in the law.
- Employee Handbook. Many companies have an employee handbook containing key policies such as “Code of Ethics and Business Conduct,” “Anti-Corruption,” “Anti-Trust,” “Insider Trading,” “Health and Safety,” “Trade Compliance,” etc. Set up a process with HR to go through these policies together and update the handbook and relevant policies as needed (e.g., recent changes in pregnancy accommodation). Note that without proper wording or disclaimers, an at-will employee handbook can become a binding contract. And be aware that the NLRB’s general counsel recently issued a 30-page memorandum on how provisions in an employee handbook can violate Section 7 of the National Labor Relations Act. You should already be thinking about how your handbook matches up to the NLRB’s expectations and make revisions as needed.
- Employee/Contractor Classification. Another area fraught with risk and traps for the unwary. HR and Legal should periodically review all independent contractors each year to ensure they are not being treated like “employees” (e.g., contractor invited to employee meetings, close supervision and direction of the contractor’s work) and therefore entitled to employee benefits. Supervisors and anyone with the ability to engage contractors should understand the proper process around hiring and managing them. I recommend setting up a procedure to flag and review contractors who have been working with the company for a set period of time (e.g., six months), and that there is a review higher up in the organization to look at any decision to keep a contractor beyond the set period of time. If there are no clear guidelines in place around the use and management of independent contractors your company could be in for some real problems and costly litigation.
- Layoffs. Nobody likes to discuss this topic. Regardless, a pro-active Legal Department will work with HR to be prepared for the possibility of layoffs in any year including a process to reduce the legal risks that can arise when layoffs happen. You should jointly create a simple checklist of all of the steps the company will need to take in the event there is a layoff (e.g., internal/external communications). One key issue is the need for a disparate impact analysis of the potential layoffs to ensure there is no bias against any protected class. You should have in place the tools to run this analysis along with identifying outside counsel to help evaluate the results. Additionally, you should be familiar with the requirements of WARN (or state-specific “mini-WARN” statutes) in the U.S. and “TUPE” throughout Europe (and similar laws in other countries). These statutory worker protections can trip the company up and delay layoffs and/or impose additional costs if not followed. Developing (and keeping current) form severance agreements/releases constitutes good planning and can be helpful when things start to pile up.
- Internal Investigations Policy. At my last job, we (Legal/Compliance Office) worked with HR and Internal Audit to develop a written investigation policy and protocol. At most companies, internal investigations typically involve the participation of these three groups. We found that over time, the lines become blurred and that information was not being shared properly between us and there were often duplicative efforts underway to look at the same issue. To fix this we created a document that clearly set out the roles and responsibilities of each group depending on the type of issue presented (e.g., sex discrimination complaint vs. internal fraud vs. business ethics policy violation). In addition, the policy set out how information would be shared, what follow-ups were required, who was copied on what, etc. We prepared an annual joint communication to all managers sharing and explaining the policy and telling them where they should start in the event they had issues involving employees. Not only did this policy increase cooperation between the three groups, and it ended up saving us all a lot of time and effort because we knew who had the wheel for any particular type of investigation and what was expected from our teams.
- Background Checks. Given the potential legal exposure for making a “bad” hire, many companies now do criminal background checks on all potential employees and/or promotion candidates. This is an area to use great care as various cities and states have enacted or are in the process of enacting laws that change the ground rules on when employers can ask job applicants questions about prior arrests. Similarly, the EEOC has set out its expectations with respect to when and how an employer can consider arrest and conviction records. There should also be appropriate due diligence on any third parties your company engages to conduct background checks, in particular around compliance with the Fair Credit Reporting Act which sets out the general rules of the road for employers in this area. Legal and HR should work together to ensure that the company is in compliance with all of the different laws in the U.S (or elsewhere) and fully understands any limitations on the use of background checks.
- “Cutting Edge.” Finally, Legal should meet with HR several times a year to simply discuss any cutting edge issues in employment law. For example, Work From Home policies, BYOD policies, the use of social media by employees, Americans with Disability Act issues, dress codes/religious accommodation guidance, open-source/download policies, personal use of company e-mail, service animals, affirmative action plans, unionization efforts, firearms, “wellness programs”, inclement weather policies, ERISA, etc. You do not need to have an answer to all of these types of issues, but you should have a plan to track issues and regularly communicate what Legal and HR are seeing re the same.
As you can see, there is an endless supply of issues and concerns that Legal and HR share. Your company may have the same or vastly different issues than the ones I set out above, but it’s a good starting point. The takeaway is the importance of setting up regular meetings between the two staff groups (and this is also an area where outside counsel can be great thought partners and probably give you some free hours to be at the table). If these meetings are not going on today, make it your goal to make the first move and set them up. You’ll find that your friends in HR will appreciate the opportunity to work together. Furthermore, talk with other senior company leaders outside of HR and get their views on what employment-type issues or problems they are seeing or think need to be addressed. The company (and you) will benefit from your taking a proactive and strategic role in identifying areas of risk and working to minimize problems down the road.
April 2, 2015
(If you find this blog useful, please pass along to colleagues or friends and/or “Tweet” it. “Ten Things” is not legal advice or legal opinion. It is intended to provide practical tips and references to the busy in-house practitioner and other readers. You can find this blog and all past posts at http://www.TenThings.net or www.sterlingmiller2014.wordpress.com. You can follow me on Twitter: @10ThingsLegal)
This is a great list. Thank you. Although not the focus of your article, I would add that HR can be a great partner in also supporting legal team personnel needs, such as performance evaluations, issue resolution and creating individual development plans. We are currently holding a training session with HR on creating our annual development plans, which is very helpful.
It is really a great and useful piece of information. I am glad that you shared this useful information with us. Please keep us up to date like this. Thanks for sharing.