MBA News - Terminations

What should be in your employee’s severance payment?

MBAHRO — Tue, 30 Mar 2010 18:25:00 GMT

What should be in your employee’s severance payment?

You are probably aware that State laws governing employees' final pay upon termination vary widely. As your company grows, needing to terminate an employee may come up more often. To avoid legal hassles, you should make sure your HR people know how to legally cut the employee’s severance payment check.

For example, a laid-off employee's severance payment may be due immediately upon termination (e.g., in California), or not until an employee's next regularly scheduled payday (e.g., in Florida).

Likewise, an employee's entitlement to payment for accrued vacation and/or sick time, commissions, and bonuses varies by state.

There are different rules in each state for whether the employee is entitled to:

Accrued vacation
Accrued sick time
Commissions
Bonuses

Failing to pay an employee as required by law can subject you to costly unpaid wage claims and additional civil penalties. You should encourage your HR resources to take a look at applicable laws to determine amounts owed to employees.

Modern Business Associates frequently deals with HR issues. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including designing legal processes for terminations and council when calculating a legally abiding severance payment.

Federal HIRE Act offers a tax credit on social security, how much can my company earn?

MBAHRO — Thu, 25 Mar 2010 22:42:00 GMT

Federal HIRE Act offers a tax credit on social security, how much can my company earn?

President Obama signed into law the Hiring Incentives to Restore Employment Act ( HIRE Act ) in March of 2010. The federal HIRE Act carries a tax credit on Social Security. It starts immediately for employers hiring qualified employees through the remainder of 2010.

The best way to generate the maximum tax credit on Social Security is to hire qualified employees early in the year, since the exemption stops on wages paid after January 1, 2011.

If an employee earning $40,000 annually is hired on April 1, 2010, the Social Security tax credit to the employer would be approximately $1,900.
If the same employee was not hired until Aug. 15, 2010, the savings would be lowered to $950.

The tax credit on Social Security can be used to offset scheduled tax deposit liabilities beginning April 1, 2010 and accrue with each payroll processed.

Employers will receive a 6.2% Employer Social Security Tax Exemption on wages paid to “qualified employees” after March 18, 2010 and before January 1, 2011, up to the Social Security maximum of $106,800.

The maximum credit per qualified employee is $6,621.

Pay close attention to the HIRE Act requirements the employee must meet to activate the tax credits.

Modern Business Associates is available to assist as you navigate through the federal HIRE Act and work toward maximizing your tax credit on Social Security. While we focus on these areas, you can concentrate on your core business needs and goals. Should you have any questions, please do not hesitate to contact us.

Having an employee sign a separation agreement doesn’t cover you completely.

MBAHRO — Thu, 11 Mar 2010 23:02:00 GMT

Having an employee sign a separation agreement doesn’t cover you completely.

If you offer a severance, a separation agreement and general release is essential to secure the release of employment-related claims.

Keep in mind that not all claims can be released by an employee, Including:

Wage and hour claims
Certain workers' compensation-related claims
Family and Medical Leave Act (FMLA) claims (courts are split over this issue).

Additionally, an employer cannot bar an employee from filing a charge of discrimination (although it can prevent an employee from obtaining related monetary relief thereunder). Because of varying local/state employment laws, employers should be encouraged to seek outside counsel for separation agreement drafting and review.

A separation agreement should be clearly written and must comply with local, state, and federal law. Important factors must be considered when negotiating severance and drafting a separation agreement.

Modern Business Associates frequently deals with legal HR issues. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including designing legal processes for terminations and designing a separation agreement.

Employee discipline documentation is your friend when preparing for a lay off.

MBAHRO — Mon, 08 Mar 2010 23:04:00 GMT

Employee discipline documentation is your friend when preparing for a layoff.

Documentation of employee discipline is critical when building a list of potential candidates for a lay off. Employee discipline documentation is one of the most important aspect to adding credibility to recommending an “inflexible” or “weak link” employee for a layoff list.

However, it is too often the case that management cannot support its rationale with documented employee discipline. In those instances, the employer's decision about who to include in the lay off can be used by former employees to bolster discrimination allegations. Document your poor performers before considering a layoff.

Fighting costly legal battles can quickly offset savings achieved during a layoff. A June 2008 Supreme Court decision has made lay offs even riskier for employers. In Meacham et al. v. Knolls Atomic Power Laboratory, the court determined that an employer must bear the burden of proving the "reasonableness" of factors other than age when a RIF has an adverse impact on workers age 40 and older. Employers who are unversed in the legal pitfalls of a lay off often seek to eliminate their "weakest links," citing non-specific, undocumented and legally weak issues, like "performance" or "lack of flexibility" (two criteria used by the employer in Meacham) as the reasons employees were selected for a layoff.

Modern Business Associates frequently deals with lay off issues. As a HR outsource company, our clients rely on us to help them effectively deal with these kinds of topics including designing plans for lay offs and documenting employee discipline.

Benefits of Performance Appraisals include Compliance Protection

MBAHRO — Fri, 05 Mar 2010 23:06:00 GMT

Benefits of Performance Appraisals include Compliance Protection

A performance appraisal system, when properly managed, provides you with a means of measuring, maintaining, and improving your employee’s job performances. Through the job performance appraisal program, your company can:

Validate hiring decisions
Recognize employees' job performance strengths and weaknesses
Identify employees who are ready for promotion or greater responsibilities
Assess training needs

From a compliance perspective, you should be able to rely on performance appraisals to justify the full range of personnel decisions, including discipline and termination actions.

For example, if a performance appraisal reflects poor job performance by the employee and this employee is later terminated, the you can point to the performance appraisal to show the employee was not performing to standards. If, however, an employee with overall weak performance is given a good or even average appraisal, and the employee is later terminated without interim discipline, the performance appraisal will have the opposite result — the employee may use it to show the termination decision was not justified and instead, was based on a discriminatory or other unlawful factor.

A well designed and administered performance appraisal program can go far to protect employers from certain legal challenges to employment decisions.

Modern Business Associates frequently deals with performance appraisals. As a HR outsource organ, our clients rely on us to help them effectively deal with these kinds of topics including compliance protection.

How to avoid age discrimination issues during layoffs.

MBAHRO — Thu, 04 Mar 2010 23:07:00 GMT

How to avoid age discrimination issues during layoffs.

There are a variety of reasons for an employer to offer severance to an employee who is separating from employment (e.g., to settle threatened or actual litigation, as a goodwill gesture in the event of a layoff), but in virtually all situations, the employer is going to insist that the employee sign a release as a condition to receiving the settlement payment.

This article outlines some of the most important issues, specific to age discrimination, employers should consider when drafting such waivers. In all circumstances, it is advisable that outside counsel review all agreements.

The Age Discrimination in Employment Act (ADEA) has a list of requirements that must be incorporated into your release. They focus on making sure the departing employee does not waive any right or claim under ADEA unless the waiver is “knowing and voluntary”. This means the release must:

Be "written in a manner calculated to be understood" by the employee; and
Specifically refer to the employee's rights or claims under the Age Discrimination in Employment Act; and
Only waive rights or claims that arose prior to the date the waiver was signed; and
Provide consideration; and
Advise the employee to consult an attorney prior to executing the release; and
Allow the employee at least 21 days to consider whether she will sign the agreement; and
Allow the employee at least seven days to revoke the agreement.

Keep in mind, a release under the Age Discrimination in Employment Act may not preclude an employee from filing a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) or participating in an EEOC investigation.

A release agreement can serve useful business purposes, including, but not only, litigation prevention and avoidance. To achieve its objective, however, the waiver must be carefully drafted to ensure that if challenged, it will be enforced.

Modern Business Associates deals with these kinds of issues on a frequent basis. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including issues around age discrimination.

WARN act can ruin your layoff plan, are you at risk?

MBAHRO — Mon, 01 Mar 2010 23:11:00 GMT

WARN act can ruin your layoff plan, are you at risk?

Here at Modern Business Associates, we frequently deal with federal labor and employment laws and how they affect our clients. Laws relating to layoffs have been a hot topic lately. The Worker Adjustment and Retraining Notification Act (WARN act) is one such hot legal issue.

The WARN act sets forth specific notification requirements for covered employers undergoing certain layoffs. (States including California, Illinois, Maine, and New Jersey have enacted similar legislation expanding an employer's notification obligations.)

In part, the WARN act requires employers with 100 or more employees to provide workers with 60 days written notice of:

Plant Closings
Mass Layoffs

Under the WARN act, a "plant closing" is a permanent or temporary shutdown of a single site of employment resulting in an employment loss of 50 or more employees during a 30-day period.

Under the WARN act, a "mass layoff" is either a reduction in workforce resulting in a single-site employment loss of at least 33 percent of the site's employees (a minimum of 50 employees must be affected), or an employer's overall loss of 500 or more total employees.

With certain exceptions, employers who fail to comply with the WARN act, face substantial monetary liability. An affected employer must identify and adhere to its obligations under the WARN act and its state counterparts.

Modern Business Associates frequently deals with complex HR issues. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including designing plans for layoffs and HR communication plans appropriate to federal labor laws.

How to Follow your Termination Template and Use the Termination Meeting to lower your legal risk.

MBAHRO — Thu, 25 Feb 2010 16:53:00 GMT

How to Follow your Termination Template and Use the Termination Meeting to lower your legal risk.

The termination meeting is an opportunity for an employer to minimize risk. Your termination template should include specific elements of the termination meeting.

As an initial matter, you should carefully consider the personnel conducting layoffs. Someone with a direct supervisory relationship over the worker is advisable and a third party witness should attend the meeting.
Employees should be given their final paychecks, severance, and any applicable notifications during the termination meeting so they are not walking away "empty-handed".
Separation agreements and releases should be distributed and signed (if possible).
Additionally, it is a good idea to conduct terminations earlier in the week to give employees an opportunity to file for unemployment and begin considering other employment alternatives.

Modern Business Associates frequently deals with HR issues. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including designing processes for terminations and constructing a termination template.

Harassment Policy Violation - What to do when your new manager makes a firing mistake

MBAHRO — Mon, 22 Feb 2010 16:55:00 GMT

Harassment Policy Violation - What to do when your new manager makes a firing mistake.

Most companies want to do the right thing and make correct HR decisions. A quality HR program pays off in a multitude of ways. Still, companies sometimes make very bad decisions, or, more likely, employees may make poor decisions that you may have been unaware of when the decision was made. Reasons for ill-advised decisions vary, but many times these are rooted in a lack of proper knowledge and training. Bad manager decisions force you to operate reactively rather than proactively. While the old adage "an ounce of prevention is worth a pound of cure" is absolutely true with respect to HR matters, there are times that the only thing you can do in a reactive mode is provide that "pound of cure."

Let’s presume you already have a comprehensive antidiscrimination and harassment policy. In addition to the creation of the policy, proper notification of the policy and training were provided to employees. All appears well, until you get "the call." A former employee calls and claims that she was unfairly treated and terminated after she told her manager several times that she did thought a co-worker’s jokes were offensive.

Investigate And Take Action Immediately

In situations like this, it is imperative that you begin a thorough investigation immediately. This investigation should not only focus on the underlying complaint, but also in determining why the complaint was not investigated earlier. It may be important down the road to show that, although there was an initial breakdown in the policy, a thorough investigation was ultimately conducted.

You come to find out:

A co-worker (a long-term employee) routinely made offensive jokes to her, and others, about the female anatomy.
That the fired employee had made repeated complaints to your manager (a new employee who had been with the company for only a few months)
Against the Harassment Policy, it looks like nothing was done after her complaints and the jokes continued.
After she complained for the third time to the manager this morning, the manager terminated her for her "bad attitude."
In addition, it looks like the employee was never disciplined for anything whatsoever in the past.
The manager admits to terminating her because he felt that what she was complaining about was not a big deal.
Lastly, the manager never received training on how to handle such situations.

Next Steps

You should review whether the procedure for reporting complaints was adequate. In avoiding harassment cases, it’s important to have a policy and process for handling complaints. Also, was the process followed in this case? Was the employee and the manager adequately trained? Given a handbook? Acknowledged its receipt?

As in most harassment cases, the biggest potential problem is the specter of a costly retaliation lawsuit. Because of that, employment counsel should be involved in developing an appropriate response.

In this scenario, all efforts should be made to get the complaining employee back to work. Even if you don’t think the employee will accept the offer of employment, it should still be made. By making an offer, even if it is not accepted, you are potentially limiting back pay damages if a lawsuit eventually does ensue.

Still, you cannot simply bring the complaining employee back to work without addressing her original complaints of harassment. Assuming her co-worker was indeed routinely making offensive jokes, appropriate discipline must be taken. The past discipline history of the employee should be taken into account in determining the correct disciplinary action. Keep in mind that the discipline should be designed to eliminate the conduct that was in violation of the anti-discrimination and harassment policy.

Fix Your Process to Prevent Future Problems

Finally you have to address the manager's failure to properly address the original complaints. This scenario could have potentially been avoided if the manager received proper HR and management training. Bottom line, don’t have a manager working who does not understand this important policy. Failure to do so exposes your business to potentially costly litigation.

Modern Business Associates frequently deals with harassment policies. As a Professional Employee Organization, our clients rely on us to help them effectively deal with these kinds of topics including how to prepare properly to avoid harassment claims.

Layoffs and other times when job reinstatement according to FMLA regulations may not be necessary.

MBAHRO — Wed, 17 Feb 2010 16:58:00 GMT

Layoffs and other times when job reinstatement according to FMLA regulations may not be necessary.

Does your HR department know the limited situations under which an employer can refuse to reinstate an employee who has taken FMLA leave according to FMLA regulations?

The Act's primary purpose is to ensure that employees are reinstated to the same or equivalent positions held at the commencement of the leave. Moreover, when there is a dispute, it is probably fair to say that the U.S. Department of Labor and most courts lean strongly in favor of the reinstatement of employees. Laws in this area do offer some limited circumstances in which an employer may deny job restoration to otherwise protected employees:

Key employees-According to FMLA laws, an employer may deny reinstatement, but not leave, to "key employees." A key employee is a salaried employee who is compensated within the top 10 percent of the employees working within a 75-mile radius of the employee's worksite. 29 CFR §825.217.1 To deny job restoration to a "key employee," the employer must be able to show that the employee's restoration, not leave, would cause "substantial and grievous economic injury" to the employer's operations. In addition, the employer must have informed the employee, in writing, of his status as a "key employee" prior to the commencement of the FMLA leave. 29 CFR §825.216(c).
Layoffs-An employer may deny reinstatement to an employee whose job was eliminated due to a reduction in force, but only when the employer can demonstrate that the employee's job would have been eliminated even if the employee had not been on FMLA-protected leave. 29 CFR §825.216(a)(1).
Specific term or project-Some employees are hired for a specific term or to perform a specific function. If the term expires or the function ends while the employee is on FMLA leave, the right to job restoration ends as well. 29 CFR §825.216(b).
Employee notice-In rare circumstances, an employee taking leave according to FMLA laws will tell the employer that he will not be returning to work. Pursuant to the Act's regulations, an employer's obligation to restore an employee to work ceases if the employee provides the employer with "unequivocal notice" that he will not return to work. However, the regulations also make it clear that an employee does not forfeit his right to reinstatement when the employee states that he may not be able to return to work, but would like to do so. 29 CFR §825.309(b)
Fitness for duty-Sometimes an employer has concerns about an employee's ability to resume all previous job duties and wants to delay or eventually deny an employee's release until a "fitness for duty" certification is obtained. This is permissible only if the employer notified the employee in writing prior to the leave that a fitness for duty certificate will be required to return to work and the employee fails to present such documentation. 29 CFR §825.216(c).
Other considerations-In determining whether an employee who is on leave due to an illness or injury is entitled to job reinstatement, an employer should not ignore state and local family and medical leave laws and the Americans with Disabilities Act (ADA). If the employee was injured at work, state workers' compensation laws may govern.

No decision to deny job restoration can be taken lightly and you should consult with your HR professional prior to any decision involving the job status of someone who has been on leave provided by FMLA laws.

1. The court in Harbert v. Healthcare Service Group, Inc., 391 F.3d 1140 (10th Cir. 2004), cert. denied, 126 S.Ct.
356 (2006), concluded that in "joint employer" situations in which the employee has a fixed job site, the term "worksite" is the site to which the employee is assigned.

2. The Department of Labor (DOL), in a December 1, 2006, Federal Register notice, published a request for information soliciting comments on the FMLA. The comments were due on February 16, 2007, and will be used by the DOL in a possible overhaul of the FMLA regulations.

Modern Business Associates frequently deals with issues relating to FMLA laws and employees. Laws like FMLA are the kinds of topics MBA deals with regularly as a Professional Employee Organization. Our clients rely on us to help them effectively deal with these kinds of topics including FMLA regulations.