This week's tip:
of Disabled Employees
Both Federal and Washington
State law require that employers provide reasonable accommodation to
disabled employees, so long as this does not cause undue hardship to the employer. However, Washington State law demands much more of employers
than the Federal law does. If you make sure you are in compliance with the former, you will also be in compliance with the
latter. Therefore, this tip will focus on Washington State law.
An employer is a person
or entity that employs eight or more people. Non-profit religious or sectarian organizations are excluded.
is a blurry concept, heavily dependent on the facts of the case. It may include making changes in a work station or the working
environment, providing rest periods, providing leaves of absence, or arranging light duty. Undue hardship is also a fact driven
question. It is easier to understand what is expected by considering what is not expected. An employer need not make exactly
the accommodation an employee requests, so long as the employer does make a reasonable accommodation that addresses the particular
limits imposed by the disability. The employer need not create a new position for the employee, nor need the employer eliminate
an essential function of the employee’s job.
The determination of
what is undue hardship and what is reasonable accommodation will also vary from one employer to another. Economic circumstances,
workplace particulars, and available alternate positions all play a part. If an employer is aware that an employee is or has
become disabled, and that the employee might be qualified and able to fill a position that is vacant, the employer would be
wise to look into whether the disabled employee would be the best choice for the job.
In Washington State, the definition of “disabled”
has undergone some dramatic shifts. Under Federal law, a disability must be so severe as to interfere with the disabled person’s
ability to perform major life functions such as performing manual tasks, caring for himself, walking, seeing, hearing, speaking,
breathing, learning or working. A temporary condition is not considered a disability under Federal law. Washington
State regulations (regulations are rules made by administrative agencies, rather
than passed by the state legislature) defined disability under Washington
law much more broadly, including both temporary and permanent conditions, and including any impairment (physical, mental or
emotional) which has a substantial limiting effect on the ability of the employee to do his or her job. In 2006, the state
Supreme Court ruled that the regulations took too much license, went beyond what the state legislature had intended, and that
henceforth, the Federal definitions would apply. In 2007, the Washington State Legislature responded that, to the contrary,
it approved of the regulations, and it placed the previous regulatory definitions into the statute. Therefore, any medical
condition or impairment which interferes with an employee’s ability to do his or her job may be found to be a disability
requiring reasonable accommodation.
The following tips will
help the small business owner navigate the churning waters of disability discrimination law:
1) If you suspect an
employee may have a disability, but you do not know, do not ask, “Do you have a disability?” Instead ask, “Is
there anything that would prevent you from doing this job?”
2) If an employee does
disclose to you that he or she has a disability, open a dialog and keep communication lines open as to what would help enable
that employee to work. Explore different options to find the one most effective as well as most practical.
3) Remember that the
law requires reasonable accommodation. It is impossible to address every possible
situation in a short website tip about this fact specific area of law. If you are unsure of what is expected of you as an
employer in a given situation, spend a few minutes with your business attorney to find out what is likely to be required in
your particular case.
How Bad Employees
Can Become an Employer’s Nightmare
Employees who lie, employees
who steal, employees with abrasive personalities and employees who are just plain incompetent make many employers wish they
could do away with the relying on people in the workplace. Such employees drive away customers, discourage valued employees
and irritate vendors.
They can also cost the
employer a lot in legal damages. In broad terms, this can happen in one of two ways.
First, employers are
vicariously liable for the wrongful acts of their employees done in the course of employment. For the employer to be liable,
1) the act
has to be reasonably foreseeable;
2) it must
be related to or connected with the employee’s duties and
3) it must
occur within the workplace and during work time.
Thus, if a bouncer at
a tavern gets carried away and hurts someone while trying to forcefully eject him, the employer would be liable. If a bread
truck driver has a traffic accident while making deliveries, the bread company will be liable to the innocent third party.
If the bouncer has a traffic accident while driving to the bank on his meal break, however, the employer is probably not liable.
Second, employers may
be liable if they do not bear their responsibility or duty to protect others (called collateral liability). Parties to be
protected include customers and clients, other employees, vendors and members of the general public who may come in contact
with the employee in question. Thus, a plumbing company will be responsible for damages to the homeowner for an incompetent
plumber who floods the ground floor. If an employer becomes aware that an employee has an anger management problem while at
work, the employer will be held liable when the employee punches out a customer.
Employers are required
to use reasonable care in hiring safe and competent employees. They are also required to provide adequate supervision of their
employees. What is deemed reasonable and adequate will vary greatly depending on the situation. For some positions, such as
those involving care of children or vulnerable adults, a complete background check may be in order. For other positions, such
as for wait staff in a restaurant, an employer should be alert to inconsistencies in the job application, but otherwise need
not carry out a criminal background check in the hiring process.
To be clear, employees
continue to be responsible for their own negligent or intentional bad acts. The innocent third party can seek redress from
the employee as well as the employer, and the employer can often seek recovery from the problem employee. However, in practice,
employees often have neither the assets nor the insurance to make good on the obligation, and so the employer will have to
be the one who opens his wallet or her purse.
Employers can protect
themselves by relying on a thorough screening process at hiring, setting out clear behavioral expectations for staff, and
then enforcing a disciplinary process when those expectations are not met. Employers should also provide supervision that
is adequate, but that does not reach the level of micro-management.
Employers would also
do well to review their hiring procedures and management programs with their employment attorneys. It is important to screen,
hire and supervise adequately, but it is also important to avoid forbidden screening techniques (such as polygraph tests,
illegal for most purposes), or procedures that illegally invade the employee’s (or prospective employee’s) privacy.
Some hiring and management tools can inadvertently open an employer to accusations of illegal discrimination as well. Thus,
for each employer, the personalized guidance of their own attorney can be a helpful, and in the long run, money saving tool.
Ratings and Successor Businesses
This week’s tip is for
businesses that are employers, but it concerns what happens when businesses merge, so it could also properly be posted in
the general business tip section.
From time to time, business owners
decide that the business’ experience rating with Employment Security has gotten too high, and the tax burden has gotten
too onerous. In search of relief, these business owners decide that if they can just transfer everything to a new entity,
they can scrape off that high experience rating as they pass through the door.
The Washington Legislature, and
Employment Security, are both aware of this approach, and the provisions of the applicable laws and regulations put such business
owners in the same position with regard to unemployment compensation contributions after the transfer as they occupied before.
Because such transfers have a transaction cost, such employers will be in a net loss position after the transfer.
law, if the successor business (the new business that is acquiring the old one) was an employer prior to the transfer of the
business, the successor business keeps its old experience rating for the rest of the year. After that year, its contribution
rate is based on the experience rating of the successor business and the experience rating of the acquired business after the transfer. In other words, if a construction company with employees and a good experience rating acquires
a plumbing company with a poor experience rating, the construction company keeps its old experience rating for the year it
buys the plumbing company. The following year, its contribution will be based on its experience rate with its construction
employees, but also on its experience rate with its new plumbing employees, but the company will not be accountable for the
predecessor (selling) company’s poor rating.
Thus, a business that has been
employing workers and has been maintaining a good experience rating will get to keep that desirable rating if the business
acquires another business which has not done so well at keeping employees working.
However, if a business that is
not an employer acquires a business that is an employer, the new business will pay Employment Security contributions based
either on the predecessor company’s rating, or at the average rate for that industry plus 15%.
Also, if there is a “substantial
continuity of ownership” between the successor and predecessor company, the successor company will be assigned the predecessor
company’s experience and rating.
In other words, if Employment
Security finds that the owners of the employer closed the business and reopened under a new name, all of the experience rating
“baggage” will simply be transferred to the new entity. This will apply even if the business entity is passed
through an intermediary owner. If Employment Security cannot show a continuity of ownership, but the new employer has no previous
employment record, the successor business will still need to pay either at the predecessor’s rate or at 15% above industry
Of course, the new company will
also suffer loss of goodwill and recognition in the industry, and may also suffer increased scrutiny from other government
There are many effective ways
to keep unemployment taxes under control, including careful hiring, and properly documenting employee resignations and terminations
for misconduct. Dissolving and reforming a business is not one of them.
Employers often unwittingly
violate overtime rules. Many arrangements which “seem fair” violate state and federal laws and can subject the
employer to penalties. Exceptions to the rules exist, but this article will only address those that apply to private industry.
When is overtime due?
Overtime is due to any
employee who works over 40 hours in a week, unless that employee is exempt. There is no requirement that an employee be paid
overtime for a workday that exceeds 8 hours, so long as the work week does not exceed 40 hours. (However, an employer may
choose to pay overtime for workdays in excess of 8 hours.) If an employer is issuing payroll less frequently than once a week,
the employer may not “average out” the time between the weeks to determine whether overtime is due. For example,
if an employer is paying employees every two weeks, the employee who worked 42 hours one week and 38 hours the next week is
entitled to two hours of overtime pay, even though she averaged 40 hours per week. The employer’s workweek may begin
on any day, but must begin on the same day every week.
What rights does the
employer have to control this cost?
The right to overtime
cannot be waived by agreement between the employer and the employee. This is true even if there is a union contract, unless
a special statutory exception exists. (Film projection workers may, by law, waive overtime under a union contract, for example.)
The employer also cannot
refuse to pay overtime when the worker was told not to work overtime, whether specifically or through a general policy that
forbids overtime without authorization. While it would seem that the more moderate correction of withholding unauthorized
overtime pay would serve everyone well, the employer’s available remedy for the employee who works unauthorized overtime
is either demotion or discharge.
If an employer is subject
to the Fair Labor Standards Act (including nearly all private employers), the employer may not substitute some other benefit
such as “comp time” for the required overtime pay. Comp time is acceptable if taken during the same week that
overtime is worked, because it simply reduces the number of hours worked during that week. However, comp time is not an acceptable
substitute for overtime if taken at a later date.
On the other hand, an
employer may require overtime, so long as proper overtime is paid. Employers are wise to consider the needs of employees who
must pick up children from day care, or who otherwise may suffer hardship from working extended hours. Further, if an employee
suffers a disability for which exemption from overtime might be considered a reasonable accommodation, employers should usually
make that accommodation. Union contracts may also carve out exceptions to this rule, and special rules also apply to workers
under the age of 18. Outside of these exceptions, whether mandated legally or by common sense rules about maintaining employee
morale, there is no requirement that employees be released at the 8 hour mark if pressing business requires attention.
Who must be paid overtime?
Overtime must be paid
to every employee who works more than 40 hours in a week, and who is not exempt. A few specific job categories are exempt,
including agricultural workers, casual workers in private residences, sailors, and air carrier workers when the overtime is
worked in connection with voluntary shift swapping. Other special categories exist, and an employer should check the Washington
Labor and Industries website, or the company attorney, if the employer believes the company workers may be exempt.
In addition, executive,
administrative, professional, computer professional and outside sales employees are also exempt. Specific limitations apply
for each of these groups. Executive employees must be in a decision making position and must have the ability to hire and
fire, among other requirements, for example. Simply making someone a department supervisor does not necessary make that employee
exempt from overtime rules.
Must salaried workers
be paid overtime?
Absolutely, they must,
unless the workers fit in one of the exemptions. The myth that salaried workers are automatically exempt from overtime misleads
employers more often than any other bit of misinformation regarding overtime. Whether an employee is paid hourly or on salary
is not relevant to whether they qualify for overtime.
How do I calculate
overtime, especially if the worker is not paid a straight, hourly rate?
Overtime pay is at least
1 ½ times the employee’s “regular rate”. If the employee is paid an hourly rate, with no other compensation,
this is easy to determine. Otherwise, the employer must add up all compensation
paid to the employee and divide by 40, to arrive at the employee’s “regular rate”. This includes wages,
whether hourly or a salary, but also includes non-discretionary bonuses, commissions, and “on call” pay. It does
not include vacation or sick pay, gifts (such as the annual discretionary holiday bonus), or reimbursement of expenses.
It also does not include
overtime pay, or weekend or holiday premium pay, so long as that pay exceeds 150% of the regular rate. For example, if an
employer has a policy of paying workers at least 150% of their regular rate for hours worked over 8 in a day or for working
on weekend days, that pay is not included in the overtime calculation.
More information about
overtime rules is available at the web link below. While overtime policies seem like one more hand in the employer’s
pocket, compliance is important. If the rules are not observed, employees may turn to the Department of Labor & Industries
for enforcement. Additionally, they may bring a private right of action for unpaid wages and reasonable attorney’s fees.
The state may also criminally prosecute non-compliant employers if deemed appropriate.
If you have questions
about your overtime payment practices, check the link below for further information, or check with your employment law attorney.
Washington State Dept. of Labor & Industries - Overtime
When Employees Leave
– 12 Steps for an Orderly Exit
Departure of an employee
can be a stressful time. If the employee is leaving involuntarily (is being fired or laid off), the manager or business owner
who has made that decision will almost inevitably struggle with mixed feelings. When the employee is leaving to pursue work
elsewhere, or even when the employee is leaving to go back to school, to begin full time parenting, or to pursue the rewards
of retirement, sadness and concerns about finding a replacement will make this a difficult time to remember the details.
Therefore, it is a good
idea for the small business owner, who does not have a Human Resources Department dedicated to cycling people through, to
have a checklist on hand of what needs to be done.
1) Make sure
that both you and the employee are clear about why the working relationship is ending. If the employee is terminating the
relationship, try to learn why the decision to change. If the employee is unhappy with the working situation, try to learn
why. If the employee decides to express his or her reasons, quietly listen. Don’t argue or defend, and don’t sympathize
or agree. Just listen politely. This may help the you improve the workplace for others, and may also give the you an advance
warning of possible legal challenges to come. If you are the one terminating the relationship, make sure the employee understands
why. For a layoff, be sure the employee understands that it is not his or her fault, and if he or she would be welcome back
in better times, make that clear, too. If the employee is being fired, be sure they understand why, without scolding or otherwise
causing unnecessary emotional distress. If the employee is not clear as to what your reason is, he or she will assume a reason,
possibly a legally actionable one. If you are not able to articulate a specific, legal reason (even to yourself) why the employee
must go, you may want to delay termination until you can.
2) Make sure
everyone is clear about when the last day of work is. If the employee is being involuntarily terminated, this should as soon
as he or she is notified of the termination. Realistically, you cannot fairly expect enthusiastic labors from someone who
knows that unemployment is days away, even from employees who have a strong work ethic. Among less motivated employees, all
sorts of costly misconduct may be anticipated in the waning hours of their employment.
3) Learn about
future employment plans. This is obviously particularly important for employees who are leaving to take another position.
4) Have the
final check ready on the last day of work (for voluntarily departing employees) or at the exit interview (for those leaving
involuntarily). Legally, you must remit any final pay due by the next regular pay day, but it is easier to hand the check
directly to the departing employee, and you do not risk a violation of the deadlines if the check is lost in the mail. You
also do not risk disgruntled employees wanting to return to the office on a later day to pick up their checks.
5) Get an
address for mailing w-2s and any other later documents.
6) Make sure
the employee understands his or her COBRA rights, or, if your firm is too small to be subject to COBRA, his or her options,
if any, with regard to continuing medical coverage and other benefits at his or her own expense after termination.
to the employee what options he or she has with regard to 401(k) or other employment based pension plans, and how he or she
may exercise those options.
8) Have at
hand a list of company property which must be returned.
9) Have at
hand a summary of any expenses or compensation which may be due the employee at a later time, and when these will be paid.
Some types of compensation, such as commissions on orders, simply cannot be calculated and paid until a later date.
10) Review any employment agreements
with regard to non-disclosure, non-compete or other restrictive clauses. Make sure the employee understands any restrictions
that may survive termination of employment, and that you intend to enforce those restrictions.
11) Especially if the employee is being
involuntarily terminated, make every effort to respect the employee’s dignity. Conduct the exit interview privately
12) If the employee is being laid off,
and is not at fault, do not waste your time trying to avoid the inevitable. Graciously confirm the lay off when you get the
notice from Employment Security, and move on with growing your business. Severance pay, if designated as pay for the equivalent
time period (for example, if two weeks severance pay is designated as pay for the two weeks following the date of termination)
will delay the date that the employee is qualified for unemployment, but may also obligate the company to an additional month
of medical insurance (and other benefit) premiums.
Documenting New Employees
Whenever you welcome
a new employee into your company, you must be sure that the necessary documentation is completed to satisfy a surprising crowd
of interested parties.
The first interested
party is the employer itself. Open a file for each new employee that includes all documentation generated during the hiring
process, including applications, letters and resumes. The file should also include the employee’s address and other
contact information, job description, hours, pay rate, and copies of the documents mentioned below, unless otherwise noted.
If you have an employee handbook (a practice I strongly recommend), you should also obtain a signed acknowledgement from the
employee that he or she has received a copy.
The second interested
party is your employee. He or she will want to be enrolled in any benefit programs that are immediately available to new hires.
Your personnel file should document that this has been done, although the file should not contain copies of any insurance
applications that may contain medical or other sensitive information that is legally of no interest to the company.
The third interested
party is the State of Washington. (This article assumes the reader is operating within the State of Washington. If this is not so, the information in this article may
be inappropriate in several places and should not be relied upon.) Within 20 days of your new employee’s first day,
you must provide the Department of Social and Health Services (the agency that looks for deadbeat parents who owe child support)
with your new employee’s information, including his or her Social Security number. Fortunately, this can easily be done
on line at http://www1.dshs.wa.gov/newhire/. If you already have employees, and have failed to do this, DSHS requests that you go ahead and enter their information as
soon as possible. A large number of small businesses are unaware of this requirement, and DSHS policy is to encourage compliance
by not penalizing businesses that have been noncompliant out of ignorance.
The federal government
is the fourth interested party. All new employees (and all employees, at the beginning of the year) must complete a W4 to
provide their employers with their withholding information. These forms are available from the IRS web page, at www.irs.gov.
The federal government
also requires that each new employee complete an I-9 and provide supporting identification as provided on the form. The I-9
is the mechanism whereby the employer documents its reasonable efforts to confirm that the new employee is legally entitled
to work in this country. These forms can be downloaded at http://www.uscis.gov/files/form/i-9/pdf. Keep your I-9s together in a separate file from your other personnel information, as they may be subject to inspection by
Signing employment agreements
with key employees is often beneficial for both employers and employees. Absent an agreement, the expectations that either
party may have of the other are defined by law and a limited. An agreement removes uncertainty for both sides. Following are
some key points that an agreement can render unambiguous, and comments on including these in the agreement with key employees.
Term of employment –
Employment may be “at will”, for a specified term (after which employment ceases absent further agreement), or
for a specified term (after which the agreement is renewed absent objection from one of the parties). Of course, the employer
cannot force someone to continue to work for it if the employee decides to leave in the middle of a contract. However, employment
contracts can provide for financial penalties that would strongly discourage an employee from making an early departure in
breach of the contract.
It is often helpful to spell out what compensation and benefits have been agreed upon. If the employer anticipates that an
employee may become especially important to the company’s growth, the contract might also include incentives that the
employee will receive after remaining a certain time or performing to a certain level. Where appropriate, “golden handcuff”
incentives, pensions, stock options or other assets can be structured so that the employee forfeits them if the employee chooses
to depart early.
Protecting company information
– Employment agreements should also include terms requiring that the employee not disclose company trade secrets and
respect any applicable intellectual property rights. At the same time, the agreement may acknowledge any intellectual property
rights that the employee may have had prior to joining the company. (This may particularly apply in the case of highly skilled
research and development staff who may be concerned that research done prior to being hired may become entwined in their work
for hire.) Contracts may also include non-compete terms
Prior commitments –
Experienced employees often arrive with non-disclosure and non-compete commitments to prior employers. While it may be tempting
to try to persuade such employees to breach these commitments, the wiser course is to resist the urge. Subsequent employers
can be held liable when the employee breaches. A clause in the contract acknowledging such prior obligations encourages the
employee to comply, and may also serve as a defense if the employee chooses to breach the prior commitment anyway.
When adopting an employment
agreement for key employees, it is important to remember that a generic agreement will not work for everyone. The agreement
must be appropriate for the employer’s industry, and must not reach for more than what is needed. The agreement should
also be adapted to the particular requirements and expectations of the employer and sometimes also the employee.
If the employer plans
to use an employment agreement, it is best to put it in place as part of the hiring process. First, no additional compensation
is needed at that time. If the contract is signed later, the employer will need to provide the employee with some additional
compensation of some sort for signing. In addition, the introduction of an employment contract after a period of time suggests
that something is not right and is to be corrected by the contract. This may cause some employees to become concerned.
Many employees do not
need contracts, both from the employer’s and the employee’s perspective. For those key players who are contributing
significantly to the growth and health of the company, an employment agreement will protect the interests or both the worker
and the company.
Meaning Business about
Business owners understand
how a charge of sexual harassment causes an employer to consider the advantages of a completely automated, employee-free workplace.
The nightmare of litigating a sexual harassment charge, even when the employer prevails, drains a business. Even more important,
sexual harassment is about power more than it is about desire, and incidents leave the victim humiliated and coworkers demoralized.
While the employer’s moral imperative to prevent this is primary, it should not be forgotten that such occurences severely
inhibit productivity by leaving victims and witnesses feeling powerless and abused.
Sexual harassment is
defined as unwelcome sexual advances, requests for sexual favors and other verbal or physical conduct of a sexual nature when
(1) submission to such conduct is made explicitly or implicitly a term or condition of an individual’s employment, (2)
submission to or rejection of such conduct by an individual is used as the basis for employment decisions affecting such individual,
or, (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or
creating an intimidating, hostile, or offensive work environment. (29 CFR § 1604.11(a)).
Whether a particular
case of sexual harassment will be imputed to the employer (and thus become the employer’s legal headache) or just to
the employee committing the harassment requires a longer explanation than can be covered here. The remainder of this tip will
outline measures every employer should take, both to discourage sexual harassment on a practical level and to provide some
legal protection if such abuse does occur.
Every employer should
have in place a policy against sexual harassment, either published as part of the employee handbook or distributed to all
employees separately. The employer should make clear its intent to enforce the policy purposefully and evenly, and then should
do so. The policy should hold all managers and supervisors accountable for sexual harassment that they know about or reasonable
should have known about, if they do not take steps to stop it. The policy should provide a clear procedure for an employee
to lodge a complaint about sexual harassment, and for that complaint to be investigated. The employee should have more than
one way to lodge the complaint, in case the party who would normally receive the complaint is also the harasser. The policy
should include a commitment not to allow retaliation against employees who make complaints.
One hopes that such a
policy will discourage misbehavior. Even if it doesn’t, if a policy is present, if the victim employee does not avail
herself (or himself) of it, and if no adverse employment action (pay cut, reassignment to less desirable working situation,
etc) was taken against the employee because of refusal to submit to the harassment, the policy will provide the employer (though
not the perpetrator, of course) with a defense. Absent a policy, the victim employee may reasonably argue that she had no
clear authority to turn to for help, and the employer could be held vicariously liable for the harassing employee’s
If harassment does result
in adverse employment action, the employer will be deemed to have known, and thus will be liable. Therefore, it is always
a good idea to question changes that work to the disadvantage of one employee, and have systems in place that prevent a supervisor
or manager from making significant changes to any employee’s terms of employment without the approval of a manager higher
up the chain.
Sexual harassment probably
finds its roots in behavior that predates written history, and is likely to continue to be a problem whenever a large enough
group of people work together. The employer will need to continue to do what is necessary to protect its employees, and thereby
to protect itself, from being victimized.
Covenants not to Compete
and Trade Secrets
Employees, as part of
their work, necessarily learn things about the company that may be cause for concern if the employee leaves the company. Employers
can protect themselves through the use of properly crafted covenants not to compete, and through enforcement of the Uniform
Trade Secrets Act.
Ordinarily, a former
employee is free to compete against his former employer using general knowledge, skills and experience acquired under his
or her former employer. A plumber cannot prevent her former apprentice from opening up shop across the street. An employer
may restrict the former employee from entering into competition through a covenant not to compete, but certain restrictions
apply and certain steps must be followed. It is a good idea to have a covenant not to compete drafted by a competent attorney,
but employers wondering whether such a document might be right for them should consider the following:
agreement must be necessary to protect the business or goodwill of the employer. Covenants
not to compete are probably not appropriate for employees who perform unskilled labor, for example. The employer must be able
to show that it has a protectable interest.
2) The agreement
must not impose a restraint on the employee that is greater than needed to protect the employer’s interests. Courts
especially take note of whether the covenant is for a longer term than necessary, or covers a larger geographic area than
needed. As a matter of public policy, courts are also reluctant to restrict someone’s ability to earn a living.
3) The agreement
must not injure the public through loss of the employee’s service or skill. If two obstetricians work together in one
practice, and there are no other doctors available in the area to perform this service, for example, a covenant between them
not to compete (if they split the practice) would likely be unenforceable.
4) The covenant
must be a legitimate contract. In practical terms, this means the employee also must receive something in order for the contract
to be binding. New employees receive employment in exchange for their promise not to compete. When asking established employees
to sign such an agreement however, employers must be prepared to provide a small bonus or other consideration in return.
Even though, absent a
written agreement to the contrary, employees are free to compete against their former employers, they are not free to use
or release trade secrets or confidential information. Under Washington’s Uniform Trade Secrets Act (UTSA) (RCW 19.108.010
- .940), a trade secret is defined as, “…information, including a formula, pattern, compilation, program, device,
method, technique, or process that: (a) Derives independent economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from it’s
disclosure or use; and (b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”
This means it must be
something that competitors could not figure out on their own, and the employer must make a reasonable effort to keep the matter
secret. This protection is generally agreed to include customer lists if such information is kept secret. It would also include,
for example, a restaurant’s meatloaf recipe that relied on orange juice and ginger for a unique flavor (not readily
ascertainable) but would not protect a meatloaf recipe the relied on raisins (readily ascertainable by visual inspection)
or onion soup (common practice).
The protection applies
whether or not there is a written agreement with the employee, and covers information carried away in memory as well as information
that is reduced to a document form.
Employers wishing to
enjoy the protection of UTSA for legitimate trade secrets should make sure that they take reasonable steps to protect the
information. It should obviously not be available to the general public through any means. Additionally, employers should
not allow employees to remove this information from the premises unless there is an identifiable business reason to do so.
Employee handbooks should clearly explain what information is protected, what provisions are enforced to protect it, and what
the consequences are of violating these provisions.
– The Long Goodbye
Many employers are shocked
to realize how much their quarterly taxes paid to Employment Security go up when one of their former employees collects unemployment
compensation. The tax is a percentage of the employer’s payroll, but the rate is determined by the employer’s
experience rating, which is in turn adjusted annually, based on claims paid. The rate can be as low as 0.35% ($105 for a $30,000
payroll) or as high as 6% ($1800 for that same $30,000 payroll).
Employers therefore take
a keen interest in whether former employees qualify for unemployment. They law was written to provide financial benefits to
those who find themselves unemployed through no fault of their own.
Thus, employees do not
qualify for benefits if they are terminated for misconduct. They do qualify for benefits if they are let go for reasons other
than misconduct, including, of course, termination for lack of work. Employers may be surprised to learn, however, that, so
long as the employee did not make any misrepresentations during the hiring process, he or she will qualify for unemployment
if terminated for incompetence or inability to do the job. (The moral here is, be thoughtful in your hiring process.)
An employee will not
qualify for unemployment if he or she voluntarily quits work, with ten exceptions. The employee will qualify, even following
a voluntary termination, if one of the following situations apply:
1) The employee
was accepting a definite offer of employment from another employer.
2) The employee
left because of illness, disability, or a death in the family, asked to be reinstated when again available for work, and was
denied. (Watch “Weekly Tips” for an item on the Family Medical Leave Act).
3) The employee
left because of a mandatory transfer of his or her spouse, who is employed by the military.
4) The employee
had to leave work in order to evade domestic violence of stalking.
5) The employee’s
compensation was reduced by 25% or more.
6) The employee’s
hours were reduced by 25% or more.
7) The employee’s
worksite was relocated, resulting in an increase in commuting distance that was deemed material for that industry.
conditions at the workplace deteriorated, the employee reported the problems to the employer, and no action was taken within
a reasonable time.
activities were conducted in the workplace.
10) The job description changed to
include duties that violated the employee’s religious convictions or sincerely held moral beliefs.
Former employees also
do not qualify for unemployment compensation if they are not actively searching for work, if they refuse to accept suitable
work, if they are receiving disability payments from the Department of Labor & Industries, if they are full time students,
or generally if they are unemployed due to a strike or lockout.
With the foregoing in
mind, employers can take some steps to keep Employment Security taxes low, such of carefully screening job applicants to be
sure they can handle the work, and being responsible about handling hazards and illegal activities in the workplace.
However, at other times,
employers are well advised to cut their losses and move on. A tax burdened employer
may be tempted to claim misconduct where none truly exists, or to try to prompt a facially voluntary resignation from a worker
who is well intentioned but incompetent. However, the problems that may result are both more costly and more time consuming.
Further, not only is it the wrong thing to do, the morale of the remaining employees will certainly be undermined,
to the employer’s detriment.
Is the Employer Permitted to Read Employee
The question to ask is whether the employee
has a “reasonable expectation of privacy”. The Electronic Communications Privacy Act, 18 U.S.C. 2510, prohibits
the reading of someone else’s email without consent. If the employee is on notice that emails using the employer’s
email system, and internet use on the employer’s computer are both subject to inspection by company management, the
employer is deemed to have consent and is generally free to monitor either one or both.
Notice should be in writing, in straight forward,
understandable, and reasonably brief form. An electronic writing is also legally effective. Notice should be acknowledged
by the employee (either by signing and returning a copy, or by clicking an acknowledgement on the electronic form). The policy
should remind employees that email and internet access are not intended for personal use and are not private. The policy should
also be uniformly enforced.
A wise employer, however, will permit reasonable
personal use. Employees who can communicate with family members by email about scheduling of the evening’s activities,
or who can check the traffic website to plan their commutes home are happier and thus more productive employees. A policy
may specifically authorize “limited” or “de minimis” personal use without sacrificing the rights of
the employer to examine the communications or use.
Why would an employer want to examine employees’
emails or internet use? Employees may be releasing confidential company information, whether with malicious intent or out
of ignorance. Employees may be visiting infected websites or opening infected emails from friends, exposing the employer’s
network to viruses and spyware. Employees may be spending unreasonable amounts of time on personal interests. (The author
knows of one individual, thankfully not employed by any of her clients, who spends his shift day-trading on line.) Employees
who visit child porn sites break federal law themselves and expose their employers to legal headaches.
At the same time, a word of caution is in
order. Recent lower court decisions have found that employers do not have the right to publish their employees’ personal
communications. Also, employees MAY still have a reasonable expectation of privacy if they take reasonable steps to keep communications
private. The court so found in a case involving an employee who sent confidential emails (about a pending action against the
employer) to her attorney from the company laptop, but while at home. She deleted the emails from the laptop, but the employer
was able to recover them from the hard disk anyway. The court found that attorney/client privilege was not waived, even though
she used the company laptop, and the emails were not admissible. Neither case establishes precedent under Washington
law, but employers are advised to check with an attorney before doing any investigation that involves extraordinary digging,
or before passing what the employer may find to any third parties.