May, 2015

3 Top Employment Law Audit Items: Get Your HR House in Order

Employers are most vulnerable to employment law claims when their business practices are out of sink with current legal standards.  Our top three:

  • new hire notices,
  • background check procedures, and
  • staff classification.

With just a small time investment to check current practices regarding new hire notices and background check procedures, you can save your business many headaches down the road.  Depending on the size and nature of your workforce, a review of staff classification may be a lengthier project, but is well worth the investment in reducing your liability exposure.

Check Your Notices for New Hires

New York employers have several unique employee notice obligations.  Upon hire, employees must receive:

  • Notice of wage rates under the New York Wage Theft Prevention Act;
  • Notice of their rights under the NYC Human Rights Law with respect to pregnancy accommodation (for all NYC employees, regardless of gender or age); and
  • Notice of their rights under the NYC Sick Time Act (for all NYC employees).

Templates for all three notices are available on the government websites.  Employers who do not already include the distribution of these notices as part of their standard hiring practices should immediately bring their process into compliance.

Review Your Background Check Procedures

Effective September 3, 2015, most NYC employers are precluded from conducting credit checks on job applicants and employees.  On the east coast, only Connecticut and Maryland have similar laws.  The NYC law is broader than most in that it defines credit checks to include not only consumer credit reports and credit scores, but also directly inquiring of job applicants or employees about any of the details of their credit accounts or about bankruptcies, judgments or liens.  The law recognizes only limited exceptions, particularly for certain sensitive positions, law enforcement, or where state or federal laws require checking credit history.

NYC employers that currently check credit history have this summer to get their practices into compliance.  Further, employers who conduct background checks on job applicants or employees need to be mindful of the federal Fair Credit Reporting Act (FCRA) and any equivalent state laws.  Under FCRA, background checks conducted for employment purposes have disclosure and notice obligations that are unique from other types of background checks.  The model disclosure forms provided by background check vendors are not always compliant with employers’ special FCRA obligations.  FCRA’s requirements are not new, but recently there has been a notable uptick in class action lawsuits to enforce the law.

Consider Whether Your Staff Are Appropriately Classified

Freelancers reportedly now comprise 30% or more of the U.S. workforce.  This trend has not gone unnoticed by the Department of Labor on the federal or state levels, and they have increased their enforcement activities with regard to inappropriate classification of workers as independent contractors.  Further, new laws in New York and elsewhere, as well as recent court decisions have increasingly narrowed the definition of independent contractor and established that all workers, at least in certain industries, are presumptively employees.

Misclassification can be costly, as it may require refiling quarterly reports and making retroactive payments (with interest and penalties) for unemployment insurance, payroll taxes, Social Security, Medicare and now the Affordable Care Act.  And it doesn’t take much to trigger a government audit – it can begin as simply as a freelancer filing a claim for unemployment benefits following the conclusion of a work assignment for your business, or even for a subsequent employer who then seeks contribution from you as a prior employer.  Now is the time for you to work with legal counsel in conducting an assessment of how you have structured your workforce to determine whether workers are appropriately classified.

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