Having recently completed an MBA, I now evaluate an employer's legal risk differently, emphasizing the overall business impact. When you make risk/reward determinations, these have the most potential for real risk:

  • Employee classification -- Whether this means misclassifying employees as independent contractors or improperly paying workers on a salary with no overtime. The big risks are class action lawsuits with a close second being enhanced government enforcement. The potential tax or overtime savings are simply not worth it. Many former personal injury lawyers are now FLSA class action specialists and this administration has more fully funded misclassification investigations by the IRS and DOL. Employers be aware.
  • Taking/Using Others Employees or Information – Almost half of what I argue about is whether a company violated a noncompete, nonsolicitation or nondisclosure agreement. Take your agreements and your competitor's agreements seriously. Put precautions in place to protect your business as you don't need your competitor's information or employees to thrive.
  • Don't Overlook Disparate Impact – As BMW and Dollar General recently learned with background checks, having a policy which appears neutral on its face can cause significant legal issues. This risk goes well beyond background checks, although that remains a real and current EEOC target. For example, broad policies requiring all employees returning from Family Medical Leave to submit a full medical release also creates risk of adverse impact against disabled employees in need of accommodation. Watch for unintended consequences.
  • Audit Your Policies -- If you don't follow them it is best not to have them. Experience shows that juries do not forgive inconsistencies. They expect employers to follow policy. There are also enforcement issues here. I would bet most employers have I-9 inconsistencies which creates huge risk if you draw an audit.
  • Not Doing the Right Thing – I know that sounds vague but it is true. You do not need me to tell you to fire the employee who is sexually harassing your employees, to remove the threats of violence, and, importantly, to take complaints seriously and admit mistakes. These are the big jury verdicts when employers keep the seemingly lucrative salesperson that terrorizes the staff or fails to bring back an employee when it knows it made a mistake.

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