As your company grows, so does the
need for keeping abreast of additional employment laws. Beginning at 15 or more employees, a firm is covered by
certain federal anti-discrimination laws. At
50 employees, the Family and Medical
Leave Act (FMLA) kicks in. At 100 employees, a business becomes subject to the
WARN Act, which pertains to certain layoffs and plant closings. It is important to be
aware of these thresholds long before you
reach them.
“As a company approaches the 100-employee threshold, there is more to be
aware of than the employment laws,” says
Peter Donati, head of the Employment
Service Group at Chicago’s Levenfeld
Pearlstein, LLC. “Policies and procedures
need to be looked at for standardization.
Also, the larger the firm, the bigger target it
becomes for litigation. It is a new world
that requires new thinking.”
Smart Business talked with Donati for
more insight on what owners and CEOs
should be aware of as a company grows,
especially as it reaches the 100-employee
milestone.
How does the number of employees affect
policies and procedures?
As the company becomes a larger organization, the owner/founder cannot continue to control all HR decisions. You need to
look at more standardized rules and policies that will guide people as they run the
business on a day-to-day basis.
Handbook requirements become more
critical. It is important for a handbook to
reflect the actual practices and priorities
of the organization. Does it have what is
needed? Does it contain items that should
no longer be included? For example, if different departments have different tardiness policies, problems are created when
employees converse with each other or
are moved from one department to another. How can you explain differences in a
valid way? Supervisors have a tougher
time if they don’t have guidelines to work
within.
Also, compensation and evaluation policies need to be reviewed and standardized.
Organizations need to tie evaluations and
compensation decisions together in a way
that is both fair and defensible.
Make sure that all employees are classified accurately as exempt or nonexempt.
These are hot areas for litigation, and
penalties can mount up very rapidly.
What are the key areas to be conscious of as
a company approaches 100 employees?
Companies obviously need to be aware
of the employment laws that will be applicable, and be ready for compliance before
the threshold for coverage is reached.
However, laws that may have been applicable to them as a smaller organization
also take on greater importance.
When you have more employees, there is
a greater chance of litigation. The government takes more interest in your organization. And lawsuits, particularly those
involving multiple plaintiffs, present
greater risks.
At some point between 50 and 100
employees, you are going to need to consider hiring an HR professional as opposed
to non-HR-trained individuals wearing several hats. That person may have to be
placed at the same level as other upper-level management.
How can all this be approached holistically?
Bring in an employment lawyer or HR
consultant to perform a compliance audit.
Besides auditing wage-and-hour-law compliance, a comprehensive audit could
include interviewing and hiring practices,
how you deal with employees on the job,
and what to do when they are separated.
Also consider an immigration audit to
make sure you are securing and storing I9s
(immigration forms) properly and complying with all other aspects of immigration
law.
Are there other areas to consider?
Review all your forms and agreements,
including job application forms, employment agreements, and confidentiality and
noncompete agreements. Some may have
been developed early on and may no
longer be applicable or compliant with
changes in the laws.
Also examine your training policies, especially sexual harassment policies. Know
what is permitted and what is not. Where
do complaints go and how are they handled? What training is required of management and what is required for all employees? For example, California now requires
two hours of training every two years for
managers. Potential union activity is another area in which your managers should
receive training.
How important is outside counsel for any of
these issues?
Even if you have expert in-house counsel,
you will want to have a good relationship
with outside specialists for certain areas to
assure compliance. Getting advice before
you make a decision is much better than
looking for an attorney when you have
been sued by a group of employees.
Incorrect decisions can set the company
back for years. Get the best advice possible.
PETER DONATI is a partner and leads the Employment Service
Group at Levenfeld Pearlstein, LLC in Chicago. Reach him at
(312) 476-7590 or [email protected].