Oregon Equal Pay Act Goes Into Effect in 2019. Are You Ready?

 

by Frank J. Godfrey III

On June 1, 2017, Oregon Governor Kate Brown signed the new Oregon Equal Pay Act into law. The act enjoyed unusual bipartisan support, in part because it simultaneously strengthens and clarifies employee protections while providing safe harbor to employers who can demonstrate good faith efforts to rectify pay disparities within their organization.

You wouldn’t be entirely wrong if you thought we already had the question of equal pay covered by existing laws. It is true that Oregon law already prohibited offering unequal wages for equal work based on an employee’s sex.

However, despite long-standing law in this matter, pay disparities persist to this day. Oregon women earn, on average, 53 to 83 cents to every dollar Oregon men earn, with women of color falling the furthest behind in the pay gap.

In recognizing that race and other differences can be a factor in wage discrimination, Oregon’s new law has expanded protected classes to include “a group of persons distinguished by race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age.”

In addition to expanding recognized protected classes, the act also broadens and clarifies the legal definition of compensation, previously stated as “wages” to now include “wages, salary, bonuses, benefits, fringe benefits and equity-based compensation.”

The act also introduces new rules related to hiring and promotion, including, among others:

  • An employer may not screen an applicant based on their current or past compensation
  • An employer may not lower to wages of employees to bring their overall compensation structure into compliance with the law.
  • An employer will no longer be able to ask an applicant what they are being paid at their current position or what compensation for past positions had been.

The screening and compensation provisions do not go into effect until January 1, 2019, giving employers time to review their hiring policies and wages and take the steps needed to comply with the law. The prohibition on salary inquiries will go into effect on October 6th of this year.

The law provides some protection from future legal action if you can demonstrate that you have conducted a wage audit and are a making a good faith effort to bring your business into compliance. Therefore, it is a good time now to review your hiring practices and examine your existing compensation structure.

If you have questions about how the Oregon Equal Pay Act affects your company, or want advice on how to bring your operations into compliance, it is best to seek legal counsel.

Communication is Key

by Frank J. Godfrey III

An attorney I’ve worked with for almost 20 years is fond of the old saw “communication is the key.” He will say it when working through a legal problem. He will say it when working through a staffing assignment matter. He will say it when we are on the golf course. I’ve also heard him say it when we are out dining and his waiter brings the wrong entrée. And interestingly enough, in most circumstances, he is correct: clear communication helps avoid misunderstandings big and small.

I’ve thought about this pearl of wisdom often. In fact, it occurred to me that a client’s recent workplace dispute would not have escalated had his manager and employee clearly communicated to each other about a simple request for additional rest breaks. The employee was coping with a medical condition that required additional breaks in order to consume food and regulate blood sugar level. The employee was a productive member of her team. Unfortunately, the employee was embarrassed about her medical condition and did not fully explain the need for additional breaks to her manager. Her manager did not ask additional questions that could have led him to conclude her request for additional breaks was reasonable under the circumstances.

This simple lack of clear communication between employer and employee could have resulted in the loss of a productive employee and a complex lawsuit alleging violations of the Americans with Disability Act (“ADA”). The lawsuit could have exposed the employer to significant monetary liability and a loss of productivity as certain employees would be swept into the currents of litigation preparation and defense.

Fortunately for all concerned, this story had a happy ending. The employee’s workplace friend quietly informed her manager that the employee was coping with a medical condition. The manager was able to then specifically address the employee’s request for additional breaks, keep a productive employee on the job, send a positive message to other employees that the employer cared for his employees and limit the employer’s exposure to liability.

It is obvious that communication was the key to working through and accommodating this employee’s reasonable request. And that is the intent of the ADA’s interactive process, which requires good faith discussions between employer and employee to determine whether a reasonable accommodation is necessary and possible.

Employers faced with this type of employee accommodation request— or any other employment-related issues— should keep this chesnut in mind. As the above example demonstrates, this not only helps employers comply with various employment related laws, it also reflects good business judgment and practice.

It is not always possible for employers to cope with employee disputes without advice of legal counsel. However, in our experience, disputes that require assistance of legal counsel are more efficiently resolved when there is a record of good communication between the employer and employee.

Where there’s a revocable living trust, there’s a way: The importance of estate planning for business owners

 

by Nick Mesirow

While exact numbers are unknown, anecdotal evidence tells us that a shocking number of small business owners have done little or no estate planning, including creating a revocable living trust or a will.

A lack of estate planning on the part of an owner poses a risk to their business because:

  • Their heirs, as determined by a probate court, will inherit their assets, including their ownership stake in the business. This means that a business owner’s spouse or adult child may assume ownership of the business. These heirs may not be prepared to assume the deceased owner’s responsibilities, which can place the business in serious peril.
  • While a probate court settles a will-less estate, the ownership stake is in limbo, and businesses won’t be able to make major business decisions without clear ownership
  • A substantial portion of small business owners’ assets are tied up in their businesses. The owner’s family may be put in a difficult financial position while the disposition of the estate is ironed out in probate.

Business owners will find a desirable alternative to wills in documents called revocable living trusts. Reasons to pursue a revocable living trust in place of a will include:

  • An estate with a will in place must still be disposed through a probate court. While having a will is preferable to no will, the probate process is still costly and time consuming. Settling an estate in probate also makes the disposition and details of your estate a matter of public record.
  • Unlike a will, a revocable living trust can be crafted to protect you in the event that you are mentally incapacitated. The document can be crafted to codify how you would be declared mentally incompetent, and would put a trustee in place to manage your finances until you return to competence or pass away.

Revocable living trusts are more costly to create than wills, but investing in one is a form of paying it forward. When well done, they are simpler and less costly to execute and more comprehensive in their scope.

If you’re a business owner who needs to enact an estate plan, seek legal counsel. There is no time like the present to plan for the future.

When a Non-Compete is a Non-Starter

by Frank J. Godfrey III

Boilerplate non-compete, non-solicitation, and non-disclosure agreements are popular items to download from the Internet. It seems so simple – just download, drop in the names of the members of the agreement, fill in a few more details, and you’re done, right?

Not so fast. These agreements, if needed, can be key tools in protecting your business when an employee leaves, and deserve careful consideration. Issues to explore include:

·      Agreements that are too broad to be enforceable (i.e. insisting that the former employee doesn’t practice their profession for overly long periods of time)

·      Agreements that don’t cover the right things (i.e., neglecting to protect key intellectual property owned by the employer)

If you feel you need key employees to sign a non-compete, non-solicitation, or non-disclosure agreement, you should consider:

·      Which of the intellectual properties, clients, and processes that your company has developed are most deserving of protection

·      How far you’re willing to go to enforce a non-compete

·      Who among your employees must sign one

Finally, each state applies different – and very specific rules – in regards to these documents. If you’ve been relying on boilerplate documents of this kind, or feel you might need to put some in place, it’s a good idea to seek legal counsel to make sure you have agreements that work for you.

Business Succession Planning

Image of female and male hands holding red baton

 

by Nick Mesirow

Business owners who want or need their business to continue on after they’ve ceased to be involved in it should put a succession plan in place. Business succession plans establish who will run a business after the owner or a co-founder retires or dies and how ownership will be transferred.

Every business owner needs to answer three key questions to provide a basis for their plan:

  1. What is your timetable? Your age, health, and retirement horizon will dictate the strategies to be selected in your succession plan.
  2. What is the value of your business?  The number of options available to you are driven in part by what your business is currently worth or what it may be worth to future owners.
  3. What are your retirement needs?  Preparation of your succession plan will also be driven by your personal financial needs. If your business is your primary asset, then your succession plan should set out the income you will need to retire by the date of your planned exit.

Once these basic parameters are established, it is time to move on to a legal audit. Although the term is comprised of two words many people try to avoid at all costs, the legal audit is simply a meeting with legal counsel to discuss strategic plans and objectives, review key documents and records, and identify and analyze current and projected legal needs of the company.

Any legal audit should focus on how your current ownership structure will affect the succession strategies available to you.  Some ownership structures inhibit or restrict the options that would otherwise be available, while others provide for “creative” solutions to the implementation of the succession plan.  Flexibility is a key component to making a succession plan work for all stakeholders.

Finally, it’s important to note that preparing an effective succession plan cannot be done in a vacuum. After seeking input from your advisory team, such as lawyers, accountants, and consultants, you should obtain input and build consensus with the parties targeted to be the next generation of ownership and other affected stakeholders to assure that the succession plan will be well-received and smoothly implemented. The key is to make all affected parties feel as if they were part of the process, which is hard to do if the succession plan is merely presented to them in final form.

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A Business Perspective on Employment Laws

 

 

by Frank J. Godfrey III 

Disabled releated vector icons set

Let’s be honest: employment laws and regulations often intimidate business owners. This is an understandable response. Most business owners spend their days trying to serve their customers and keep their businesses on a successful track. It often seems there is not enough time in the day to accomplish those daily goals, so the last thing business owners want to think of are laws and regulations that appear to add another obstacle to achieving success.

Let’s consider an alternative perspective. What if business owners could use employment laws and regulations as additional tools to achieve success, rather than being intimidated?

The Americans with Disabilities Act (“ADA”) provides a good example of this. The ADA includes an obligation for business owners to consider and discuss potential accommodations to allow an employee with a disability to continue working and contributing to business success. This discussion is referred to as an interactive process. The conversation should be candid and honest, and in most cases will quickly identify whether a reasonable accommodations is necessary and possible.

For example, during the discussion, the business owner may learn that the employee has an illness that qualifies as an ADA covered condition. That condition may require regular visits to the employee’s medical provider that can be addressed through a simple scheduling change. Or they may discover that an employee has a covered condition that justifies additional meal or rest breaks. Providing these additional breaks may be simple adjustments that allow an otherwise productive employee to continue working.

When it comes to the ADA and an employee’s request for a reasonable accommodation, there are simple steps business owners can take now to prepare for and effectively manage their way through a future interactive process:

  1. Review your handbook and confirm you have a disability accommodation policy that explains the interactive process and obligations of the business owner and employee.
  2. Make sure your managers and supervisors understand the disability accommodation policy and legal obligations the company must follow.
  3. Make sure the interactive process is a positive, collaborative discussion focused on the particular employee’s requested accommodation. Keep in mind, each employee requesting a reasonable accommodation will present their own unique facts and circumstances. Avoid taking a “one size fits all” approach.
  4. Document the interactive process and all discussions and actions taken with regard to the employee’s requested accommodation.
  5. Follow up with the employee who is provided a reasonable accommodation to ensure the accommodation provided is working for the employee and employer. Also keep in mind, the employee’s covered condition may change over time, necessitating additional reasonable accommodations.
  6. Contact your attorney as soon as an employee requests an accommodation or you believe an employee has a medical condition that prohibits them from performing their duties. Your attorney can advise you on all related issues including confidentiality obligations, documentation matters and what you can and cannot ask your employee during the interactive process.

Of course, business owners may encounter accommodation requests that cannot be met for various reasons. While the requesting employee will probably not be happy with that result, it is more likely than not they will appreciate the business owner having the discussion and attempting to work with them through a difficult issue. Employees who believe they were treated fairly by their employers are far less likely to file lawsuits. And other employees will appreciate that the business owner cares enough to work through these types of difficult issues with their workers. This is an added benefit that can help business owners continue on their path to success.

Conducting Effective Workplace Investigations

 

by Frank J. Godfrey III

Two business people sitting in front of each other in the office while discussing something

When issues involving the behavior of individual employees or interactions between employees crop up, a workplace investigation may be in order. Examples of incidents or patterns of behavior that should spur an investigation include discrimination or harassment complaints, safety problems or work rule violations, criminal activity such as theft or threatening behavior, among others.

Workplace investigations are important but complicated matters. A well-planned and documented workplace investigation is an effective tool that can limit a company’s liability exposure to employment related claims. Unfortunately, a poorly planned and executed workplace investigation can have the opposite effect and expose a company to liability.

A fairly recent employment case illustrates this issue. A former employee sued IBM for age discrimination in 2014. The former employee complained to IBM’s human resource manager about discriminatory practices based on his age. IBM’s workplace policies required employees to report discriminatory practices to human resources. Human resources investigated the employee’s complaint and concluded no evidence existed of discriminatory practices. IBM attempted to admit the human resource manager’s report of the workplace investigation into evidence.

The judge refused to admit the report and leveled harsh criticism at IBM regarding how it handled the investigation and documented its findings. The judge noted the investigation report was biased and one-sided. He concluded IBM failed to address and include any evidence favorable to the complaining employee. The judge stated the investigation and report lacked evidence that the complaining employee was treated fairly, and that it appeared it was intended to exonerate IBM rather than to seriously address the employee’s complaints, which was required by IBM’s own anti-discrimination policy.

The former employee was awarded $1.4 million. The workplace investigation and resulting report should have acted as a shield to protect IBM from the former employee’s allegations and claims. Instead, and as a result of its own poor practices, IBM’s workplace investigation and report became a sword used against it at trial and final judgment.

With these matters in mind, employers should consider the following when conducting workplace investigations. Investigations should be taken seriously. The investigation should be conducted promptly. Employers should be thorough when conducting workplace investigations. The investigative process should be fair and the conclusion of the investigation should be objective. A report that reflects these goals will go a long way in shielding employers from liability exposure. Moreover, workplace investigations conducted in this manner help maintain employee morale and trust.

Investigating employee complaints can be challenging, complicated and stressful. When concerns arise, it is best to contact legal counsel for advice. However, employers should, at a minimum, keep the following best practices in mind when planning to conduct a workplace investigation:

Before launching an investigation, determine:

  • The purpose of the investigation
  • Who will manage and conduct the investigation
  • A plan for the investigation process
  • All matters that will be investigated
  • Evidence to address regarding specifics of the employee complaint
  • Witnesses who will be questioned
  • If you need assistance from legal counsel or a private investigator
  • Conclusions objectively and based on facts

In contrast, employers should avoid at all costs a failure to:

  • Take an employee’s complaints seriously
  • Adequately plan a fair investigation
  • Obtain assistance from legal counsel or private investigator when the situation warrants it
  • Maintain objectivity and fair processes during the investigation
  • Reach a conclusion that is based on facts
  • Reach a conclusion at all
  • Document the results of the investigation

Another important but often overlooked consideration is maintaining confidentiality. Employers should do their best to maintain confidentiality when investigating employee complaints. However, it is sometimes necessary to discuss matters with other employees or people outside of the company. For example, a serious complaint may necessitate involvement with local law enforcement or the employer’s insurance carrier. This should be discussed and explained to the complaining employee and witnesses who are interviewed. Employers should simply state they will do their best to maintain confidentiality and share information on a need-to-know basis. However, be sure to make clear there can be no guarantee of confidentiality.

Fairly conducted workplace investigations are essential for effective limitation of liability exposure. Following the practices outlined above will help employers conduct productive and fair investigations that can be used to protect their interests should future disputes arise. Another benefit to conducting investigations in this manner is that it will help employers determine which policies and practices are working, and which need to be revised. It will also help identify areas that require additional training. This presents an opportunity to recast a complicated, workplace challenge into a positive experience and result for employers.

Using Contractors: Proceed with Caution

 

By Frank J. Godfrey III

FreelancerOrEmployee_webBusiness owners often consider using independent contractors in place of employees. This makes business sense because the proper use of independent contractors produces financial benefits for business owners.

For example, there are savings in payroll taxes and employment benefits. Furthermore, wage and hour laws are not applicable, negating the need to track overtime, for example.

Unfortunately, when business owners misclassify independent contractors, the financial consequences can be significant. Penalties for misclassification include:

  • Reimbursing the contractor for employment benefits you offer employees. These may include medical insurance, 401(k) contributions, paid vacation and sick days, etc.
  • Paying the government back payroll taxes for each misclassification during each tax period including unemployment insurance taxes, workers compensation insurance, Social Security and Medicare taxes, etc.
  • Providing the contractor back overtime pay
  • Paying civil fines to government agencies for violating laws regulating employee benefits, including the Family Medical Leave Act, Oregon Family Leave Act
  • Restructuring costs to ensure proper compliance for the present and future workforce.

The stakes are high and for the last several years both state and federal agencies have stepped up enforcement of independent contractor misclassification. These state and federal agencies include the Bureau of Labor and Industries, the Oregon Revenue Department, the Equal Employment Opportunity Commission, the US Department of Labor, and the Internal Revenue Service. This enforcement trend will continue into the foreseeable future.

It is important to properly classify independent contractors given the above consequences. However, proper classification is challenging. Use of independent contractor agreements can be helpful, but words alone are not enough to shield business owners from the costly consequences of misclassification. State and federal agencies will consider the facts of the relationship to determine classification. The agencies’ tests focus on whether the worker is free from the business owner’s direction and control and whether the worker is independent of the business to which it is providing services. For example, an independent contractor:

  • does business as a corporation, limited liability company or under an assumed business name,
  • has an office (preferably outside of their home), and
  • provides their own insurance, licenses and permits.

This list is not exhaustive; there are other determinative factors considered by courts or state and federal agencies when adjudicating employment status.

To further complicate matters, each agency may use a different legal test to determine whether there is an actual employment relationship. For example, the Bureau of Labor and Industries uses the “economic reality test” to determine proper classification in a wage and hour dispute and the “right to control test” to determine classification in a civil rights dispute. And as always, the facts of each situation are carefully considered and the business owner bears the burden to prove proper classification.

Proper use of independent contractors requires consideration and planning. Business owners contemplating the use of independent contractors should proceed with caution and seek legal advice to limit exposure to liability.