With exception of an employment contract or unionized employees, Michigan is employment “at-will”, which means the employer or employee can terminate the employment relationship for any reason or no reason at any time. However, employers are generally subject to possible legal action if the termination by the employer involved a violation of an employee’s legally protected rights under state and/or federal law (as applicable to the employer). By way of illustration, an employer cannot terminate an individual if such termination was based on a discriminatory reason(s). Over my 25 years of legal practice representing both employees and employers in the workplace in Michigan, the following are a list of common termination mistakes made by employers that may leave them legally exposed:
- Not having the proposed termination and related documentation reviewed first by legal counsel
- Making an emotional or impulsive decision
- Not following a progressive disciplinary process if the employer has one
- Terminating an employee after they have made a claim that the employer violated a protected right of an employee under the law
- Failure of an employer to investigate a prior employee complaint involving a potential violation of an employee’s protected right under the law
- Terminating an employee for an event/situation where prior employees were not terminated for the same event/situation
- Disciplining employees for frivolous issues
- Terminating an employee under false pretenses (i.e., making up a reason)
- Not having a witness for the employer at termination
- Not conducting an exit interview of the employee
- Not providing a legitimate, non-discriminatory reason(s) for termination
- Giving multiple, inconsistent reasons for the termination
- Giving bad performance reviews when the employee previously had consistently good performance reviews
- Terminating an employee for performance-based reason(s) that are not realistically obtainable
- Mishandling the termination
- Not following the procedures outlined in an employee manual/handbook
- Poor timing of the termination
- Not having documentation to support the termination reason(s)
- Waiting too long after an event/situation to terminate the employee
- Terminating an employee shortly after they filed a complaint with a government agency concerning the employer or where an employee threatens an employer to file a complaint with a government agency
- Terminating employees to save on wages
- Not following proper employer termination procedures
- Giving other employee preferential treatment
- Not offering a separation package when appropriate under the circumstances
- Unless a serious offense, failing to discuss the problem with the employee prior to termination
The U.S. Equal Employment Opportunity Commission (“EEOC”) is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. Most employers with at least 15 employees are covered by EEOC laws (20 employees in age discrimination cases).
The EEOC’s priority focus, include:
Eliminating Barriers in Recruitment and Hiring The primary focus will be on class-based recruitment and hiring practices that discriminate against racial, ethnic, and religious groups, older workers (over 40), women, and people with disabilities. Areas include exclusionary policies and practices, job segregation, channeling/steering of individuals into specific jobs due to their status in a particular group, restrictive application processes (including online systems that are inaccessible to individuals with disabilities), and screening tools that disproportionately impact workers based on their protected status (e.g., pre-employment tests, background checks impacting African Americans and Latinos, date-of-birth inquiries impacting older workers, and medical questionnaires impacting individuals with disabilities.
Addressing Selected Emerging and Developing Areas
- Qualification standards and inflexible leave policies that discriminate against those with disabilities;
- Accommodating pregnancy-related limitations under the ADAAA and Pregnancy Discrimination Act
- Protecting lesbians, gay men, bisexuals and transgender (LGBT) people from discrimination based on sex;
- Clarifying the employment relationship and the application of civil rights protections in light of increasing complexity of employment relationships and structures, including temporary workers, staffing agencies, and independent contractors.
Preserving Access to the Legal System The EEOC will focus on policies and procedures that limit substantive rights, discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or impede EEOC’s investigative or enforcement efforts. Specifically, the EEOC will focus on: 1) overly broad waivers, releases and mandatory arbitration provisions; 2) employers’ failure to maintain and retain applicant and employee data and records required by EEOC regulations; and 3) significant retaliatory practices that effectively dissuade others in the workplace from exercising their rights.
The following are a non-exhaustive list of Michigan related employment documents that employees should consider having reviewed by an attorney before executing them. These types of documents normally involve pre and post-employment matters and can often involve intricate legal terms of art which the general lay person may not understand. Having an attorney review these legal documents to assist in the negotiating process, which may include proposing modifications and changes to the documents or to merely consult with the employee on what all the terms and conditions mean would be a wise decision for any lay person.
- Restrictive Covenant Agreements: Restrictive covenant agreements commonly involve a written document drafted by the company or their legal counsel which normally encompass clauses pertaining to confidentiality, non-solicit, non-disclosure, trade secrets, innovations and non-compete and are commonly often required to be signed in conjunction with an offer of employment. These types of agreements restrict an employee’s ability to do certain things while employed and after employment.
- Employment Contracts: Employment contracts are commonly found in areas involving highly compensated individuals or those who will hold upper management positions or who have professional degrees.
- Severance Agreements: Severance agreements are commonly offered at the time of separation of employment. Severance agreements will normally provide additional money to the employee in exchange for a release by the employee not to sue the employee for any reason involving their past employment with the company. Severance agreements may also include restrictive post-employment covenants.
Between 2013-2015 the Michigan Unemployment Agency assessed thousands of Michigan workers with claims of fraud pertaining to unemployment benefits. Although the state claims it was doing everything by the book, those who have filed suit against the state of Michigan and Michigan legislators have indicated that the problem with improper adjudications pertaining to unemployment matters started when the state switched over to a new computer system and laid off approximately 400 people in the process. Estimates indicate that approximately 60,000 filed claims during this period should be re-reviewed by in person unemployment adjudicators. A high percentage of the Michigan unemployment fraud cases brought before administrative law judges have been summarily dismissed on multiple grounds.
The law firm of Seth T. Seidell, has specialized in Michigan unemployment matters since 1998, including many cases involving misrepresentation and fraud. Although each case is unique based on its own facts, the Seidell law firm has been highly successful in winning many of those cases. If you believe that you have been mistakenly charged with fraud and/or misrepresentation by the Michigan unemployment agency, and whether or not your appeal period has run out, you may still be entitled to a review of your claim by a state administrative law judge or otherwise.
National Labor Relations Board (“NLRB”) Scrutinizes Employer Handbook and Other Written Policy Language of Private Non-Union Employers
Section 7 of the National Labor Relations Act (“NLRA”) guarantees employees “the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” as well as the right “to refrain from any or all such activities.” One of the great misconceptions in the business world is that the NLRA does not apply to private employers who are non-union. The NLRA applies to both union and non-union private sector employers and is regulated by the National Labor Relations Board (“NLRB”) as well as the federal courts. Generally, disputes in this area arise when a private non-union employee has been disciplined, suspended and/or terminated for violation of company policies and procedures which have been generally noted in employer handbooks.
Recent rulings of the NLRB include the following handbook provisions and/or written policies and procedures that were deemed unlawful under the NLRA:
- Provisions defining “confidential information” as “personnel information, including, but not limited to, all personnel lists, rosters, personal information of co-workers” and “personnel information such as home phone numbers, cellphone numbers, addresses and email addresses.”
- A blanket rule that bars employees involved in worker misconduct probes from discussing the proceedings with their colleagues.
- Language that called for “courtesy” on the part of employees.
- “At-Will” employment clause that states the employment relationship cannot be amended, modified or altered in any way.
- A general policy that suggests that employees must first take a complaint through an open-door policy, dispute resolution or human resources and does not allow employees to complain to each other or outsiders (e.g. NLRB).
- No-loitering rules after finishing a shift.
- Statements that indicate that the employer is “non-union.”
- Dissemination of information during non-work hours or in break rooms.
- Requiring employees to represent a company in a “positive and professional manner” and to “avoid negative comments.”
- Certain types of social media postings.
When it comes to employer handbooks and/or other written policies and procedures there is no substitute to having those documents reviewed periodically by trained professionals such as legal counsel.
The following summarizes cases and/or legal matters handled by the Seidell Law firm for the year 2015. This list in non-exhaustive and does not represent all legal matters handled by the firm.
- Represented and resolved multiple wrongful discharge cases on behalf of employees
- Represented and resolved multiple employment related matters on behalf of employers
- Resolved several unemployment fraud cases with favorable rulings to the employee
- Resolved several administrative individual licensing matters before state government agencies
- Drafted and/or reviewed multiple corporate employee handbooks, forms, policies and procedures
- Handled multiple buy/sell transactions on behalf of the seller or buyer
- Litigated and settled a breach of contract case between two companies involving failure to pay past due rent
- Drafted and reviewed business and employment contracts covering a wide range of industries
- Represented employees and employers on issues before the EEOC, MDCR and wage and hour
- Handled multiple federal trademark filings
There are many things to consider when starting a business in Michigan. Although the list below is non-exhaustive, these items, in addition to your business plan, pertain to areas covering the law, taxes and insurance. When working your business plan, you should also incorporate these items into your overall start-up costs.
- Business Entity Type: Commonly, there are multiple business types, including: sole proprietorship (e.g. dba), partnerships, limited liability company and corporations. From a legal perspective, lawyers generally avoid the use of a sole proprietorship and partnerships as they drastically increase your personal liability. In addition, there will be certain tax implications and requirements depending on the entity you form.
- Business Legal Documents: Many businesses that form either an LLC or corporation, especially when multiple owners are involved, will also need business related documents such as an operating agreement or bylaws, restrictive covenants, and a buy-sell agreement.
- Business Insurance: There are multiple types of insurances available for each business and certain businesses may require specific insurance as it relates to their specific industry. A thorough discussion with a property and casualty independent insurance agent is a must when starting a business.
- Business License and Regulations: Some types of businesses require a special license and/or require the owner to have a license (e.g doctor, lawyer, etc.). Further analysis should be conducted to determine what licenses you may need from a local, state and/or federal level before you conduct business. In addition, many types of businesses are regulated by local, state and federal laws and a thorough review of these laws should be conducted.
- Business Tax Registration. You will want to determine, based on your business, whether or not you need to file for business related taxes with the state, especially if your business has employees and/or sales or use taxes. A thorough discussion with your CPA should be conducted. They can also assist you in getting your federal tax ID number with the IRS.
- Businesses with Employees. If you plan on hiring employees you should consult with an employment attorney to discuss your legal requirements as an employer.
In closing, prior to starting any business you should consult with an experienced business attorney regarding any legal documents that are necessary, an experienced employment attorney if you plan on hiring employees, a CPA or accountant regarding tax matters and a property and casualty independent insurance agent for business related insurance. All three of these trusted advisors will be critical to your business success.
A human resource individual can be described as a person who “professionally” oversees the organization’s human resource management functions. This includes a wide spectrum of managing the entire employee-employer relationship, including outside forces that interact, and employment laws applicable to the workplace.
Employees are a businesses’ “most valuable asset!” Whether you have just one employee or many, the success of any business operation lies with its employees. Attracting and retaining employees is critical to any businesses’ operational success. Unfortunately, many business owners unwisely leave human resource functions to individuals who are not qualified in the area (e.g. receptionist, office manager, accounting, etc.), because the individual lacks the proper education, experience, or otherwise, which leaves the business operation vulnerable to employee litigation, increased turnover, and unhappy employees. Business operators should use a qualified individual to manage key internal human resource functions. There are three (3) key areas of human resource management which can be summed up into the following categories:
- Employee Recruitment and Retention: includes by way of example, but not limitation creating organizational roles, interviewing, job descriptions, selection and placement, assessments, and background screening
- Employee Retention and Engagement: includes by way of example, but not limitation on boarding of new employees, training and development, compensation and benefits, career and/or succession planning, performance management, and employee related issues
- HR Policies, Procedures, and Law Compliance: includes by way of example, but not limitation, HR strategy, HR tools, HR policies (e.g. employee manuals and forms), compliance with local, state, or federal employment laws, HR training, education, and certifications.
According to the US Department of Labor, the number of suits filed in federal courts concerning employment grievances has grown over 400 percent in the last two decades. In addition, the Equal Employment Opportunity commission has received on average 90,000 discrimination complaints from across the country per year. The expansion of federal and state discrimination laws over the last couple of decades, coupled with recent National Labor Relations Board rulings, have dramatically increased employee rights in the workplace in the United States. As a result, administrative regulatory compliance in the workplace has imposed significant costs on employers. According to a study done by CNA, a large national insurance carrier, almost 75% of all litigation against corporations today involve employment disputes and, of those, over 40% of the claims filed against private employers involve employers between 15 and 100 employees. CNA’s study also indicated that nearly 25% of all litigation in federal courts involves employment disputes, and an even higher percentage in state courts, with the average defense costs (not settlements to employees or verdicts) being $100,000 per claim. Per US Labor statistics, for every dollar given to employees to resolve the dispute, an equal dollar is spent on attorneys. According to the EEOC, the most frequent type of claims involve sexual harassment, race, disability, sex and retaliation. In addition, state and federal wage and hour claims at both an administrative and judicial level has been on a significant rise.
Although not all encompassing, there are certain things employers can do to minimize and/or protect themselves against potential employment law exposures.
- Have legal counsel review corporate employment policies and procedures on a yearly basis.
- Have legal counsel develop an employee manual and related forms which provide written guidance on workplace policies, procedures and rules and provide statutory notices to employees on employment related rights.
- Have legal counsel review all corporate layoffs and/or terminations before they happen.
- Create internal corporate dispute resolutions systems/policies (e.g. open door policies and grievance procedures).
- Using outside mediators during employment disputes.
- Draft and implementing a binding employment arbitration agreement which avoids the court process.
- Utilization of Severance Agreements during permanent layoffs and/or discharges.
- Purchasing of Employment Practices Liability Insurance (“EPLI”) coverage through an insurance agent.