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.
Quite frequently, as an experienced business attorney, entrepreneurs have asked me what things they need to be conscious of and be knowledgeable in when owning a business. Although many business owners are great at what they do, they do not necessarily have the know-how about business related subjects which will ultimately play an important role in their success in their business venture. As such, I have come up with a list of areas that I feel are important for any business owner to be knowledgeable in or to at least have access to experienced legal counsel, a certified public accountant and a business related insurance agent or agency.
- Business Insurance. Almost all businesses need some form of insurance to protect either themselves as owners or the company as a whole. A business owner should sit down and explore all the business insurance programs available to them consistent with their business operations and needs. Business insurance is an important part of protecting business assets and the owners from potential exposure. For example, if a company handles a lot of money, the company should consider getting employee dishonesty insurance to cover the potential exposure of an embezzlement claim.
- Government Regulations. Business owners should be cognizant of all government regulations that could affect the workplace. This includes tax, employment, and conducting business in general (e.g. licensing). Some businesses, depending on the specific industry, are more regulated than others. For example, the trucking industry might be more highly regulated by laws than perhaps a pizza establishment.
- Business Taxes. A general understanding of all taxes related to the company is important. Knowing how much tax will be assessed to businesses is as equally important as getting an understanding of when they need to be paid as well as what forms need to be filed with local, state and the federal government. Failure to pay taxes when due and in the amount due could have a serious, detrimental impact on a business.
- Business Contracts. Ultimately businesses will be doing businesses with third parties (e.g. vendors, employees, individuals, other companies, etc.), and in many of those instances, a written agreement is important to protect the interests of the business. In many instances, contracts will dictate what the parties have agreed upon.
- Intellectual Property. Protecting your name, product, slogan, or services are extremely important in business. Getting trademarks, patents, and copyrights protects you from competitors.
In my opinion, when running a business, business owners should have 3 “trusted” advisors which would include an experienced business attorney, certified public accountant and a business insurance agent or agency
Below is a non-exhaustive list of things to consider when starting a business.
1. Before starting a business, do you have a business plan which encompasses both short and long term goals and objectives?
2. Where to conduct business activity (what state and community) and what type of business structure should you utilize (e.g. corporation, LLC, etc.).
3. Will you need financing to start up the business and what are the projected start-up costs?
4. What type of insurance coverage will the company need?
5. What type of licenses or permits will the company need?
6. Federal, state or local registration requirements for business taxes?
7. If hiring employees, information on payroll taxes and labor and employment law compliance.
If you plan on starting a business it is highly recommended that you seek out a business attorney, CPA and/or accountant, banker and insurance broker who can assist you in the process and answer questions. Seth T. Seidell, Attorney is an experienced business attorney in Michigan.
For many years my law firm has represented both buyers and sellers of small to medium sized privately held businesses in Michigan. Although “hybrid” options are available, in general, there are normally two options in a structured sale of a business. Business sale transactions consist of either an asset or stock/membership sale.
Business Asset Sale
In an Asset Sale, specified assets (some or all) are transferred from the entity to the purchaser while the corporation and/or limited liability company entity that sold the assets remains in place and continues to be owned by its owners. Often times, although agreements can be modified accordingly, although assets are sold to a buyer, the entity who sold the assets still retains the liabilities. In most cases, depending on the facts, buyers generally prefer the asset purchase method since they will not be taking on past liabilities and the buyer can normally use the purchase price of the assets as the assets basis for tax purposes.
Business Stock Sale
In a Stock Sale, the buyer purchases the equity (stock or membership) interests from the owner(s) of the entity to be sold. There is no change in the status of the entity itself and the new equity owners take on, unless otherwise agreed to, all of the entity’s liabilities and contracts and the assets remain with the entity. Government authorizations, permits and licenses may not be transferable, and, therefore, in some industries because of the restrictions, a stock sale may be the preferred method amongst the parties. In most cases, depending on the facts, sellers generally prefer the stock purchase method as, unless otherwise agreed to by the parties, the seller will no longer be liable for the entity’s liabilities.
This article is a mere synopsis on the types of transactions that are normally done in a privately held sale of a business in Michigan. Generally, facts will dictate the type of sale that should be contemplated. This is just one area of discussion when contemplating a sale of business transactions and many other facets are involved in such a transaction. It is important to seek legal and accounting professionals when contemplating a business sale or purchase. Seth T. Seidell, Attorney at Law, concentrates his legal practice in the area of business law.
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.
During my many years of legal practice in Michigan I have come across numerous situations where businesses lacked insurance coverage when they tried to file a claim with their insurance carrier and/or was denied coverage when a claim was filed because it was excluded from their policy. Many of the owners have asserted to me an “I didn’t know I didn’t have the coverage, my insurance agent never told me that my policy wouldn’t cover the type of claim involved or my insurance agent didn’t advise me that I needed additional coverage for certain types of potential claims.” In many instances, I have come to the realization and conclusion that the business owner merely didn’t want to pay for the additional coverage or didn’t think that type of coverage was needed. I always tell my business clients when they plan on purchasing business insurance they should review the policy in its entirety before signing on the dotted line, and to especially review and take notice of the area that usually is entitled “exclusions” from the policy. In many instances, and depending on your state’s insurance statute, an insurance agent must inform you of all coverages available to the business. Many insurance agencies and agents are now requiring you to fill out waiver forms if you do not wish to take certain additional coverages for your business so they can avoid potential malpractice claims. Depending on the type of industry a business is involved in may determine the type of extra or additional coverage the business should look into. A business owner would be wise to spend time reading a property and casualty policy or any other business related policy in advance of binding coverage with the insurance carrier in order to verify what is covered and what is excluded from coverage.
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.