Sunday
Apr182010

Employee Management & Benefits I and II

Disputes about the management of employees are among the most common source of litigation for small business.  The legal issues mainly concern the legal limitations on an employer’s discretion to hire, fire, direct, and otherwise manage the work and other conduct of employees. For the small business lawyer, a principal concern is the extent to which the employer can effectively use contract or other means to reduce or eliminate these limitations and thereby increase management creativity and flexibility.  The issues include:

  • disciplinary action
  • employee privacy
  • Employee Polygraph Protection Act
  • employer privileges for communicating employee information
  • employment agreements
  • employment at-will/wrongful discharge
  • enforceability of employee handbooks and other employer management regulations
  • federal anti-discrimination laws
  • human resource policies and practices
  • layoff, reduction in force, and termination (separation) of employees
  • monitoring the workplace and testing (including drug and alcohol testing) and investigating employees
  • non-compete agreements
  • restrictive covenants and confidentiality agreements
  • state and local anti-discrimination laws that are more protective than federal laws
  • trade secret laws
  • whistleblower protection

The importance of these matters to small business is often greatly amplified by the closeness of relationships in the workplace and the absence of full-time professionals constantly managing human relations.     

Integrally related to issues of management are matters affecting employee benefits. Employee benefits are commonly defined in terms of direct, financial incentives or financial insurance for sickness, disability, unemployment, retirement, and the like.  Legally, employers are only required to provide workers’ compensation insurance and pay and withhold FICA and payroll taxes; but competitive, social, and ethical forces urge all businesses, including Small Business, to provide additional, voluntary benefits. The costs of these benefits are high. The U.S. Chamber of Commerce estimates that the average benefit package is worth more than one-third of wage compensation.  The costs of health care benefits are the highest among the smallest companies.

Whether these employee benefits are required by law or provided by choice, the costs include compliance with attendant, complex, legal obligations. The costs of legal compliance grow quickly and burden Small Business competitiveness absent partnership with a Small Business lawyer insuring compliance with statutes, including the Employee Retirement Income Security Act (ERISA) and related provisions of the Internal Revenue Code, as unendingly supplemented by rules and regulations from agencies including the Departments of Labor and Treasury, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC). 

ERISA covers employer-sponsored and participant-directed retirement plans and also, to some extent, employer health care plans and other employee benefits.  Principal ERISA topics for study include how Small Business defines and satisfies fiduciary duties and how Small Business lawyers limit and manage litigation, which often includes issues of discrimination law.

This course study also covers the alphabet soup of other laws that add to federal compliance requirements for employer health plans, such as: COBRA (Consolidated Omnibus Budget Reconciliation Act), OBRA (allows disabled employee to continue health coverage after COBRA), HIPAA (Health Insurance Portability and Accountability Act), NMHPA (Newborns and Mothers' Health Protection Act), MHPA (Medical and Health Care Continuation Act), and WHCRA (Women's Health and Cancer Rights Act). 

Employee benefits often overlooked also include legally mandated, employee rights, privileges, and protections which flood Small Business under extensive, complex laws such as: Fair Labor Standards Act; Family Medical Leave Act (FMLA); Health Insurance Portability and Accountability Act (HIPAA); Migrant and Seasonal Agricultural Worker Protection Act (MSPA); Occupational Health and Safety Act; Older Worker's Benefit Protection Act; Uniformed Services Employment and Reemployment Rights Act (USERRA); Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA); and Worker Adjustment and Retraining Notification Act (WARN), as well as workers’ compensation laws.  These kinds of “benefits” more widely affect Small Business, and the effect is amplified (and the costs to Small Business are compounded) by similar or related state and local laws that enlarge employee rights, privileges, and protections.

This course focuses on the scope of these federal and state laws (as much or more than employee welfare benefits) and the exceptions so that small business lawyers understand when the laws apply, and how best to comply with them. With respect to all employee benefits, this course emphasizes compliance equally with applicability of the law.  Both dimensions of knowledge may increase the value that lawyers can add to small business, decrease the costs of small business, and help make small business more competitive with large firms.

Because issues of employee benefits and management are so closely related in business and handled conjunctively by Small Business owners and their lawyers, this two-semester course organizes and integrates the two subjects around common dimensions and themes of the Small Business workplace, rather than segregating management and benefit topics in two, independent courses.  It is important that the small business lawyer understand the interconnectedness of the subjects.