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You are here: Home: >> Public Legal Resources: >> Free Legal Guides: >> Employment Law:

Employment Law

There are a variety of considerations that a business will face in the course of hiring, employing, and terminating its employees. This discussion will provide you with a brief overview of the legal issues that you must consider as a part of these decision making processes.

Applicant Screening and Hiring

Finding the right applicant to fill a position with your company can be a difficult process. It can be helpful during this process to acquire as much information about each potential candidate as possible, using employment applications or job interviews. (Note that you may wish to have applicants sign a consent to release information, authorizing you to verify the information they submit to you during this evaluation process.) But there are a number of legal issues that must be kept in mind as you go about the screening process. The majority of these issues relate to employment discrimination.

Both state and federal law prohibits many different types of discrimination in the employment context. Below is a brief discussion of the different federal statutes prohibiting employment discrimination.

Title VII

Title VII of the Civil Rights Act of 1964 protects individuals against discrimination on the bases of race, color, national origin, sex (including discrimination on the basis of pregnancy, childbirth, or related conditions), and religion. It prohibits such discrimination in regard to hiring, termination, promotion, compensation, job training, or any other term, condition, or privilege of employment. Title VII applies to employers with 15 or more employees, including state and local governments.

In the context of hiring, Title VII states that requesting pre-employment information that discloses or tends to disclose an applicant’s race strongly suggests that race will be used unlawfully as a basis for hiring. Therefore, if members of minority groups are excluded from employment, the request for such pre-employment information would likely constitute evidence of discrimination.

If an employer legitimately needs information about its employees’ or applicants’ race for affirmative action purposes and/or to track applicant flow, it may obtain racial information and simultaneously guard against discriminatory selection by using “tear-off sheets” for the identification of an applicant’s race. After the applicant completes the application and the tear-off portion, the employer separates the tear-off sheet from the application and does not use it in the selection process.

Further, Title VII prohibits discrimination on the basis of an immutable characteristic associated with race, such as skin color, hair texture, or certain facial features, even though not all members of the race share the same characteristic. Discrimination is also prohibited on the basis of a condition that predominantly affects one race unless the practice is job related and consistent with business necessity.

Age Discrimination in Employment Act (ADEA)

The Age Discrimination in Employment Act of 1967 (ADEA) protects individuals who are 40 years of age or older from employment discrimination based on age. The ADEA’s protections apply to both employees and job applicants. Under the ADEA, it is unlawful to discriminate against a person because of his/her age with respect to hiring. The ADEA applies to employers with 20 or more employees, including state and local governments. It also applies to employment agencies and labor organizations, as well as to the federal government.

The ADEA does not specifically prohibit an employer from asking an applicant’s age or date of birth. However, because such inquiries may deter older workers from applying for employment or may otherwise indicate possible intent to discriminate based on age, requests for age information will be closely scrutinized to make sure that the inquiry was made for a lawful purpose, rather than for a purpose prohibited by the ADEA.

The ADEA generally makes it unlawful to include age preferences, limitations, or specifications in job notices or advertisements. A job notice or advertisement may specify an age limit only in the rare circumstances where age is shown to be a “bona fide occupational qualification” (BFOQ) reasonably necessary to the normal operation of the business.

Americans with Disabilities Act (ADA)

Title I of the Americans with Disabilities Act of 1990 prohibits private employers, state and local governments, employment agencies and labor unions from discriminating against qualified individuals with disabilities in job application procedures, hiring, firing, advancement, compensation, job training, and other terms, conditions, and privileges of employment. The ADA covers employers with 15 or more employees, including state and local governments. It also applies to employment agencies and to labor organizations. Under the ADA, an individual with a disability is a person who:

Has a physical or mental impairment that substantially limits one or more major life activities
Has a record of such an impairment
Is regarded as having such an impairment

A qualified employee or applicant with a disability is an individual who, with or without reasonable accommodation, can perform the essential functions of the job in question. Reasonable accommodation may include, but is not limited to:

Making existing facilities used by employees readily accessible to and usable by persons with disabilities
Job restructuring, modifying work schedules, reassignment to a vacant position
Acquiring or modifying equipment or devices, adjusting or modifying examinations, training materials, or policies, and providing qualified readers or interpreters.

An employer is required to make a reasonable accommodation to the known disability of a qualified applicant or employee if it would not impose an “undue hardship” on the operation of the employer’s business. Undue hardship is defined as an action requiring significant difficulty or expense when considered in light of factors such as an employer’s size, financial resources, and the nature and structure of its operation.

An employer is not required to lower quality or production standards to make an accommodation; nor is an employer obligated to provide personal use items such as glasses or hearing aids.

In the context of applicant screening and hiring, it is important to note that Title I of the ADA also covers:

Medical Examinations and Inquiries
Employers may not ask job applicants about the existence, nature, or severity of a disability. Applicants may be asked about their ability to perform specific job functions. A job offer may be conditioned on the results of a medical examination, but only if the examination is required for all entering employees in similar jobs. Medical examinations of employees must be job related and consistent with the employer’s business needs.
Drug and Alcohol Abuse
Employees and applicants currently engaging in the illegal use of drugs are not covered by the ADA when an employer acts on the basis of such use. Tests for illegal drugs are not subject to the ADA’s restrictions on medical examinations. Employers may hold illegal drug users and alcoholics to the same performance standards as other employees.

Applicant Rejection

Once you have completed the applicant screening process and are prepared to make an offer of employment, you may wish to formally notify those applicants to whom you did not make an offer that you have made your decision. A formal rejection letter will contribute to the documentary record of the hiring and rejection process, potentially helping your business to defeat claims from rejected applicants. It may also help to cultivate some measure of goodwill with those applicants, and perhaps encourage them to apply should another opening arise within your company.

Employment

There are a variety of ways that you can formally engage the employment of a chosen applicant. While it is not a legal requirement, you may wish to have your employees sign an Employment Agreement. Such an agreement sets forth the terms and conditions of employment, i.e. salary, basic duties, benefits. It will also protect you as an employer, spelling out clearly what will be expected of the employee, and what will be considered grounds for termination. In lieu of an Employment Agreement, you may also establish employment terms and conditions in a more casual format, through the use of an Employment Offer Letter.

Miscellaneous Employment Agreements

As employment begins, you may wish to formally address certain legal issues to avoid confusion and disputes in the future. For example, you may wish to have your new employees sign a Confidentiality Agreement, preventing them from disclosing information, such as business or trade secrets that they learn while in your employ. This would include any information regarding customers, supplies, finances, research, development or manufacturing processes, or any technical or business information.

Additionally, you may wish to have your employees sign a Non-Compete Agreement and/or a Non-Solicitation Agreement. A Non-Compete Agreement simply states that if the employee chooses to leave your company, they agree that they will not engage in any business that would directly compete with yours. It is important to note that many courts may decide to enforce only portions of such an agreement, as they do not permit unreasonable restrictions to be placed upon on the ex-employees ability to earn a living. A Non-Solicitation Agreement states that in the event the employee leaves your company, they will not solicit your customers, clients or employees for a stated period of time.

If there is the potential to develop proprietary inventions or designs in the course of working for your business, you also wish to have new employees sign an Employee Patents and Inventions Agreement. By signing this agreement, your employee agrees to assign to your company any rights they may have to those inventions or designs. Such an agreement can prevent disputes between you and your employees in the future.

To purchase any of the forms discussed above, or to find other forms relating to ongoing employment, please click the appropriate link below:

Minimum Wage and Overtime

Minimum wage and overtime rules are addressed at both the state and federal levels. Under federal law, these issues are covered by the Fair Labor Standards Act (FLSA). The FLSA applies to government employers, as well as to most private employers. In the simplest terms, it mandates a minimum hourly wage for a 40 hour workweek, and requires that overtime pay of at least 1.5 times the regular hourly wage be paid for any additional time worked. However, the statute contains a host of exemptions to these rules, as well as requirements for employee recordkeeping, and child-labor restrictions. For more detailed information regarding the FLSA, see the Department of Labor’s FLSA Compliance web page.

Your state will likely have its own laws regarding minimum wage and overtime rules. (See the State Minimum Wage and Overtime Table, below). The Labor Department provides a brief summary of each state’s laws.

Family and Medical Leave

Employers are required to provide a certain amount of unpaid leave to their employees for family and medical issues. Under federal law, these requirements are set forth in the Family and Medical Leave Act (FMLA). The FMLA requires that eligible employees be given up 12 weeks of unpaid leave for any of the following reasons:

for the birth and care of the newborn child of the employee
for placement with the employee of a son or daughter for adoption or foster care
to care for an immediate family member (spouse, child, or parent) with a serious health condition
to take medical leave when the employee is unable to work because of a serious health condition

Some states have also enacted their own Family and Medical Leave legislation. You can find a brief comparison of some of these states’ statutes with the FMLA on the Labor Department’s website. For more detailed information about your state’s labor and employment laws, contact your state labor office.

Workplace Discrimination

Anti-discrimination prohibitions generally apply not only to hiring, but also to advancement, job training, compensation, and any other term, condition or benefit of employment.

For example, Title VII prohibits many different forms of sexual harassment in the workplace. Unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitute sexual harassment when this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance, or creates an intimidating, hostile, or offensive work environment. Title VII also includes the following general prohibitions:

Employees who belong to a protected group may not be segregated by physically isolating them from other employees or from customer contact.
Employers may not assign employees according to race or color.
Members of one protected group may not be excluded from particular positions, nor may employees be categorized in such was so that certain jobs are generally held by members of a certain protected group.

For more information about the law regarding other forms of workplace discrimination, please see the Equal Employment Opportunity Commission’s website.

Termination and At Will Employment

If an employee has an employment agreement with your company, that agreement will govern the terms and conditions under which they may be terminated. However, if the agreement does not specify the term of employment, then the employee is an At-Will Employee.

The At-Will Employment doctrine states that an employee may be terminated at any time and for any reason. They are employees only so long as their employer wishes them to remain so. The doctrine derives from a common law theory that employers and employees held equal bargaining power, and should be treated as equals.

While the at-will employment doctrine remains the law in every state in the U.S., three general exceptions have been carved out of the doctrine. The three exceptions are 1) where termination would violate a clear public policy, 2) where an implied contract has been reached with the employee, and 3) in a few states, where the termination was in bad faith.

Public Policy- This exemption exists in most states (see State Exemption Table below), and states that an employee termination that is in clear violation of an established public policy will not be permitted. For example, a employer that discharged an employee for refusing to break the law would violate this exemption. In order for a public policy exemption to exist, most states require that the public policy be clearly expressed in either the State constitution, a state statute, or other governmental rule or regulation.
Implied Contract- This exemption exists in a majority of states. It says that even if an employee does not have a written employment agreement, they may not be terminated without cause if an implied contract exists with their employer. An implied contract can be either written or oral, and may exist when an employer makes assurances to employees regarding job security, or regarding procedures that will be followed prior to termination. An example is an employee handbook, stating that employees will only be terminated for just cause. Such a statement might constitute an implied contract, and an exception to the at-will employment doctrine.
Good Faith and Fair Dealing- In a minority of states, a covenant of good faith and fair dealing is read into every employment relationship. These states may prohibit terminations that are made either in bad faith, or without just cause, depending upon that state’s interpretation of the exception.

Discriminatory Termination

The anti-discrimination statutes discussed above have their own prohibitions against certain types of terminations. In general terms, an individual may not be terminated because of their membership within a protected class, unless the termination falls within a specific statutory exemption. These prohibitions are based upon federal law, and supersede the at-will employment doctrine. For more information about terminations deemed to be discriminatory, see the Equal Employment Opportunity Commission’s website.

Independent Contractors

In certain situations, you may wish to have an individual perform services for you business without establishing a formal employment relationship. One method of accomplishing this is to hire the individual as an independent contractor. An independent contractor is not an employee, and as such, the employer is not responsible for withholding federal or state income taxes for that individual. Further, employers are not required to pay workers’ compensation or unemployment insurance for individuals classified as independent contractors.

The determination as to whether an individual is an employee or an independent contractor depends largely upon the degree of control that the employer exercises over them. For example, whether the employer dictates the location in which work is performed; the degree to which the individual’s business expenses are reimbursed; and the permanency of the relationship, are all factors that go into determining whether an individual is an independent contractor or an employee.

You can purchase Employment Agreements for Independent Contractors here: