Have you ever heard “be careful what you put in writing?” This phrase is especially true when making written offers of employment. Perhaps you were lucky enough to find ideal candidates to fill unique positions; some of which may have been difficult to fill in the past. While this is good news, these sharp candidates have a keen eye to quickly identify operational errors, wage and hour law missteps and inappropriate activity. Their ability to do so can prove to be very costly for a small business.
So, before you or one of your supervisor’s makes an offer to that ideal candidate, make sure you understand the three most common job offer mistakes.
1. Promising a long term employment relationship
In nearly every state, unless a formal contract states otherwise, employees are hired at-will. “At-will” means that there is no legal binding agreement between the company and employee you hire for a guaranteed period of time. It also means that the company OR the employee has a right to end the employment relationship at any time, for any reason, so long as it is not an illegal reason. Finally, “at-will” means there is no guarantee of employment terms, conditions or benefits except those that are made in writing by the owner or a designated and authorized executive level manager. Simply put, it means there is no guarantee that the employee will be promoted quickly, given a raise at a particular time, will always report to the same manager, always have the same health care, etc.
It is considered a highly encouraged best practice to include “at-will” and it’s meaning in written offers of employment and to reinforce that standard in the company’s employee handbook. It is equally important to remember that all verbal and written communication with your employees should be consistent with an at-will employment relationship. It is recommend that you avoid language in an offer letter such as “we look forward to a long term working relationship” or “we will guarantee a promotion after you meet or exceed our expectations in this role”.
We never want to believe that the person we have chosen to hire will end up becoming someone who legally challenges the company. Nor do we want to think they we will ever have to terminate them. But there are no guarantees. Not for the employee and not for the company.
When you decide to change benefits plans, who is to say a current employee won’t use a poorly worded promise of specific benefits against you? What about the employee that could end up becoming a poor performer or a policy violator? Don’t let promises you have made in writing in the offer letter interfere with your right to terminate the employee with as little risk as possible.
2. Not knowing the FLSA classification
As a small business owner, do you understand the Fair Labor Standards Act (FLSA)? Do you know what it obligates you to do? Another common mistake when making an offer of employment is not identifying if an employee should be exempt (is not eligible for overtime wages) or non-exempt (must be paid overtime). Under the FLSA, each job in your company must be classified as exempt or non-exempt. Employees who are classified as non-exempt are entitled to overtime pay after they physically worked more than 40 hours in a standard seven day period (a.k.a. work week). Employees who QUALIFY to be classified as exempt are typically paid a salary are paid to get a job done, not for their hours worked – so, no overtime payment is required.
Employers who improperly classify an employee as exempt, and do not provide payment for overtime, run the risk of costly wage and hour fines and violations, including back wages. According to the Department of Labor, “willful violators may be prosecuted criminally and fined up to $10,000. A second conviction may result in imprisonment. Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to civil money penalties of up to $1,100 per violation” .
So before you extend a verbal and written job offer, we recommend you make yourself familiar with the Department of Labor’s Fair Labor Standards Act Advisor. In order to minimize risk, identify the correct job classification as exempt or non-exempt in the new hire’s offer letter and in the job description. Be prepared to explain the classification decision, and make sure the employee Handbook clearly defines these categories. Finally, determine if your employees are properly set up in your payroll system; the job title and the exempt or non-exempt classification. Above all remember, just because you pay the person a salary DOES NOT automatically make them exempt.
3. Not following up on required paperwork
You just hired a new employee, and today is their first day. Great news. You know they need to complete Form I-9; a form required by immigration to prove the employee is authorized to work in the United States. But, the new hire forgot their identification. What now? That’s fine. They must be provided no more than three business days to provide it and complete the form. Off to work they go. But who is following up on that three day requirement?
Picture this. It has been six months, and you still have not received the employee’s documentation. Did you know under The Immigration Reform and Control Act of 1986 there is federal penalty that ranges from $375 up to $16,000 per worker for this or a related type of action(s)? What were you supposed to do after those first three days? Suspend the employee from payroll until they satisfy form I-9 requirements? To not do so is a willful violation of this law.
To avoid this risk, use the written offer letter to remind your new hires of the importance of providing their documentation to your company on the first date of employment. Emphasize if they do not provide this information on their first date of employment, they will have up to three business days from the date of hire to provide this information or they will be suspended or terminated from your company. This policy should be reinforced with the immigration law compliance policy for in your employee handbook.
In order to avoid losing valuable time and incurring unnecessary losses, before writing an offer letter, ask yourself these questions:
1. Does the offer letter imply a long term relationship between my company and the employee?
2. Does the letter imply any other promises that the company may not be able to deliver?
3. Do I have any language in the letter that may imply that the employee would have a right to remain at my company even if his or her performance or behavior do not meet or exceed the expectations for this role?
4. Do I have a job description for this new hire (and for each job in my company) and does it have the correct FLSA classification?
5. Does the offer letter include information about the immigration law compliance?
6. Did the company fully complete form I-9 for the employee, including proper notation of the identification presented by the new hire?
7. Does the company have completed form I-9 for all current employees and recent new hires, including signatures in all required areas?
8. Does the company have an employee handbook that defines an at-will employment, exempt and non-exempt classifications, and the immigration law compliance?
As a small business owner, do you have all the tools and resources in place to minimize risk and protect your company’s P&L?
Click the link to view our recent blog: PEO for HR Support and Peace of Mind or check back for more on human resources, payroll, insurance and benefits.