The "Gig" Economy
In many respects, the law has struggled to keep up with rapid advances across industries. Employers have warmed to the gig economy approach, sometimes relying heavily on transient, temporary and short-stint workers, many focused on particular projects or ventures. With industry experts predicting a steady increase in the gig economy, employers need to understand the challenges and risks. While the economy has drastically changed, applicable US law has not.
Employers (or entities contracting for services or personnel) must consider the costs, savings and potential risks related to particular choices in this framework. Misclassifying workers as "independent contractors" who should be classified as "employees" leads to legal issues, including in the following areas: collective bargaining, taxes, wage and hour compliance, benefits, and anti-discrimination laws.
These areas are based on workers having employee status. Independent contractors typically have no such protections under federal and most state employment laws. The question regarding whether a worker or group of workers is properly classified can easily lead to disputes before administrative agencies and state and federal courts. See more detailed information on the independent contractor relationship in 2.1 Defining and Understanding the Relationship.
Artificial intelligence is capable of streamlining and focusing decision-making processes, but the risk for employers is that the assumptions used may have an inadvertent discriminatory impact on a legally protected class of employees. That a computer program has sorted employment candidates, for instance, will not protect an employer from potential liability under a federal or state employment statute (such as Title VII of the Civil Rights Act of 1964) if disparate impact occurs in relation to age, race, disability or any other protected characteristic. A disparate impact is a legal concept that results in liability even in the absence of wrongful intent when statistical evidence would indicate that a facially neutral policy or practice has a disproportionate adverse effect on a legally protected group of individuals.
Cyberspace and Social Media
In the information age, current and former employees, and even current and former applicants, have the ability to publicly vent their opinions about their employers to a wide audience.
Under the National Labor Relations Act, US employers cannot preclude many forms of free expression related to work matters and work conditions (and cannot easily take adverse action against those engaging in such free expression). Employers can, however, restrict the sharing and/or misappropriation of their confidential information and trade secrets, including in online forums.
Technology has allowed employers to be flexible with their workforce, allowing employees to address work issues outside of the traditional office environment. However, hourly workers not exempt from the requirements of the Fair Labor Standards Act (FLSA) likely will need to be paid for work performed after hours. US employers need to have clear policies that address their compensation policies with respect to the use of these devices and after hours work.
While US employers have adopted and implemented longstanding policies prohibiting harassment based on legally protected characteristics, the attention placed on this issue by the "Me Too" movement and the publicity generated in recent high-profile cases has initiated a seeming cultural shift from preventing conduct that is illegal to promoting a respectful and inclusive work environment. This shift can be seen in training being provided by employers (more focused on civility training and respect), as well as the focus of anti-harassment policies. The promotion of environments that encourage reporting and offer multiple avenues to bring concerns forward, coupled with an appropriate response to the behaviors at issue, are important components of such a program.
Congress recently passed a comprehensive tax reform bill. Section 162(q) of the Internal Revenue Code now eliminates a tax deduction in a sexual harassment or sexual abuse settlement if the settlement or payment is subject to a nondisclosure agreement. Accordingly, while settlement payments made to claimants in connection with employment-related disputes are generally treated as deductible business expenses, this tax benefit no longer exists for confidential settlements involving a claim of sexual harassment. This provision forces companies to choose between economic incentives and public scrutiny in an attempt to create greater transparency and accountability for unlawful sexual conduct in the workplace.
In Georgia, absent a contract or policy to the contrary, private sector employees do not have "due process" rights like their public sector counterparts.
Most companies prefer to operate union-free for various reasons, such as avoiding limitations on dealing directly with their employees and minimizing the risk of work stoppages. Union membership has been on a significant decline in the USA for decades, with private sector union membership hovering around 6.5%. Their ranks remain strongest on the coasts (eg, New York and California). The South historically has the lowest unionization rate, but many states in the Midwest have seen their union numbers dwindle increasingly in recent years. Indeed, there was a 12.5% decline in union membership from 2016 to 2017.
At 4.5%, Georgia has one of the lowest private sector union membership rates in the country. This has spurred investment and development in the automotive, manufacturing and other business sectors in the state. Georgia was a very early adopter of Right to Work laws, making it illegal to require employees to join a union as a condition of employment.
The National Labor Relations Board (NLRB) is vested with enforcing the National Labor Relations Act (NLRA), which provides workers with certain rights with respect to unionizing and discussing, protesting, etc their terms and conditions of employment. The NLRB governs private sector labor relations in the USA, and its regulations and administrative decisions apply to all 50 states. Consisting of five members appointed by the president, their views can change from administration to administration. Because the law is national in scope, no specific region, generally speaking, has a "leg up" on another when it comes to US labor law.
There are a variety of different types of service arrangements in the USA. As a result, it is important that the parties agree on the terms and conditions at the outset of their relationship, and ensure that the agreement reached is consistent with applicable law. Failing to properly do this at the commencement of the engagement not only creates unnecessary uncertainty, it increases the organization’s legal exposure with regard to future disputes.
The default service relationship in the USA is that of employer and employee. Most states, including Georgia, are "at-will" employment jurisdictions, meaning either party (the employer or the employee) can terminate the relationship at any time and without having to provide a reason – provided, of course, that the termination decision is not otherwise prohibited by law (ie, due to discrimination or retaliation). In some situations, employees may have contracts specifying the terms and conditions of their employment. Such contracts are not required in the USA, but may be warranted depending on certain factors such as the type of employee in question (ie, an executive). Barring a formal written contract, terms regarding the employment relationship are typically relegated to documents such as offer letters, job descriptions, employment policies or employment handbooks.
Joint employment is not the norm and applies only in limited circumstances, usually in a legal proceeding as a mechanism by which an employee attempts to recover damages against a third party. However, to show that a third party is a joint employer, they must do more than simply allow another employer’s employee to work at its facility; the third party must have exerted significant control over the employee. Factors to consider in determining joint employer status are:
Under the NLRA, the NLRB currently may find two or more entities are joint employers if they are both employers within the meaning of the common law and if they share or codetermine matters governing the essential terms and conditions of employment. The primary inquiry by the NLRB is whether the purported joint employer possesses the actual or potential authority to exercise control over the primary employer’s employees, even if the authority has not been exercised. This current NLRB joint-employment standard could change through case law or rulemaking. In fact, the NLRB has proposed a rule that would impact this analysis that could be finalised by the end of 2019.
The importance of control in a relationship also extends to the determination of whether a worker is an independent contractor. Contracting is very popular in the USA; the number of contractors, as a percentage of the workforce, has doubled since the 1990s. (See GAO-15-168R Contingent Workforce.) As contracting has grown in popularity, it has attracted more scrutiny from the courts, lawmakers and administrative agencies. Accordingly, simply describing a worker as an independent contractor is not sufficient – what matters is how the parties act in practice based on the totality of the circumstances. The law in this area is rapidly evolving and there are no rigid rules for determining whether a person is an independent contractor or an employee. Various jurisdictions and administrative agencies in the USA have adopted different tests to determine whether an individual is an independent contractor. For its part, Georgia has adopted a relatively moderate approach, distinguishing employees from independent contractors based on the following types of factors:
While no one factor is dispositive of a person’s status, the extent of control over the work performed by the worker is regarded by Georgia courts as the single most significant factor in determining the existence of an employer-employee relationship.
Most typical workplace scenarios in the USA do not involve franchising. While there is some overlap between the terminology of an independent contractor and that of a franchise, the structure of the relationship is different. A franchise involves a relationship whereby the franchisee undertakes to conduct a business or sell a product or service in accordance with the methods and procedures prescribed by the franchisor, and the franchisor assists through advertising, promotion and other advisory services.
Georgia is not a franchise registration state. Most franchise regulations and disclosure obligations in Georgia are governed by federal rules.
Internships have been the subject of considerable scrutiny in the past few years, notably from the standpoint of whether private businesses can rely on unpaid interns. The US Department of Labor’s Wage and Hour Division has developed a test for evaluating whether an individual constitutes a "trainee" (intern) for the purposes of the FLSA. The following factors are considered in determining whether a for-profit employer lawfully can utilize an unpaid intern:
See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act.
Georgia, like most states, is an employment "at-will" jurisdiction. This means that if there is no contract setting forth a specific term for the employment relationship or limiting the means by which an employee can be terminated, the employer can lawfully terminate the employee at any time without giving notice or providing a reason for the termination, as long as the termination is not otherwise prohibited by law. The at-will relationship does not extinguish or limit any other statutory or legal right an employee has under applicable federal, state or local laws, and employers must comply with all laws that govern the employment relationship in the jurisdiction in which the employee works. Thus, clear documentation and communication of the basis for the termination decision will serve employers well should their decision be challenged under the various civil rights or leave laws applicable to the specific situation.
Although Georgia is an employment at-will jurisdiction, an employer can forfeit its at-will right to terminate an employee by promising employment for a fixed period of time or stating that employment will only be terminated under certain circumstances. Either situation may create an implied "contract of employment". Similarly, promises that an employer makes to a prospective employee regarding compensation also may be enforceable. Consequently, if employees are promised a set wage rate, commission benefit or bonus, they may sue to enforce such promises. The employment at-will doctrine is codified in Georgia law and creates a very strong presumption of at-will employment in the state. As a result, there are very few exceptions created by the courts to the at-will doctrine and most lawsuits alleging a tort of “wrongful discharge” tend to be dismissed. Employees are left with a breach of contract claim, which limits potential remedies.
Employers may choose to create enforceable employment contracts. Typically, contracts are entered into in limited situations involving high-level or critical employees, such as senior executives, research scientists, etc. Any employment agreement that is entered into will be subject to the same general parameters applicable to any regular contract, whether there was an offer and acceptance for the terms embodied in the agreement and whether there was consideration provided for the promises contained in the agreement.
The terms of an employment agreement will vary significantly depending on the circumstances and the parties at issue. Agreements can be limited to specific issues such as restrictive covenants. On the other hand, agreements also can cover most of the terms of employment. In those cases, the agreements will tend to cover the employee’s duties and responsibilities, compensation and benefits, the term of the relationship and the parameters by which the relationship can be terminated, including whether it is terminable for cause and the circumstances defining cause. Such agreements also typically address whether the employee would be eligible to receive severance and the terms and conditions associated with the severance package, including whether the employee is required to release any claims they may have against the company before receiving such severance.
In Georgia, when an employment agreement is for a definite period of time but does not specify grounds for early termination, then a good cause requirement is implied. Under the Georgia Statute of Frauds, an employment agreement lasting for one year or longer must be written and signed in order to be enforceable.
Offer letters are commonly used to communicate the basic terms of employment to a prospective employee. Typically, these identify the type of job that is being offered (probationary, temporary, part-time, full-time), the department the person will be working in, who they will report to, and their wages or compensation structure. The offer letter also presents an opportunity to provide a copy of the job description that may go into more detail about the requirements for the position, as well as covering any unique aspects of the offer, such as whether the employee will be required to abide by restrictive covenants (which usually will be set forth in a separate agreement) as a condition of accepting the position.
Offer letters for at-will employees should also contain appropriate language that affirms the at-will nature of the employment relationship. Because the contents of an offer may become the basis for a later claim of breach of contract or a promissory estoppel claim, many employers require that the employee sign the offer to acknowledge receipt and acceptance of the terms that are specified.
In Georgia, offer letters lacking language stating that employment will be at-will and terminable at any time have been found to constitute an employment contract.
Most employers provide employee handbooks to inform employees about the company, and the policies and regulations that the company has adopted for the workplace. Handbooks are reference tools that help to promote consistency in the workplace and ensure that all members of management and all employees understand the company’s requirements, policies and benefits. Handbooks can address a wide array of employment terms, including the company’s non-discrimination, non-retaliation and harassment policies, the regular hours of operation, exempt and non-exempt status, requests for leave, employment benefits, discipline and discharge procedures, and the usage of company property and equipment.
In Georgia, courts have found that promises made in an employee handbook can be found to be enforceable contracts absent appropriate disclaimer language. For example, Georgia courts have held that promises of certain fringe benefits like vacation or severance pay and similar provisions can be binding promises. As such, employers should include language that provides that the employer reserves the right in its sole discretion to amend benefits and provisions in the handbook, and that the handbook is not a binding employment contract.
Exempt and Non-exempt Status
Exempt and non-exempt status in the USA is determined by the federal FLSA as well as individual state laws addressing this issue. The FLSA applies to all businesses or similar entities that have annual sales or business of at least USD500,000 or to individuals who are engaged in interstate commerce or in the production of goods for interstate commerce. The FLSA imposes various requirements on employers, including obligations to make and preserve records on employee pay, child labor restrictions, minimum wage, and overtime at time and a half the regular rate for all hours worked in excess of 40 hours in a seven-day workweek.
Generally, to establish that an employee is exempt from the FLSA’s overtime requirements, an employer must show that an employee:
An employee’s "primary duty" is defined by the regulations as the "principal, main, major or most important duty that the employee performs." In assessing whether or not an employee is exempt based on the performance of his or her primary duty, the regulations look to the character of the employee’s job as a whole, not what a company labels an employee. Although there are several exemptions, the ones most commonly used by employers are the "white-collar" exemptions: executive, professional and administrative.
In order to come within the scope of the executive exemption, an employee who is paid on a salary basis at the threshold level must also have the primary duty of managing the business (or a department of the business), customarily and regularly direct the work of at least two other full-time employees or their equivalents, and have the authority to hire and fire other employees or have his or her suggestions and recommendations on key personnel decisions such as hiring, firing and promotions be given "particular weight".
The professional exemption requires that employees – in addition to being paid the required amount – perform work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, or work that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
The administrative exemption requires – in addition to being paid the required amount – that employees exercise discretion and independent judgment with respect to matters of significance to the business. This area has been the subject of considerable and ongoing litigation. Accordingly, prudent employers identify the proper classification that may be applicable to workers before the commencement of the employment relationship.
The Georgia minimum wage law applies only to very small employers not covered by the federal Fair Labor Standards Act (FLSA).
Immigration and Related Foreign Workers Issues
Federal law requires that every employer verify the identity and employment eligibility of new employees and complete Form I-9, Employment Eligibility Verification. This requirement arose out of the Immigration Reform and Control Act of 1986. Employers are prohibited from hiring and employing, or continuing to employ, an individual knowing they are not authorized for employment. This law also prohibits employers from hiring any individual, including US citizens, for employment in the USA without verifying the individual’s identity and employment eligibility. Given the current climate of increased immigration enforcement, developing and following a comprehensive immigration compliance program, to include I-9, is extremely important to avoid immigration audits, fines or raids and the accompanying negative press coverage.
Employers and employees are responsible for completing their respective portions of Form I-9 within a defined period of time. There are three sections. Employees must complete Section 1 no later than their first day of employment. However, Section 1 should never be completed before an employee has accepted the offer of employment. Employers must complete Section 2 within three business days of the employee’s first day of employment. This section requires an employer to review the physical document presented by the employee to establish the employee’s identity and employment eligibility. Section 3 applies only to reverifications and rehires. Reverification must be completed prior to the expiration date of an employee’s employment authorization document. Employers should not reverify US citizens, US nationals, or US legal residents who presented a legal residency card or certain identity documents. If an employer rehires an employee within three years of the date the Form I-9 was previously executed, an employer may either complete Section 3 of the previous I-9 or complete a new I-9. Employees rehired after three years of execution of Form I-9 must complete a new Form I-9.
The Hiring Process
While the employment verification process requires that an employer complete a Form I-9 and review documents presented by an employee to confirm the employee’s identity and employment authorization, employers also may be subject to charges of discrimination or document abuse by requiring specific documents or too many documents as a part of that process. It is illegal to discriminate against employment-authorized individuals in hiring, firing, recruitment or referral for a fee in the employment eligibility process based on the individual’s citizenship status, immigration status or national origin. Employers are prohibited from specifying which documents an employee may present to establish employment authorization and identity. The refusal to hire or continue to employ an individual due to a future expiration date on the documents presented by an employee is also prohibited.
However, an employer is allowed to ask an applicant if they will require visa sponsorship during the interview process. For example, while applicants may not be asked if they are US citizens or be asked to show employment authorization prior to hiring, an employer may ask applicants if they are currently authorized to be employed in the USA and if the applicants will require visa sponsorship from the employer. In addition, applicants should not be told that only citizens are hired. Applicants should not be told that the organization does not sponsor visas, unless that truly is the case. Employers also should be aware that some categories of employment authorization must be paid for by the employer and may not be paid for by the employee; others may be paid by either the employer or the employee, or the cost may be split between them.
Importantly, punitive agreements to pay the employer back for immigration or employment authorization-related costs are generally unenforceable, although in certain cases a forgivable loan agreement, which reduces over time, may be permissible. Because no entity can predict with certainty whether a government agency will grant a request for employment authorization or visa, an employer may choose to state that it will attempt to assist an employee with these efforts, but it should not promise to obtain any specific result. While in the past, the focus may have been on ensuring that protected classes and foreign workers were not discriminated against, recent compliance and enforcement measures indicate that the federal government may take equally aggressive measures against actions that are deemed discriminatory toward protected US workers.
Corporate Structure and Relationships
The L visa is reserved for international companies wishing to transfer executives, managers, or specialized workers to the USA. A business operating in at least one foreign country may wish to consider whether or not common ownership and control (at least 51%) exists with the foreign entity and the existing or planned US operation. If common ownership and control exists, the organization may be able to transfer specialized knowledge or managerial and executive employees from the foreign operation to the US entity after one year of qualifying service abroad.
Another option for visa sponsorship for companies is the H-1B visa. These visas are generally reserved for specialty occupations – those occupations requiring at least a relevant bachelor’s degree. However, demand far exceeds the number of available H-1B visa slots and new H-1B slots are typically used within the first few days of filing each federal fiscal year. H-1B is potentially available for foreign workers where the position to be filled is a specialty occupation and for which the foreign worker has earned at least a relevant bachelor’s degree or the foreign equivalent. Some exceptions exist to this quota system in that workers granted an H-1B in the last six years may be exempt from the cap, while some university and research or non-profit employers may not be subject to the cap. Many organizations take advantage of this to hire existing H-1B workers from other organizations (which also means an organization could easily lose an H-1B to another entity). Importantly, a relatively new exception to the cap exists for entities having a formal affiliation agreement with a university or research institution; structured correctly, this can be a valuable tool for H-1B for an otherwise cap-subject employer.
The NAFTA Professional (TN) visa allows employers to sponsor citizens of Canada and Mexico for employment in the USA in a professional capacity. To be eligible for a TN visa, the profession must be on the NAFTA list and the employee must satisfy the qualifications for eligibility for employment in that profession.
Another option for visa sponsorship is the E visa. The E visa category includes treaty traders and treaty investors who come to the USA under a treaty of commerce and navigation between the USA and the country of which the treaty trader or investor is a citizen or national, and some employees of the treaty trader or treaty investor. This category also includes Australian specialty workers – similar to an H-1B visa. To qualify as an employee of a treaty trader or treaty investor, the general requirements are that the employee share the same nationality as the employer, and that the employee be engaged in the duties of an executive, manager, or specialized worker.
Employing Recent University Graduates and Use of e-Verify
Another source of professional employees is new foreign graduates of US colleges and universities. While some of these recent graduates are hired in H-1B or some other moderate-term employment status, many are employed for a short time, post-graduation, in Optional Practical Training (OPT) status. This is a process by which the college or university, in coordination with US immigration agencies, may grant up to 12 months of practical training authorization (minus time spent working as a student) in order for the individual to work in a field related to his or her studies. This is a relatively simple and inexpensive option for employers, albeit very short-term. At the end of this time, the employer must either discontinue employing the person, or move him or her to another status, such as H-1B status. However, for graduates in certain STEM fields, the initial 12 months of OPT may be extended by up to an additional 24 months of STEM OPT, if the college or university agrees.
Important aspects of this 24-month potential extension of work authorization include the requirement that the employer develop a specific training plan, the job to be done must be one of the approved STEM occupational fields on the government list (and must be related to the field that the person studied), and the employer MUST be a participant in e-Verify. E-Verify is not required for the initial OPT employment, but an employer must participate in e-Verify in order to qualify to utilize STEM OPT. Decisions about location of hiring sites and storage and maintenance of Form I-9 records may also be impacted by the decision to utilize e-Verify (or its mandatory use, where required).
In Georgia, effective July 1, 2013, all private employers with more than ten employees must participate in the federal e-Verify program new hires or re-hires. Georgia employers may enroll in e-Verify directly at the US Citizenship and Immigration Services website.
Maintenance of Status and Compliance Issues
Compliance with Form I-9 requirements, and regulations governing employment visas have increased in importance in the past several years. Federal agencies, such as ICE and the Department of Labor, have greatly increased their investigation and routine compliance monitoring, as well as expanding methods for the general public or interested parties to report violations. Fraud, noncompliance and even some unintentional errors can lead to the loss or denial of work authorization, large fines and, in the most egregious cases, criminal charges for responsible management or ownership. This stresses the importance of accurately completing immigration and Form I-9 documents, correcting any errors, ensuring that any terms and conditions of the visa classification are followed and that any material changes are examined for potential consequences.
A robust system of tracking Form I-9 expiration dates and compliance and for monitoring and requesting or renewing any needed work authorizations is necessary. Most employment authorization documents and non-immigrant employment visas need to be periodically renewed and many classifications have a maximum number of years for which they may be used. Many are also employer and location specific and do not directly transfer to another employer, or even another job with the same employer. As a part of certain processes, such as H-1B and labor certification and the H2 program for filling temporary or seasonal needs, information such as the job availability and wage or wage range may be required to be disclosed publicly via prominent posting or notice to the relevant union.
To the extent the company desires to remain union-free, the importance of hiring a strong HR and employee relations staff who can establish a positive culture and get buy-in from the managers cannot be overstated. The vast majority of union campaigns start because of perceived toxicity in the workplace (eg, favoritism, no outlets for employees to express their views, etc). Being union-free vests the organization with the autonomy to make decisions about policies and other terms and conditions of employment. If the employees are represented by a union and/or ever vote a union into the workplace, an employer has a legal obligation to bargain virtually every potential change to workers’ terms and conditions of employment with the union. Accordingly, many employers strive to remain union-free in order to enjoy maximum flexibility.
If an entity acquires a business where employees are represented by a union, the entity may have options under the NLRA depending on the nature of the transaction. If the acquisition is a stock transaction, a stock purchaser is almost always bound by the existing collective bargaining agreement with the union. If, however, the acquisition is an asset purchase, the purchasing entity generally has the right to either assume or not assume the existing collective bargaining agreement. If there is continuity in the "employing industry" (with the most significant factor being the continuity of the workforce), the purchasing entity of the assets becomes a "successor" with an obligation to recognize and negotiate with the union. Depending on the specific facts, a "successor" may be able to establish "initial terms and conditions" of employment prior to negotiating with the union.
The pre-hire and interviewing process is a significant opportunity for Georgia employers to identify and hire the strongest candidate for the positions in question. Prior to the employment interview, employers should consider requiring applicants to complete an employment application that accurately describes prior educational and work history, reasons for leaving prior employment, references and any special skills. While many applicants currently seek to replace completing the work history part of the application with a resume, employers should consider requiring the applicants to complete the application as well, as the questions on the application seek additional information not included on a resume, such as dates of employment and reasons for leaving.
As a best practice, the employment application should include a certification by the applicant that he or she provided complete, accurate and truthful information on the application. This certification provides employers with a means to limit or mitigate damages in an employment discrimination case. The employment application should also contain an affirmation of the "at-will" nature of the employment relationship, and employers should refrain from making verbal or written assurances of "long-term" or "permanent" employment, or other statements that could adversely affect the employer’s ability to successfully assert that the employee was employed at will at a later time. In addition, to the extent that any post-offer testing is to be conducted, employers should include that information in the employment application to ensure that applicants are aware of the requirements and allow them to request reasonable accommodations, if needed.
The employment application and the interview process, as a best practice, should not ask questions or elicit information about legally protected characteristics such as age, national origin/race, religious practices, pregnancy or desire to have children, sex, sexual orientation or gender identity, or medical conditions or disabilities and similarly should avoid questions that would elicit this type of information.
A common aspect of the hiring process is a limited criminal background check for the successful candidate. While this due diligence provides benefits for employers, such as a defense to a negligent hiring claim and the avoidance of a high-risk hire, this is an area of the law that is currently evolving on the national, state and local level. The Equal Employment Opportunity Commission has taken the position that, given the fact that minorities are disproportionately adversely affected with regard to both convictions and arrests, criminal convictions should only be considered if they are job-related to the particular position being sought. Employers should consider doing a case-by-case analysis, and review the type of conviction, the date of the conviction, the nature of the job in question, and any exceptional circumstances before making a decision about employment based on a criminal conviction.
Employers using background checks (including credit reports and criminal records) to make employment decisions, including hiring, retention, promotion or reassignment, must comply with the federal Fair Credit Reporting Act (FCRA) administered by the Federal Trade Commission (FTC). There are numerous procedural and notice requirements under the FCRA that employers must follow.
Employers in Georgia should be mindful of the state’s “First Time Offender” Act. O.C.G.A. § 42-8-63.1. Generally speaking, this law provides that a first-time offender who successfully completes court-ordered probation will not have a conviction reported on their record and the case will be sealed from official criminal history reports. However, there are exceptions for jobs that require working with children, the elderly, or the mentally ill, on matters related to certain sexual offenses.
Another common component of a background check involves credit checks. Again, because credit checks tend to disproportionately disqualify minorities, it is best practice to conduct a similar analysis of the job-relatedness of a credit check to the position in question to avoid unnecessary legal exposure.
The Americans with Disabilities Act (ADA) also imposes restrictions on employers with regard to what information can be sought or discussed during the hiring process. The ADA generally prohibits employers from any pre-employment inquiries about an applicant’s medical condition. Thus, the employer may not ask any questions designed to elicit medical information prior to a conditional job offer being made.
After a conditional offer of employment has been made, the employer may then conduct a post-offer medical examination, provided that this is required of all applicants for the position. However, to withdraw an offer of employment, the employer must be able to demonstrate that the individual is unable to perform the essential functions of the job in question, even with reasonable accommodations. Thus, to the extent that post-offer testing is to be completed, employers should ensure that the components of the test directly correlate to the essential functions of the position.
Employers may also require physical agility testing. Depending on how these tests are constructed, they may or not be considered a "medical examination" under the ADA. For example, if an agility test simply requires an employee to pick up products and carry them a certain distance, such a test would not be a medical examination. However, if the tester measures the employee’s physiological response to the activity (eg, pulse and blood pressure), the test may be considered a medical examination subject to the ADA restrictions on such testing. Even these agility tests must be job-related and consistent with business necessity, in essence accurately depicting the physical demands of the position in question. As this is a highly technical area of the law, employers are well advised to seek legal assistance with these determinations.
The Genetic Information Nondiscrimination Act (GINA) similarly imposes restrictions on employers during the hiring process (and afterward), making it unlawful for employers to request genetic information with respect to employees. Because genetic information is defined broadly to include family medical history, employers should ensure that any post-offer medical examinations, even those conducted by occupational doctors, do not elicit this information.
Finally, the ADA requires employers to provide reasonable accommodation to disabled applicants to permit them to participate equally in the hiring process. While reasonable accommodations may take many forms, such as having an interpreter for a hearing-impaired applicant, administering a test in an accommodated format – more time, reading the questions, answering in a different format (eg, dictating), ensuring access to the testing site, etc – the employer is not required to "carve off" essential functions of the position in question as such an accommodation would not be reasonable.
As an initial matter, determining the applicable law that governs a contractual restrictive covenant is of critical importance. The enforceability of restrictive covenants in the USA is heavily dependent upon state law, which varies dramatically on this subject. For example, some states – such as California and North Dakota – consider non-competition and non-solicitation covenants to be void and unenforceable under almost all circumstances, whereas other states – such as Louisiana and Oklahoma – will enforce contractual restrictions, but only if they meet specific criteria set forth by state statute. Other states will enforce such restrictions, but only reluctantly and only if the terms are reasonable and narrowly defined. Accordingly, careful attention should be paid to the state law controlling the covenant at issue, either set forth by the parties in the contract or that may be determined by the various jurisdictions where the parties are located.
In Georgia, post-employment restrictive covenants are governed by state law. The Georgia legislature passed a statute effective May 11, 2011 that governs non-competition agreements. The statute would apply to any such agreement entered into after the effective date. The law covers non-competition covenants, customer non-solicitation covenants, and covenants regarding non-disclosure of confidential information. The statute contains detailed requirements about the scope of such agreements, the time period for which they may be effective, and other safe harbour provisions. Georgia employers should discuss the provisions of the statute with legal counsel.
Information that comes within the scope of a "trade secret" is protected from "misappropriation", which is defined as the acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by "improper means" (theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage) or the disclosure or use of a trade secret without authorization by someone who used improper means to obtain the information or who knew, or had reason to know, that the information was protected by law. Assuming the information at issue meets these elements, then the statute provides trade secret holders with a variety of options, including obtaining an injunction to prevent the actual or threatened misappropriation of the trade secret, damages for actual losses suffered, as well as exemplary damages for willful or malicious acts, and attorney’s fees.
Georgia adopted the Trade Secrets Act of 1990. The Georgia version of the law is found at O.C.G.A. § 10-1-761.
The trade secret statute does not protect all information that a company may regard as proprietary or that may be harmful if it were to be disclosed to a competitor. For example, information about operational costs and executive salaries may not – by themselves – provide economic value to the company (and therefore would not qualify as a "trade secret") but this could damage the company if a competitor were to find out about it. The only way to protect information that does not qualify as a trade secret is by contract. Fortunately, confidentiality or non-disclosure agreements between employers and employees generally are enforceable in the USA, and with a few exceptions, they are not subject to the stringent requirements that states impose on non-competes and non-solicitation provisions. While such agreements still are considered restraints on trade, they tend to be treated much more leniently by the courts.
With regard to privacy concerns in the private sector, this issue remains one of the most debated issues, and the laws vary from state to state on this topic. Generally speaking, even though the employee is on the company’s premises, they still enjoy a certain zone of privacy. For example, employers should refrain from searching an employee’s person or the interior of their private vehicle. An unwanted touching could be viewed as a battery that could subject the company and the particular manager to liability. Detaining an employee in a room and refusing to allow him or her to exit could be viewed as false imprisonment, resulting in the potential for liability.
Employers that provide electronic equipment for employees to use in connection with their job duties (ie, laptops and internet access) are generally permitted to adopt policies notifying employees of the right to monitor the use of such equipment and reminding employees of their ownership interest in these devices. Employers can also impose reasonable requirements on how the employees can use the equipment. For the most part, these policies have been upheld on the grounds that employees have no reasonable expectation of privacy while using company equipment. However, this is not without limits. Employers cannot demand that an employee involuntarily turn over their private cell phone for examination, divulge their password to a personal email or social media account, or attempt to hack into the employee’s personal accounts, even if the employee used company equipment to access the private accounts. For example, in Purple Commc’ns, Inc, 361 NLRB 126 (2014), the NLRB held that "employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems." In short, aside from issues relating to the terms and conditions of employment (ie, wage/hours) on nonworking time, employers have had a fairly wide berth in terms of regulating access and content on the electronic devices and networks they make available for employees.
With respect to monitoring employee activities in the workplace, this generally is permitted under federal and state law; however, employers should exercise caution in doing so and should make sure that the employer’s actions are reasonable. Discreet surveillance programs long have found favor with the courts. The key question is whether the surveillance constitutes an invasion of the employee’s right to privacy. For the most part, the tort of invasion of privacy requires a plaintiff-employee to show an intentional invasion that is highly offensive to a reasonable person and that occurs where there is a reasonable expectation of privacy. Employees typically have no reasonable expectation of privacy on a factory floor. However, the same is not true for a bathroom or locker room. Thus, an employer can conduct video surveillance of work areas, lunchrooms, offices, parking lots and any other area of its business, with the exception of those areas where employees have a reasonable expectation of privacy from visual observation (such as restrooms and showers).
There are a number of federal laws that prohibit discrimination, harassment or retaliation based on legally protected characteristics or legally protected activity. Legally protected characteristics include, age, gender (potentially including sexual orientation and/or gender identity), pregnancy, race, color, national origin, disability, military or veteran status, genetic information, religion or citizenship status. In addition to federal laws, many states, as well as local governmental entities such as cities, counties and townships, have enacted laws that expand the coverage of legally protected characteristics. Thus, it is important to understand and abide by all the laws in the jurisdiction in which the employer is located.
Employers are well advised to conduct periodic supervisor training that identifies the types of behaviors that are inappropriate in the workplace, the methods to report concerns, their role as a member of the management team (both in communicating with applicants and employees and in the investigatory process), and how to appropriately document and issue any discipline needed. Employees should also receive training on the applicable policies, the types of behaviors that would violate the policies, the mechanism to report concerns, and the non-retaliation provisions of the policies. Many employers are also including diversity training designed to foster an inclusive and respectful workplace, and to discuss varying perspectives employees may bring to the workplace as a result of their life experiences.
The Occupational Safety and Health Administration (OSHA) is the federal agency charged with enforcing all applicable safety laws and regulations in the OSH Act. Roughly 22 states have applied for and have been granted authorization to establish state plans to administer and enforce the applicable safety and health compliance program for private employers in their states. While state plans must be at least as effective as the federal standards, states can be stricter than their federal counterpart with regard to regulatory compliance. Generally, the employer’s obligation under the OSHA statute and regulatory framework runs to employees, not to third-party non-employees or members of the public.
In Georgia, an employer who establishes a “drug-free workplace program” in compliance with state law is eligible for a discount on its workers’ compensation insurance premiums. The program must include all of the required provisions in Georgia law.
The provision of employee benefits and the documentation of employee benefit plans is largely a matter of federal law under the Employee Retirement Income Security Act of 1974 (ERISA). Generally, state law is pre-empted as it relates to employee benefit plans.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is an element of ERISA that requires that administrators of group health plans provide the option of purchasing continued healthcare coverage to employees and their qualified beneficiaries who would otherwise lose coverage as a result of a "qualifying event", such as the termination from employment. The purpose behind COBRA is to provide employees with continuing healthcare coverage for a limited period as a "stopgap" measure between the time they leave one employer and begin working for another. Under COBRA, after an employee undergoes a qualifying event, the employer is required to notify the plan administrator within 30 days. The administrator then must notify any employee/qualified beneficiary of his or her COBRA rights to elect continued healthcare coverage within 14 days. If the administrator fails to provide the requisite COBRA notice to the employee within 44 days of a qualifying event, the employee may seek a per diem penalty of up to USD110 per day "from the date of such failure or refusal". Whether the imposition of a per diem penalty is appropriate and the amount of such penalty, if any, are matters entrusted to the court’s discretion.
Federal courts have jurisdiction to interpret how ERISA applies to employee benefit plans and these interpretations can vary from geographic region to geographic region. The federal courts that have authority for interpreting ERISA as it applies to employers located in Georgia have generally been more employer-friendly in their interpretations.
The process associated with terminating an employee is not only the most difficult to handle from an HR perspective, it also is the most likely to result in litigation.
If an employee is at-will, this should be disclosed to them up front so there are no surprises if they are terminated at a later point. The employer should – at a minimum – be able to point to evidence documenting that the employees were advised of their at-will status at the commencement of employment. Care must be taken throughout employment to ensure that the at-will status is maintained. Best practice is to ensure that at-will statements are included in the employment application, offer letters, and employee handbooks and acknowledgment forms.
Terminations by Operation of Contract and Severance
If the parties have entered into an employment agreement that addresses how the employment relationship will end, the terms of the agreement will normally govern the situation. Employers are well advised to pay close attention to the language of the employment agreement, especially where there are defined terms addressing termination for "cause", "change of control", and provisions describing the renewal of the contract. Employees in the USA typically are not entitled to severance unless the employer agrees to provide it pursuant to the terms of an agreement or policy. In either case, the employee’s entitlement to receive severance will be construed pursuant to the terms of the agreement or policy. Best practices dictate that when severance is provided, that severance payment should be contingent upon entering into a release and waiver of all claims against the employer (unless a waiver is precluded by explicit operation of law).
Separation Agreements and Releases
In the event employees are offered severance, this customarily will be contingent upon them entering into a release waiving any and all claims they may have against the company. Such release agreements are treated as contracts, and generally will be subject to enforcement in a similar manner. One caveat, however, concerns waivers for employees age 40 or over pursuant to federal law. The federal Age Discrimination in Employment Act (ADEA) prohibits discrimination against individuals age 40 or over and applies to companies with 20 or more employees. In order for a waiver of claims under the ADEA to be valid, it:
In the case of a group termination – which can be as few as two employees – additional requirements apply. In those situations, employees age 40 or over must have at least 45 days (not 21 days) to consider the agreement (with a comparable seven-day revocation period), and the affected employees must be provided with a memorandum identifying:
Beyond federal law, some states require additional provisions to ensure that a release is valid. As such, the current state of the law in the applicable jurisdiction must be reviewed before any release is prepared and presented to an employee.
Terminating multiple employees may trigger requirements under another federal law, the Worker Adjustment Retraining and Notification Act of 1988 (WARN), if a sufficient number of employees are affected. This law applies to any business that employs 100 or more employees (excluding part-time employees). Under the law, if an employment loss results in a "plant closing" or "mass layoff", a qualifying employer must provide affected employees and certain government officials at least 60 days' advance notice of the event. Employers who fail to provide the requisite notice can be required to pay the affected employees’ back pay for each day of the violation, reimburse them for the loss of benefits and any medical expenses they incurred, and may also have to pay civil penalties.
In addition to the federal WARN Act, many states (and some cities) have their own mini-WARN acts. Georgia does not have a mini-WARN statute and follows the federal law.
The law in the USA generally favors the private adjudication of disputes. This was codified in the Federal Arbitration Act (FAA), which demonstrates a liberal federal policy favoring arbitration agreements. In order for an agreement to arbitrate to be enforceable under the FAA:
Arbitration applies to employment disputes and can cover the full range of potential claims that employees can raise against employers, including tort claims and claims based on the violation of federal employment statutes. Indeed, the US Supreme Court held in May 2018 that a valid arbitration agreement can waive an employee’s right to participate in a class or collective action.
Georgia’s arbitration act only applies in limited circumstances where an employer is not involved in interstate commerce or where parties specifically designate its application as part of their agreement. Georgia employers should be mindful of basic contract formation requirements when seeking to enter into a binding arbitration agreement with employees. Under Georgia law, to constitute a valid contract, there must be, among other things, “the assent of the parties to the terms of the contract.” O.C.G.A. § 13-3-1. A party cannot be required to submit to arbitration any dispute that he or she has not agreed so to submit. The party seeking to enforce an arbitration agreement must prove assent to the contractual terms.
Generally, most employers can easily retain workers on an "at-will" basis so that no "breach of contract" claims can be brought against the company upon an employee’s separation. Care must be taken, though, to ensure that a company follows a state’s requirements for keeping employees at-will. In union environments, the labor agreement between the parties controls employees’ terms and conditions of employment, including termination decisions. Violations of labor contracts most often are adjudicated in arbitration, including disputes over employee discharges.
Damages for contractual claims most often are tied to the alleged harm suffered. For instance, if an employee had a five-year employment agreement and argued he or she was terminated improperly three years prematurely, the employee, if successful, would be entitled to three years of pay. It is important to note, however, that some contracts may provide for one or both parties to receive attorney’s fees or other, additional categories of damages in the event they prevail in a dispute under the agreement, which can be significant sums.
In some circumstances, it is held that handbooks may create enforceable rights, many employers include clear disclaimers that the handbook is not a contract, that the employees are employed at-will absent some clear agreement signed by an officer of the company and that the policies may be changed at any time, for any reason, without prior notice.
While handbooks generally are not construed as contracts, employers should consistently follow the terms of the handbook policies (absent exceptional circumstances) to avoid claims of disparate treatment based on a legally protected characteristic.
In a union environment, a labor agreement between the union and employer governs employees’ terms and conditions of employment, including employee terminations. Nearly every such agreement provides (either explicitly or implicitly) that a union employee can only be terminated with "just cause". "Just cause" is a murky standard that is viewed differently by arbitrators, and union employee discharge cases most frequently are pursued in arbitration. Generally, the employer must show that the reason for the termination was justified, that the employee should have known the misconduct at issue could lead to discharge, and that the company consistently has imposed such penalty for similar violations in the past. In terms of potential damages in labor arbitrations related to employee terminations, generally only back pay and reinstatement are available as potential remedies.
When it comes to wage and hour compliance, the FLSA is the law of the land (supplemented by an array of state wage and hour laws). The FLSA requires that all covered non-exempt employees be paid at least minimum wage and overtime pay at no less than time and one half their regular rates of pay for all hours worked in excess of 40 in a single workweek.
The laundry list of potential wage and hour-related legal issues can seem daunting and includes: classification of employees as exempt and non-exempt; classification of independent contractors and consultants; compensable v non-compensable work time; payroll docking policies and practices; "off-the-clock" and regular work time; meal periods, breaks and on-call time; overtime, commissions, bonuses, reimbursements and tip pooling; record-keeping and notice obligations; payments upon termination of employment; compensable time to be included in an employee’s hours; calculation of overtime; and deductions from pay. In addition to the FLSA, states can impose requirements on employers concerning pay.
Claims under the FLSA often are brought in a class action under Federal Rule of Civil Procedure 23, or a collective action under Section 216(b) of the FLSA. Either framework allows a large number of employees citing similar alleged wage or compensation errors to join together against an employer to make claims for monetary and equitable relief. Potential damages include back pay, front pay, punitive or liquidated damages, and attorney fees. Additional wage claims and penalties are available on a state-by-state basis.
One way to try to combat the risks and costs of collective and class actions is to require employees to sign class action waivers, requiring employees with disputes to individually adjudicate the dispute in arbitration. Such waivers must be carefully crafted to help ensure enforceability.
There are a variety of federal and state laws that protect employees who report perceived unlawful acts. Even if it is ultimately determined that the employee’s perception is wrong, the employee generally will still be protected unless the employer can establish that the employee knew he or she was making a false report. The types of conduct that afford this protection include on-the-job safety issues, violation of federal or state anti-discrimination laws, violation of the Affordable Care Act, wage payment violations, environmental violations, fraud against the government, financial misconduct including false reporting of financial information or tax evasion, and misappropriation or misuse of investor funds in a public company. To successfully defend against such a whistle-blower claim, the employer must typically provide substantial evidence of its non-retaliatory reason for the discipline or discharge. Many statutes give the governmental entity authorized with evaluating these claims the power to reinstate a terminated employee before making a final decision on whether the termination was lawful.
The means by which a worker can present a claim against an employer in the USA are very broad. These can range from internal complaints to filing claims with government agencies to participating in arbitration to a full-blown lawsuit filed in court.
During employment, the most common way for an employee to present a claim against the employer is by way of a complaint to his or her supervisor or manager or to the HR department (although it should be noted that nothing expressly prohibits an employee from pursuing a claim with a government agency or even filing a lawsuit while employed). This is why it is essential that supervisors/managers are properly trained on how to recognize and respond to such complaints. This also is why it is imperative that employers educate employees on the policies or procedures that apply to such complaints – so employees know how to make the complaints and employers can deal with them promptly. Employers receiving complaints should have HR procedures in place to address them, including interviewing the people in question and taking steps to correct any problems.
The investigation process and the outcome of the investigation should be well documented. There are no rigid rules on what steps an employer should take to investigate a complaint or who should be involved in the investigation. However, courts have inferred discriminatory motive from the failure to conduct a reasonable investigation. As a result, employers have a vested interest in carefully conducting investigations and dutifully maintaining records of each step in the process. Taking proactive steps to address concerns raised by employees can help fix actual problems in the workplace, can correct perceived bias, and – if nothing else – can be used as evidence that the company took the matter seriously in the event the case does proceed to litigation.
If the parties have entered into a valid arbitration agreement, the agreement will typically be upheld and the parties will proceed in the forum selected. The benefit to arbitration is that the parties have more control over the proceedings and the case usually proceeds faster than it would in court and at less cost. Still, in practice arbitrations tend to take months to resolve (as opposed to years in court). Arbitration proceedings include an abbreviated period of discovery in which the parties can collect documents from each other and obtain testimony from witnesses in advance of a final hearing in which each side will present their case and arguments to the arbitrator. Thereafter, the arbitrator will issue a decision. With few exceptions, arbitration decisions are final and are not appealable.
Another ADR procedure that is popular in the USA is mediation. In contrast to arbitration (where the dispute is submitted to one or more individuals to render a decision), a mediator acts as a go-between for the separate parties and tries to structure a resolution. The mediator does not issue a final, binding decision (although the mediator certainly may provide input on how he or she perceives the relative strengths and weaknesses of the parties’ positions). The benefit of mediation is that it is fast and does not involve protracted litigation or discovery. Additionally, the parties can conduct multiple mediations (with the same or different mediators) if they so choose.
There are both federal and state administrative agencies that present an avenue for employees to pursue claims against an employer. Almost every state has a civil rights agency that can address claims of discrimination, harassment or retaliation. In addition, multiple cities have also enacted non-discrimination ordinances and have a local agency that can investigate complaints. Employees also can submit worker’s compensation claims in the state in which they worked (or where the incident occurred), or file a claim for unemployment in that state if they are terminated. Separate and apart from the state agencies, the federal Equal Employment Opportunity Commission (EEOC) has jurisdiction over federal laws regarding discrimination, harassment and retaliation, and employees in any state can file a charge with that agency. Other federal agencies also have jurisdiction to decide employment disputes involving issues within their regulatory authority.
There are two parallel court systems in the USA: state and federal. Each state operates its own trial courts (circuit or superior courts). Decisions made by the trial courts are subject to appeal to intermediate appellate courts and, ultimately, each state’s Supreme Court. The federal system operates in a similar manner with trial courts (federal district courts), then intermediate appellate courts (circuit courts) and finally the United States Supreme Court. Generally, state courts have jurisdiction over claims involving state laws, state residents and actions that take place in the state, whereas federal courts have jurisdiction over federal statutes (which includes many employment laws), and disputes over a certain threshold dollar amount involving citizens of different states (diversity jurisdiction).
Actions filed in court are subject to liberal discovery, which permits each side to obtain documents and question witnesses well in advance of the filing of a dispositive motion or trial. After the initial discovery period (which typically takes several months), the parties can file motions requesting that the presiding judge dismiss the case. If the case proceeds to trial, most will be tried before a jury, although in some limited circumstances – or by agreement – the parties can have the trial be decided by the judge (a bench trial). Thereafter, the decision of the judge or jury can be submitted to an appellate court for review.
Damages and Remedies
There are a wide variety of remedies that can be recovered by parties in litigation, particularly in employment cases. Most statutes specify the nature of relief that may be recovered for violation of its provisions. Injunctive relief, which involves asking a court to order the other party to do something (or refrain from doing something), is often requested, but less often ordered. Plaintiffs in most employment actions typically seek to recover the actual damages they have suffered as a result of the defendant’s conduct – referred to as back pay. Prospective damages, or front pay, may also be claimed in order to compensate for damages going forward in time that an employee expects to experience. Damages for emotional distress, punitive or exemplary damages to punish the defendant for extreme or outrageous conduct, and attorney’s fees are also typically sought. The available damages vary based on the law under which the claim is brought, and some may not be available in all instances.
In addition to wage and hour claims, certain forms of discrimination claims are often brought in a class action under Federal Rule of Civil Procedure 23. A class action allows a large number of employees citing similar alleged discriminatory practices to join together against an employer to make claims for monetary and equitable relief.
Potential damages vary depending on the statute under which the claim is brought, but may include such items as back pay, front pay, punitive or liquidated damages, and attorney's fees. The court can also order the employer to reinstate/rehire employees found to have been improperly discharged.
Overseas assignments and hiring US citizens abroad may trigger the potential application of US law. US employment statutes do not usually apply beyond its border. In fact, there is a presumption against applying any US law on an extraterritorial basis. For example, the overtime provisions of the FLSA and the provisions of the Family and Medical Leave Act do not apply to employees who are employed outside of the USA or covered US territories.
Other employment statutes, including Title VII of the Civil Rights Act of 1964 (precluding discrimination on the basis of race, gender or certain other protected characteristics), the ADA and the ADEA, explicitly provide for certain extraterritorial applications. These statutes cover employees working outside the USA if the employee is a US citizen working for a US employer, or a foreign employer controlled by a US entity.
The wording of an assignment, employment or other contract may be important in the analysis. Further, employers need to take care not to inadvertently incorporate language of a jurisdiction (eg, the USA), if that is not to their advantage.
Finally, certain state laws may apply if the alleged wrongful activity took place in the state and/or the employee is a resident of that state even if the employee works in another state.