As more companies grow and expand beyond their startup location, the potential for employment law landmines increases exponentially. Many companies desire the ease and uniformity of one-size-fits-all policies and procedures, especially as the company grows. But companies operating in multiple states must take care that their policies and procedures comport with not just federal employment laws, but also state and even local employment laws for all of the jurisdictions in which they operate. Even documents as standard as an employment application may need to be modified based upon state or local law. Thus, companies need to constantly reassess their policies and procedures for compliance with a myriad of applicable laws.
Here are just some of the complex employment law landmines faced by unwary companies:
Gone are the days when companies could use just one standard employment application for all locations. More and more states, and even some municipalities, are beginning to legislate what information an employer may lawfully seek or require from an applicant on an employment application. For example, Massachusetts passed a law in 2010 prohibiting employers from inquiring about an applicant’s criminal history on a written employment application or seeking disclosure of such information prior to the first interview, with limited exceptions. This means that employers that use a standard check-box-type question regarding prior criminal convictions cannot use that question on an application given to a Massachusetts applicant, absent a disclaimer. The states of Hawaii, Rhode Island and Minnesota and the cities of Philadelphia, Newark, N.J., Buffalo, N.Y., and Seattle have passed similar “Ban the Box” laws. Several other states and cities have pending Ban the Box legislation.
Other states prohibit employers from seeking information about an applicant’s prior arrests, expunged records or credit history but do not specifically ban questions related to prior criminal convictions.
At least two states—Maryland and Massachusetts—require polygraph-related disclosures on employment applications. Applicants must be informed that they may not be required to submit to a polygraph test as a condition to employment.
A handful of states require employers to notify new employees of their nonexempt status, rate of pay, basis of wage payment and payday time/location in writing at the time of hire. California and New York go a step further and require employers also to provide new hires with detailed company information, including the employer’s corporate name; physical address of main office or principal place of business and mailing address, if different; telephone number; and doing-business-as name. Multistate employers that do not send out written offer letters should take note of these requirements and prepare the appropriate letters for employees.
Personnel File Review
Most employers are aware that current employees have a right to review their personnel files. Savvy multistate employers know that the specifics of this right vary from state to state, and that some states broaden the right to encompass former employees or allow the employees to receive a copy of their personnel files.
In fact, at least 10 states specifically allow a former employee to request access to a personnel file, although several of those states limit the right to those employees terminated within one year of the request. A handful of states require employers to provide a copy of the file to the employee/former employee, while other states merely require that the employer make the file available for review. Maine law goes so far as to allow employees to request a free copy of their personnel file once per year. Other states allow employers to charge reasonable copying fees. Accordingly, one-size-fits-all policies regarding personnel file reviews are a thing of the past for multistate companies.
Employers attempting to create uniform payroll practices need to ensure that their payroll policies and procedures comply with all of the state wage-and-hour laws in the states in which they operate. Common pitfalls include the frequency of paychecks, timing of payment upon termination and direct deposit requirements.
• Frequency of wage payment: Employers that pay all employees on a biweekly or semimonthly basis may be surprised to learn that such a practice is not the law in all 50 states. Certain states require nonexempt employees to be paid on a weekly basis, whereas other states require either a biweekly or semimonthly practice. For example, Rhode Island currently requires weekly pay for nonexempt employees, with very limited exceptions. (Beginning on Jan. 1, Rhode Island will allow certain employers to pay its employees biweekly.) Connecticut and New Hampshire also require weekly pay (and do not distinguish between exempt and nonexempt employees), but both states do allow for waivers upon written request. Employers that insist on adopting a uniform but noncompliant practice open themselves up to potential fines and criminal penalties.
• Payment upon termination of employment: When an employer must pay an employee his or her final wages depends upon state law where the employee works. While more than half of the states allow for payment of final wages at the next regularly scheduled payday, at least five states require an employer to pay a terminating employee immediately upon termination (California, Colorado, Hawaii, Missouri and Nevada). At least three require an employer to pay a terminating employee within 24 hours (Connecticut, District of Columbia and Utah) and four states require payment within 72 hours of termination (Alaska, Montana, New Hampshire and West Virginia). Thus, employers would be wise to consult state law (or legal counsel) prior to terminating an employee to ensure compliance with state wage payment laws.
• Direct deposit: Similarly, whether an employer may mandate direct deposit of paychecks depends on the state in which the employee works. While the majority of states do not permit employers to mandate direct deposit of paychecks, at least 10 states allow employers to impose such a requirement within certain guidelines (typically, the employee must not be subject to bank fees for direct deposit and the employee must be allowed to choose the financial institution).
Employers that desire to enact uniform leave laws may also get tripped up by the various state leave requirements (i.e., jury duty, voting leave, school activity leave, witness/court attendance leave, domestic violence leave and family/pregnancy/disability leave). Family leave requirements, in particular, may vary wildly from state to state, with some states providing for more generous leave than the federal Family and Medical Leave Act. California and New Jersey, in particular, have their own state statutes that may allow eligible employees to take more than 12 weeks of job-protected leave. Other state laws have a broader definition of “family” to include a broader range of family members (i.e., in-laws and grandparents) or allow such leave for broader purposes (i.e., routine medical visits and nonserious illness/injury that require home care).
Employers that wish to implement uniform drug-testing policies would be wise to research state law requirements before adopting such a policy. More than one-quarter of the states require employers to implement a comprehensive written drug-testing policy prior to rolling out a drug-testing program. And those states typically mandate the policy requirements and the advance notice that must be afforded to the affected employees.
What is a savvy multistate employer to do in today’s world? For starters, companies should place a disclaimer in their employee handbook stating that the company will adhere to all applicable state and local laws, to the extent that applicable laws differ from those set forth in the handbook. Companies that use a single employment application for all office locations should either place a disclaimer above any problematic questions, directing employees in particular states not to respond to the question, or remove the question altogether. Employers will need to weigh the importance of obtaining the information at the employment application stage against the risk of running afoul of state and local law. With respect to payroll issues, companies can consider contacting state agencies to seek a waiver to payroll laws. When all else fails, remember to contact your labor and employment attorney for guidance.
This article first appeared in Corporate Counsel, a Legal affiliate based in New York.
Carrie B. Rosen is a member of the labor and employment practice group at Cozen O’Connor.