HRMN 408 Assignment 2: Discrimination and Harassment Case Study

CHAPTER 3

• Reasons for Evaluating

• Legal Considerations

• Employee Handbooks

• Dress Codes

• Personnel Files

• Required Posters

• Corporate Ethics and the Sarbanes-Oxley Act

• Disciplinary Actions

Evaluations, Work Rules, and Discipline

C o p y r i g h t 2 0 1 7 . S o c i e t y F o r H u m a n R e s o u r c e M a n a g e m e n t .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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The SHRM Essential Guide to Employment Law42

REASONS FOR EVALUATING Employers have good reasons to perform evaluations if they are done properly. They provide a rational basis on which to promote, discipline, and terminate. And they provide powerful evidence to meet a claim that adverse action was taken for discriminatory or other improper reasons. Employees, particularly newer employ- ees who may be uncertain of their performance, like them. If not done properly, however, they do more harm than good.

Evaluating an employee is a whole lot easier if a history of open communication and regular feedback exists. In short, the process should not be full of surprises.

Some employers have their employees fill out a self-evaluation form that the evaluator then reviews and comments on. While that approach may ease the evaluator’s burden, it seems less direct. The employee may end up feeling not only that his or her work habits need improvement, but also that his or her character, honesty, and self-insight are under attack as well.

Some organizations use what are known as 360-degree evalu- ations (also called 360-degree assessments or multirater feedback systems). These involve evaluations not only by an employee’s supervisor, but also by peers, direct reports, and in some cases, internal or outside customers and clients. Employers need to plan 360-degree evaluation programs with particular care and under- stand and clearly communicate to employees the procedures and objectives. Follow-up is also critical; otherwise, substantial time will have been wasted collecting useless or unused data.

QUICK TIP Since evaluations themselves are not usually considered adverse actions, a bad evalua-

tion will normally not justify a claim of discrimination or retaliation. However, imposing

discipline or terminating an employee based on a discriminatory evaluation can give rise

to a claim.

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Evaluations, Work Rules, and Discipline 43

LEGAL CONSIDERATIONS Below are a few suggestions for evaluating employees. Figure 3.1 is an evaluation disclaimer that should also be considered.

• If you have an evaluation policy, follow it. Nothing looks more suspicious than a negative evaluation done just before taking adverse action, especially when the employer’s past evaluation procedures have been haphazard and intermittent.

• Use a written form containing a standard set of objective criteria.

• Be truthful and candid. An effort to spare an employee’s feel- ings is bound to backfire should the employee eventually be let go.

• Avoid vague, subjective comments, like “unprofessional,” “bad attitude,” or “poor work habits.” Such comments offer little guidance.

• Avoid comments that could be construed as discriminatory, such as “Your approach to the job is stale” (age discrimina- tion), “You need a softer, less aggressive demeanor with cli- ents” (sex discrimination when directed to a female employee), or “I know your husband’s health has been a distraction for you” (disability discrimination).

• Keep job descriptions up-to-date. Employees will feel unfairly treated if they are criticized on aspects of their jobs for which they did not know they were responsible.

• Tie comments on job performance—whether positive or nega- tive—to the job description.

• Tie comments on behavioral problems to the employee hand- book or other written policy statements.

• Give specific examples to support comments: “Jane’s report last May on production problems in the York, Pa., plant was prompt and thorough and contained many good suggestions. This is typical of her high-quality work.”

• If you evaluate annually, be sure the evaluation considers the entire past year and not just the last few months.

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The SHRM Essential Guide to Employment Law44

• Discuss your evaluation with the employee and offer him or her an opportunity to comment in a private, confidential set- ting. Transcribe the employee’s comments to writing and include them in the employee’s personnel file.

• Follow up on any specific deficiencies noted in the evaluation and make a record of your follow-up in the employee’s personnel file.

• Provide regular feedback—particularly, positive feedback— between evaluations.

FIGURE 3.1: EVALUATION DISCLAIMER

An evaluation that is misleadingly favorable might convince an employee that he or she has long-term prospects with the company, when in fact that is not true. Therefore, an evaluation that is shared with the affected employee might contain the following disclaimer:

This evaluation is solely for the company’s benefit. Nothing in this evaluation is intended to change or affect in any way the at-will employment relationship between the company and the employee or to limit or affect the company’s or the employee’s right to terminate the employment relationship at any time for any reason.

EMPLOYEE HANDBOOKS While there is no obligation for an employer to have a written employee handbook, many employers find them to be a valuable management tool.

Advantages Handbooks promote uniformity in treatment of employees, par- ticularly for larger employers with several layers of management. That in turn improves morale and frees the employer from a stream of requests for special treatment.

Handbooks are also a convenient source of information for job applicants and new hires, as well as existing employees. They pro- mote efficiency and help establish an institutional culture. They set out guides for workplace behavior that, if willfully violated and result in termination, provide the employer with a defense to an unemployment insurance claim or an abusive discharge suit.

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Evaluations, Work Rules, and Discipline 45

Finally, they provide evidence of employer compliance with law in areas such as workers’ compensation, equal employment, and sexual harassment.

Employers that choose to have an employee handbook should not overlook the requirement that if the handbook describes leave policies and the employer is covered by the Family and Medi- cal Leave Act (FMLA), the handbook must include a descrip- tion of extended leave benefits under the FMLA. (See Chapter 8 for details.) And since an employer must have a written sexual harassment policy to be able to defend against sexual harassment charges (discussed in Chapter 15), the handbook is the obvious place to set out that policy.

When distributing employee handbooks or updates to employ- ees, have each employee sign an acknowledgment that he or she has received the handbook and will read it. Such acknowledg- ments are helpful in meeting an employee’s claim that he or she was unaware of a particular policy or procedure contained in the handbook.

QUICK TIP Handbooks can be distributed online via a company intranet, and employees can be

alerted to updates via email. When an employee accesses the handbook or an update,

he or she should be required to check an electronic acknowledgment in lieu of a paper

acknowledgment.

Disadvantages The down side to having an employee handbook or similar state- ment of policy is that it might be considered a unilateral contract— that is, a one-sided offer by the employer to abide by the provisions of the handbook that the employee accepts simply by working for the employer. In other words, courts may treat a poorly worded handbook as converting an at-will employment relationship to a contractual relationship that limits an employer’s right to fire or discipline.

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The SHRM Essential Guide to Employment Law46

When adopting an employee handbook, consider the following steps to reduce, if not eliminate, the risk of contractual liability:

• Include prominent disclaimers that the handbook is not a con- tract of employment and is not intended to change the at-will status of any employee.

• State that the handbook is intended only as a convenient source of information about the company and its current practices and procedures, which are subject to change at any time with- out prior notice.

• State that employees are free to resign at any time and that the company is free to discharge an employee at any time, with or without cause.

• State that the company is not bound to follow any particular disciplinary procedures and that the company need not be con- sistent in imposing discipline.

• Avoid statements such as the company promises or guarantees or will take specified action in certain circumstances.

• Avoid any requirement that employees sign an agreement to comply with or be bound by the handbook.

• Follow the policies specified in the handbook.

In addition to an employee handbook, some companies have a managers-only manual, distributed only to managers, setting out required procedures for them to follow for discrimination complaints, discipline, termination, and so on, involving their subordinates. Placing procedural requirements in a managers-on- ly manual, rather than the employee handbook, makes it more difficult for rank-and-file employees to claim that the company is contractually obligated to follow the procedures. Even these manuals, however, must be drafted with care and include dis- claimers that nothing in the manual is intended to change any employee’s at-will status.

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Evaluations, Work Rules, and Discipline 47

ALERT! The National Labor Relations Board has attacked numerous handbook provisions, claim-

ing they tend to chill employees’ rights to engage in concerted activities protected by the

National Labor Relations Act (see Chapter 24).

DRESS CODES An employer may generally impose a dress code or grooming code on employees, so long as doing so has a legitimate business reason and so long as the code is not discriminatory on the basis or gender, race, religion, or other protected criteria. (Dress codes as a form of sex discrimination are discussed in Chapter 15. Also see Chapter 14 regarding dress codes and religious discrimination.)

ALERT! Relaxing dress code standards may be a required reasonable accommodation for an

employee suffering from a medical condition covered by the Americans with Disabilities

Act (ADA).

Dress codes are nothing new. For example, safety considerations may warrant banning long sleeves or flowing skirts. Companies often require their delivery personnel to wear identifying uniforms sporting the corporate colors. Physicians wear white lab coats. Lawyers wear conservative suits and carry briefcases. In office settings, suit jackets, ties, and appropriate slacks for men and suits, dresses, and skirts and blouses for women have long been the unofficial uniforms. The only exceptions might be casual, summertime Fridays, or special allowanc- es for persons with medical conditions or temporary injuries.

Casual, summertime Fridays are giving way to casual everyday all year. Casual can mean anything from a comfortable old sports jacket with leather elbow patches to a beer-stained T-shirt and torn jeans, from a blouse and slacks to a bare midriff.

If you decide to go casual, keep the following points in mind: • Your dress policy should be in writing (such as in the employee handbook) and well publicized.

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The SHRM Essential Guide to Employment Law48

• The policy should contain a clear definition of business casual. For example: “Dress and grooming should be neat and consis- tent with a professional office atmosphere. Clothing should be clean and without rips or excessive wear. Women may wear dress- es, blouses, sweaters, slacks, skirts, blazers, and dress sandals; men may wear shirts with collars, polo shirts, sweaters, chino slacks, jackets, and dress sandals.”

• The policy should also contain a clear statement of what is not per- mitted. For example: “The following are examples of items that do not qualify as ‘business casual’ and are not permitted at any time: T-shirts; tank tops; halters; jeans; shorts; sweats or similar athletic clothing; “athleisure” ware, yoga pants, or see-through clothing; clothing that exposes areas normally covered by busi- ness attire; clothing that exposes underwear; work boots; and flip- flops and sneakers.”

• Managers should have the authority to determine that casual dress for their immediate staff is inappropriate on particular days, such as when customers or visitors are expected.

• Since not everyone is comfortable wearing casual clothes to work, those who would prefer to dress more formally should feel free to do so.

• The consequences of inappropriate dress should be spelled out. For example: “Employees who report to work unacceptably dressed may be required to return home to change and will be charged with leave during their absence.”

• The policy should be consistently and evenhandedly enforced.

PERSONNEL FILES The employment relationship generates a vast array of documents. Some of them are required by law and must be retained for specified time periods. Good examples are Forms I-9 forms and wage and hour records. Other documents, though perhaps not legally required to be retained, provide evidence of legal compliance. A copy of the new-hire report form submitted to the State Directory of New Hires

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Evaluations, Work Rules, and Discipline 49

falls in this category. Finally, there are documents that management needs, like job descriptions, evaluations, and disciplinary actions to make sound employment decisions.

Employers should maintain a separate personnel file for each employee. The file should not be a waste basket containing everything related to the employee. Instead, management should determine in advance which documents are, and are not, to be kept in the file. In addition, the file should be organized into sections so that particular items can be located easily. A checklist placed on top of each section avoids misfiling and enables management to see, at a glance, whether it is complete and current. Files should be reviewed periodically to ensure compliance with established requirements and procedures.

A typical personnel file might include the following: • employment application, along with supporting materials such as resume, transcripts, and interview notes

• recommendation letters and reference checks • copies of restrictive covenants with the employee’s previous employers

• offer letter and any contractual documents, such as restrictive cov- enants and arbitration agreements

• Form I-9 (note that some employers prefer to keep all Forms I-9 together in a separate file for ease of updating and reverifying)

• copy of new-hire report form • tax withholding forms (W-4, W-5, and state equivalents) • job description • copies of any required licenses or certificates required for the position

• signed receipt for employee handbook • testing materials, if the employee was required to take any tests as part of the application process

• training records relating to job competency, safety, sexual harass- ment policies, etc.

• evaluations • commendations and disciplinary actions

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The SHRM Essential Guide to Employment Law50

• personal information—such as home address, home telephone, and name of spouse—and emergency contact (but see Chapter 18 about employee privacy)

• benefit plan participation records (for example, application, ben- eficiary designation)

• exit interview notes • recommendation letters and notes of references given to prospec- tive employers

Personnel files should not contain medical information that the employer may have received in connection with an ADA accom- modation request or an FMLA leave request, and they should not contain data collected to complete the EEO-1 report to submit to the Equal Employment Opportunity Commission (EEOC).

Employers should also establish a records retention policy. When particular documents are required by law, the law usually speci- fies how long they need to be retained. In the absence of a specif- ic requirement, the applicable statute of limitations should be the guide. (A statute of limitations says that a claim may be barred unless suit on the claim is filed within a specified time period, such as three years.) Convenience also plays a role. For example, if the employ- er commonly receives reference inquiries up to two years after an employee leaves, then the employer may want to retain relevant records at least that long to respond.

Employers also need to establish rules for who has access to per- sonnel files and who may add, remove, or change file contents. Access restrictions also need to be in place for files that are main- tained electronically. Backup information should be kept offsite to protect against disasters and sabotage.

Litigation Hold With the explosion of employment-related lawsuits, just about every organization can expect to get sued sooner or later by a disgrun- tled employee. Once a suit is pending, a process known as discov-

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Evaluations, Work Rules, and Discipline 51

ery begins, during which the employee’s attorney can require the employer to answer written questions under oath, furnish personnel files and a variety of other documents, and attend depositions at which the attorney takes testimony with a court reporter present.

When an employer receives a subpoena or a formal request for documents from opposing counsel, the employer cannot simply destroy the documents and then claim they do not exist. (Whether or not the employer actually has to produce all the requested docu- ments is another issue, but destruction is not an option.)

However, the duty to preserve evidence, known as a litigation hold, begins long before receipt of a formal request. The courts generally take the view that a party has a duty to preserve evidence when the party is on notice that the evidence is relevant to pending litigation or an administrative charge, or when the party should have known that the evidence may become relevant to future pro- ceedings. Destruction of evidence in these circumstances, known as spoliation, can expose the party to significant court-ordered sanctions.

The litigation hold applies not only to paper documents but to email and other electronic data as well. Therefore, when litigation has begun or appears likely, the employer should suspend existing policies for automatic deletion of electronic data and preserve elec- tronic media such as backup tapes.

Employee Access A number of states have statutes affording an employee the right to see his or her personnel file, copy it, and rebut any negative evalua- tions or comments contained in the file. However, absent a statute affording such rights or a contract or collective bargaining agree- ment in which the employer has agreed to grant access, the employ- er does not have to allow an employee access to his or her file.

Even in the absence of a statute or agreement, it is probably a good idea to allow employees access to their personnel files. One approach is to allow an employee to inspect the file generally, but

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The SHRM Essential Guide to Employment Law52

only receive copies of documents he or she has signed. So if an employee wants a copy of a disciplinary notice, for example, he or she first has to sign it, which places the employer in the desirable position of having a receipted copy of the notice.

Another advantage of a policy allowing an employee access to his or her personnel files is that it promotes open communica- tion and a healthier, less secretive work environment. Yet another advantage is that if an employee has access but fails to dispute unfavorable information, he or she is in a poor position to com- plain about subsequent personnel actions or references that are based on the information. Perhaps most important, under an open access policy managers and supervisors are likely to be more disciplined in how they keep personnel files and what they put in them.

REQUIRED POSTERS The various federal agencies charged with implementing feder- al employment statutes require employers to post notices in the workplace summarizing the provisions of the statutes the agen- cies enforce. These include the following:

• the EEOC’s “Equal Employment Opportunity Is the Law” poster, covering discrimination under Title VII, the ADA, the Age Discrimination in Employment Act (ADEA), genetics, the Equal Pay Act, and retaliation

• the U.S. Department of Labor’s (DOL’s) “Employee Rights under the Fair Labor Standards Act” poster, covering mini- mum wage and overtime requirements, child labor, tip credit, and break time for nursing mothers

• the DOL’s “Employee Rights under the Family and Medical Leave Act” poster

• the DOL’s “Employee Rights on Government Contracts” poster, applicable to U.S. government contractors

• the DOL’s “EEO is the Law” poster supplement, covering equal employment opportunity for U.S. government contractors

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Evaluations, Work Rules, and Discipline 53

• the DOL’s “Migrant and Seasonal Agricultural Worker Protec- tion Act” poster

• the DOL’s “Employee Polygraph Protection Act” poster • the DOL’s “Your Rights Under USERRA” poster • the Occupational Safety and Health Administration’s (OSHA’s) “Job Safety and Health” poster

These posters are available on each agency’s website in English, Spanish, and in some instances other languages. States and some local jurisdictions have their own poster requirements typically covering nondiscrimination, wage and hour rules, workers’ com- pensation, unemployment insurance, and smoking. Private pub- lishers have put together for sale comprehensive posters covering federal, state, and local requirements for most jurisdictions.

CORPORATE ETHICS AND THE SARBANES-OXLEY ACT The rash of corporate scandals by publicly traded companies prompt- ed Congress to pass the Sarbanes-Oxley Act of 2002. Although the act focuses primarily on accounting oversight and corporate governance, it also contains a number of provisions that directly affect high-level, and in some cases, lower-echelon, employees of publicly traded com- panies. Highlights of the act include the following:

• Certification of financial statements. The act requires the Secu- rities and Exchange Commission (SEC) to issue rules requiring a company’s principal executive and financial officers to certify the company’s financial statements as true and complete. In the event of any failure to comply with reporting requirements such that financial statements have to be restated, those same officers must forfeit their bonuses and incentive compensation for a 12-month period.

• Blackouts. Whenever a company imposes a blackout by prohib- iting pension plan participants from trading in company stock, company directors and executive officers are also prohibited from selling any stock they may have acquired through their

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The SHRM Essential Guide to Employment Law54

employment with the company. Plan administrators must give advance notice of the blackout to plan participants and bene- ficiaries, including a statement of the reason for the blackout.

• Loans. Subject to certain narrow exceptions, companies are prohibited from making personal loans or extending credit to their directors and executive officers.

• Code of ethics. Companies must report to the SEC whether they have adopted a code of ethics for their senior financial officers and, if they have not, why they have not.

• Document retention. The act requires the SEC to adopt rules governing companies’ retention of documents relating to financial audits and reviews. Knowing and willful violation of the rules is a criminal offense.

• Fitness to serve. The SEC is authorized by the act to prohibit persons who are deemed unfit from serving as officers or direc- tors if they have violated rules governing deception or fraud.

• Whistle-blowing. It is also criminal for a company to retaliate against an employee who assists in any investigation by federal regulators, Congress, or company supervisors, or who provides information to federal law enforcement officers. Any person who suffers unlawful retaliation may also initiate a civil pro- ceeding for reinstatement, back pay, and other damages.

Even if your company is not publicly traded and subject to the Sarbanes-Oxley Act, it is a good idea to have a corporate code of ethics for employees covering the president on down. Prohibit- ed activities, many of which are illegal as well as unethical, might include the following:

• hiring relatives • carrying phantom employees • borrowing money from subordinate employees, vendors, or customers

• accepting bribes, kickbacks, expensive gifts, or lavish entertain- ment from vendors or customers

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Evaluations, Work Rules, and Discipline 55

• accepting discounts on purchases from vendors or customers that are not offered to the general public

• falsifying business records, tax returns, or reports to government agencies

• carrying off-the-books employees, accounts, or funds • performing paid services for customers on a personal basis out- side normal company channels

• blacklisting employees, customers, or vendors • fixing bids or sharing pricing or cost information with competitors • requiring customers to buy unwanted products to get products they do want

DISCIPLINARY ACTIONS Assuming you have made the decision to issue an employee hand- book, to what extent should you spell out in the handbook how and when you will take disciplinary action? Probably the less spe- cific the handbook is in this regard, the better, so that management retains discretion to impose discipline as the circumstances warrant. Figure 3.2 contains a suggested handbook provision on discipline.

FIGURE 3.2: DISCIPLINARY ACTION

Failure to observe established rules and practices can, in the company’s sole discretion, lead to disciplinary action, including an oral reprimand, a written reprimand, probation, suspension without pay, demotion, reassignment, and discharge.

For minor infractions, the company generally follows a progressive discipline approach, beginning with an oral reprimand and proceeding with more severe discipline if the matter is not corrected. However, the company is not obligated to follow a progressive discipline approach and may take more severe action, including dismissal, in its discretion. Disciplinary action may be taken whether or not it is set out in this handbook, with or without prior warning, and whether or not such disciplinary action is consistent with other actions directed to the employee involved or to other employees.

Every disciplinary action should be accompanied by a concur- rent, written, dated, and signed entry in the employee’s personnel file describing the offense and the action taken.

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The SHRM Essential Guide to Employment Law56

ALERT! In suspending without pay, the employee must be paid for all past work. Loss of pay

can occur only for the period the employee is suspended. For exempt employees,

suspension without pay must be consistent with the salary basis regulations of the

DOL. (See Chapter 5.)

Offenses meriting a multistep approach might include tardiness, excessive absenteeism, minor neglect of work, violation of company parking regulations, violation of smoking regulations, or frequent personal phone calls. More serious offenses justifying immediate suspension, demotion, or termination might include insubordina- tion, theft or unauthorized use of company property or property of fellow employees, use or possession of illegal substances, posses- sion of a firearm (unless permitted under state law), gambling on company premises, use of company facilities to transmit obscene material, violence or threats of violence against supervisors, racial or sexual harassment, other forms of intentional discrimination, falsify- ing records or reports, and willful disregard of important company policies such as workplace safety procedures.

ALERT! Currently, illegal drug use is not protected by the ADA. However, drug addiction and

alcoholism are disabilities that can trigger company obligations under the ADA.

This list of offenses is not, of course, complete. Discipline needs to be tailored to each employer’s circumstances. A restaurant, for example, will be far more concerned about the failure of its kitchen staff to report communicable diseases than will a computer software company whose programmers work at home.

Even when conduct would otherwise justify immediate termina- tion, it is often better to suspend the employee first. This approach allows tempers to cool and provides an opportunity for a more objective assessment of the situation.

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Evaluations, Work Rules, and Discipline 57

Performance Improvement Plans A performance improvement plan (PIP) may be a better way to accomplish management’s objectives than simply imposing disci- pline. A PIP should be in writing and should contain at least these features:

• identification of the employee’s specific performance or behavior- al issues that need improvement

• a plan of action, developed collaboratively between management and the employee, to address the issues, such as providing addi- tional training in deficient areas

• specific goals and deadlines by which to achieve them

Once the deadlines have been reached, a follow-up assessment is needed to determine whether the goals have been achieved. If they have been achieved, the employee should be released from the PIP. If they have not been achieved, management needs to decide wheth- er to extend the PIP or take other action, such as termination.

Last Chance Contracts Depending on the seriousness of the offense, some employers use a last chance contract in which the employee agrees, in writing, that he or she is being given one final opportunity to correct the problem and will be terminated if it is not corrected. Then, if the problem later recurs, the employer is on solid ground in following through with termination.

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