CEO's Notebook

Hands On

The HR minefield

Here's what you should--and probably don't--know about employment law
BY CHRISTOPHER CAGGIANO

What you don't know can hurt you--especially in court. Employment-related lawsuits are on the rise, as are the amounts awarded in compensatory and punitive damages. "It's one of the biggest legal trends of last few decades," says Fred Steingold, a lawyer and the author of The Legal Guide for Starting and Running a Small Business. "Numerous laws and court decisions have been carving out [new] employee rights, and employees have become better informed and more aggressive."

What do you really need to worry about? Here are a few key areas:

The Internet. "The law hasn't been clarified yet," says Steingold. "It's still too new." But some areas are already problematic. Web surfing is one. Employees with Internet access can pull off and disseminate offensive content. Employers can also be liable if a worker takes copyrighted material from the Web and reconfigures it for company use.

Then there's E-mail. In harassment or discrimination cases, E-mail can become an enormous problem during the discovery phase of litigation. "Having E-mail is creating documentary evidence," says Mary Dollarhide of Paul, Hastings, Janofsky & Walker in Stamford, Conn.

Your E-mail policy should outline proper use of company resources and advise your employees that you may be monitoring and archiving their cybermissives.

Wrongful discharge. According to Steingold, the riskiest action you can take is to fire someone without knowing the legal rules. "That's when the really large verdicts are possible," he says. Many postfiring lawsuits charge employers with breach of contract. Not a problem, my employees are at-will, you say? Well, you may be more vulnerable than you think. Employee handbooks and job-offer letters, improperly handled, can undermine the at-will relationship.

A performance-based termination should never be a surprise, so make performance appraisals as candid as possible. "Often a supervisor will shy away from hard criticism," says Miriam McKendall, a partner at Holland & Knight in Boston. "Then if an employee's performance is called into question, it's harder to discipline or terminate them."

Sexual harassment. Recent U.S. Supreme Court decisions have widened legal protection to include both genders. Also, the courts have become more focused on the perception of the person subjected to the behavior. Many states now require companies to have a corporate sexual-harassment policy. But you also need to have a clearly defined reporting procedure and an investigative process that you actually adhere to.

Disabilities. Authorities can't seem to agree on what exactly constitutes a disability. Courts have proved unpredictable. One way to help protect your company is by maintaining up-to-date job descriptions, so there's never any question regarding the essential functions of each job.

HR red herrings
For all the recent shifting of the legal ground, some areas of potential employer liability are actually a lot safer than you might think. Despite the warnings you may have heard over the years, here are two areas in which you probably don't need to worry as much as you do:

Interview questions. This one sure gets a lot of watercooler talk. But even though certain probing interview questions may be technically illegal--examples include "Would your spouse be moving along with you?" or "Are you planning on having any children?"--they are not a major source of lawsuits, according to Fred Steingold. "People ask the wrong questions all the time," he says. "But you don't really see the major cases unless a pattern is involved."

Mary Dollarhide agrees that the questionable interview query is not a litigation hotbed. "You don't see a lot of this, except in connection with cases regarding the Americans with Disabilities Act," she says. When a candidate gets the job, he or she is unlikely to quibble over a dicey question. Still, it's a sound practice to give proper training to anyone in your organization who does hiring interviews.

Employment references. It's also a good practice to answer carefully when someone calls to ask you about a former employee's performance. Many companies now have policies about supplying only titles and dates. But that can be frustrating to other employers; just think how important that information is to you when you're evaluating a candidate for your company. Wouldn't it be great if we could all be just a bit more open?

Well, according to Steingold, you probably can. "You don't want to savage the person or psychoanalyze them," he says. "But as long as you stick to documented facts, you should be fine." A number of states have passed laws that attempt to protect employers who in good faith tell the facts as they see them. Even so, Miriam McKendall suggests you have outgoing employees sign a release stating that you, as their former employer, are permitted to give out performance information.

Being open when asked for references is especially important when a former employee was engaged in criminal activity while on your payroll--bringing an unlicensed gun to work, for example. "That's not only appropriate, it may be your duty," says Steingold. "You could be held liable for failing to disclose that." -- C. C.

Hot Tips
International companies can sometimes offer good prices on services. Case in point: Rider McDowell of Knight-McDowell Labs, in Carmel, Calif., wanted to trademark the name of several products. Friends referred him to a San Francisco law firm, whose eye-popping fee for a U.S. trademark was nearly $15,000, with more charges for registration in other countries. But while visiting Vancouver, McDowell contacted a local company, Dean Palmer Intellectual Property Law, and asked for a price quote on trademarking. Palmer's fee was 75% less than the U.S. firm's. And the Canadian company could handle international trademarks to boot. "It was great," says McDowell. "I spent, total, about $15,000 for registration in 22 countries," including China, Switzerland, and Brazil. -- Mike Hofman