Some very basic basics: HR issues for first time employers

Lately, I’ve encountered several entrepreneurs who have recently started companies and are successful enough to need to hire employees.  I am definitely seeing trends in terms of the questions, concerns and trials that these entrepreneurs are facing so will devote the next few posts to the top issues and vulnerabilities I’m seeing and some basics to cover when you bring aboard your first employees.  For seasoned managers, HR professionals and employment attorneys, this is not going to be new information, but that doesn’t mean everyone is familiar with the ins and outs of our professions.   As with many areas of HR, there is a great deal of crossover between issues appropriate for a human resources professional and an labor attorney.  I have always considered a good labor attorney to be the most powerful and necessary resources at my disposal as an HR service provider and put great stock in verifying policies and contracts with a reputable labor law attorney if I am unsure about anything.  

1)    If you are telling them what to do, they’re probably not independent contractors
Almost every business owner I’ve met wants at some point to categorize his/her labor force as independent contractors.  The reasons for doing this tend to be so that the employer can ‘try out’ the employee before committing to full time employment, because they cannot be sure there is a long term need, or because they can’t afford employee benefits.  These are all valid concerns but are not legitimate qualifications to classify someone as a contractor.  A legitimate independent contractor should have their own business, other customers, a business license and insurance.  You should not direct their day to day activities.  The IRS’ determining factors are here, but your state may have additional requirements. 

2)    Probationary Period
Actually, this isn’t just restricted to small businesses but there still is a tendency to want to have a probationary period.  The intent is to indicate that the employer and employee are in a ‘try out’ phase and to indicate a lack of commitment.  There is really no value to a probationary period and in fact, it usually negates any kind of at-will agreement the employer may wish to have.  In an at-will employment agreement, either the employer or employee can terminate employment at any time for any reason.  If you have a probation period you are implicitly stating that employment is secure after a designated window has passed.  This is not a good idea.

3)    Progressive Discipline
This is another policy that seems like a good idea but will could potentially give you headaches down the road if you’re not careful.  Progressive discipline policies state the progression of consequences for performance infractions.  For example, the first time an employee is late they may get a verbal warning, then a written warning, then a suspension and then terminated.  The intent behind them is to ensure management deals with issues in a consistent manner and this is not only a very good idea, it’s crucial. The problem with progressive discipline plans is that you really don’t want to tie your hands as far as consequences go.  If you are set on having a written progressive discipline policy, make sure you include wording to the effect that the employer reserves the right to impose discipline up to and including termination.

4)    Non-Competes
Many employers work with proprietary information, trade secrets and client lists that they want to protect.  In an effort to do so, there are often non-compete agreements drafted and provided to employees.  The reality is that these are unenforceable in almost every state.  California, for example, is a right to work states, and it is illegal to try to prevent someone from working in an industry of their choice for any amount of time.  You are much better off putting in place a non-solicitation/non-disclosure agreement.  These agreement prevent employees from soliciting employees or customers away if they leave your employ and/or from disclosing anything they have learned during their tenure with you.  The best part is, these are enforceable.  

5)    Applications
It’s a good idea to have an employment application.  These are legal documents that candidates fill out and they usually have wording indicating that falsifying information is grounds for termination.  You can download these almost anywhere.  You should be aware that if you solicit applications (such as from a job ad) you are obligated to keep applications for two years.  As well, in many states and jurisdictions (such as the state of California, or the city of Seattle) it is illegal to ask if someone has been convicted of a crime at the initial stages of the selection process, unless you have a valid, job related, reason for doing so.

At the end of the day, if you have started your own business, and have employees, it’s a good idea to start with an employee handbook and make sure your policies are in accordance with your handbook.  Labor law attorneys will review your documents to make sure they are legal and enforceable and a good HR person (or consultant) can give you some best practices tips to make sure you are on the right track. 


I couldn’t make this stuff up….my 5 favorite HR stories

I have found that any time 2 or more HR people are gathered, sharing war stories, someone is always bound to mention that based on things they’ve seen or done they’d like to write a book.  I am also guilty as charged and probably would write one but can’t decide the genre.  Here are some of my favorite stories.  Some are hilarious (although they didn’t seem like it at the time) some are horrifying and some just make you roll your eyes.  They all definitely have a lesson embedded somewhere.   Names and identifying information have been changed to protect the innocent and not-so-innocent and although I’m writing them all first person, some of them maybe happened to a friend, or a friend of a friend.

1)    “I Spy”
I will never forget the time a local manager called me to ask for advice on a situation.  In this facility the male and female restrooms were separated by a wall.  Apparently, the men had drilled a hole in the bathroom wall and were attempting to spy on the women.  They were unsuccessful in the attempt, as the women a) noticed the 2 inch hole in the bathroom wall and b) heard the giggling.  These were grown adults, mind you!  The manager called me about a week or so after he had discovered the incident with a question.  His solution had been to rent a porta-potty and forbid any males to use the indoor facilities going forward.  He might never have told me about the incident but one of the men was confined to a wheelchair and the manager wasn’t sure whether to make an exception for this employee, or have him use the female’s restroom.
Lesson:  Be very explicit about expectations and when overt harassment occurs, investigate thoroughly and deliver consequences to (only) the offending parties.

2)    “Fight it Out”
We had a production manager whose crews were having personality conflicts.  The manager told me his solution when people couldn’t get along was to make them partners, riding and working together, until they could resolve it.  It wasn’t until months later that he also confided the second part of his magic formula.  If they still couldn’t get along, have them fight it out behind the equipment shed after hours.
Lesson: Ensure management understands and is compliant with your workplace violence policy.

3)    “But my girlfriend is my best assistant.”
I found out that one of our Directors was having an affair with his direct report after his wife phoned to complain about it.  I confronted the Director with the information and he admitted that the information was accurate and acknowledged that he had not shown the best judgment.  He was quite contrite until I informed him that the ‘love interest’ would no longer be able to report to him, at which point he became belligerent, insisting that she was necessary to his success and it would be a hardship to have her off the team.  I stated the obvious and moved the assistant (who then proceeded to have an affair with our client). At this particular company, I eventually learned that nearly half the senior leadership team was engaged in similar behavior.  
Lesson: Ensure management understands and is held accountable to your sexual harassment policy.

4)    “The broad got knocked up”
In a management meeting one time, a senior manager asked me for permission to fire one of his account managers, because she had just disclosed she was pregnant.  I informed him about her legal rights and why he couldn’t do that.  His response was “I get all that but I asked her point blank in her interview if she was going to have kids and she said no and now the broad got knocked up so I want her gone.”  This, by the way, was a highly educated business owner.
Lesson: Train all levels of management on legal interviewing as well as discrimination laws.

5)    Best Leader Ever
We’ve all seen examples of true leadership potential and we’ve all seen the powerful effects a leader can have in an organization, regardless of his level of authority.  The best example I ever saw of a natural leader was a field installer.  We had been grooming him to be a trainer, but he had no management or supervisory authority, although we had high hopes.  Our hopes, sadly were dashed one day when we received a call from the police.  Apparently, while working overtime on a construction site one day a group of framers from another company had cast aspersions of one type or another on one of our employees.  Our leader in the rough jumped to this person’s defense and organized THE ENTIRE CREW to come back to the jobsite to challenge the framers.  A full on ‘rumble’ ensured, the police were called, a gun was found and we had to fire the best natural leader I’ve ever encountered. 
Lesson: Identify your leaders and channel their influence for good.  Also, see the workplace violence point from point 2.

In conclusion, I’ve found that what is legal, what is moral and what is good common sense rarely intersect completely.  When you add a bunch of people in high pressure situations to the mix, who knows what may happen.  Do you have a great HR story?  Please share (but don’t use names!)