Spring Cleaning: Is Your Working House in Order?

Spring is here (for most of us we hope) with warmer weather, fresh flowers, yard work and outdoor activities. Now is also a good time to make sure your work house is in order. Here are some items for your work to-do list to see what seems ripe for tackling and/or preparation.

One of your first priorities after the New Year (which, like most employers, gets pushed down the list) is to make sure your policies and procedures are up to date. For years, one of the most repeated statements from clients to lawyers is that I want to get my handbook to you so that it can be revised and updated for the New Year. Well, April is almost over, and I’m guessing that many well-intentioned business owners still haven’t crossed this item off their list. So let’s get moving and do the following:

1. Update your handbook to include all new and changed policies, and then provide it to your legal counsel for review. If you have acquired or established new operations, these should be integrated into your existing policies and procedures.
2. Provide a timeline for when you want the review to be completed and set a date for implementation.
3. If appropriate, prepare written copies (hard copy or electronic) for distribution. It can be the entire manual or just several sections for distribution, with the entire manual up-to-date and available for online review.
4. If necessary, with wholesale changes or new policies, you can schedule employee meetings to discuss them or add them to pre-shift supervisory meetings.
5. Make sure you get employee acknowledgment forms that confirm receipt of the updated handbook and/or newly issued policies.

Now that your handbook review is underway, similar steps need to be taken to update your current restrictive covenant agreements (non-competition and non-solicitation agreements). This is especially true given the onslaught of state law and court decisions denying and/or limiting the enforcement of non-compete agreements. Additional changes have occurred with the Federal Trade Commission (FTC) issuing its final rule prohibiting non-compete agreements. The employer organizations’ litigation challenging the rule was filed on April 24, 2024, in federal court for the Eastern District of Texas. The FTC first proposed a near-total ban on non-compete agreements in January 2023, arguing that such agreements interfered with free markets and labor competition. Released on April 23, 2024, the FTC’s new rule prohibits non-compete agreements in most cases (which our firm addressed in a separate blog post). That said, here’s what employers should focus on when updating their agreements:

1. Ensure that your restrictive covenant agreements are in place to protect legitimate business interests and confidential information. Over the years, we’ve seen these types of agreements spread to numerous levels of employment, with even hourly workers in seemingly benign positions unable to change jobs in their industry. Is the barista or sandwich designer really a competitive threat to your business?
2. Courts often prohibit the enforcement of non-compete agreements, but are still receptive to enforcing legitimate non-solicitation agreements that protect bona fide business interests. Ask yourself: Can your business interests be protected by a properly drafted non-solicitation agreement (for both customers and employees)? Is it reasonable to allow your employees to go to work for a competitor while restricting the use of their confidential information and keeping them away from your customers and employees for a reasonable period of time? Note, the FTC rule can also encroach on these provisions if it effectively prohibits the employee from going to work for a competitor.
3. Has your business structure changed? Many employers don’t usually think about it pre-pandemic, but now more of your employees may be working remotely, especially sales reps and customer relationship managers. Perhaps your current restrictive covenants limit competitive business activities to a geographic area, such as the company’s principal location or branches and competitors within X miles of the applicable location. But what if your employee, for example, lives and works in Ohio (serving Ohio and Michigan) and your offices are in Tennessee and Kentucky? By definition, if the restrictions are limited to a certain distance from brick and mortar business locations, potential competitors located in Ohio and Michigan are employment opportunities for your employees. So there are two things to keep in mind: a) You should include the remote location of employees within your definition of business location (but understand that this may also be subject to legal scrutiny); ib) strengthen its non-solicitation protection to keep the employee away from its customers and potential customers in those areas and with whom the employee provided service, had contact and/or responsibility.

Another possible item on your spring cleaning to-do list should be to review your job descriptions and employee classifications. The IRS and Department of Labor are focused on identifying and correcting employee misclassification: the former for employees misclassified as independent contractors and taxes not withheld by employers, and the latter for independent contractor issues , as well as exempt versus non-exempt. employee classifications. Your job descriptions should be reviewed to ensure they are consistent with the duties of the job actually being performed. Often, job duties change due to business needs, but job descriptions are not updated. These changes may convert an employee from non-exempt status to exempt status andvice versa. Physical requirements for manufacturing, production and manual work sites must be monitored and updated. This becomes especially important in cases involving claims of discrimination by an employer that allegedly failed to provide reasonable accommodations under the Americans with Disabilities Act (ADA). Employers often unknowingly rely on outdated job descriptions to support arguments as to why certain reasonable accommodations could not be accommodated for the restrictions of disabled employees and/or whether it was an undue hardship . Most of the cases we see brought under the ADA today involve the reasonable accommodation requirement and the interactive process and involve claims that employers have not made.get involved fullyin the interactive process.

Finally, have you committed to reducing the footprint of your employment records and moving file and record storage entirely to an electronic record? Having moved law firms in late 2023, it’s amazing how much material we can accumulate even if you think you’ve made a commitment to keeping your records electronically. Now is the time to convert your paper records to electronic storage and/or dispose of them properly. Note that various labor laws and regulations have record retention requirements for how long employee and personnel records must be retained for both current and former employees. These time periods usually vary from one to seven years. Likewise, make sure you have all the records you’re supposed to keep, such as employee I-9 forms. I often hear from clients who have discovered that certain employee I-9 forms are missing, uncompleted, or incomplete. It is important to rectify any errors, complete the existing form or a new form, and date it with the current date and an explanation attached to the document explaining what was discovered and when it was corrected. Then place the corrected records in the appropriate location (other than personnel files). donoreturn these forms for any reason.

Now that your work to-do list is complete, or at least well underway, enjoy spring before the dog days of summer bring a whole new set of problems to deal with!