- Alexei Leonard
Will Bachman 00:01
Hello and welcome to Unleashed the show that explores how to thrive as an independent professional. I’m your host will Bachman and I am excited to be here today with Alexander Leonard. I’ve been wanting to do this episode for a long time. Alexander is a labor law attorney at Golenblock, Eisman, Pescoe… and and he’ll tell us the full name of the firm. Alexi, welcome to the show.
Alexei Leonard 00:24
Thank you. Yes, I I don’t blame you for not trying to attempt this. It’s, Golenblock, Eisman, Assor Bell, Pescoe
Will Bachman 00:37
Okay, now, the now all the name partners are happy. So Alexi, what I thought we could talk about on today’s show is a lot of members of Umbrex. And other independent consultants that I know, think about hiring their first employee, a lot of people take the path of, they’ll start out and they first start out, just doing work themselves as independent consultants. And then probably the next stage for people as a practice grows, is they might start bringing on independent contractors from time to time for projects. And then people start thinking, Well, you know, sometimes the people that I want, they’re not available, because they’re on their own thing. And then you know, I have to bring in someone new, so they start thinking, okay, maybe I need to actually hire an associate. Or people think maybe I need to hire an executive assistant, or kind of office, person, maybe even part time to bring to take some stuff off my plate. So people are thinking about bringing on a full time employee. And in today’s show, I want to explore with you all of the things that people need to think about to bring on that person. And that might include an employment letter worker’s comp, insurance, unemployment insurance does just a partial list. Why don’t we start with what is the list of things to think about if you’re hiring your first employee? And I’m talking in the United States, by the way, right?
Alexei Leonard 02:00
Yes. Um, so, you know, I prac, I’ve been practicing employment law for quite some time now, over about 14 years. And, you know, things of things have changed significantly, in that even in that time, it’s a very complex regulatory environment. So it can be very daunting. And it’s good place to start with, you know, what are what’s the key list of documents and compliance items that I need to worry about if I’m looking to bring on my first employee, um, you know, we deal with at our firm, different companies of different sizes in different industries. But I like to say to a company that is more on the smaller side or startup is that you know, you want to be you want to be Goldilocks, you want to be not too lacks. And you also want to not be too paranoid, because you have a business to run. And I, I can leave all the paranoia to US attorneys, because I’ll make sure to jump up and down if something’s going wrong. But, you know, if you assume that everyone has had employees for for the ages, and they’ve somehow managed to get through it, but their businesses, it shouldn’t be too hard for you. Do you have that view, you’re being too lacks, you’re not in the you’re not in the right frame of mind to be a Goldilocks, there’s a reason that you know, plaintiff’s attorneys exist and defense attorneys, it’s not because we have nothing to do, it’s because we have plenty to do. It’s a very complex environment, specially if you live in some of the major cities in the United States, oftentimes, the states and localities will have significant restrictions. By the same token, you don’t want to have, you know, a too severe outlook, when you’re just starting out, when you’re just bringing on your first employee. There’s a lot to worry about. I worry constantly, because there’s so many new laws coming online, it seems like it’s weekly at this point. But if you get bogged down in the minutiae, then you’re not going to be able to run your business. So I like to be a little bit practical. And you don’t want to get into too many of the complexities. What I try and do, when I speak to a first client is, especially when they’re on the smaller side is it’s all a matter of risk, there’s certain things that you want to aim for, particularly the low hanging fruit, so that you can make sure that you’re not going to have any catastrophic incidents. And to try and mitigate that and kind of work your way up as you grow simultaneously. You know, increasing your, your compliance measures. So that’s a long way of saying I’m, I’m happy to give you the list, but just make sure that you focus on you know, the key items that you You’re really going to need because the list is very long. So as Will was saying, you know, there’s there’s different types of documents that you can that you can give out to your employees. Some things you need to worry about are, you know, giving out an offer letter or an employment agreement sets for fourth determines and conditions of, of employment, the basic economic terms, what protections there are for the company if there are any protections for the employee. And is it an Attwell and rate arrangement, there’s workers comp insurance, if an employee is injured on the job, there’s a worker’s compensation scheme in most states, where the injuries will be, will be compensated based upon tables that the government comes up with, you need to buy into that system in most states. And you need to make sure that you have a carrier who is registered with your state. There’s unemployment insurance, many states have them, I think, I think all of them do this point. They, they generally work with a scheme of tax deductions and tax payments that the employer will pay on top of payroll, which are paid into the system and then the state department of labor or an equivalent agency will administer it. And it basically gives money to people who have no work are terminated through no fault of their own. And no fault of their own is a very broad concept that, you know, unless they burn down the building, they’re generally getting unemployment. Beyond that, there’s a whole host of other types of policies and documents that he can put into place, some of which are required, some are not the ones that are required are probably what you should focus on first, such as state and city. Posters and notifications. For example, in New York, you have to give in New York City, you have to give out pregnancy, discrimination, notice sexual harassment, discrimination notice, that’s prescribed by the city. And if you don’t, there’s certain presumptions that will be held against you, if there was ever litigation. There’s a rate of pay forum in New York, where you need to state exactly what the employee will be paid, and what your employer name is, and a whole host of other information that you are required to put into that document, and give out to the employees within 10 days of their their hire. If you don’t there’s a $5,000 per per employee penalty. There’s also certain posters that you’re supposed to have in your workplace. For example, the most federal most state department’s of labor, as well as the Federal Department of Labor, have guidance on what is the minimum wage and what the minimum salary requirements are. And you’re required to post those in your workplace or if you don’t have a physical location, make it available electronically. So those tend to be the the most important documents that you get out, at least in the beginning. Beyond that, you may want an employee handbook at some point. I am a big proponent of them, as many people are, as a lawyer and prudent paranoid advisors, companies, I tend to say you should get them no matter what your size is. I tend not to really push clients to get an employee handbook, unless they’re up to three or four employees. Because it’s just it’s not the lowest hanging fruit, you should get your documentation in order first. And the the but the handbook has a whole host of policies that can be helpful to you, for example, it’ll state what your vacation policy is. And it’s important to put into writing what your vacation policy is. Because in some states, it’s required, including New York. And also if you if you don’t want to have to pay out accrued vacation upon termination, you need to state in your vacation policy that such crude but unused time will not be paid out. So it’s a very important document and can provide you a number of legal protections. It also has codes of conduct, how people should be using your information systems. So it can be it can be a very useful document and it’s definitely worth the expense, at least when you get above a very minimal level of employees. In addition, there’s a number of documents that you may be familiar with, if you ever had a job where you fill them out basically upon your first day. And this these provide key information that are necessary to hire someone and to pay them such as the I nine form. Even if you are fully aware that someone’s a US citizen, you need to obtain documentation that would establish an individual’s ability to work and remain in the United States. And if you don’t, and the INS ever did an audit of your documents, and you could be facing very stiff penalties, potentially even criminal penalties, and that goes for any size of employer. So you want to make sure that you have i nines for every single employee that you hire, there’s also tax forms, you know, the W two form that you may be accustomed to. There’s also, there’s also generally, you know, a a wage, direct deposit type of form. If you want to pay someone by direct deposit, you can’t just automatically direct deposit money, you need to get a signed form, which generally your payroll provider will, will give to you. But there’s a category of documents in in that world where there, they’re essentially documents that your employee will fill out upon their first day. And then beyond that, there’s a lot of other optional things that, you know, I’m not going to get into them all, one of the most more common items that you may see is a nondisclosure agreement, which will outline confidentiality, it’ll outline what obligations the employee has to the organization regarding returning the property of the organization after they’ve they’ve concluded their employment. It also may have certain restrictions on whether or not they can, you know, disparage the organization after they leave whether or not there’s no obligations, not to solicit your employees or not to solicit your clients. And there are very, there are varying levels of protection that you’re you are permitted to put into that document, depending upon what state you’re in. The states will dictate what kinds of non disclosure and restrictive covenant obligations you can implement. So for that type of document, it’s a little bit more fact intensive. And you need to really work with counsel to make sure that that document will actually be enforced if you need it to be. So hopefully, that has fully scared you off from wanting to hire any employees.
Will Bachman 12:34
All right. Well, it’s certainly a good start. So you mentioned payroll provider. Talk to me about that a little bit, it seems a little bit, probably inadvisable for you to just try to calculate the correct pay yourself and pay someone and hold the deductions and like it’s probably impractical to submit the right amounts to state and federal governments, they kind of need to use probably a payroll provider on there’s a lot out there. And I know people use gussto or ADP or paychecks or, you know, a variety of firms like that. Any any tips that you have on you know how to actually pay someone?
Alexei Leonard 13:19
Yes, I would definitely follow your advice counselor, Bachman. And I would ensure that you do not pay out payroll yourself. You’re supposed to do deductions. And if you get it wrong, it could be, you know, the there could be repercussions for you. Whereas if you get a payroll provider, where there’s there’s a number of them and they’re used to dealing with any size of business, they’ll do the deductions for you. There’s also certain reporting requirements. payroll companies are supposed to report the wages that are received to unemployment. For example, using a New York it’s called the NYS 45 every quarter. If you don’t get a payroll provider, then you will need to file that yourself. And there’s a number of other different headaches that you’ll need to you’ll need to manage. So it’s definitely worth the cost. Plus payroll providers can have a number of other benefits depending upon who you use, some are known as PEOs, which are professional employer organizations, where your employees will be jointly employed on their on their tax number, and there may be some benefits access. Through the PEO. Some payroll providers have have that available. They may also provide Employment Practices Liability insurance to the company. If there is an issue, that for certain types of employment claims, there may be some coverage after a deductible is met, which can help limit you know, any type of catastrophic Pick employment law liability. So it’s definitely worth looking at them, I would suggest no talk to two or three payroll companies, at least because they’re they vary in their level of service. And definitely in terms of costs, some are more sophisticated with respect to electronic systems than others, some are still back in the dark ages with paper and, and are don’t have very robust systems. So, you know, if you send a note to, to three payroll providers online or through a referral, which is usually the better way to go, I’m sure one of their sales representatives will get in touch with you, almost instantaneously, if not within an hour, and they’ll set up, they’ll be happy to set up a demo for you. And then you can kind of kick the tires, because it’s a very important tool that you use. So I would, I would suggest kicking the tires on a few of them before you commit to one, but definitely use a payroll company.
Will Bachman 16:00
There’s also this step where if you, whatever state your company, your LLC, or your your C, your C Corp, or S corp, or heavier registered, let’s say your LLC, whatever state you’re registered in, if you have an employee in a different state, then there’s also the step of kind of setting up as a business in that state. Right. So we’ve gone through this a few times at Umbrex, where we have some employees across the United States. So each time we have an employee in a different state, we have to kind of go and set up with the Secretary of State there and, you know, register as a business in that state. I’m not sure about what the process is called, but but speak about that a little bit about just, you know, like, going through and saying, Okay, now we have someone in Utah or California or Texas, so we have to, you know, yeah, get set up there.
Alexei Leonard 16:49
Um, no matter where you’re incorporated or organized. You If you hire an employee in another state, and California, Utah, wherever it is, you need to comply with that the local laws there, and most states have at least some agencies that you need to register with if you do hire someone. And the most notable are unemployment. Any taxing authorities taxing authority sometimes wants you to register. There’s the Department of Labor in these in these states, they ask you to register and report new hires within a certain time period. That’s meant to catch deadbeats, who are trying to escape their garnishments. So there’s basically in any state, when you get a new employee and a new state, there’s going to be some sort of register, registering obligation from an employment law standpoint. And then there may also be other items that you need to register, like, you may need to register with the Secretary of State so that you can benefit from from having a service of process address there and potentially being able to sue in the state. There’s also other types of business taxes that sometimes you need to pay, which I leave to my corporate colleagues, but there’s, there’s a number of different areas that you need to look at. And I would suggest you reach out to your counsel or whoever you you are working with to organize your business to help you manage that. That is also yet again, a reason why you should have a payroll company, if you have employees in three different states. And you need to register with them and make quarterly reporting. You know, it’s very difficult to do that on your own or even through your accountant. The payroll companies often will help with that burden, depending upon the payroll company.
Will Bachman 18:55
Talk to me a bit about background checks. And when it’s allowed to do those and so forth.
Alexei Leonard 19:06
You must be very, very careful with background checks. I’m the flavor of the month for many, many jurisdictions right now is curtailing the use of background checks. They are seeing to be negative a negative measure, if you if you implement them. And the reasoning behind that is if someone’s done their time, they want them to get employment, and they don’t want to have a mark against them just because they committed a crime, especially if they committed a crime a long time ago when they were younger. So many states have what’s known as Ban the Box rules. Ban the Box refers to the box in an application which would ask for criminal history and with signal that the employer will likely not hire so Anyone with a criminal history. So many states, including New York, Ban the Box, you cannot have a pre interview an application question or any other type of inquiry before you give a conditional offer. Asking about criminal history, you need to basically encourage anyone, including people with criminal histories to make an application. If after you’ve given an offer, you can then conduct a background check provided you follow the guidelines that are set out by the federal government and the state and local governments. I’ll speak to New York just for simplicity, it differs based upon the state on what you can ask for and what you’re allowed to do, depending on the position, but generally speaking, in New York, you need to first get a authorization from the employer. It’s known as a fakra. Notice, usually, most employers will get this from a background check agency, I highly recommend if you’re going to do background checks, you do not do it yourself. There is a lot of liability and litigation over what goes into a fakra. Notice, which is the authorization for the background check. So doing it on your own, you know, going and Google sleuthing, that’s not recommended. Use a reputable agency. Sterling is one example. A lot of other I think ADP has won itself. You know, there’s there’s use one of those agencies that is more likely to be compliant with state and local law, they will often supply the factor notice to you as well, so that you can then present it to the employee to sign before the background check is conducted. So background check goes out, you get the background check results back, then then what do you what do you do? You need to make sure that any notices have gone out required under state and local law under New York law, you’re supposed to give out a notice about exactly what what are the factors that are supposed to be considered when an employer is looking at a background check. You want to make sure that that has all gone out to the employee before you take in one look at that background check. On there’s a law called corrections law 23 A at the state level. And then there’s a city law in New York City known as the New York City Fair Chance Act. And there’s there’s disclosure requirements under both of them. But at least one document needs to go out that complies with both, and you get the results back now you can actually look at them now that you’ve ensured that your all your notices have gone to the prospective employer. If there’s no results on the background check, it’s fine. And you hired the employee. The main issue is what if you get something back on the background check? And then you want to rescind the offer? Or do you want to change it? That’s when you need to treat things very delicately. At that point, it is such a highly regulated area, whether or not you can withdraw and offer once you because of someone’s criminal history. I would suggest you get counsel involved so that you can go through the process or at least an HR consulting company if you’re working with one. Because you’re supposed to you’re supposed to document the process take the factors under New York law, such as what’s the time period from when the crime was committed to when you’re analyzing whether or not you’re going to hire the employee? Has it been 10 years? Has it been 20 years? Was the person younger? You’re supposed to also analyze, what’s the job that the employer is supposed to be doing for you? Are they just going to be, you know, answering the phones where it’s not as relevant whether or not you know, they they got into a DUI when they were younger? Or are you expecting them to to go around and drive around to various clients with that might be a little bit more relevant. And you’re supposed to go through each of these six factors under New York state law to make sure that it makes sense that you would want to rescind the offer based upon these factors and that and that you have a justifiable reason to do so. Under New York City Law, you’re supposed to then give an opportunity for rebuttal. And then have a certain time period for the employee to to give a legitimate reason or some sort of rebuttal to why why they think they should retain the job regardless of their criminal history. And then and only then you can then make your your final decision as to whether or not you’re going to hire the person based upon You’re based upon their criminal history, that if you don’t follow that whole process, it’s it’s it causes liability and you could potentially get sued under that law. So be very careful when you’re doing background checks. Again, I would suggest using a background check company a reputable one. If you do get positive results back, and you want to change the the reason the change the offer or say that you’re going to change the position because of because of their criminal history. And you should either engage counsel or engage your HR consultants or your internal HR, if you’re big enough to help you go through that process and make sure you stay on the right side of the law. One other final nuance. In New York, there’s legislation that says you cannot use arrest history as as a reason to deny someone a job. So a mere accusation of a crime is not sufficient to to, to allow you to rescind a job offer. So be aware that if you find someone’s arrest records online, you really cannot use that when you’re deciding whether or not to hire them.
Will Bachman 26:26
Tell me about salary a little bit, what are some of the rules that we should be aware of around asking people what they think their salary should be? Or what their salary has been in the past? Are there anything that we should know about that?
Alexei Leonard 26:41
Yes, this is another flavor of the month, maybe flavor of the week. Now, for a lot of legislators prior salary history is, is a sensitive topic, you generally cannot ask for prior salary history of an employee that you’re looking to hire. So the question, you know, okay, what are you making now, you’re not supposed to do that. And the reasoning behind that is, you know, over decades someone who’s been discriminated against, they may have a pay artificially lowered salary, and everyone should be judged just based upon what their qualifications are not necessarily what they’ve made in the past. And they don’t want to continue to institutionalize any type of discrimination. So, asking prior salary history is generally not permitted. New York is one of those states, California is even stricter than New York. Um, what you can do is you can, you know, ask for expectations, you can say, what is your expectation in terms of compensation, if you have someone who’s has, you know, equity compensation at their, for some sort of incentive compensation at their prior job. And you want to, you know, determine if there’s some sort of compensation that you need to give the person in order to entice them to, to give up the golden handcuffs at their prior job, you can ask those questions, but you need to be very direct and limited in that. Nothing that and you can’t also go out and research what the person’s salary is at the job. You can’t go and ask your friends at that, at that company, what that person makes or what they’re likely making. All of those types of inquiries are technically banned by the law, although I don’t know how someone would figure out if you did that, unless someone turned you in. So, your salary history is a is a big no no. You asked for salary expectations instead one new piece of legislation which is not in effect yet is a New York you’re supposed your you will soon be required to list a salary range or a job. So the range of salaries that you might employ someone for a particular job if you have a job posting on on some sort of job board is supposed to list the range of of salary that might be paid and what the compensation looks like. Once Once that laws in effect
Will Bachman 29:37
you mentioned that you need to have some the potential employee fill out an i nine form to prove that they are you eligible to work in the US that kind of is someone just self reporting it do you need to like look at actual their, you know, birth certificate or pass board or something to make them prove that they’re a citizen? Or do you need to use I forget the name of it, there’s some kind of federal system of checking, you know, eligibility and I forget the name of that system verify e verify. Is it? Can you just have them? Do the I nine form? And that’s it? Or is there any other things that you need to be aware of?
Alexei Leonard 30:20
Um, yes, there’s many other things. The I nine form itself needs to be completed, of course, as to whether or not you need to look at someone’s birth certificate, unfortunately, you do need to look at some documentation does not need to necessarily be a birth birth certificate. On the I nine form itself, do you go to the USCIS website, they have samples of them, there’s lists of different types of documentation, which will either prove identity, or ability to work, and remain in the United States. Um, if someone presents the United States passport, I think that works for both lists, if I remember correctly, and that would be sufficient documentation. Otherwise, you know, oftentimes, it’s a driver’s license and a social security card, that you need to basically get something from list a and list B, so that you can prove that the person is who they say they are, and that they are a legal citizen, or they have the right to work and remain in the United States. So you do need to look at documentation. A lot of companies will copy that documentation to just have in the file and attach it to the DNI, you are not required to do that. You just need to be consistent. If you decide to copy, you need to copy for everyone, you can’t just copy for say, you know, employees, you know, who are foreign citizens. So, you know, just make sure you are consistent. You also need to, you don’t need to be an FBI agent, but you need to look at the forms. And if it’s clearly a fake document that has been presented to you, you do need to, you know, push back a little and say, well, the name is different on this document. birth dates don’t match up, you know, there’s 10 misspellings the United States is missing a T and E, you, you need to follow up on that and say, This is not sufficient, and make sure that you get, you know, valid documentation. Again, you’re not required to be a sleuth, but you need to at least make sure it passes the smell test. As to verify, you know, that’s a voluntary program. In most states. In New York, it’s a voluntary program, it’s a federal program where you voluntarily sign up for and it basically plugs in an employee’s information to electronically verify whether or not they are able to work and remain in the US has not replaced the I nine form. It’s basically another method of, of just checking identity. And some companies do it because they want to, they want to make sure that they don’t have issues with no match letters, and that, you know, the i nine process will, will miss some of these issues. So they want the Verify process to catch that. In other cases, in certain states, they require you to, to agree to E verify. Um, I think Arizona is one of them. But New York is not
Will Bachman 33:36
visible interest to a lot of listeners, think about hiring someone would be some of the some of the optional documents he talked about particularly nondisclosure agreement, as well as the non solicitation. So, you know, if you leave my consulting practice, you’re not allowed for some time period to go and, you know, serve the clients that you got to know, by working here. Talk to me about those documents and some of the limitations and sort of what might be allowed what not, might not be allowed in those in those documents?
Alexei Leonard 34:09
Sure. Um, so the nondisclosure agreement can have a number of different provisions in there. It’s not necessarily it doesn’t necessarily have to have non solicitation obligations. On the the documents, you know, that I do tend to be about six to 10 pages long, depending upon the state. Um, they’re very useful tools. And I would suggest them in most cases, unless you have, you know, a low wage employee, because at the very least, they have confidentiality obligations in there, which will ensure that the employee contractually agrees that they will not disclose your information will not disclose the information of your clients. And that if there’s any Property leftover or data, say they sent data from the, from the client to their personal email that still in their personal email that they’re going to give all that back. While you know, an employee can’t retain the property of another person or a client for yours, it’s a lot easier to enforce a contract than it is federal law that they’re not supposed to. But they’re not supposed to, you know, steal property essentially. So I highly recommend having it in place for that purpose. Also, you know, depending upon the state, it’s important to have the invention assignment and intellectual property requirements, the employee will have to agree to assign over certain rights, like patent rights, those can’t be assigned over just as a matter of course, you need to have some written document that clearly specifies that the default rule for other types of intellectual property, like, you know, documents that an employee prepares, is that it is the property of the employer. So that will be yours by default, but it’s a lot clearer to have it in a contract, it’s a lot easier to enforce contracts with, with a number of different protections and remedies that are available there. It’s also, it’s also useful to have the contract in place to help protect against solicitation of employees, there is no rule against an employee poaching your other employees after they’ve left. It’s a free country free competition, that’s the that is the default rule. But without that agreement, there’s nothing you can do about that other than, you know, simply trying to retain the employees you have and keep them happy. There, you can have a post termination, restriction on on soliciting your employees trying to poach them, it can’t be infinite, there needs to be a reasonable period of time, the employee needs to be relatively high level, they can’t be like a minimum wage employee generally, because the court does not need to enforce those agreements, they look at the equities, they don’t want to prevent people from getting a new job, if they really want to go somewhere else really needs to just protect your legitimate interests. Most commonly, I see a 12 month tail on a non solicit post termination, that tends to be enforceable in New York, as long as it is, you know, relatively well tailored. Beyond that you can have non solicitation of clients, you can have non competition provisions saying that you can’t compete directly against the company, those are more difficult to enforce, they’re not impossible, I would suggest not preparing those on your own because very often, they need to be very carefully crafted in accordance with the state’s law. If you have an employee in California as well, California does not allow you to have non competition and and in some cases non solicitation of client provisions. So you may not have an enforceable agreement at all, and in California may have penalties from certain state agencies. So, you know, be very careful when doing any type of non competition or non solicitation of client provision. And definitely suggest working with counsel on that. And, you know, the question that often comes up in connection with non disclosure agreements and these types of provisions is, do I need to give someone severance to have an enforceable non compete? The short answer is, at least in New York, no, you do not continued employment, even at will employment is sufficient consideration for an employment agreement and non disclosure agreement. So but there’s limitations to that if you hire someone and then a week later, you terminate them. And you terminate them without cause that’s not going to be a very enforceable document. So it it depends upon the exact circumstances, but you don’t necessarily need to give someone gardening leave or some sort of benefit, other than just employment for that to be an enforceable document. In other states, you do need to provide certain consideration and the law is constantly changing in that regard.
Will Bachman 39:36
So what would it sounds like it varies by state, what would typically be allowed if you say, Hey, if you come into my consulting practice, then you’re not allowed to go? You know, just leave and then directly go and serve one of the clients that you’ve been working for, you know, through through my firm is typically considered law One year would be appropriate or two years, or is there some time period around that, that most states would would say that’s reasonable? And does it depend if? Yeah, so, like, what’s typically allowed around non solicitation of clients or customers?
Alexei Leonard 40:17
Yeah, I would agree in a majority of states, a year would be a year post termination would be allowed. That you, you can restrict solicitation of clients. Presuming, you know, the employee is, you know, a relatively well compensated employee, you know, making, let’s say, over 75,000 a year, um, you know, they’ll likely be subject to the, to those non solicitation provisions and will enforce that, there’s probably some positions that might not be enforceable, like if you have an executive assistant, and you’re saying they can’t solicit clients, you know, that that doesn’t make as much sense why you need that restriction. So it’s not across the board. But the most common I see is probably a year, and a lot of states, you can get away with two years, New York has enforced, you know, to your non solicits and to your non competes, on, but it really needs to be well tailored for a judge to agree to enforce that. That said, there are certain states, such as California, which generally never allow any of those types of restrictions.
Will Bachman 41:31
Question about references. So, it’s sort of two parts. One is, what are the rules around if you’re about to, you know, think about hiring someone checking their references, anything we should know. And then on the flip side, if someone leaves your firm, and, you know, someone other employer calls you to, to provide a reference, some things that we should be aware of.
Alexei Leonard 41:52
I’m a big fan of reference checks, I think they’re one of the best ways to get an honest assessment of someone, I like to get, you know, a few references, at least three, I think it’s also useful to have if you have multiple partners in the organization, to have them both call the reference if you can, so that they can get the perspectives of both partners. When you have that call, you want to be, you know, of course, careful not to discuss any protected characteristics about a person, even if, even if that former employer brings it up, for example, if they say, you know, this person had a kid, or they were disabled for a period of time, or that, or there’s some other other information that comes out during that, during that interview, you don’t want to engage in that conversation at all, because it could then be seen that you’re making decisions in a discriminatory way, even if you’re not gonna be perceived that you got that information, and then changed your tune and, and decided not to hire the person. But I think, I think in almost every case, you should get references and call them. I don’t think that should be overlooked. The old adage is, you hire slowly, fire quickly, you know, that’s part of the hiring slowly process, making sure that other people have, you know, verbally stated to you that they want to work with the person that they wanted to work with the person and, and think highly of them. And you can, you know, kind of hear the tone of their voice. When someone calls you, after an employee leaves. There are, there’s probably more room for there to be risk to you. So if someone calls you and they say, Yeah, tell me the real story about Jane or John, you know, what, why are they looking to leave? Why are they looking to come to my company? Do I really want to hire them? If you speak negatively about them, it could be seen as you you know, interfering with their perspective employment. And the employee may take that the former employee may take that, you know, personally, and then look to come to you with some sort of legal claim, there are certain legal claims that could conceivably be brought, there’s generally a qualified privilege for forgiving, honest employment references, but it’s not a very robust protection, in my opinion. And I think it’s better generally, for most employers that I work with, have a neutral reference policy and just say, you know, company policy is we just give out name rank and serial number. You know, there’s there’s no other information that we generally provide. That’s just our our company’s policy. And that way, you’re not saying favorably or unfavorably in one way or the other and you can you can fulfill your obligation, while not risking any type of viability, if you say the wrong thing, so neutral reference policies would be would be a positive. And that can that situation, you can also have, you can also have in your employment application, if you didn’t use employment applications, which I do recommend you have at the end, you know, a, basically a disclosure that the employee signed saying, We will contact your references that you provide, and you waive any liability for, you know, information that is that is provided back to us. And you can even potentially put in there, you know, at the end of your employment, we also reserve the right to give out references in our discretion. It’s, um, you know, it’s not necessarily the easiest thing to enforce a firm at the back of an employment application that someone signed before they were even employed. But it is a useful document if they were to ever bring a claim against you that you interfered with their employment. So just some thoughts to consider when when dealing with references. Okay,
Will Bachman 46:12
so if we’re hiring someone, we should definitely ask for references and ask for all the juicy info, but someone’s calling us for reference. Mum’s the word. Yes, they worked here. Move on.
Alexei Leonard 46:25
Who’s ever known a lawyer to be hypocritical?
Will Bachman 46:28
I mean, that’s, I mean, that’s the advice. So okay. Now we know. So, offer letters, what are some of the elements? So it’s, I mean, don’t get something just off of LegalZoom? Right. Right, or just download some random, you know, thing off the internet? Probably mean, obviously, a little bit self interested, but you know, work with an labor attorney to get it drafted up. Right. What are some of the things to be aware of just to make sure, like our checklist, you know, that we should be looking for in a typical offer letter? What are the different paragraphs or sections?
Alexei Leonard 47:08
Sure. So offer letter employment agreement, whatever it is, it’s important to think, what’s the purpose of this doctrine? There’s a few different purposes. One, you want to convey the basic economic terms? What’s the salary, if there’s a piece rate? Or if there’s a there’s a hourly rate that needs to be specified? Are you gonna? Are you gonna pay the person as exempt from overtime? Meaning they don’t get overtime? And are they? Are they going to be hourly? And they’ll be non exempt from overtime? And are they properly classified in each of those bets should be all spelled out in your offer letter. Are there any bonuses that you want to, you know, illustrate there? So part of this is conveying information about compensation and exactly, you know, what you’re exchanging for the person services. Beyond that, most most of the offer letter for employment agreement, if you go that, that route, is for the benefit of the employer for the company. And that can include even these protections that we discussed in the non disclosure agreement. You could have a confidentiality term in there. You can have, you know, non disparagement potentially. And those are generally enforceable, I recommend you put you leave those for a real agreements, like a nondisclosure agreement. And, you know, keep the offer letter for basic economic terms and also key representations regarding the prospective employment. What do I mean by that? The biggest one is, as we’ve talked about, employers can have restrictive covenants, they can have non competes. And if an employee comes to your organization and is subjected to a non compete, one, they might not be able to do the job you hired for them. And two, you may if you do hire them, then the company, the prior employer may come after you for tortious interference with that non competition agreement. So good thing to put in an offer letter is there’s some sort of representation that the employee is not subject to any of those types of obligations or has obtained a waiver of them. Or to the extent there are any that they’ve disclosed them to you so that you’re not caught unaware. I also sometimes put in there that DOL indemnify you for any legal liability that arises and or your attorneys fees. Granted, an employee is less likely to be able to pay your legal bills, but at least gives them pause before you know maybe ignoring a non compete and not telling you about it. So I think that’s a important piece to put in there as well. Also, the offer letter will generally generally have at least some description of duties, which is good to just kind of set out at the beginning. So there’s no misunderstandings about what the person will be doing. It’s good to be a little bit general about that. And also make sure you have a caveat that you can also change, change that employment at any time and those duties, and that you can give anything, give any types of tasks that you wish to the person, make that clear, kind of in a catch all at the end, so that the employee can’t later on playing well, this was my job description, you know, you’re asking me to do something outside my job description. So you know, I am not going to be here or I need I need additional pay, you can try to mitigate that. The most important thing, though, and why most people have offer letters is you state that the employment is at will. And what does that mean? at will employment means you can fire the employee at any time for any reason, as long as it’s not an unlawful one like because their gender and the employee can resign at any time. That’s very important to stay in writing at least somewhere. As paranoid attorneys, we put it everywhere we put it in the employee handbook, put it in the offer letter, you put it in different policies, because you don’t want to be in a situation where the employee claims that you promised me employment for six months or a year. And then it’s not working out after four weeks. And the employee says, Well, you promised me employment for six months, so pay me for my remaining five months, even though I’m not. So having an atwill disclaimer. So if they’re called in your offer letter is very important. And that’s one of the key provisions that you’ll have there. I’ve also mentions offer letters versus employment agreements. What’s the difference? An offer letter is generally a briefer document. And it’s not meant to be a formal agreement type document with enforcement mechanisms. offer letter is more meant to just state the general terms of employment with some key representations. An employment agreement is a more fulsome document, and it may include some of these terms that we talked about with the nondisclosure agreement. An employment agreement is often overkill for most employees. Usually, you just see employment agreements for very high level employees. You generally see employment agreements where you’re trying to convince someone to come over to your organization you want, they want to see that there are certain promises made to them. So employment agreements tend to be favorable to the employee, speaking in general terms, so you can put whatever you want in them, you could say it’s an at will employment agreement and has all your protections. But in that case, you might as well just do an offer letter for maybe a nondisclosure agreement on the site. Usually, an employment agreement will say, if you come over, we’ll give you a signup bonus of 10 grand, you know, we’ll, we’ll give you this title. And if we get rid of you, because it’s just not working out within the first year, we’ll pay well, you know, three months of severance. So those types of protections are more common for an employment agreement. That’s when that would be useful. Um, and then, if you want we’ll we can also talk about independent contractors briefly in the last few minutes.
Will Bachman 53:34
That might be a whole other episode, Alexi Serna. I don’t want to try to squeeze that in because I don’t think we could cover it probably in sufficient fairness, just in a few minutes. So if listeners did want to follow up with you, and maybe they’re looking for an employment attorney, either to hire someone or maybe they’re getting hired, how can they find you?
Alexei Leonard 53:59
The great thing about attorneys is we plaster ourselves everywhere. Go online to Golan Bach Iseman sweb site. My name again is Alexander Leonard on the employment practice had forgotten Bach Iseman and my email address is the letter A Leonard Le O. Na rd at Gallen Bach Shi o le and the O CK fi comm you can also give me a call at 347-346-1717. I’m happy to talk at length about any of these topics. I very much enjoy the intellectual dialogue.
Will Bachman 54:40
Fantastic. Well, luckily we’ll include those links in the show notes for anyone who wants to reach out. Thanks so much for joining today. This was very powerful and very illuminating.
Alexei Leonard 54:51
I try. It was pleasure to be here.