But for most organizations to stay competitive, it’s a necessity. In the last few years, there’s been a fast-rising trend for employees to claim they’re owed money for unused time when their employment ends.

Vested benefit

While paid vacations and PTO aren’t legally required benefits, it’s a different ballgame once you offer such benefits. There are a host of laws – mostly at the state level – that address what happens with unused time.

In many cases, courts are ruling it’s a vested benefit and must be paid. The most publicized recent case – a class action suit against Target by 270,000 California employees – cost the company $10 million to settle.

But employees in several other states have also cashed in, with major cases pending in Illinois and Washington. In the majority of cases, the dispute centers around an employer’s use-it-or-lose-it policy.

Under these policies, employees typically can’t cash in unused vacation or PTO when they leave the company.

In some states, most notably California and Illinois, there are laws severely limiting employer rights. Meanwhile, the Nebraska Supreme Court ruled that even if an employee handbook clearly says vacations are use-it-or-lose-it, employers have to pay upon termination (Roselund v. Strategic Management, Inc.).

Other states such as Florida and Texas currently favor employers, but that could change as the trend grows.

Employers have won some battles. The Minnesota Supreme Court decided vacation policies are a contract between employers and workers (Lee v. Fresnius Medical Care). In plain English, that means if you got sued in Minnesota, the wording of your policy and the clarity of your employee handbooks would be the deciding factors in the case.

PTO could present problems

Nowadays, many employers save money by lumping vacation days into a single PTO bank with sick pay, personal days, bereavement and other types of paid leave.

But here’s the problem: Even though termination pay for unused sick days and other non-vacation leave are rarely covered by state vacation-pay rules, they may be protected when the days count as all-purpose PTO.

Courts have mixed views on whether employees are entitled to reimbursement for all unused PTO or merely the “vacation portion” of it.

With the rise of PTO policies in place of separate leave, a host of states are considering whether to amend vacation-pay laws or to leave interpretations up to the court system. Meanwhile, some experts recommend organizations with PTO  consider going back to separate vacation and sick banks.

The state’s Department of Transportation circulated the newsletter to its 2,600 employee in an effort to explain what’s acceptable conversation with others. That was the first mistake. No, wait. The first mistake was including such info as informing workers that they should never:

• ask a black co-worker, “Should we order the fried chicken or watermelon for you?”
• attempt to buddy-up with an Hispanic employee by inquiring, “Can you help me out with my landscaping?”
• help an elderly worker’s career advancement by noting, “You know Wal-Mart is hiring.”

There’s more of the same — and worse –  but you’re not going to see it repeated here.

The agency apologized for the content of the newsletter after at least one employee told reporters, “That is the most ridiculous thing I’ve ever read,” and minority-rights groups marveled at the sheer wifty-ness of the advice.

A down economy is an up time for wrongful-discharge lawsuits by employees who have been let go — and are angry about it.

That’s why every employer should know and understand the seven relevant legal facts about wrongful discharge:

1. Although many employment relationships are “at-will,” meaning that either the employer or the employee may terminate the relationship at any time with or without reason, that doesn’t give employers a blank check. If an employer terminates an employee, even one who is at-will, in violation of federal, state, or local anti-discrimination laws, that’s illegal.
2. Federal anti-discrimination laws protect employees from being discharged or otherwise penalized with respect to the terms and conditions of employment on the bases of race, color, national origin, sex, religion, disability, pregnancy, and age. State laws may mirror these categories of protections and, in some instances, be tougher than the federal laws.
3. Not all wrongful-termination claims are discrimination-based. An employee who given a contract of employment, either written or implied, and is terminated before the expiration of, or in violation of, the contract, may be able to bring a claim for wrongful discharge and breach of employment contract.
4. Wrongful discharge suits may also be brought in situations where the employer has retaliated against an employee for exercising a right that is supported by the law. For example, if an employee is terminated because he or she reported the employer to a governmental body for violation of workplace safety laws, the employee may be able to successfully bring a wrongful discharge lawsuit.
5. If an employee refuses an employer’s order to perform an illegal act and is subsequently terminated, there may be a wrongful discharge cause of action. For example, if a supervisor orders an employee to perform a duty in violation of safety laws, the employee may refuse and cannot be fired for refusing.
6. An employee who’s terminated for taking time off under a law which gives him or her a legal right to have that time off — such for voting or military service — may also have a wrongful discharge cause of action.
7. An employer who has not followed specific disciplinary and termination policies that are in place can also face a wrongful-discharge suit. For example, if an employer has a handbook that states that employees are entitled to receive two written warnings for misconduct or poor performance before they are terminated, and an employee is terminated after receiving only one verbal warning, that employee may be able to successfully bring a wrongful discharge action.

The employee sued for wrongful termination. His case hinged mainly on a passage in the employee handbook: “Employees who are discourteous or impolite to others will receive two warnings about such behavior and will be considered for termination after a third violation.” So, the employee argued in court, company policy stated that he should get two warnings before being terminated.

The employer said:
The handbook was not a contract, and just set guidelines and options for handling situations. And since the employer was in an at-will state where firing was permitted for any non-discriminatory reason, the termination was legal.

Who won the case?

Answer: The company.

Why: A judge ruled the handbook in fact wasn’t a contract with an at-will employee.  A “contract,” has to name a specific employee in the document.

So the company won, but only after a long, expensive court battle.

The case is a good illustration of the kinds of headaches company handbooks can cause when they’re open to interpretation. How might the handbook in this case have been written to avoid the mess altogether? At least two possibilities:

• The handbook could have stated specifically that the discipline approach outlined was an optional one – or a guideline – and not a mandatory procedure.
• Maybe there was no need to outline the approach at all. If at-will employees are treated equally and disciplined the same way for the same offenses, a “policy” might not be needed. Besides, evidence of fair treatment is more crucial than what’s written in a handbook.

Try to keep those factors in mind when someone insists that the handbook should cover all situations.

Cite: Denis v. P&L Campbell Co.

Now, consider what weapons you have to avoid complaints. If you haven’t listed your employee handbook among the weapons, maybe you should. It could be your No. 1 preventive measure. So let’s build a checklist of what should be in your employee handbook:

Two general legal statements. Most lawyers recommend that your handbook lead off with two statements about the legality of the content. In general, they should note:
1. that all employees are employed at will, and thus, they can be terminated at any time (except in union situations), and
2. that the handbook is not intended to be an employment contract, and the employer has the right to revise any part at any time.

An “open door,” or grievance policy. There’s a difference between writing down your complaint policy and just telling employees about it. Putting the policy in a formal, written form serves at least two purposes:
1. Makes clear the exact procedure employees can use to get their complaints addressed — without calling a lawyer or the EEOC.
2. Lets everyone — including judges — that you’re committed to the process enough to write it down.

Benefits information. Leave policies, retirement plans, insurance coverage and other benefits should be listed, along with the  terms of the benefits (such as, for instance, the formula for accumulating leave). They instill loyalty in the employee and show the company as more than just a place to work. Note: Make sure the handbook gives the employer full discretion to interpret the terms of all benefits programs and determine eligibility and entitlements. And the  section should specify that if the benefit description in the handbook differs from the plan documents, the plan documents govern. This protects you from mistakes and puts more weight on a document that’s probably undergone legal analysis.

Standards of conduct. You’ll want to have a list of the types of  conduct that could subject an employee to discipline, up to and including termination. Just be sure to note that the list isn’t all-inclusive and that there can be other infractions that are subject to discipline.

Overtime. If necessary, you’ll want to note that overtime can be required when it suits business needs. And don’t forget to mention that nonexempt employees must have appropriate approvals before working overtime.

Telecommunications. State the terms under which employees can use company  phones, faxes, computers, Internet connections, etc., including those employees who work offsite.

Confidentiality. Employees should be prohibited from disclosing confidential company or co-worker information to anyone or using it for personal purposes.

Ethics. Remind employees that no one is allowed to use their position or knowledge gained through employment for personal financial gain, and they all must deal with vendors, contractors and other business contacts in a legitimate manner at all times. You may also want to detail the company’s position on outside employment and what’s considered a conflict of interest. How tight this policy is depends on the nature of your business.

Attendance and punctuality. You can lay out your attendance policies in a reasonably straightforward way, but don’t forget to include a  job-abandonment policy if an employee fails to call in  or appear for work for a certain number of consecutive work days.

Business expenses. While it is helpful to have guidelines for nature and amounts that may be spent in the pursuit of business, this policy is mentioned here for another reason entirely. It is imperative that companies set standards for the timing and nature of submitting expense reports and ensure employees know they are responsible for the accuracy and truthfulness of all such submissions. Theft via padding expense reports is a genuine concern.

Prohibitions on personal use of office equipment, telephones and supplies. A policy of this nature is actually an anti-theft measure. Costs stack up, in astonishing amounts, just from the fact that workers take pens, reams of paper and even electronics for their own use, not to mention the costs from phone bills and time taken away from work when employees make personal calls. Employees need to be informed that company property, including time, is for company use only, and this includes time spent on personal cell phones.

HR’s new function: Standing up to workplace bullies. What used to be considered a good idea may now become law. 

And here’s the big problem: Someone is going to have to referee and figure out who’s a bully and who’s just a big pain in the butt who should be ignored. In short, you may have to play Civility Cop. That’s the assessment of attorneys who are looking at the proposed anti-bullying legislation, which in effect demands that employees play nice with one another.

Let’s look at the type of scenario that could pop up:

A white manager supervises a black employee. The white manager is a crusty type who criticizes the black employee in public, maybe even loudly uses insults like “stupid” and “lazy.” Under anti-discrimination laws, the black employee had no legal recourse — the law doesn’t demand that managers be civil to their employees.

But under proposed legislation, the employee could charge with manager with bullying — and charge the company with allowing it, unless you step in.

Start now
Your best bet: Start now to head off any bullying charges. For instance –

• Have policies in place that make it clear bullying behaviors will not be tolerated.
• If you have an employee handbook, emphasize in it that workers must treat each other with respect.
• Encourage employees who feel bullied to report the conduct, just as they would report charges of harassment or discrimination, and investigate those complaints seriously.
• If an investigation warrants it, take appropriate action.

Here are the states that are looking at anti-bullying legislation:

• California
• Connecticut
• Hawaii
• Kansas
• Massachusetts
• Missouri
• Montana
• New Jersey
• New York
• Oklahoma
• Oregon
• Vermont
• Washington

 And here’s sample legislation from New York.

Hardly anyone can be certain about complying with all the provisions of the Fair Labor Standards Act relating to overtime and white-collar exemptions. But you can adopt good policies that protect your company from penalties if someone does make a compliance blunder.

The federal government calls them “safe harbor” policies, meaning there’s a good chance auditors will let you off the hook with just a warning if you’ve followed the policies but have misclassified a worker or made improper deductions from the worker’s pay. If you don’t have such policies, you could be subject to fines, damage payments and reclassification of workers, making them eligible for OT pay.

Generally, the FLSA states that you can escape penalties if you:

• Have a “clearly communicated” policy prohibiting improper deductions and a system under which employees can file in-house complaints about improper deductions
• Reimburse employees for improper deductions, and
• Make a good-faith effort to comply after discovering mistakes.

However, the question remains: What are “good policies”?

The law firm of Jackson Lewis provides two – one as a general policy and the other for fluctuating workweeks.

Companies can:

• adopt the two
• use them as guides for customizing or formulating policies,
• or compare them with existing policies to make sure you’ve covered all the bases.

Using a four-step test, attorney Jim Velasco audits companies’ I-9 procedures to make sure they comply with government standards. Most companies fail the test.

When Velasco walks into a company, he asks four major questions – pretty much the same ones a government inspector will ask when investigating an I-9 violation: 

1. Do you have policies and procedures for verifying an employee’s identity, and are they in writing? Has top management signed off on them? At a minimum, the policies should adhere to the requirements outlined in Form M-274 Employer Handbook from the U.S Citizen and Immigration Services. 

2. Do you conduct awareness training for staff who deal with I-9s? And is the training documented? 

3. Do you conduct sample audits of verification documents, including the I-9 forms and supporting documents? You can do the audit with in-house staff or hire an audit professional. 

4. If you find problems with a sample audit, do you conduct a wider audit to see if the problems are widespread? 

Velasco, writing in the summer issue of “Relationships” magazine, says that besides failing the four-part test, 30% to 50% of the companies have compliance problems just with the I-9s themselves. 

A big reason to take the four steps: Besides uncovering mistakes, the procedure amounts to an excellent “good faith” defense – that you’ve given it your best shot to comply – if government investigators do uncover a violation. 

Maybe, in exchange for tuition assistance or other education aid, you have a policy where the recipient sign an agreement to pay back the money if the employee quits before a specified time. If so, ask yourself this: How will we get the money back if the employee quits early and refuses to pay?

Dock the person’s last paycheck? OK, but what if that amount doesn’t come close to covering the total aid? And docking the last pay is even illegal in some states, such as California.

Sue the individual for the money? You could find your company paying $20,000 in legal bills to collect $10,000 in tuition reimbursement.

Another way

There’s another way that’s cheaper and more effective: a promissory note. That is, setting up the agreement as a loan whose provisions will be waived if the employee works the specified amount of time. And here’s why a note is better than any other type of agreement:

It’s easier to enforce. Collecting money from a loan generally requires fewer hoops to jump through – and fewer legal fees – than other types of agreements.

There’s a psychological factor. A legally binding loan, and repaying it, gets more of the employee’s attention than just another employee/employer agreement. Employees see it as a financial obligation.

Note: Most legal experts suggest that you don’t use your company manual or handbook to lay out or even mention the details of your education-assistance program. That just sets you up for mistakes and contradictions that can be used against you in a legal battle.

Getting the information needed to revise your organization’s policy manual, or to write a whole new one, involves a little bit of planning and three straightforward steps.

1. Meet with employees. Note that it doesn’t say, “Meet with employees and supervisors.” Your first meeting should be with workers alone, and should not include supervisors. However, be sure to request the meeting through the supervisors. In other words, ask them for permission to meet with their employees. The bosses are going to say “yes,” but it doesn’t hurt to practice a little diplomacy to get things off the ground.

OK, you’ve got all the workers in a room. Now it’s time to ask them the first question: “What policies or practices here do you like?” Everyone likes something, so this gets the meeting off on a positive note. Field and note their responses, and then ask the next question:

“What don’t you like?”

At this point, don’t try to defend anything that’s unpopular. Just note the responses and reasons, and mention that the purpose of the meeting is to gather information designed to build better policies.

2. Meet with supervisors. All you’re going to do in this meeting is ask the same questions you presented in the employee meeting: What do you like? What don’t you like?

You’ll especially want to note when there’s a match in what the bosses and the employees like and dislike. If everyone likes something, that’s a clear case of not fixing something that ain’t broke. If everyone dislikes something – say, for instance, the vacation policy – that may be something you want to look at for revision.

3. Meet with the boss. With your your responses in hand, and without naming names, present to the boss what’s popular and what seems to need changing, and why. If the boss agrees with certain changes, note that and report back to people that they’ve been heard and heeded. Of course, not all wishes can be granted, and some requests will be denied because of solid business reasons. Report back to people on those, too, and explain the reasons the changes can’t be made. They’ll respect that, and you.