10 Resolutions for 2010 That Every Employer Should Make

While you are focused on taking advantage of to grow your business in 2010, don’t inadvertently expose yourself to a lawsuit or Department of Labor audit. To protect yourself legally, resolve to implement the following 10 key resolutions in 2010 to help limit and avoid employee-related liability:

1. Use written commission agreements for sales staff. Prevent commission disputes by having written agreements with sales staff. These agreements should include the commission rate and commission calculation, when commissions are earned (e.g., when the product/service is sold or when the customer payment is received), when commissions are paid, and how long after termination a sales rep might still receive commissions. In New York State specifically, the NY Department of Labor will assume the employee’s version of commission calculations is correct unless there is a written agreement saying otherwise. Other states may have similar rules.

2. Properly distinguish between independent contractors and employees. “1099 employees” do not exist—someone providing services is either an employee or an independent contractor. The proper classification depends on the degree of control and other specific factors, not the designation you and the individual agree on. If you can dictate the hours worked, the work location, and/or how to do the job, the person is almost certainly an employee.

Utilize written contracts with independent contractors, but avoid them with employees. They may inadvertently tie your hands. Employee benefits, policies, and guidelines should be in an employee handbook that can be changed at the employer’s option; this is in contrast with employee contracts, each of which would need to be changed individually. Independent contractor agreements set out all the provisions that distinguish contractors from employees and are evidence of the contractor’s agreement to those provisions.

3. Properly classify employees as exempt or nonexempt from overtime wages. The classification does not hinge on whether employees receive a salary or hourly wages. Everyone is entitled to overtime pay unless they fall under one of the exemptions to that rule. Being exempt from overtime pay depends primarily on the employee’s duties and responsibilities, not how you structure payroll. Information on the various exemptions can be obtained from overtimeadvisor.com, and from the Department of Labor’s website.

Ensure overtime is paid to nonexempt employees working more than 40 hours in one workweek. Even if employees are paid semimonthly or biweekly, overtime is earned based on hours worked over 40 during a single workweek. Avoid disputes by keeping accurate written records of hours worked by nonexempt employees, and make sure they sign off on them.

4. Make sure your hiring practices are in order. Avoid discrimination or hiring the wrong applicant. Ask appropriate, non-discriminatory questions, and make decisions based on merit, skills, and other job-related factors. Advertise to a diverse applicant pool, rather than relying solely on employee referrals. Also, use background and reference checks to help select honest, reliable applicants who pose no risk to your property, employees, or customer base.