Perspectives

A well-structured performance management process is a vital tool for employers. Not only does it help align individual contributions with organizational goals, but it also boosts employee engagement, productivity, and long-term success. Here’s a guide for employers on crafting a performance management strategy that not only drives performance but also fosters a fair, supportive workplace.

Key Elements of an Effective Performance Management Process

1. Continuous Performance Development: Performance management is not a one-time event; it’s a continuous cycle of identifying, measuring, and developing employee performance. By consistently communicating expectations and offering opportunities for improvement, employers can create a culture of transparency and fairness.
   • Open Communication: Effective performance management starts from the hiring stage. Clearly communicate job descriptions, work rules, and performance standards. This sets the stage for employees to understand what is expected of them.
   • Timely Feedback: Provide employees with regular, constructive feedback. Don’t wait until a formal review; let them know where they stand and offer guidance on how to meet performance standards.
   • Documentation: Keep detailed notes of all discussions. Document the date, people involved, and a summary of the conversation. For instance, “On May 15, I advised Frank that his error rate for processing claims is 5%, which is above the acceptable range. We discussed strategies for improvement.”
2. Aligning Individual Performance with Organizational Goals: An effective process ensures that each employee’s performance aligns with the larger organizational objectives. This fosters a sense of purpose and accountability, empowering employees to understand how their role contributes to the company’s success.
   • Establish Clear Goals: Set measurable, achievable goals that align with the company’s mission. Employees who understand how their goals impact the organization are more likely to feel engaged and motivated.
   • Reduce Legal Risk: When employees are notified of performance issues before termination, they are less likely to file claims. Should a claim arise, written warnings are invaluable for demonstrating that the employer’s actions were justified.
   • Formal Evaluations and Continuous Review: Human Resources (HR) plays critical role in ensuring consistent and fair treatment. HR can review managerial decisions to confirm that they are aligned with the company’s policies and have been handled consistently across similar situations.

Key Components of a Performance Management System

1. Goal Setting: Setting clear and realistic goals is the first step in aligning performance with expectations. These goals provide a roadmap for employees, offering clarity on what they should achieve. When employees are aware of their targets, they are more likely to contribute effectively.
2. Continuous Feedback: Feedback shouldn’t be reserved for annual reviews. Regular feedback-both positive and corrective- helps employees stay on track and feel valued. It’s essential that this feedback is well-documented and timely.
3. Performance Appraisals: Conduct formal evaluations to assess employee’s achievements and areas for improvement. Performance appraisals provide an opportunity to discuss progress, reinforce goals, and address any concerns. Remember, consistency is crucial-similar performance issues should be addressed in a similar manner.
4. Development Plans: Growth opportunities keep employees engaged and motivated. Creating development plans for employees, including training, skill-building, or career advancement opportunities, can enhance loyalty and performance.

Compliance and Legal Protections

An effective performance management process is also a valuable asset for legal compliance. Regular documentation, written warnings, and clear communication can shield employers from potential legal issues. Here are some tips for maintaining a legally compliant performance management system:

• Keep Records: Ensure all performance-related documentation is securely stored in the employee’s personnel file. Notes from 1:1 meetings should be kept in a manager file, and electronic communications should be professional, as they may be discoverable in a lawsuit.
• Involve HR: HR provides an independent review of disciplinary actions, ensuring that they are fair and consistent with company policy.

Partnering with Legal and HR Professionals

Navigating performance management can be challenging, especially when disciplinary action or termination is involved. To manage this process compliantly, work with trusted legal counsel and HR professionals. These experts can guide you in implementing performance management strategies that not only improve productivity but also help you minimize legal risks, fostering a productive and legally sound work environment.

Partial-day absences for exempt employees can create confusion for employers. The Fair Labor Standards Act (FLSA) has strict rules on salary deductions, and understanding these rules is essential to avoid costly compliance issues. Let’s examine a common scenario to highlight the right approach for managing partial-day absences in a compliant way.

Case Study: Partial-Day Absence Deduction

Scenario: Maria, an exempt employee, takes a half day off for a medical appointment. Her employer deducts four hours of pay from her weekly salary to account for this absence.

Impact: This deduction reduces Maria’s salary based on the hours worked, which is a violation of the FLSA. Exempt employees, under the FLSA, must receive their full salary for any week in which they perform any work, regardless of hours worked, with limited exceptions.

Correct Approach: Maria should receive her full weekly salary despite her partial-day absence. If her employer has a Paid Time Off (PTO) policy, they are permitted to deduct the four hours from her PTO balance instead. If Maria’s PTO is exhausted, her salary should still remain unaffected by the absence.

Key Takeaways for Employers and HR Professionals 

• Understand the FLSA Rules on Salary Deductions for Exempt Employees

Exempt employees are generally entitled to their full weekly salary if they work any part of the week, with very limited exceptions. Partial-day deductions from an exempt employee’s salary are typically prohibited.

• Implement a Clear PTO Policy

A well-defined Paid Time Off policy allows employers to manage partial-day absences in compliance with FLSA guidelines. Employers can deduct partial-day absences from an exempt employee’s PTO balance without affecting their salary.

• Avoid Salary Deductions After PTO Exhaustion

If an exempt employee has used up all available PTO, you still cannot reduce their salary for a partial-day absence. It’s important to communicate this rule clearly to managers and payroll teams to prevent inadvertent violations.

• Train Supervisors and Payroll Staff

Ensure that your HR, payroll, and supervisory staff understand how to handle partial-day absences for exempt employees. Training them on these guidelines can help prevent misunderstandings that lead to compliance issues.

Applying This Lesson to Your Business

Consider conducting a review of your PTO policies and payroll practices to confirm compliance with FLSA standards. Are partial-day absences being managed correctly for exempt employees? Do supervisors and payroll staff know the rules and understand the correct procedures? Making adjustments now can protect your business from potential penalties down the line.

Consult Legal Counsel to Ensure Compliance

Handling partial-day absences for exempt employees requires a clear understanding of FLSA rules and your own company’s policies. To ensure full compliance, consult with experienced legal counsel who can review your policies and help you implement best practices. Reach out to our team to discuss how we can assist you in navigating complex employment laws and maintaining compliant, fair practices in your workplace.

The National Labor Relations Board’s (NLRB) General Counsel, Jennifer Abruzzo, recently issued a memo declaring that many stay-or-play provisions in employment contracts, which often take the form of Training Repayment Agreement Provisions (TRAPs), likely violate workers’ Section 7 rights under the National Labor Relations Act (NLRA). These provisions, designed to recoup costs like training or sign-on bonuses if an employee leaves their job within a specified period, have long been used by companies- but are now under heightened scrutiny.

Why Stay-or-Pay Provisions Violate Section 7 Rights

At the heart of the issues is the way these provisions restrict employee mobility. TRAPs make it financially difficult for employees to resign, effectively coercing them into staying in roles they might otherwise leave. This can discourage employees from engaging in activities protected under Section 7, such as organizing, advocating for improved working conditions, or seeking new employment.

The NLRB’s General Counsel argues that these provisions interfere with worker’s rights by increasing the fear of job loss if they engage in protected concerted activities. Employees might be reluctant to quit or challenge workplace conditions if doing so would trigger a significant financial penalty, making it harder for them to exercise their legal rights.

Types of Stay-or-Pay Agreements Covered

The memo covers a wide range of provisions beyond traditional TRAPs, including:

• Educational reimbursement or repayment agreements
• Quit fees or liquidated damages clauses
• Sign-on bonuses or relocation stipends tied to a mandatory stay period

These provisions typically require employees to pay back costs or face penalties if they leave their job voluntarily or are terminated for reasons other than cause within a certain period.

What is Still Permissible?

The NLRB memo does not ban all forms of stay-or-pay agreements. Employers can still use repayment provisions, but they must be narrowly tailored to avoid interfering with Section 7 rights. Specifically, agreements are more likely to be considered lawful if they meet the following criteria:

1. Voluntarily Entered: Employees must freely choose to enter the agreement, with no undue financial or employment consequences if they decline. For instance, repayment terms tied to optional training or benefits, like elective educational opportunities, are generally permissible.
2. Reasonable and Specific Repayment Amount: The repayment amount must reflect the actual cost to the employer for the benefit provided. If the amount is higher than the actual cost, the provision is likely intended to restrict employee mobility, making it unlawful. Further, the amount of the repayment must be clearly communicated to the employee at the time the agreement is entered into.
3. Reasonable Stay Period: The length o f the required stay should be proportional to the benefit. For example, if the employer provides a costly relocation stipend, the stay period might reasonably be longer than than it is for less expensive benefits, like a sign-on bonus.
4. No Repayment if Terminated with Cause: Employees should not be required to repay amounts if they are terminated without cause. Otherwise, they might fear engaging in protected activities, worrying they could be fired and forced to pay.

60-Day Deadline to Modify Nonconforming Agreements

Employers currently using TRAPs or other stay-or-pay provisions should note that they have a 60-day window from the memo’s issuance to modify any nonconforming agreements. This essentially creates a December, 6, 2024, deadline to comply. Failure to do so could result in enforcement action by the NLRB, including the rescission of the provisions and potential financial liability for any financial harm caused to employees. It is critical for HR professionals and management to promptly review and revise any existing agreements to ensure compliance with the new guidance.

What this Means for Employers

Employers should carefully review their contracts and policies involving TRAPs or other stay-or-pay provisions. While the goal of retaining talent is valid, these provisions cannot come at at the cost of violating worker’s rights. HR teams and company management should ensure that any stay-or-pay provisions comply with the criteria stated above. Businesses should take note of these developments and ensure their policies are compliant within the 60-day window, focusing on creating retention strategies that respect employees’ legal rights and promote a healthy, motived workforce.

In light of these developments, it’s essential for employers to stay ahead of compliance issues by reviewing their stay-or-pay provisions and ensuring they align with the NLRB’s guidance. By taking proactive steps to modify agreements and protect workers’ rights, businesses can mitigate risks and foster a positive workplace culture. For tailored advice and support in navigating these changes, we recommend reaching out to your trusted legal advisor or contacting the Employment and Labor team at Wagner, Falconer & Judd to ensure your policies are fully compliant and designed to protect both your company and its employees.

Employers have a duty to engage in the interactive process when an employee requests accommodations for a disability. This collaborative process ensures that reasonable accommodations are provided, allowing employees to perform their job effectively.

Steps in the Interactive Process:

1. Acknowledge the Request

When an employee requests an accommodation for a disability, the employer must respond promptly. This step is critical not only to comply with the Americans with Disabilities Act (ADA) but also to show the employee that their request is taken seriously.

• Best Practices: Employers should have clear procedures in place for handling accommodation requests. This includes training managers and HR staff on recognizing requests, even if they are informal or don’t explicitly use the term “accommodation”. It is vital to avoid unnecessary delays, as failing to respond in a timely manner can be seen as a violation of ADA requirements.
• Legal Implications: If an employer ignores or delays a response, it may lead to claims of discrimination or non-compliance under the ADA.

2. Gather Information

Once the request has been acknowledged, the employer must gather relevant information to understand the employee’s disability and the type of accommodation needed. This step often involves open dialogue with the employee to better understand their specific limitations and job requirements.

• Best Practices: Ask open-ended questions to fully understand the employee’s situation, while being mindful of privacy and confidentiality. Involving HR, supervisors, or external experts, such as medical professionals, may help in identifying appropriate accommodations.
• Legal Considerations: Employers may request documentation about the employee’s disability from a healthcare provider, but this should be limited to confirming the need for accommodation, not an invasive inquiry into the individual’s medical condition.

3. Explore Accommodation Options

After gathering information, the employer should research and evaluate potential accommodations. Under the ADA, employers are not required to provide the exact accommodation the employee requests, but they must consider reasonable alternatives that allow the employee to perform their essential job functions.

• Best Practices: Collaborate with the employee to brainstorm accommodation options that work for both parties. Common accommodations might include modifying work schedules, restructuring job duties, or providing assistive technologies.
• Reasonableness Standard: Employers should keep in mind that accommodations are considered “reasonable” if they don’t create an undue hardship for the business. Factors like the cost of accommodation, the size of the business, and its overall resources are all considered in determining undue hardship.

4. Implement Accommodations

Once an agreement on the appropriate accommodation is reached, it’s time to implement it. This may involve making physical adjustments to the workplace, providing new equipment, or altering work schedules or duties.

Best Practices: Ensure all stakeholders, including the employee’s supervisors, are informed of the accommodation so it can be integrated smoothly. It’s important to document the accommodation process and provide any necessary training or support for the employee to effectively use the accommodation.

Potential Challenges: Sometimes accommodations require adjustments to work processes, which may cause initial disruption. Clear communication is key to minimizing confusion or frustration from both the accommodated employee and the broader team.

5. Monitor and Evaluate

After accommodations are implemented, employers must continue to monitor their effectiveness. Disabilities and job demands may evolve over time, making it crucial to check in with the employee regularly to ensure the accommodation remains suitable.

Best Practices: Set regular follow-up meetings to review how the accommodation is working and address any concerns or adjustments that may be needed. Keep communication open so that the employee feels comfortable discussing if their needs change.

Documentation: It is important to document these evaluations and any changes to the accommodation to protect the company in case of future disputes or claims of non-compliance.

By following these steps, employers can not only support employees with disabilities but also demonstrate a commitment to an inclusive and compliant workplace. The interactive process should be seen as a continual dialogue between the employer and employee, fostering collaboration to find effective solutions. Moreover, compliance with the ADA protects businesses from legal risks while promoting a positive work environment that values diversity and equal opportunity.

Developing a Robust Compliance Program Can Protect from Litigation from Internal Sources

Developing and maintaining a robust compliance program is critical for businesses to protect themselves from potential litigation arising from internal sources, such as employees or management. Understanding the importance of a comprehensive compliance program is essential to safeguarding a business’ financial and legal interests, ensuring that operations are conducted in accordance with relevant laws and regulations.

The Role of a Compliance Program

A compliance program is a structured set of policies, procedures, and practices designed to ensure that companies and their employees adhere to legal and ethical standards. A robust compliance program serves as a first line of defense against internal risks by promoting a culture of accountability and transparency within the organization. It helps prevent misconduct, detect violations early, and respond effectively to any issues that arise, thereby reducing the likelihood of litigation.

Key Components of a Robust Compliance Program

1. Clear Policies and Procedures: The foundation of any compliance program is a set of well-defined policies and procedures that outline the company’s expectations for ethical behavior and legal compliance. These should cover a wide range of areas, including workplace safety, anti-discrimination, harassment prevention, data privacy, and financial reporting. Policies should be easily accessible to all employees, written in clear language, and regularly updated to reflect changes in laws or business practices.
2. Training and Education: Regular training programs are essential to ensure that employees understand their responsibilities under the compliance program. This includes not only initial onboarding training but also ongoing education on topics such as regulatory updates, ethical conduct, and specific risks relevant to the company’s operations. Training should be tailored to different roles within the organization, ensuring that all employees, from front-line workers to senior management, are equipped to comply with applicable laws and policies.
3. Internal Reporting Mechanisms: A key aspect of a compliance program is the establishment of effective internal reporting mechanisms. Employees should have a clear and confidential way to report concerns or potential violations without fear of retaliation. This can include anonymous hotlines, secure online reporting tools, or direct access to compliance officers. Encouraging employees to report issues internally allows the organization to address problems early, before they escalate into legal disputes.
4. Monitoring and Auditing: Regular monitoring and auditing of compliance activities are crucial for detecting potential issues and ensuring that the program is being implemented effectively. This includes conducting internal audits of financial transactions, reviewing adherence to safety protocols, and assessing the effectiveness of training programs. Audits should be conducted by independent personnel or external experts to ensure objectivity and thoroughness.
5. Enforcement and Discipline: A robust compliance program must include clear enforcement mechanisms for dealing with violations. This means having a consistent and fair disciplinary process in place that holds employees accountable for misconduct. Disciplinary actions should be well-documented and applied uniformly across the organization to prevent claims of unfair treatment or discrimination, which can lead to litigation.
6. Leadership Commitment: The success of a compliance program depends heavily on the commitment of the organization’s leadership. Senior management must lead by example, demonstrating a strong commitment to ethical conduct and compliance with laws and regulations. This includes allocating sufficient resources to the compliance program, regularly communicating its importance to employees, and actively participating in compliance initiatives.

Benefits of a Robust Compliance Program

Implementing a comprehensive compliance program offers several key benefits that can protect companies from internal litigation:

• Litigation Prevention: By proactively addressing potential issues and promoting a culture of compliance, companies can prevent internal disputes from escalating into costly litigation. Employees are more likely to resolve concerns internally if they trust that the organization takes compliance seriously.
• Legal and Financial Protection: A strong compliance program helps ensure that everything operates within the bounds of the law, reducing the risk of legal violations that could result in fines, penalties, or lawsuits. This not only protects the company’s finances but also its reputation.
• Improved Employee Morale and Retention: A workplace culture that prioritizes ethical behavior and compliance fosters a positive work environment, leading to higher employee morale and retention. Employees who feel valued and respected are less likely to engage in misconduct or file lawsuits against the company.
• Enhanced Operational Efficiency: Compliance programs help streamline operations by establishing clear procedures and reducing the likelihood of disruptions caused by legal disputes or regulatory investigations.

Ongoing Maintenance and Review

A compliance program is not a one-time initiative but an ongoing process that requires regular maintenance and review. Internal teams should work closely with legal counsel and compliance officers to continually assess the program’s effectiveness and make necessary adjustments. This includes staying informed about changes in laws and regulations, updating policies and training materials, and addressing any new risks that arise.

Developing and maintaining a robust compliance program can create a solid foundation for legal and ethical operations, significantly reducing the risk of litigation from internal sources and protecting long-term success.

To ensure your compliance program is comprehensive and tailored to your company’s unique needs, the Employment and Labor group at Wagner, Falconer & Judd is here to help. Our team of experienced attorneys and HR Professionals can work with you to assess, develop, and enhance your compliance strategies, providing the legal expertise needed to protect your business from internal risks. Contact us today to take your compliance program to the next level and safeguard you from costly litigation.

The landscape of workplace safety inspections is evolving, with new regulations from the Occupational Safety and Health Administration (OSHA) reshaping the dynamics between employers, employees, and third-party representatives. Effective May 31, 2024, a revised rule grants employees the right to choose a representative, whether an internal colleague or an external third-party, to accompany OSHA inspectors during workplace inspections.

This significant shift is designed to bring clarity and inclusivity to the inspection process. No longer bound by formal credentials, such as safety engineering or industrial hygiene qualifications, third-party representatives can now be selected based on their knowledge, skills or experience relevant to the workplaces’ hazards and operations. The purpose is clear: to facilitate effective and thorough inspections that prioritize safety and compliance.

However, with this newfound flexibility comes a need for careful consideration and preparation on the part of employers. Understanding the implications of this rule and how to navigate them is crucial for maintaining compliance and ensuring a smooth inspection process.

Key Points in the Revised Rule:

• Expanded Representation Options: Employees now have the freedom to choose either an internal colleague or an external third-party as their representative during inspections.
• Inclusive Representation Criteria: Third-party representatives are not limited to individuals with formal credentials. Instead, their selection is based on their ability to contribute positively to the inspection through their knowledge, skills or experience.
• Compliance Officer’s Discretion: The Compliance Safety and Health Officer retains ultimate authority to determine whether a third-party representative is reasonably necessary for an effective inspection. This decision hinges on the representative’s potential contribution to the process.

Employer Response and Preparation

In anticipation of these changes, employers must revisit their policies and procedures related to OSHA inspections. This includes:

Analyzing Good Cause: Employers should be prepared to assess whether there is a legitimate argument against the presence of a third-party representative and articulate objections to the compliance officer.

Monitoring Representative Activities: Employers must ensure that third-party representatives adhere to the scope and purpose of their presence, preventing any behaviors that could disrupt or interfere with the inspection process.

Ensuring Transparency: Employers can promote transparency by staying informed about the selection process for third party representatives, potentially through active involvement in safety committees.

Addressing Union Concerns

While unions may view this rule change as an opportunity to increase organizing activities, it’s crucial to emphasize that the presence of third-party representatives is strictly for aiding in inspections. Compliance officers retain the authority to exclude individuals whose conduct disrupts the process.

OSHA’s revised rule on third-party representation in workplace inspections represents a significant step towards inclusivity and effectiveness. By empowering employees to choose representatives based on their expertise, the aim is to enhance safety and compliance standards. However, employers must be proactive in understanding and implementing these changes to ensure a smooth inspection process while maintaining a focus on workplace safety and compliance.

As employers adapt to to these changes, it’s essential to see guidance and expertise to ensure compliance while maintaining a safe working environment. If you find yourself grappling with updated regulations or need assistance in developing effective policies and procedures, we’re here to help.

On April 23, 2024, the U.S Department of Labor (DOL) issued a Final Rule raising the minimum salary thresholds for exempt employees under the Fair Labor Standards Act (FLSA). Exempt employees are (quite literally) exempt from the minimum wage, overtime, and time reporting provisions of the FLSA, allowing employers to pay these employees a weekly salary regardless of actual hours worked. The DOL sets the minimum threshold for compensation, and the positions must meet certain duties tests to be considered exempt. The Final Rule affects employees under the White Collar Exemption (executive, administrative, or professional) and Highly Compensated Employees’ Exemption.

Now and until July 1, 2024, employees occupying white collar exempt positions must be compensated at a rate of at least $684 per week ( about $35,568 per year). Similarly, employees in highly compensated positions must be compensated at a rate of at least $107,432 to qualify for the exemption.

The DOL, in its Final Rule, drastically raised these thresholds. But, potentially to soften the blow on the employers, the DOL is implementing the salary threshold increase in a two-part approach:

• First, effective on July 1, 2024, the salary level threshold for exempt employees will increase to a minimum of $844 per week (about $43,888 per year), and to $132, 964 per year for highly compensated employees.
• Then, starting on January 1, 2025, the threshold is set to increase to at least $1,128 per week (about $58,656 per year) for exempt employees and $151, 164 per year for highly compensated employees.

The Department of Labor plans on updating salary thresholds every three years beginning July, 1, 2027.

What Should Employers Do Now?

The Final Rule has already not been well received by some, and is expected to be challenged-which could delay implementation. Nevertheless, employers should proceed with caution and, despite the potential delay in the implementation, start preparing and budgeting for the changes.

• Employers could either prepare to increase employees’ salaries in a two-part approach, as the DOL suggests, first on July 1, 2024, and then again on January 1, 2025.
• Employers could also increase the salary threshold to January 1, 2025 levels on July 1, 2024.
• Employers can always convert the employees to the nonexempt status should the new thresholds be too burdensome.

As always, when it comes to exempt employees’ classification and compensation, employers should always seek experienced legal counsel. Our attorneys at Wagner, Falconer & Judd are always available to answer any of your questions.