Staffing firms and their clients: Who is the employer?

The Affordable Care Act (ACA), with its so-called “play or pay” penalties under the employer mandate, has some businesses deciding not to increase their permanent workforce. Large employers must offer group health insurance to their full-time employees or pay a penalty. That has many employers turning to staffing agencies as a cost-saving solution.

“Generally, staffing firms offer lower benefits for the temporary workers placed with clients as compared to a business’s permanent employees,” says Jules S. Henshell, of counsel at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Henshell about the employer mandate and the use of staffing agencies.

What is the employer mandate?

The ACA added Section 4980H to the IRS Code to require applicable large employers to either offer their full-time employees, including full-time equivalent employees (FTEs), affordable, minimum essential health coverage or pay a penalty. For 2015, employers with at least 100 FTEs are subject to this so-called pay or play mandate. In 2016, the mandate becomes effective for employers with at least 50 FTEs.

For 2015, an employer that fails to offer minimum essential coverage must pay a penalty of $2,000 per year for each full-time employee minus the first 80 if any full-time employee receives a tax credit to purchase health insurance through a health care exchange. Beginning in 2016, the penalty is based upon the number of full-time employees minus 30.

An employer may be liable for a penalty of $3,000 annually for each full-time employee who receives a tax credit because the employer does not offer coverage that is affordable or fails to provide minimum value.

How can staffing agencies help business owners comply with the ACA, contain costs and avoid penalties?

If a business uses temporary workers from a staffing agency, it can get work done without increasing its FTE count. If the business is close to the threshold for becoming a large employer, using a varying number of temporary workers hired through staffing agencies can save benefit costs. A small business with fewer than 25 FTEs could bring in temporary workers as needed, remain below the employee threshold and thereby maintain eligibility for health care tax credits under the ACA.

By using a temp-to-perm hiring plan, businesses can delay the cost of providing health insurance. The staffing agency supplies qualified candidates. If they don’t work out, the client can request another worker from the staffing agency without having to go through the firing process.

Is the staffing agency responsible for the ACA pay or play obligations?

The determination of who is the employer is complicated in a scenario in which a business retains the services of temporary and contract workers through a third-party staffing agency. The operating premise of the staffing industry has been that a staffing firm is the employer of the workers it assigns to clients for the purpose of tax and benefits laws.

It remains to be seen, however, whether the ACA’s shared responsibility requirements will impact which entity is deemed to be the common law employer and subject to the employer mandate penalty. That determination requires a case-by-case factual analysis. There are some 20 factors that are considered by the IRS. Those factors address what entity has behavioral, financial and legal control over a worker. The fact that a staffing contract designates which party is the employer is not dispositive of the issue, according to the IRS.

How can businesses using staffing agencies limit their risk under the ACA?

Together with counsel, businesses should review their staffing agreements, operations and financial arrangements and determine who is likely to be deemed the employer under the common law test. Businesses and staffing firms should each assess internal compliance with the ACA employer mandate by reviewing health insurance coverage, correctly tracking employee hours and accurately identifying new workers as variable hour, part-time, seasonal or full-time. Also, review and revise all staffing agreements to promote the reliability of representations that the staffing firm is the employer and it will provide adequate offers of health coverage where required by the ACA as well as indemnification of the business client.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

Companies must be thoughtful in how wellness programs are offered

Corporate wellness programs lead to healthier and more productive employees, as well as reduced insurance premiums. There are challenges, however, in the design and implementation of these programs, says Daniel K. Glessner, attorney at law with Brouse McDowell.

“Wellness programs are viewed by employees in different ways,” Glessner says. “Some see them as a violation of their privacy and do not want to be told that they have to do certain things to participate in a wellness program.”

This leaves employers in a tough spot. In order to maximize savings on health care expenses and reduce insurance premiums, you need to maximize participation. But there are legal considerations in terms of what you can do to compel employees to participate.

Smart Business spoke with Glessner about designing a wellness program that is compliant, maximizes participation and reduces your insurance premiums.

How can a wellness program help a company reduce insurance premiums?

Your savings is completely based on participation. Insurance companies will say if you get 80 percent of your people to participate, you will save X on your premium — savings resulting from an anticipated reduction in claims when you have healthier employees. There are also deductible business expenses, which can provide a tax advantage to corporations that have wellness programs.

What legal considerations should companies be concerned about?

Under the Affordable Care Act, employers may reward employees for participation in nondiscriminatory health-contingent wellness programs. However, the Americans with Disabilities Act (ADA) requires participation in wellness programs to be voluntary. That leads employers to the question — what does voluntary mean?

In late 2014, the Equal Employment Opportunity Commission (EEOC) began targeting corporate wellness programs under the ADA. The EEOC has sued in cases where employees were required to pay the full cost of their health plan premium and fined $50 if they did not complete a health assessment and fitness test, and in a case where an employer required that employees submit to certain testing or their insurance coverage would be cancelled.

Most recently, the EEOC sued Honeywell over its wellness program, which requires employees to get biometric testing, or stand to lose the contribution to their health savings account and incur a $500 surcharge on their insurance premiums. This case is still pending and leaves many unanswered questions for employers. The EEOC has acknowledged that with regard to voluntary wellness programs, the meaning of ‘voluntary’ warrants further clarification.

Until that happens, be transparent in communications to your employees. Emphasize rewards for those who participate and refrain from punishing those who don’t. Be clear about how personal information is collected, why it is needed, and how it will be protected. A good rule of thumb is to offer your employees a discount on their premium in return for completing a health assessment, rather than charging them if they fail to complete testing.

How does physician pay/reimbursement factor into the wellness equation?

The payment structure from Medicare and commercial insurers is trending towards risk-sharing. Providers have a strong incentive to have a healthy patient population. Where a hospital’s reimbursement is based on having healthy patients, incentive pay for its employed physicians may be based on metrics that determine a healthy patient population.

The use of electronic health records also makes it easier to have a recurring dialogue with patients that encourages a healthier lifestyle. Momentum is in place to improve wellness programs in the workplace and in the process, reduce insurance premiums. For naysayers, consider the power of one life that is changed.

If one or two people quit smoking, monitor their diet or manage their diabetes, that’s a great start. Ultimately, corporate wellness programs are encouraging employees to become healthier. The challenge lies in implementing a wellness program that complies with the law and effectively incentivizes employees.

Insights Legal Affairs is brought to you by Brouse McDowell

Energy efficiency audits can be a valuable tool in reducing expenses

Business owners who continuously evaluate the energy it takes to power their company and then search for ways to do it more efficiently can significantly reduce their expenses, says Christopher J. Allwein, Of Counsel at Kegler, Brown, Hill + Ritter.

“It’s easy to remember to turn out the lights when you leave a conference room,” Allwein says. “That’s conservation. Energy efficiency is finding ways to do what you need to do to power your business, but do it with less energy. With the rapid pace of technological innovation, it’s important to go back every so often and look at what’s out there to make your business more energy efficient.”

Smart Business spoke with Allwein about developing good energy efficiency practices.

What are some easy steps a company can take to be more energy efficient?

You can begin your pursuit of greater energy efficiency by hiring an energy services professional to come in and conduct an audit of your power usage. If your company is within the territory of an investor-owned utility, contact that utility and review what programs are available for businesses.

Start by identifying obvious areas where efficiencies can be gained cost-effectively (lighting, motors, etc). Next, re-examine processes that may be energy intensive and see if there is a way to accomplish the same result with less energy. Maybe there is a strategic opportunity to cut a couple steps out of a process or new technologies that could enable you to complete that process more efficiently.

What is cogeneration?

Cogeneration, more commonly known as combined heat and power, or CHP, integrates the production of usable heat and power in a single, high-efficiency process. It is not a single technology, but an integrated energy system that can be modified depending upon the energy needs of the process or end-user. Most CHP facilities employ a natural gas generator, but the process is fuel neutral, meaning you could also employ waste heat, fuel oil, etc.

CHP generates electricity and captures the heat byproduct, which can be utilized for space conditioning or as part of a manufacturing process. It reduces the amount of electricity that a business has to pull through utility wires. It’s more efficient because you have excess heat capture that you can now use to power another part of your business. CHP facilities are typically between 70 and 80 percent efficient.

What programs are available to help fund such energy efficiency initiatives?

There are several available from Ohio utilities. Dayton Power & Light just announced a program that provides a fairly significant incentive not only for the project itself, but it also provides funding to offset the cost of an audit. American Electric Power (AEP) Ohio and Duke Energy have also proposed or provided incentives for customers participating in their programs.

If you receive service from an investor-owned utility and think your company might have potential for a CHP facility, you should contact that utility to see what is available. A good approach is to identify the opportunity and then look for rebates or incentives that are available either through the utility or through the state and federal government to offset the cost of the facility and decrease payback time.

What else can companies do to promote energy efficiency?

The best eyes and ears to discover that potential are your employees. Talk to your employees and department managers about the processes they follow to complete their work. Find out if they have ideas to streamline a process. Energy efficiency helps the utility companies deal with forecasted increases in future demand. It’s a way to control future demand increases by making any increase more steady and predictable.

How does the process become easier with a new facility?

The idea of starting something from the ground up when expanding a facility or building a new location is something that is being emphasized in architecture and pre-construction engineering. By investing a little more upfront to make the structure more efficient, you’re going to save quite a bit once you’re in operation or once the new space is occupied. It’s a huge opportunity.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

What employers need to know about notifying employees

Employers are scrambling to comply with the requirements of the new California sick leave law, the Healthy Workplace Healthy Family Act of 2014.

The law, which covers all types of employees, including interns, part-time and seasonal workers, says that employees who work in California for 30 or more days within a year from the beginning of employment are entitled to at least one hour of paid leave for every 30 hours worked.

“This law applies to employers of all sizes, from those that employ a few individuals who work from their homes to companies that have a workforce that includes thousands of employees,” says Olivia Goodkin, a Labor and Employment Partner at Greenberg Glusker. “It also requires employers to notify employees of their rights.”

Smart Business spoke with Goodkin about what employers need to know about their notification obligations under this new law.

What are the posting and notice requirements employers must follow?

As of Jan. 1, 2015, employers were required to post information about the Healthy Workplace Healthy Family Act in a conspicuous location at the workplace and provide individual notices to both new and existing employees regarding the new sick leave policies. Although notice requirements took effect on Jan. 1, 2015, employers may delay changing their actual sick leave policies until July 1, 2015.

There has been some confusion about the notice requirement. California law, specifically the Wage Theft Protection Act, requires employers to distribute written notices to new nonexempt employees with information regarding wages, workers’ compensation coverage and now compliance with the new sick leave law.

Most employers use the approved notice that is posted on the Division of Labor Standards Enforcement (DLSE) website for these purposes — the DLSE, in addition to providing the notice, is also charged with interpreting and enforcing the new sick leave law.
The notice must be completed and provided to all nonexempt employees hired on or after Jan. 1, 2015, at their time of hire. But it is never too late to provide the notice if you have not done so already.

Under the new law, what must happen if an employer changes its sick leave policy?

According to the DLSE’s FAQs section of its website, the notice must be given to all nonexempt employees both at the time of hire and also at the time any information on the notice changes. For example, if an employer changed its sick leave policy on Jan. 1, 2015, then information about the change needed to be given to existing employees at that time.

The notice is not strictly required. The new information, however, must be communicated in a separate written document containing the required information. Thus, if you have distributed a new handbook or sick leave policy to employees — hopefully with an acknowledgment form for the employee to sign — then you can bypass use of the notice for existing nonexempt employees.

Employers that wait until July 1, 2015, to change their sick leave policies may wait until that time to provide either the notice or another written document to their existing employees, notifying them of the change.

The FAQs also state, somewhat confusingly, that even if an employer’s existing sick leave policy complies with the new law and no changes are made, the notice must be distributed to existing employees containing information about the sick leave law. Although the statute only requires notices to be given to nonexempt employees, it’s recommended that for any change in policy, written notification is distributed to all affected employees.

What questions do employers still have regarding the new law?

While some questions have now been answered by the DLSE, other questions remain. One common question, how employers should determine sick leave entitlement for part-time employees, has been answered. If, for example, a part-time employee is provided three sick days, the three days are considered 24 hours, the minimum required under the law. If the part-time employee regularly works five-hour days, and one sick day is considered five hours, the employee will therefore have 19 hours remaining. ●

Insights Legal Affairs is brought to you by Greenberg Glusker

How sellers can recover if real estate buyers back out of a deal

Despite entering into a written agreement to buy real estate, buyers sometimes back out of their deal and refuse to buy. When this occurs, a seller may be able to recover losses incurred based on the buyer’s breach.

Smart Business spoke with Andrew D. Campbell, a partner with Novack and Macey LLP, about some of the options disappointed sellers have when buyers renege on deals.

If a buyer won’t close on a deal, what should a seller do?

The first thing a seller should do when a buyer backs out on a deal is to review the terms of the purchase agreement. Most agreements require a buyer to provide earnest money to the seller. If the sale goes through, this money is applied towards the purchase price of the property. In the event that the buyer backs out, some sales agreements provide that the earnest money will constitute liquidated damages and will be the seller’s sole remedy.

What if the agreement does not limit a seller’s remedy to the earnest money?

If keeping the buyer’s earnest money is not the seller’s only remedy, the seller has to assess whether he or she has in fact been damaged by the buyer’s breach. For example, if a buyer deposits $100,000 in earnest money and walks away from the deal, the seller has not been damaged if the property later sells at a price equal to or $100,000 less than the contract price with the first buyer.

What if the value of property decreases by more than the amount of the earnest money?

For many buyers who entered into purchase agreements just before the great recession this ‘what if’ was a reality.
In one recent case, a buyer agreed to purchase property in late 2006 for $1.2 million with a closing in early 2007. The buyer reneged, claiming he could not get financing because of the recession — there was no financing contingency in the agreement — while the real estate market was collapsing. The seller eventually sold the building in July 2007 for about $900,000. In that case, the seller sued the buyer who reneged at the $1.2 million price.

What types of money damages can a disappointed seller recover?

The principal form of recovery that sellers may recoup when a buyer breaches is the contract price less the fair market value at the time of breach.

In deciding fair market value at the time of the breach, courts often look at what the property sells for a ‘reasonable’ time after the buyer breaches. A reasonable time can be up to a year after the breach. So, in the case where the buyer backed out of the $1.2 million deal and the seller sold at $900,000, the seller was entitled to at least $300,000, referred to as benefit of the bargain damages.

In addition to benefit of the bargain damages, some courts allow sellers to recover expenses incurred in obtaining a new buyer. These costs can include brokers’ commissions and expenses for advertising.

Further, if the seller does not have beneficial use of the property while it is looking for a new buyer, it may be able to recover expenses such as maintenance, utilities, taxes, insurance premiums and other reasonably foreseeable expenses that the seller had to cover following the buyer’s breach.

At bottom, a seller’s goal is to sell his or her property at an agreed upon price. If a buyer refuses to go forward at the price agreed to, the seller is entitled to be made whole. Making sellers whole includes providing the seller with the difference between the contact price and the value of the property at the time the buyer breaches and may also include carrying costs and costs for obtaining a new buyer. ●

Insights Legal Affairs is brought to you by Novack and Macey LLP

Five tips for building a stronger, more sustainable franchise business

Franchising can be a lucrative opportunity for your business, providing the means to expand both your brand awareness and geographic footprint while also earning additional profit through royalty payments.

But many franchise systems fail because they fail to build an infrastructure that can support the new business model.

“Close to 75 percent of all startup franchisors fail within the first 10 years,” says Kacie N. Davis, associate with Kegler, Brown, Hill + Ritter. “A lot of owners see the potential in franchising their business concept and how quickly they can grow their brand and receive a new revenue stream. However, some fail to realize the initial cost of compliance and other important factors. There are things which need to be considered before you franchise.”

Smart Business spoke with Davis about five key tips that can help build a successful, sustainable franchising business.

Tip No. 1 – Establish legally compliant operations from the beginning

Make sure your franchise system is in compliance with all federal and state regulations. The Federal Trade Commission regulates franchise sales and provides the minimum level of compliance for a franchisor. Sales of franchised businesses in violation of the FTC franchise rule are subject to penalties, the ability for franchisees to rescind their contract and other damages.

Various registration states also add a layer of additional compliance. The most important (and costly) piece of compliance for a franchisor is preparing the required Franchise Disclosure Document (FDD). The FDD is a comprehensive regulated report of the franchised business, providing franchisees with detailed information on the investment they are about to make. The FTC requires franchisors to provide prospective franchisees with the FDD at least 14 days before money is exchanged or contracts are signed. Find legal counsel who can help you prepare the FDD and navigate other requirements before you start selling.

Tip No. 2 – Select the right franchisees

Look for motivated, skilled people who are enthusiastic about your brand and concept, not those looking for a business to call their own. Prior industry experience is a plus. You may also want to set a net worth requirement for your franchisees, ensuring you select someone who can afford the franchise and inject enough capital to keep it running. The bottom line: Don’t just accept anyone interested in purchasing a franchise.

Tip No. 3 – Develop a systematic growth plan

Focus on intentional strategic growth rather than growing haphazardly. Everybody wants to see their business grow, but if you don’t have a plan from the start, you could end up with a model that is difficult to manage.

Develop a systematic growth plan of the areas you want to go into rather than just letting people pop up and come to you. Let your market analysis drive the growth plan and make sure you’re growing at a speed which allows you to maintain the necessary support to make it work.

Tip No. 4 – Consider franchisee profitability and satisfaction

Don’t lose sight of the return on investment for your franchisees. Their goal is to develop a business opportunity that provides more money than they would have earned in a traditional employment situation or by opening up their own independent business.

If you don’t focus on what the franchisee can make out of it, you’re going to have a hard time selling additional franchises. Franchisees are more satisfied when you support them through training, marketing support and other services. Give them the blueprint for an ongoing, successful business. This will in turn drive your profits and help sell future franchised units.

Tip No. 5 – Don’t lose sight of the brand and underlying business operation

Once you start franchising, your primary business becomes selling that franchise.

However, never lose sight of what the business is that you are selling. Keep building the brand and reputation for that business, whether it’s locally, regionally or nationally, to build your customer base. Focus on improving your operations and systems to keep your business competitive. These efforts will help aid you in selling additional franchised units.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

Why template employment contracts don’t work with foreign nationals

The pressure to streamline internal hiring processes and minimize legal costs often leads employers to utilize template employment agreements during the hiring process.

“Although the document may perfectly fit one type of employer and employee, it may be wholly inadequate for another set of parties,” says Isabelle Bibet-Kalinyak, an Immigration and Health Care Corporate Attorney at Brouse McDowell. “Additionally, labor and employment law is state-specific.”

Employers tend to reuse, tweak and customize the first agreement they obtain in-house, without further consulting legal counsel. Among the many pitfalls of this approach lie the obligations of U.S. employers who employ foreign nationals.

Smart Business spoke with Bibet-Kalinyak about some common traps employers can avoid when drafting employment agreements for aliens.

What is the most common issue with foreign nationals’ employment agreements? 

The most common and contentious issue is money. Who will pay for the government fees and legal costs associated with filing the immigration petition? Employers should reframe this question as follows: ‘Who can or should pay for such costs?’ The Department of Labor (DOL) and immigration regulations prevent employers from putting the burden of some costs on the employee at the onset of the hiring process. Employers cannot contract out of these obligations.

Does this apply to all types of immigration petitions or visas? 

Unfortunately, the rules differ from one type of petition to the other. For example, employers must pay all costs for H-1B and L-1 nonimmigrant visa petitions, with a narrow exception for premium processing fees, which allow the expediting of a petition in two weeks.

Similarly, employers cannot shift any of the costs of the Program Electronic Review Management (PERM) process, the first step to the permanent residence process also known as the green card process. During that initial phase, the employer obtains a prevailing wage determination from the DOL, undertakes a stringent recruitment process and applies for PERM labor certification with the DOL. While there are no filing fees involved, the recruitment fees (advertising) and legal costs can add up.

The costs of the immigrant petition (Form I-140) and adjustment of status (Form I-485) present unique challenges because the rules provide little to no guidance regarding which party should pay. Nonetheless, some state laws prohibit the shifting of costs considered ‘a business necessity.’ Whether costs constitute a business necessity depends on the circumstances.

Which costs may employers safely shift to employees?

The most conservative approach is to pay all costs and treat them as an investment in the foreign national. Another safe alternative is to shift only the costs which the law expressly defines as eligible for payment by the employee such as, but not limited to, the premium processing fees, the costs of applying for the Employment Authorization Document and Advance Parole to travel (Form I-765 and Form I-131, the EAD/AP Card), and the costs for the alien’s dependents. State law would dictate whether the cost of adjusting status, the last step in the green card process (Form I-485), can safely be added to this list.

What alternatives do employers have?

A pragmatic approach is to pay for the costs upfront and draft a claw-back provision in the employment agreement under which the employee agrees to stay for a reasonable period of time or repay the costs (only costs that can be legally borne by the employee).

The repayment may be pro-rated or payable in full if the alien leaves before the end of the period. What constitutes a reasonable period of time is subjective but generally, a two-year period should not be considered unconscionable. The above examples highlight the complexity and the interrelationship between immigration regulations and state labor laws.

Employers should therefore exercise caution when reusing and customizing employment agreements without legal counsel.

Insights Legal Affairs is brought to you by Brouse McDowell

Creating bring your own device policies to mitigate risks

Many companies today allow employees to use their personal smartphones or mobile devices to perform company business and access company data. While allowing dual-use devices may result in lower costs to a company initially, failing to plan for potential risks can be very costly in the long term.

Before a company allows employee-owned devices to be used for work purposes, a bring your own device (BYOD) policy should be created that’s specifically tailored to the company’s business and explains its expectations and practices.

“Rules relating to security and privacy can help protect a company’s confidential data, but rules addressing employee privacy and personal use of their devices can also mitigate potential risks,” says Christina D. Frangiosa, an attorney at Semanoff Ormsby Greenberg & Torchia, LLC.

Smart Business spoke with Frangiosa about BYOD policies and the importance of implementing security protocols.

How can companies secure their data?

Companies should require employees to agree not to disclose confidential company information to any unauthorized persons using their devices.

Employees must use best efforts to protect company data accessible on their devices from misuse, including applying passwords to their devices, relying on randomly-generated company passwords to access confidential company data, installing any company-required security software as a condition of obtaining access, and perhaps installing mobile device management software to allow the company to update access rights and secure company data in the event of a potential breach.

How should ownership of company data be communicated?

Identify the company’s basic claim to confidential data from the outset so that it’s clear what scope of protection the company claims. This identification can also remind employees that their limited access rights to company data can be withdrawn if they do not take precautions against misuse of their devices, or for other reasons company policies may outline.

How should loss or theft be handled?

Employees should be required to report a loss or theft of their devices immediately so that company-generated passwords can be changed, minimizing the potential exposure for a data breach. If the company has a mobile device management system in place, it may be able to remotely remove company data from an employee-owned device. The company should not remotely wipe the whole device, including the employee’s personal data, without the employee’s express written consent. But if a device is truly lost or stolen, the employee may grant such consent quickly. If an employee leaves the company, remotely wiping the whole device should not be automatic; express written consent is still required.

Is data stored on an employee’s personal device discoverable in litigation?

Maybe. If companies permit employees to conduct company business using their own devices, relevant communications about company business stored on these personal devices may be discoverable if the company gets sued, and the company may have to produce them to avoid sanctions.

Provide training to employees to be sure they understand this requirement. Begin these conversations as early as possible after the employee is hired and obtain their written agreement to cooperate with the company if such an event occurs.

Companies may also need to inspect employee devices periodically to ensure that required security protocols have been installed, but should not exceed authorized access given to a device or access clearly personal areas of the device. Avoid the temptation to check an employee’s private email stored on another server. The Stored Communications Act and/or the Computer Fraud and Abuse Act may prohibit such access, and violations may expose the company to liability.

Who pays for device upgrades and service?

If the objective is to save money on the front end by permitting BYOD, then the company should clearly disclose that it does not provide technical support or device replacement at the company’s expense. BYOD devices are entirely within the control of the employee. The company’s only concerns should be with the manner in which these employee devices can access, store and/or share company data and company secrets.

Insights Legal Affairs is brought to you by Semanoff Ormsby Greenberg & Torchia, LLC

The legal risks that come with using social media as a hiring tool

When you turn to Facebook and Twitter to learn more about an individual you are considering for a job, you open yourself up to substantial legal risk, says Kailee Goold, an associate at Kegler, Brown, Hill + Ritter.

“Social media forums — Facebook, Twitter, LinkedIn and others — can reveal what is referred to in the legal world as an applicant’s protected status,” Goold says. “Gender, pregnancy, race, disability and even religion are bits of information you can collect about a person by way of a social media search.”

If you decide not to hire the applicant, and there is reason to believe you were negatively influenced by a protected status revealed in your social media research, your company could be looking at a discrimination lawsuit.

“People just don’t understand the liabilities and risks they are taking when they do this without a sound process in place,” Goold says.

Smart Business spoke with Goold about how to legally protect your business when using social media to make personnel decisions.

Is it legal to use social media to check out job candidates?

There is nothing outright illegal about viewing publicly available information as part of an informed hiring process and then making a hiring decision based on legitimate factors (e.g., not race or gender). But there are ways snooping on social media can easily go awry. For starters, it’s very dangerous to look through these sites and make assumptions if you are not familiar with them or don’t understand how they work.

So you should get educated on the various platforms and their purpose or get someone in your company who has that knowledge to do your social media research.

In fact, the solution that affords you the most protection against a lawsuit is to appoint a neutral nondecision-maker to handle this task.

How does using a nondecision-maker protect you legally?

It gives you a good defense. Let’s say you (as the hiring decision-maker) Google someone’s Facebook page and you see that the person is blind (or part of another protected class). You may be biased, even implicitly, against that person as a result of viewing this information. Even if you are not biased against the applicant, the applicant could still make the argument if you hire someone not similarly disabled.

So set up a barrier to avoid this issue altogether. To start, identify the legal disqualifiers that are valid reasons to not hire someone for the specific job. If violative of company policy, things like illegal drug use and use of hate speech may qualify and give you a nondiscriminatory reason to deny employment.

Once you have identified these legal disqualifiers, hand them off to someone who is not involved in the hiring decision. If the candidate is ultimately denied the job and says it was because you found something about his or her disability on their Facebook page, you can honestly say that it wasn’t a factor in your decision.

What else do employers need to know?

First, you can’t ask for passwords to someone’s social media accounts. You can’t interview the applicant and say, ‘Give me your password to Facebook,’ nor can you have the person sit at a computer in front of you and watch over his or her shoulder as they enter it. Similarly, you can’t create a false identity and try to friend the person on Facebook or connect on LinkedIn to gain access to information that is not publicly available.

Second, if you do find something in your research that you think is a valid disqualifier, print it out because this information can disappear in an instant. You want to have some evidence or documentation in the event the applicant brings a discrimination claim. You want proof that they were denied the job for a legitimate nondiscriminatory reason.

Third, and maybe most important, you should ask yourself if social media research is really necessary when it comes to hiring. Is what you’re going to find on Facebook or Twitter relevant to the job? If you’re looking for someone to manage your social media presence, maybe that makes a lot of sense. Otherwise, what are you looking for that you couldn’t get in an interview? Sometimes, you’re just asking for trouble.

Insights Legal Affairs is brought to you by Kegler Brown Hill + Ritter

How to prepare for death or disability

Preparing a will is one of the most valuable gifts you can leave for your loved ones.

A will insures that your estate will be distributed according to your wishes upon your death, and not pursuant to state intestacy law. And a power of attorney is imperative in the event of your disability to avoid an incapacity proceeding. You also need continuation plans for your business and home.

“It’s never too early to start the planning process,” says Howard Greenberg, managing member at Semanoff Ormsby Greenberg & Torchia, LLC. “You may think you’re too young to be concerned about preparing for death or disability, but anyone can have an accident or become ill, so it’s important to be prepared.”

Smart Business spoke with Greenberg about the importance of having a will and power of attorney, how to create business and household transition plans, and the value of providing information to family members and business associates.

Why is it important to have a will and power of attorney?

To insure that the right people and institutions receive what they’re supposed to, when they’re supposed to, and that the right people and institutions administer your estate, it’s important to have a will, as well as ancillary documents, including a power of attorney.

Otherwise, you will be subject to state intestacy laws, which may not accord with the way you want your assets distributed.

And if you’re disabled, it could become necessary to have a guardian appointed in an expensive incompetency proceeding if you have no power of attorney directing who can handle your assets.

How have new technologies affected how wills are accessed?

Most people have accounts with vendors, banks, security firms, etc.

Many access their records online.

Many people don’t receive paper statements. If someone passes away or becomes disabled, there is a significant chance that until tax season — when you might get 1099 forms and the like — you would have no idea about a person’s account information.

It’s important to have a list of accounts and password information in a secure place, like a safety deposit box, or secure storage site, known to your heirs or advisers.

What about business and household transition plans?

A business transition plan requires being prepared with a management plan for your company to function without you in the event of death or a disability.

Do you want the business to continue, or be sold or liquidated? Who is going to manage the business? Is that future management in place and what steps have you taken to induce them to stay in place? Who will make policy and strategic decisions?

If you die or become disabled and don’t have a plan that addresses these questions, it might be too late, managers may leave, no one will step in to direct the business and your thriving business will suffer. Unfortunately, your family, and your employees will suffer with it.

For household transition plans, similar principles to business transition apply. In most families one person handles bill paying, makes sure that repairs are done, contacts the plumber, makes sure that the gardener comes, etc.

Another family member should be aware of these household functions in case the responsible manager passes away, or is not functioning.

Similarly, one family member is often responsible for dealing with family accountants, lawyers and investment advisers.

These professionals need to be ready to act in the event of a death or disability. It’s crucial that the survivor knows who to contact and how to contact those advisers should it become necessary.

How should one provide directions to family?

You should write a letter to your spouse, children, or other loved ones outlining a plan in the event you become disabled or die. The plan should cover your spouse, household, family and business.

The letter should be concise and address who will be in charge of various functions and what assets are available and what professionals will assist.

If you don’t provide directions to your loved ones, locating assets and professional advisers will be a major problem, will cause them to incur needless professional expenses, and could result in losses to your estate and business. ●

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