Business Resolutions for the New Year

How to Make 2011 a Better Business Year

The New Year is here and it is a great time to make changes in your work environment by identifying old barriers to success and replacing them with new, more effective behaviors. The “To Do” list that follows offers the first five of nine suggestions in our two part series on creating a better business year in 2011.

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The suggestions are based on common sense and are relatively easy to implement. When executed properly, they can have a strong impact on your effectiveness. They are designed to limit corporate liability and also build morale and improve overall employee relations. No matter what, you are taking action to set a positive tone while improving professional standards

1. Make sure employees get feedback on a regular basis.

Once-a-year evaluations are not enough, and some HR gurus even go so far as to say that yearly reviews alone are worthless. Instead, employees should receive regular input from their supervisors. These discussions should typically focus on day-to-day performance objectives rather than on past mistakes or failures. This approach requires supervisors to observe and evaluate their employees regularly and to work closely with targeted individuals, as needed. In addition, make sure your managers give positive feedback for a job well done.

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2. Terminate poorly performing or disruptive employees.

This advice is an obvious companion to the first suggestion. However, many managers are unwilling to terminate an employee even when the action is justified. The most common reason is the fear of being sued, but others include organizational inertia, fear of confrontation, and concern for the employee’s economic well-being.

But, if you allow a poorly performing or disruptive employee to continue working, productivity and efficiency will suffer and discontent will spread. You can help limit the possibility of legal claims and make yourself more comfortable with taking decisive action by following your normal disciplinary process before you terminate. For most employers this process includes:

– Giving notice to the employee of the specific performance problems and the consequences of not improving;

– Establishing goals for improvement;

– Setting a reasonable timeframe for meeting the goals (normally two weeks to 30 days);

– Following up to see if there is improvement; and

– Terminating the employee if the goals have not been met.

(Download free Termination of Employment model policy including HR best practices and legal background.)

3. Pay overtime, even when you do not think it was properly authorized.

One of the surest ways to provoke a wage and hour claim is not to pay employees properly for overtime they have worked. According to Department of Labor (DOL) regulations, if you are aware that an employee is working more time than is scheduled, you must compensate the employee, even if you did not specifically request the additional work.

For example, if your policy requiring prior authorization for overtime work was not followed but a manager was aware the employee performed the work, you should pay for the overtime. Similarly, do not allow employees to work “off-the-clock,” for example after clocking out or during normally scheduled meal breaks. You can, and should, however, discipline the employee (and manager) under your normal disciplinary procedures for violating your work rule prohibiting unauthorized overtime.

4. Make sure your exempt employees are really exempt.

Over the last few years, the Fair Labor Standards Act (FLSA) exemptions have been the subject of several high-profile overtime cases, often involving employees who were managers in name only or administrative employees who performed primarily nonexempt job duties. Wal-Mart, Starbucks, RadioShack, Abercrombie & Fitch, and Family Dollar stores all have been targeted by class action suits alleging employees were improperly classified as exempt and seeking millions of dollars in unpaid overtime.

To ensure that your organization is not the next target of a multi-million dollar lawsuit or settlement, you should review the job duties of your exempt employees to make sure they are properly classified. In particular, make sure that their primary duties meet exemption requirements and that they are not spending too much time doing nonexempt work.

(Download free Hours of Work model policy including HR best practices and legal background.)

5. Review your independent contractor classifications.

Independent contractor classifications are another area that puts employers at risk. As a general rule, if you exercise too much control over the way a worker performs his job, the worker likely is an employee and not an independent contractor. The Internal Revenue Service (IRS) has collected millions in back taxes and penalties from employers who improperly classified employees as independent contractors. And, the IRS is not the only agency that will be after you. State labor, revenue, and unemployment compensation agencies have their own definitions of independent contractor, as does the federal Department of Labor and the National Labor Relations Board. As an example, Federal Express has spent the last several years fighting multiple state and federal lawsuits challenging its classification of home delivery drivers as independent contractors. These suits allege violations of the National Labor Relations Act, Family and Medical Leave Act, and state unemployment and tax laws.

Therefore, you should make it a priority to examine your independent contractor classifications. A good starting point is to look at the IRS 20-factor test for classifying independent contractors.


Robin Thomas, J.D.
Personnel Policy Service, Inc.

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