Article

Avoiding Legal Pitfalls

Which of the following restaurant owners might be exposed to legal liability in the hiring process?

1. Ariel, owner of Siren's Seafood Grotto, interviews Eric, a handsome young man with a winning smile, for a server position. Ariel's friend, who owns a restaurant in another town, referred Eric to her. After she asks a few questions about his experience and background, she thinks, "What a guy! I don't need to know anymore." She hires him.
2. "I'm a culinary school graduate and I have three years' experience in the kitchen of one of the finest French restaurants in the city," said Gaston to Belle, manager of the Le Provincial Village Bistro. "Can you work weekends?" she asks. "My religious beliefs prevent me from working on Sunday," he said. "Hmmm," Belle said. "I need someone who can work Sunday afternoons."
3. Buzz, owner of Pizza Planet, has 11 employees. Woody, a qualified accountant with a leg disorder, applies for the bookkeeping position. Woody notices that Buzz has difficulty walking. "We need someone who can bring the file boxes from our basement storage," he said. "Are you able to lift 25 pounds?" Buzz said he could not. Woody hires his nephew, Slinky.

If you had a hard time answering this question, you shouldn't feel bad. The above examples fall into legal "gray areas" of negligent hiring and discrimination, two important hiring legal issues.

Hiring isn't child's play. In the typically high-turnover restaurant business, the pressures can be crushing. In the fray, you can easily lose sight of the legal issues, which frequently bite new restaurateurs who lack hiring experience and are uninformed about the relevant laws. -- Barry Shuster

Hiring isn't child's play. In the typically high-turnover restaurant business, the pressures can be crushing. A new restaurateur needs to control labor costs. Positions often need to be filled in a hurry. You need to find people who can do the job well, and with a smile. In the fray, you can easily lose sight of the legal issues, which frequently bite new restaurateurs who lack hiring experience and are uninformed about the relevant laws.

Numerous federal, state, and local laws address various aspects of hiring, and like the restaurant business, employment law continually evolves. Government administrative agencies, such as the federal Equal Employment Opportunity Commission (EEOC), established by Title VII of the Civil Rights Act of 1964, educate workers about their rights and aggressively pursue violators. Employment-related lawsuits against businesses tend to be a favorite subject of national and local media and can attract unwanted publicity.

In this article, we'll review several key legal issues relevant to hiring, of which the startup restaurateur should be aware when recruiting and selecting employees. We'll also offer some practical hiring tips. Our goal is not to give you all the answers, but to help you ask some of the right questions.

Negligent Hiring

What happens if Eric, that bright young face Ariel just hired, has a history of violent outbreaks in the workplace, and punches a customer or fellow employee in an argument? If the court finds that a "reasonable" investigation into the employee's background would have disclosed his pattern of violence or misconduct, then the hiring manager and/or restaurant could be liable for the injured customer's damages under the legal theory of "negligent hiring." The argument would be that she failed to exercise "reasonable care" in screening that employee.

Negligent hiring recognizes that if your employees are brought in contact with members of the public in the course of your business, then you have a duty to exercise reasonable care in the selection (and retention) of them.

A key question in determining whether an employer has been negligent in hiring is defining "reasonable care." The definition varies slightly in each jurisdiction, but, as in most cases involving negligence, the courts look at the situation from the standpoint of a "prudent" employer. "Reasonable care" often hinges on the circumstances and common sense. For example, hiring a catering truck driver without requiring proof of a valid driver's license would certainly be lack of "reasonable care." In fact, in a number of cases involving negligent hiring claims, the employer failed to perform background checks, such as contacting the employee's references or criminal records.

In most states, the courts define reasonable care. In at least one state, Florida, the legislature attempts to provide employers guidance relating to liability for the "intentional wrongful acts" of an employee. According to Florida statute, an employer is presumed not to have been negligent in hiring an employee who intentionally injures or kills another person if, before hiring the employee, the employer takes at least one of the following steps:

1. Conducts criminal background checks through the Florida Department of Law Enforcement.
2. Makes a "reasonable effort" to contact references and former employers.
3. Uses employment applications that ask for specific information about criminal convictions.
4. Performs motor vehicle checks.
5. Interviews applicants.

(If an employer fails to conduct a background investigation, the law does not automatically presume that he or she failed to use reasonable care in hiring the employee.) To be adequately assured of how the courts view reasonable care in your state, you should consult with a local attorney to look at the case law and statutes, and provide guidelines based on both. You might ask your attorney what background checks are appropriate for the various restaurant positions. Your concerns in hiring a bartender will be different than those in hiring a catering truck driver.

The Screening Process --
Tips and Caveats

There are a number of services available to employers who wish to conduct criminal background checks on prospective employees. These include private investigative services, which are springing up in response to the increasing risk of negligent hiring claims. There are also Web-based services, such as www.nc123.com in North Carolina, which provides access to the criminal record of anyone in North Carolina, for a reasonable fee.

Most employers require a list of references from past employers or teachers. This is a simple request and one that shouldn't be skipped in the hiring process. It's good advice to talk with a minimum of three professional references; i.e., people with whom the candidate has actually worked on a daily basis, within the past five to 10 years. Employers should also verify all degrees and licenses that the prospective employee claims to have.

Don't become overzealous or overreaching in your efforts to investigate an applicant's history without conferring with your attorney. I know this advice seems to contradict caveats to exercise reasonable care.

It's a "Catch-22," to be sure, as employers run a tricky gauntlet, between exercising reasonable care in screening employees and avoiding liability for invading an employee's privacy or discriminating against him for certain behavior. For example, federal law prohibits you from discriminating against applicants who are rehabilitated from past abuse of alcohol or drugs and who no longer abuse alcohol or drugs. Also, federal law prohibits discriminating against applicants because they have filed for bankruptcy. Depending on the state, you may not be able to discriminate against an applicant because of past crimes, particularly if the crimes were committed as a minor, or a certain number of years ago.

Some laws require that you obtain the applicant's consent before requesting certain background information. Under federal law and the law of some states, educational records such as school transcripts are confidential. Under the Fair Credit Reporting Act, employers must get an employee's written consent before seeking the employee's credit report. You should also seek an applicant's consent before attempting to obtain medical or military service records.

It's also a good idea to limit your background checks to information that is relevant to the position. For example, a credit check might be useful to screen employees who will be handling money. A driving record investigation would seem reasonable if the person will be driving a vehicle as part of her duties. That said, you should obtain the candidate's consent and consult with an attorney if you feel that his history makes them an unsuitable candidate. You might want to standardize your background check for each particular position or type of position and have it reviewed by an attorney who is familiar with federal and state employment laws.

Unlawful Discrimination

No laws will penalize you for not hiring someone you don't like, need, nor want. That is, as long as your refusal to hire that person is not based on discrimination, as the law defines it. Discriminatory practices include not just bias in the recruitment, hiring, and firing of an employee. It is unlawful to discriminate in regard to compensation, assignment, or classification of employees; transfer, promotion, layoff, or recall; job advertisements; testing; fringe benefits; pay, retirement plans, and disability leave; or other terms and conditions of employment. An employee can also raise a discrimination claim if he is harassed in the workplace as a result of bias.

Since the early 1960s, Congress has passed a number of laws related to employment discrimination. Many states and even municipalities followed the federal government's lead with their own anti-discrimination laws. It can be complex. That's why you should become familiar with the major federal anti-discrimination laws, which are enforced by the EEOC.

• The Equal Pay Act prohibits paying wages based on sex by employers and unions.
• Title VII of the Civil Rights Act of 1964 makes it unlawful for employers with 15 or more employees "to discriminate against any individual with respect to his or her compensation, terms, conditions, or privileges of employment because of such individual's race, color, religion, sex, or national origin." The Pregnancy Discrimination Act expanded these laws to make it unlawful to discriminate against a woman who is pregnant. As the number of married and single mothers in the workforce increases, so have legal claims based on these laws.
• The American with Disabilities Act of 1990 (ADA) prohibits employers from discriminating on the basis of disability.

And that's just a portion of the laws that prohibit discrimination. As noted, most states have enacted their own employment discrimination laws, which may bestow even greater rights to employees than federal laws do. Depending on the offended employee's claim, an employer could be subject to administrative actions by the EEOC or state labor department, or a lawsuit in state or federal court. You will note that Title VII of the Civil Rights Act of 1964 applies to employers with 15 or more employees; many restaurants have fewer than 15 employees.

Even though you are a small business, you may not be immune from liability; in Oregon, for example, state anti-discrimination laws apply to all employers. And some states have expanded these anti-discrimination concepts to include laws designed to prevent employment discrimination based on sexual orientation or political affiliation.

Most of us do not consider ourselves sexist, bigoted, age-conscious, or insensitive to those who are different from us; nevertheless, it is easy to allow prejudices to influence hiring decisions if you are not actively aware of them. It is safe to assume that many people in "protected classes" know their rights; media attention to these matters has resulted in significant public awareness of civil rights.

Employers don't have to exhibit overt discrimination to risk liability under state or federal laws. Even seemingly benign questions during the interview process can raise the specter of discrimination. If you aren't disciplined in your interview process, it is easy to let "red flag" questions slip out. Many companies carefully draft and review pattern interview questions for specific jobs that ensure each applicant is being judged on his or her merits, and avoid questions that suggest selection bias. Even subtle inquiries can raise the question of prejudice, such as:

• What religion are you? What church do you go to? (Suggests discrimination based on religion.)
• Do you plan to start a family? (Suggests discrimination based on the prospect of pregnancy.)
• What country do you come from? (Suggests discrimination based on national origin.)
• Are you married? (To a woman, it might suggest that the employer is concerned that she will become pregnant or does not need the income, and might choose to stop working, in the near future.)

The safest course of action is to avoid questions in the interview, other than those required for determining if the candidate can comply with the performance requirements and hours of the job. If you are concerned that your hiring decision might be discriminatory, it pays to confer with an employment attorney, who can look at your particular situation and the legal issues -- including whether you might be protected under "undue hardship" exceptions based on the laws of all applicable jurisdictions. (For example, the Civil Rights Act of 1964 contains an undue hardship provision that recognizes it might be burdensome to a business to comply with Gaston's religious requirements. The Americans with Disability Act (ADA) also has an undue hardship provision, explained below.)

An Important but Tough Act to Follow -- The Americans with Disabilities Act

To employers, of the many laws related to discrimination, the ADA and its state law counterparts are among the most perplexing. Under the ADA, "the term 'employer' means a person engaged in an industry affecting commerce who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year, and any agent of such person...." Again, note that "mirror" state laws might apply to employers with fewer employees.

Pursuant to the ADA, "the term 'qualified individual with a disability' means an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires." Employers struggle with the ADA in a number of ways.

First, there are the "essential functions" of the job. A disabled individual might not be able to perform all aspects of the job as well as an able-bodied person; however you must determine whether these are "essential functions" of the position.

For example, Woody the bookkeeper might be expected to retrieve file boxes from storage as part of his job, but certainly, this is not an essential function of bookkeeping; certainly, a person who is confined to a wheelchair could fulfill the role of accountant, if he was otherwise qualified.

Second, the term "disability" includes a wide range of physical, mental, and emotional conditions. Not all "disabled" individuals have readily recognized impairments, such as paralysis or blindness. You might learn that a candidate is HIV-positive, and decline his application on that basis; not realizing that you might have left your restaurant exposed to a discrimination action.

Third, employers often have a difficult time determining what constitutes "reasonable accommodation," to assist a disabled employee to perform her job. For example, while prep cooks tend to work on their feet, it might be considered reasonable accommodation to set up a workstation that allows someone with a circulatory disorder in her legs to be seated for a large percentage of her shift.

Finally, employers wonder about the limits of the ADA's "undue hardship" provision, which takes into account the burden placed on the employer in accommodating a disabled individual. Among the factors considered in determining whether an undue hardship exists are the cost of the accommodation, the effect on the business's resources, and the size and type of business.

Again, a detailed job description, outlining all essential functions and requirements of the job, is an important first step to avoiding complicated or uncomfortable hiring decisions. If the applicant honestly must be able to lift 50 pounds, be available on weekends, or possess a valid driver's license, then clearly state that in the job description.

Questions you should avoid include:

• Do you have a disability that will prevent you from doing this job?
• Will your disability interfere with your ability to do this job?
• How many days were you sick last year?
• Do you have (name of disease)? Again, you should address specific questions and concerns about your particular situation to a labor lawyer in your state.

Then There's the Age Issue

Hiring employees should also be mindful of the laws related to age, on both ends of the age spectrum. While a large percentage of restaurant employees are relatively young, in a tight economy, you may find a greater percentage of nontraditional workers knocking on your door. Don't dismiss those baby boomers. The Age Discrimination in Employment

Act (ADEA) of 1967 prohibits employment discrimination against persons 40 years of age or older. Among other provisions, the ADAE makes it unlawful "to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." A number of states have enacted mirror laws into their statutes.

A restaurant manager or owner might be prone to claims under the ADEA or state counterparts if she has an automatic bias for young employees. Questions to avoid, include:

• When did you graduate from high school?
• How old are you?

Teenagers are great employees, but keep the law in sight. You may hire employees who are younger than 18, as long as you comply with federal and state child labor laws.

These laws seek to protect workers by restricting the type of work they can do, the number of hours they can work, and the types of businesses for whom they can work. Prior to hiring any worker younger than 18, you should refer to both federal and state law, which are available from the federal department of labor and your state's department of labor. The U.S. Department of Labor (USDOL) Web site is www.dol.gov.

Under federal law, generally, you may not employ minors 13 years of age and younger. However, the Fair Labor Standards Act (FLSA) does allow a parent who is the sole owner of a business to employ his or her child in any occupations (other than mining, manufacturing or those declared to be hazardous by the secretary of labor).

According to the USDOL, workers younger than 18 may never perform certain hazardous jobs, including operating certain power-driven or hazardous equipment, such as those used in cutting and milling wood, manufacturing brick, slicing meat, hoisting equipment, and baking. Again, you might consider contacting the federal or state department of labor for guidance.

The FLSA was amended in 1998 to allow 17-year-old workers to operate a motor vehicle under certain circumstances. The restrictions are specific, and, again, you should contact the U.S. and state labor departments for specific guidance. Federal and state laws also proscribe the number of hours for which you may hire a worker who is younger than 18.

Under the FLSA, you may hire a worker who is 16 or 17, for any nonhazardous job for unlimited hours. Youths age 14 and 15 may work outside school hours in nonhazardous jobs under the following conditions: no more than three hours on a school day, 18 hours in a school week, eight hours on a nonschool day, or 40 hours in a nonschool week. In addition, they may not begin work before 7 a.m. or work after 7 p.m., except from June 1 through Labor Day, when evening hours are extended until 9 p.m.

Immigration Law Issues

Under the Immigration and Reform and Control Act of 1986, employers may hire only persons who can legally work in the United States, i.e., citizens and nationals of the United States and aliens authorized to work in the United States. The employer must verify the identity and employment eligibility of anyone to be hired, which includes completing the Employment Eligibility Verification Form (I-9). Employers must keep each I-9 on file for at least three years or one year after employment ends, whichever is longer.

If you find a prospective employee who is not authorized to work in the United States but you would like to hire, you are well-advised to contact an immigration attorney to assist with the process of obtaining authorization. With the current security concerns in the United States, alien worker authorization can be tenuous. It is best to allow a professional to guide the process for the protection of your business and the prospective employee.

Remember, You Hold Most of the Cards

This article just scratches the surface of the legal and regulatory environment surrounding the hiring process. It may seem like a lot to digest, but consider that, outside of marriage, employment creates one of the most important relationships in our society. The laws may seem to offer more protection to the employee; however, do not lose sight that you have most of the bargaining power. You have what many people want, particularly in this economy -- a job.

For Your General Information Only...

Legal advice must be tailored to the specific circumstances of each case, and laws are constantly changing. Nothing in this article should be used as a substitute for the advice of competent counsel. Federal laws, the laws of each state, and often each municipality vary and each may have its own procedures and time limitations that must be followed. Don't rely on any information provided here in assessing your legal rights in a particular situation.

Just a Few Words on Employment Applications:

Always Get One!

It's critical that every job applicant completes a proper employment application. Why all the fuss? Employment applications can give the employer a good defense for a wrongful discharge claim. A common example is the employee who lies on his application, and then raises a wrongful discharge claim against the employer. Evidence of the employee's misrepresentation on his job application can diminish or undermine his claim, and protect your interests.

Also, an employment application allows you to obtain written consent to perform lawful background checks. For example, before an employer can get a consumer credit report for employment purposes, it must notify the applicant in writing and get her written authorization. This allows the employee to withdraw her application if there is information she would rather not see disclosed. School records cannot be disclosed without the consent of the student.

But the application can be a double-edged sword if it is not carefully constructed. Employment applications have been the focal point of discrimination lawsuits against employers. The Equal Employment Opportunity Commission cautions employers to avoid questions that tend to have a "disproportionate effect" in screening out minorities or females. All questions in an application should only seek information necessary to judge if the individual is competent to perform the particular job. (For more detailed information on both background checks and discrimination, see the accompanying article above.)

To be safe, don't attempt to draft your own employment agreement. Either use a pre-printed standard form that has been designed and reviewed by labor law and human resource specialists, or use a custom form that has been reviewed and approved by your labor attorney. In either case, applications should be periodically reviewed to make sure that the questions asked are proper and to make sure that the application protects the employer. Labor law constantly evolves in the federal and state legislatures and courts.