United States: Managing Risk Efficiently With A Multi-State Workforce

Published in New England In-House

National Drug has retail outlets on every street corner in every state. The company employs approximately 30,000 managers and hourly workers and faces a myriad of compliance issues on a daily basis.

ABC Manufacturing has a corporate office in Illinois with plants in Arizona, Texas and North Carolina. Its legal department is in Rhode Island. It employees 3500 people nationwide.  

Hi-Tech company is headquartered in Massachusetts and has outside salespeople in 15 states.  Most of these employees work from their homes and travel throughout their assigned districts to visit prospective customers. It employs a total of 225 with about 175 at its main location.

Louise runs a small company which deploys nurse auditors to medical practices across the country. She typically employees about 20 people at any one time and sends them to client locations where they stay for weeks at a time.

Each of these companies with a multi-state workforce has the daunting task of staying abreast of legal and compliance issues on a number of fronts. Even smaller companies, with more limited legal and human resource bandwidth are faced with difficult compliance issues on a frequent basis.  

Companies that operate in only one state are challenged to comply with all federal laws as well as state laws related to payment of wages, non-discrimination, leaves of absence, taxation and restrictive covenants. Those that operate in a number of states are required to maneuver through often inconsistent rules and laws. Among the many issues such employers face, and some suggested strategies to help in-house counsel take control, include:

Wage and Hour: The Sleeping Giant.  Complying with the Fair Labor Standards Act is only the beginning. The fact is that many important issues related to compensation of employees and work conditions are not covered by the FLSA which, in and of itself, is a complex set of regulations. Apart from overtime and white collar exemptions, most of the mundane day- to-day compliance is in accordance with state law.

In the six New England states alone there are five different requirements regarding the number of hours an employee must work before being entitled to a meal break.

There are similar inconsistencies concerning rules for final pay for terminated employees, required minimum pay for employees who show up for work and are sent home, permissible deductions from pay, mandatory use of direct deposit or employee pay cards and, of course, minimum wage.

The statutes and regulations alone are difficult to manage especially for organizations like National Drug and ABC Manufacturing whose human resource departments can be located thousands of miles from the far lung workplaces under their watch. When the "unwritten rules" and "common practices" of the various state agencies are added to the mix, compliance becomes a nightmare.

Consider the simple issue of whether an employer has to provide a uniform to an employee free of charge. In Maine, employers may not deduct from employee wages the cost of "uniforms," which include shirts or other items of clothing that bear the company's name or logo when the apparel is to be used "primarily for the benefit or convenience of the employer."

In New Hampshire, an employer is prohibited from even charging an employee a fee for any apparel bearing the company name or logo unless the apparel is also made available for sale to the general public.

Massachusetts requires that employers bear the cost of laundering and maintaining actual uniforms.

Staying on top of these regulations, many of which change frequently or are the subject of unwritten rules and interpretations, would be a challenge for the most well-equipped human resource department.

Leaves of Absence: The Bermuda Triangle. Family and Medical Leave Act, state maternity leave law, worker's compensation, and the Americans with Disabilities Act all combine to form a vortex of leave laws that can be perilous to maneuver.

The standard for the FMLA seems simple and straightforward: 12 weeks of unpaid leave for certain conditions must be provided to employees who work for a company with 50 or more employees within a 75 mile radius.

Consider the work-from-home employees of Hi-Tech Company, however. Although the outside sales employee in northern New Hampshire may not work within 75 miles of any other Hi-Tech employees, she is still be eligible for FMLA if she does not report to a Hi-Tech location. In these circumstances, her "home office" for purposes of FMLA is Hi-Tech's Massachusetts headquarters. She may not, however, be able to avail herself of New Hampshire's more generous and protective maternity leave because she is the only employee in the state falling short of the requisite minimum six employees for coverage under the law.

Contrast that with the employees who work in ABC's legal department office of fifteen in Rhode Island. Since these employees report to a company location with fewer than 50 employees, they are not eligible under the FMLA.

Add to the types of leave typically associated with health or injury the variety of leave available for crime victims, victims of domestic violence, first responders, parents of small children and military personnel, and the headache grows. 

It is critical for employers to be conversant in the various provisions of state and federal leave law keeping in mind the thresholds for eligibility, the qualifying reasons for the leave, whether time off is paid or unpaid and the duration of the leave.

Restrictive Covenants: The Shifting Sands. Most employers profess to have fairly simple objectives when it comes to their employment terms: protect my intellectual property, prevent someone from stealing my customers and employees and don't let the guy I trained open up across the street in a competitive business. All reasonable protections.

However, many employers attempt to address all these concerns by creating a blanket non-competition agreement that they regularly have all employees sign, regardless of the employee's job or location.  Often, when challenged, the one-size fits all agreements fail to hold up in court, leaving  a business with no protection at all.

The law of restrictive covenants continues to evolve. Legislation seeking to curtail the enforceability of the agreements is introduced frequently, and sometimes, it passes.

Consider New Hampshire's fairly new non-compete law, RSA 275:70. Effective July 2012, the law requires a business to provide a copy of the proposed "non-compete or non-piracy agreement" to a prospective employee "prior to or concurrent with making an offer of a change in job classification or an offer of employment." If the actual agreement is not provided at that time, it is likely not enforceable.

By all accounts, this is a fairly unique statute, although there is support for the advisability of providing an agreement at the time of the job offer in the case law of any number of states.  In addition, the case law continues to evolve.

It is important for employers who wish to rely on restrictive covenants to stay abreast of legal developments in the states in which they do business. Particular attention should also be paid to choice of law provisions and jurisdiction clauses in the agreements themselves.

How does a company with a multi-state workforce manage risk as efficiently as possible?

  • Maintain a relationship with a good employment lawyer. Rely on your attorney not only in times of trouble but on a proactive and forward-looking basis. Most law firms have ways of providing timely information to clients about changes in the law or particularly perilous traps for the unwary: client alerts, seminars, blogs. Subscribe to them; read them.  Similarly, keep your attorney informed of new ventures you intend to pursue. If your company is going into a new state, your attorney might have some good advice about the pitfalls of doing business there.
  • Make sure you have your bases covered at every level. If you have a legal issue in a state in which you do not have a strong management presence, make sure you involve local counsel early on in the process. Your national counsel is not going to have the connections or the knowledge of local practice to help you avoid a problem.  On the other hand, hiring local counsel to handle an appeal from an adverse ruling at the state Department of Labor is probably not the best strategy.
  • Make sure your HR department is well connected and well educated.  Its members are the front lines of risk management for you. Support their memberships in local and national professional organizations such as the Society for Human Resource Management, ("SHRM"). Consider paying for the cost of their professional certification. Send them to some conferences where they can share best practices with people from other states
  • Invest in 50- state survey publications or access SHRM's online information about a particular issue. SHRM and other professional societies publish compilations of each state's law on a particular topic. If you intend to have a firearms policy at your locations, review the summary SHRM provides to make sure you are aware of what each state's law requires.
  • Stay active and involved in legislative advocacy.  Admittedly, it is hard enough to stay up to date on current law. However, it is just as critical to make sure the voice of your business is heard when new legislation is being considered.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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