Trouble-Free Hiring

When you are hiring a new employee, you have several significant objectives. First, you want the employee to accept your offer and come on board. Second, you want the hiring process to run smoothly, so as to minimize the amount of time and energy you have to expend, and also so that the company is presented in a professional and competent way to the prospective employee. Third, you want to avoid creating problems for yourself. You do not want to “buy a lawsuit” by conducting the hiring process in such a way as to give the prospective employee ammunition that can be used against you later.

With these objectives in mind, this article will explore how you, as the hiring employer, can conduct a successful hiring process.

Before you start the hiring process, you need to be clear in your own mind about the job that you are filling. What are the duties? What are the requirements in terms of experience, education, skills and personal qualities that you are looking for?

In addition, you need to be clear on the scope and terms of the position. What are the job’s title and duties? What is the compensation? What benefits are available?

You also should have an idea as to how long you are going to give the person to prove him or herself. Even if there will not be an employment contract with a definite term of employment, you need to establish your expectations concerning the period of time the person will have to become a successful employee of your firm. You must be very careful, however, about how you communicate with a prospective employee about the time frame of the employment, because a misunderstanding on this score can easily lead to litigation at the time of a termination.

The first thing that you need to know in terms of thinking about the time frame for the employment is that, in the United States, employment ordinarily is “at will.” This means that both the employer and the employee are free to terminate the employment relationship at any time for any reason or for no reason.

This generally is a significant advantage for the employer, not for the employee. Especially in today’s economic circumstances, it is not a great privilege to be able to walk away from any job at any time. On the other hand, it gives employers a great deal of flexibility to be able to terminate employees at any time for any reason or for no reason.

We must hasten to add, however, that there are numerous exceptions to the employment-at-will doctrine, primarily consisting of those instances where an employee has an employment contract, where there are civil service or union protections, or where the anti-discrimination laws or other public policy exceptions are applicable.

Thus, while you may be free to terminate an employee for any reason or for no reason, you are not free to terminate an employee for an improper reason such as his or her age, race, gender, etc. Subject to those important exceptions, it nevertheless does remain the general rule that employment is “at will.”

Accordingly, you do not have to provide prospective employees with assurances of employment for any particular time period and, in general, it is best not to do so. Normally promises of employment for a specific period of time are given only to high level, important employees. And, in such cases, it is advisable for you to have a written employment contract with the employee so that there is no misunderstanding about the specific terms.

For the vast majority of employees, it is better to leave the employment on an “at will” basis. This means that you must be very careful to avoid making statements or representations which might give the employee grounds for arguing later that you had assured him or her of a specific time period during which they would remain employed.

In order to prevent disagreements, even where there will not be a formal employment contract, it is a good idea to provide the new employee with an offer letter which states explicitly that the employment is “at will,” which contains all of the major terms of the hiring, and which provides that any prior discussions about the terms are superseded by the letter itself.

You will also need to give careful consideration to the pay and benefits that you are willing to provide to the new employee. The employee will appreciate it if you are upfront and forthright about these matters and do not force him or her to raise them. They are obviously matters of major concern to the prospective employee and you will not endear yourself if you hold back on providing such information. Moreover, if you do not have the information ready for the employee, it will appear that you are disorganized or indecisive.

This means that you should carefully think through all of the issues relating to compensation and benefits, including not only salary, but also the terms and timing of eligibility for health insurance and any other benefits that may be provided such as life insurance, pensions, profit sharing, stock options, equity, etc.

Here again, it is advisable to set forth in an offer letter the amount of the salary and a description of the benefits that are associated with the position. The letter should state that it is controlling on these matters, any prior comments or discussions to the contrary notwithstanding.

Of course, you do not want your employees to be obsessed with their level of compensation to the exclusion of any other matters. If the prospective new employee comes across as having such an attitude, you may want to think twice about hiring him or her. Nevertheless, it is entirely appropriate for the employee to make inquiries about these matters and to want to be fully informed about them before making a decision about the prospective employment.

Strange as it may seem, it also is appropriate and commonplace for a prospective employee to be concerned about the company’s severance programs and policies.

In today’s world, it is not unrealistic for the employee to inquire about such matters before accepting a job. You should not be insulted by such an inquiry and you should have an answer at the ready. For many small companies, the answer will be that there is no severance policy. If that is the case, you should say so. On the other hand, such a stance can make the company seem disorganized or unprofessional, so you should give some thought to how you will answer this question and you may want to indicate that severance payments can be made on a case-by-case basis even if there is no policy.

If you do have formal employment policies-whether regarding severance or anything else – copies of them should be furnished to the prospective new hire so that he or she is made fully aware of them and cannot later argue that they did not realize that certain things were forbidden or expected, etc.

Before you enter into the new employment relationship, you also need to give serious consideration to whether any types of restrictions should be placed on the employee. Does your company have substantial confidential information that you need to protect? Does it have significant client relationships which could be damaged by someone in the new employee’s position leaving the company and taking clients with him?

In order to deal with these and other competitive considerations, you may want to require the new employee to sign a non-competition agreement stating that he will not compete with your company for a certain period of time after he leaves your employment. It also may be appropriate to require a non-solicitation agreement requiring that he or she will not solicit your customers and/or your employees after leaving your employment.

In most instances, you will also want a confidentiality agreement whereby the new employee agrees that he or she will not disclose or use any of the company’s confidential information at any time before or after employment other than in service to the company. There is no legitimate basis for a prospective employee to object to such a provision, so there is no harm in requiring it and it may indeed provide you with a degree of protection against a disloyal employee.

These types of agreements-non-competes, non-solicitation agreements and agreements not to disclose confidential information-should be prepared in consultation with counsel.

In the case of certain specialized employees, it may be necessary to seek even greater restrictions and controls. For example, creative employees may need to agree that the work they produce will be “work for hire” and will belong to the company and not to them. Again, in such cases, it is advisable to consult with counsel and have the new employee enter into an appropriate written agreement.

Other issues which will be relevant in many hiring situations include the amount of vacation associated with the position, the hours of work which the employee will be expected to put in, the location at which the employee will work, the company’s policies regarding reimbursement of business related expenses, and the travel requirements associated with the position.

In the case of an employee who is being recruited to come from outside of the area, you will need to consider whether you are prepared to offer a moving allowance. For a position that is located outside of the country, you should consider whether any “ex-pat” package should be offered to cover extra living expenses and taxes, among other things.

If you have given careful thought to all of these matters, it should not be difficult for you to reach a prompt and appropriate agreement on the terms of employment for your new hire.

As soon as you have done so, it is important for you to memorialize the terms of the agreement, either in the form of a contract, if there is to be one, or in the form of an offer letter. If you prefer not to do either of those things, at the very least, you should create a memorandum to the file reciting the discussions that you had with the new hire, particularly insofar as they relate to the duties of the new employee and the compensation associated with the position. Your memorandum also should include a statement that no promises or representations concerning the duration of the employment were made and that the offer was stated to be for an “at will” position only.

Finally, it is well known by now, but bears repeating, that it is absolutely essential that you refrain from making any comments or asking any questions during the interview process which are or could be construed to be discriminatory in nature. For example, do not ask about the prospective employee’s age, religion, ethnicity, etc.

You may be concerned about the employee’s outside activities, but it is not appropriate to ask about them. Many jurisdictions now have laws precluding employers from interfering with outside activities of their employees. Instead of asking about outside activities, you can ask about the individual’s ability to stay late if needed, their availability on weekends, etc., but it is essential to avoid asking about most outside activities or even matters such as marital status and family situation. If the prospective employee brings these matters up, they can be discussed in a congenial fashion, but you should avoid asking questions about them even if the prospective employee brings them up on his or her own initiative.

By following these guidelines, you will be able to effectuate the hiring of your new employee without unduly exposing yourself to potential liability.

Paul T. Shoemaker

October 2011