Welcome to My World… Clearing Up Some Common Misconceptions About Employment Law
By: Jonathan Landesman
I have been practicing labor and employment law for almost 25 years. Like most lawyers, I spend a lot of time on the phone counseling my clients and trying to keep them out of trouble. In this article, I share a few real-life scenarios to help clear up some common misconceptions about employment law and for you to learn from the mistakes of others.
As I was driving into the office the other morning, my day began with a call from a small paving contractor. After exchanging pleasantries, my client told me he was getting ready to terminate one of his longtime project managers. He explained that this project manager used to be a good employee but had slowed down in recent years. When I started asking questions, my client disclosed that the project manager was the oldest employee in the entire company and that he had taken a lot of time off because he had diabetes. I was in the middle of advising my client that we needed to slow down when he interrupted with a line that I’ve heard from countless contractors: “Can’t we just say that we are firing him because he’s an at-will employee?”
Misconception #1: It Is Okay to Rely Upon Employment at Will
That brings us to our first employment law misconception; that relying upon employment at will is okay. If you do a Google search on employment at will, you will quickly see hundreds of articles stating that at-will employees can be terminated for any reason or no reason, and at any time, with or without notice.
While that definition is technically correct, any employer who relies upon employment at will as a justification for making a termination decision is making a terrible and potentially very costly mistake. In the event of a discrimination lawsuit, an employer needs to be able to articulate and explain a legitimate, non-discriminatory business reason for all of its termination decisions. Saying that we terminated someone because they are an at-will employee just doesn’t fly.
Whenever I’m counseling an employer about the risks associated with a termination, I consider a number of factors, including:
- Whether the employee’s personnel file, including performance reviews and progressive disciplinary documentation, tells a story that is up-to-date and consistent with reality
- Whether the employer has consistently applied written workplace policies to other similarly situated employees;
- Whether the employee belongs to a protected class (based on age, race, religion, disability, national origin, etc.) that creates a greater risk of exposure; and
- Whether it makes sense to use a severance agreement to buy a general release and avoid potential claims.
Misconception #2: Salaried Employees Are Not Entitled to Overtime
My next client call came in just as I arrived at my desk. A general contractor had an employee in the office complaining about not getting overtime pay. My client explained that all of the office employees are salaried and that they have never paid any of them overtime. With this, we can now debunk our second misconception: that paying someone a salary means that they are not entitled to overtime. There are federal and state wageand-hour laws that specifically define who may be considered an exempt employee. Paying someone a salary is only part of the equation. In addition, you must satisfy the Department of Labor’s no-docking rules, called the salary basis test, and an exempt employee needs to perform “white collar” job duties. There are three types of white-collar employees: executive, administrative, and professional. Each of these categories has detailed and often counterintuitive definitions and terms. Making assumptions about an employee’s exempt status can be a very expensive mistake, especially because this area of the law is ripe for collective and class action litigation.
Misconception #3: Noncompetes Do Not Hold Up in Court
After reviewing the ins and outs of exempt status with another client and giving them practical tips for converting some of their office staff to hourly status, I began preparing for a deposition scheduled for the following day in a noncompete case. My client, a specialty electrical contractor, had hired an estimator from a direct competitor even though the estimator had signed a non-compete agreement. The company found itself in this situation because it believed that noncompete agreements are generally unenforceable and that the three-year restriction in the estimator’s agreement was especially unfair. That brings us to our third common misconception; that noncompetes won’t hold up in court. As an attorney who has litigated dozens of these cases in court, I can assure you that noncompete agreements are enforceable under New Jersey law. While many judges disfavor them and view them as anti-competitive and un-American, the law says that non-compete agreements and non-solicitation agreements should be upheld and deemed enforceable to the extent that they are necessary to protect an employer’s legitimate business interests, which can include its customer relationships and confidential trade secrets. But what about agreements that include three-year restrictions or other overly burdensome terms? New Jersey is a “blue pencil” jurisdiction. This means that if a judge determines that a noncompete goes too far, the court can essentially re-write the agreement to shorten the restriction or otherwise narrow the noncompete so that it is reasonable.
So welcome to my world. These real-life examples present a snapshot of the misconceptions I regularly encounter as a labor and employment lawyer. The big takeaway here is that employment law is often counterintuitive and that investigating and learning about an issue is the best way to avoid getting caught in the jaws of an employment lawsuit.
