Hiring 101: Evaluating the Candidate

Your business is growing and you’re ready to bring someone aboard to join your team. But the hiring process can be complicated and intimidating. Check out these important things to keep in mind as you attempt to find the perfect candidate.

Good employees can be the most crucial ingredient in a successful business. But finding and hiring good employees can be among the most challenging aspects of running a small or growing company. There are some important things to keep in mind as you set out to add the best-of-the-best to your team.

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    Know the laws

    Numerous federal and state laws govern the various processes of soliciting employees, including advertising, interviewing and hiring. If you don’t follow the rules, you may find yourself as the defendant in a lawsuit over your hiring (or non-hiring) practices.  Or, you may end up being stuck with a very costly and unproductive employee who you have trouble firing.

    Employers are subject to many laws requiring equal employment opportunity and prohibiting discrimination in employment, which can include:

    • Title VII of the Civil Rights Act of 1964;
    • Equal Pay Act;
    • Age Discrimination in Employment Act;
    • Civil Rights Act of 1966;
    • Immigration Reform and Control Act;
    • American with Disabilities Act; and
    • numerous other federal and state laws.

    Don’t even Go there

    You probably have many questions that you would like to ask a prospective employee. But certain questions can only get you in trouble (yes, you can trip over many laws in an interview). The following seven questions are examples of questions you should NOT ask:

    No.1: How old are you?

    No. 2: Do you have any disabilities?

    No. 3: Are you pregnant?

    No. 4: Are you married with kids?

    No. 5: Have you ever been arrested?

    No. 6: What is your religious affiliation?

    No. 7: What is your sexual orientation?

    Focus on questions relating to the skill and experience of the candidates and the qualifications needed to perform the job.

    Do your homework

    Once you find the “perfect” candidate for the job, you should perform a background and reference check before extending an offer. Ideally the prospective employee will sign your “background check permission form,” which allows you to get reference information from prior employers and even do a credit-check. Before formally requesting information in writing from a prior employer, make sure the prospective employee gives you permission to do so. However, you may find that previous employers are reluctant to give much information, often confirming only the employment, position and maybe salary. (And yes, your company should have a similar policy with respect to your departing employees.)

    From a fact-checking perspective, think about checking out school experience (some people embellish their degrees or where they went to school); talk to the candidate’s former supervisor(s), if possible, who may provide more meaningful information than the company’s HR department; for sensitive jobs, check for felony convictions; and verify past employment (ensure the candidate actually worked at each of the companies listed, in the position listed, and check dates of employment).

    Stacy is a founding member of BauerGriffith, a business law firm providing high quality legal and business counsel to a wide array of clients, with an emphasis on non-profit organizations, small business and individual planning clients. She serves as outsourced corporate counsel for diverse clients, partnering with executive management to design, plan and implement stated and defined business objectives within legal parameters.
    Next up: Hiring 102: 5 Must-Have Items for Your Staffing Toolkit
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  • Hiring 102: 5 Must-Have Items for Your Staffing Toolkit

    There’s a lot to consider, and a lot of information to gather, when your business is seeking new candidates. To make it an easier, more streamlined process, we’re outlining five items you should have in your hiring toolkit.

    In Hiring 101: Evaluating the Candidate, we discussed the hiring laws to be aware of, appropriate questions for interviewing and background information you should seek. Now we’re delving into five specific items you should have on hand and included in your hiring toolkit. 

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    Hiring Toolkit Item No. 1: Employment applications

    Think about requiring all prospective employees to complete an employment application. The application solicits a lot of information that will help you decide whether or not to hire the person. However, be careful regarding what is included in the application; remember some questions are illegal to ask. A good employment application asks for the following information:

    • Prior work experience
    • Special skills
    • Educational background
    • Legal right to work in the U.S.
    • Consent for the company to check references

    Attach the prospective employee’s resume to the application and keep these on file. This can be helpful later if, for example, you decide to fire an employee after discovering he/she lied about the information on the employment application form.

    Hiring Toolkit Item No. 2: Offer letters and mistakes to avoid

     When you find the applicant who seems to meet your needs, you are ready to make an offer. Although you can do this over the phone, it is better practice to put it in writing to avoid miscommunication or misunderstanding. Include the following items:

    • Position and duties
    • Start date
    • Compensation
    • Employment-at-will status
    • Various other legal provisions to protect you and your company

    Be careful not to mislead the applicant or promise something you can’t deliver. For example, avoid statements that give the applicant a false sense of security, or what might be construed as a long-term promise of employment. Stay away from phrases such as “We expect you will have a long and prosperous career here,” “You can expect your salary to increase by X% each year,” and “After a probationary period, you will enjoy the benefits the company provides to its long-term employees.” Also avoid offering different benefits to an applicant than those available to other employees. Your current employees may see this as discriminatory and take action accordingly.

    If you intend to offer stock or stock options, make sure it vests, or is earned, after some significant period of continued employment. If you plan to offer a commission, bonus or profit-sharing arrangement, make sure the percentage or amount is reasonable and does not make the employee unprofitable for your business.

    Hiring Toolkit Item No. 3: Employment agreements

     Employment agreements are not necessary for most employees, though you may want some high-level employees to sign one. A well drafted employment agreement will cover the following items:

    • Job position and whether the employer has the right to change the position
    • Length of the agreement
    • Salary, bonus and benefits
    • Whether the employee gets stock or stock options
    • When the employer can terminate the employee for good cause, along with a definition of what good cause means
    • When the employer can terminate the employee without good cause and what severance payments the employer will provide
    • Job responsibilities
    • Confidentiality obligations
    • Where and how disputes will be handled

    Hiring Toolkit Item No. 4: Confidentiality and invention assignment agreements

     Your employees, especially in high-tech businesses, have access to a lot of the company’s confidential information. In addition, you expect your employees to come up with ideas, work product and inventions that are useful to your business. To ensure your employees keep the company’s proprietary information confidential, you should require them to sign a confidentiality agreement. Either as part of the confidentiality agreement or as its own agreement, your employees should also acknowledge and agree that the ideas, work product and inventions they come up with belong to the company, not them. The following key provisions should be included:

    • The employee cannot use any of the company’s confidential information for his/her own benefit or use.
    • The employee will promptly disclose to the company any inventions, ideas, discoveries and work product related to the company’s business made during the period of employment, and that the company is the owner of such inventions, ideas, discoveries and work product.
    • His/her employment with the company does not breach any agreement or duty he/she has with anyone else, nor can he/she disclose to the company or use on its behalf any confidential information belonging to others.
    • The confidentiality provisions will continue after his/her termination of employment.
    • The agreement does not represent any guarantee of continued employment.

    Hiring Toolkit Item No. 5: New employee paperwork

     When a new employee joins the company, make sure to have all the appropriate paperwork ready for him or her to sign, preferably on day one, including the following:

    • Company employee handbook
    • IRS forms
    • Benefit elections
    • Confidentiality and invention assignment agreement
    • Form I-9
    • Emergency notification

    Hiring new employees can be an often arduous and sometimes unexpected process. Knowing that you have these items accessible and ready to go will help the situation seem less intimidating and will ensure that your company is operating at full capacity as soon as possible.

    Stacy is a founding member of BauerGriffith, a business law firm providing high quality legal and business counsel to a wide array of clients, with an emphasis on non-profit organizations, small business and individual planning clients. She serves as outsourced corporate counsel for diverse clients, partnering with executive management to design, plan and implement stated and defined business objectives within legal parameters.

    Next up: COSE WebEd Series:Hiring and Attracting Talent
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  • COSE WebEd Series:Hiring and Attracting Talent

    From an enticing headline to a perfectly worded job description to the expert delivery of your ad, CareerBoard President Richard Padgett explains how to get the most bang for your buck when it comes to writing job ads.

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    Next up: How Intellectual Property can Grow and Protect Your Business
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  • How Intellectual Property can Grow and Protect Your Business

    During this COSE webinar, attendees discovered the types of intellectual property and what it takes to obtain protection, as well as strategies for using IP to grow their businesses. Read on for more details and scroll to the bottom to view the full presentation.

    During a recent COSE WebEd Webinar, Mark Guinto, intellectual property attorney at the McDonald Hopkins law firm in Cleveland, gave an overview on intellectual property and how small businesses can leverage IP for success during a presentation titled “How to Use Intellectual Property to Grow and Protect Your Business.”

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    Guinto explained how entrepreneurs can strategically protect ideas, brands and assets when it comes to IP, with the ultimate goals of positioning themselves for future success, increasing market share and growing their businesses.

    Types of IP

    You’ve seen Shark Tank, but what do we really mean when discussing intellectual property? There are four different categories to consider when talking about IP.

    Patents protect the overall idea of your invention. For something to be patented, it’s required to be new and useful as deemed so by the United States Patent and Trademark Office upon filing. Bars to patentability might include not filing in time or not being able to prove that it’s novel. Benefits include preventing other companies from using your invention, keeping competitors out of the market, being able to license your invention to other companies, and it also helps you build your patent portfolio.

    Trademarks are your brand identifiers or source identifiers, such as the Nike Swoosh symbol. They are used to identify and distinguish the source of goods or services, and to try to build goodwill and brand awareness.

    Copyrights are rights in the expression of your idea, such as songs, books, articles, software code and advertisements your company creates.

    Trade secrets are any information, practices and know-how you keep within your own company and do not disclose to the world, like the Coca Cola recipe. Perhaps for you it’s how to operate a piece of equipment or coding practices you use.

    Legal Lingo

    In understanding the different types of intellectual property, it’s helpful to be aware of other relevant legal terminology, such as non-disclosure agreements, joint developments and licenses. 

    Non-disclosure agreements (NDAs) are agreements between companies to share proprietary information with each other with restrictions on use of such information. This type of document will most likely define what you can do with the information you receive and what the other party can do with the information you give them.

    Guinto advises that, before talking to a third party, you always look for an NDA. He says it’s important to coordinate with your sales team and reiterate to them to check for an NDA even if it’s a company you’ve been doing business with a long time. When in doubt about whether or not one exists or the details involved in it, be sure to contact legal assistance.

    Joint developments are agreements you create when your company and another company work together on developing a product. The joint development identifies who owns the IP—whether it’s one or both of you.

    Licenses can be granted from one party to another. You can give another company the right to use one of your inventions and they might pay you money in return. Licensing can be limited to a particular field, and royalties might be lump-sum or per unit.

    Action Steps

    There are three necessary action steps that a small business must take when it comes to moving forward with IP protections, according to Guinto.

    Action Step No. 1: Monitor the potential for new protections to determine whether it makes sense to file for protection on your IP.

    Action Step No. 2: Communicate with your engineers and sales team about your overall strategies and objectives for protecting your IP.

    Action Step No. 3: Because IP has a lot of moving parts and since laws can vary by state and country, it is necessary to stay in constant communication with your legal counsel.

    To File or Not to File?

    One particular area where a small business owner might be unsure if it makes sense to seek protection is with software code that their company has written. It’s important to understand that even if you aren’t successful in obtaining a patent, the information regarding your invention is nevertheless put out there to the public. So if you disclose your secret invention in an effort to receive a patent, hopefully you will, in fact, be granted a patent. But in the event you do not receive that sought-after protection, you will still be broadcasting the details of your secret invention.

    Code can and should be copyrighted with a patent office. But, when you’re dealing with code it changes so often that it is not usually cost effective to file for a copyright with each of these changes. Guinto advises his clients to launch major releases and get those covered with copyright, but to not seek it for each small edit.

    Because it costs money to get a trademark, you have to figure out if there’s going to be money in filing for a trademark. He advises that it might be a better idea to get protection for a family of products instead of for each individual product. Check out the full broadcast of this webinar by scrolling down past the disclaimer below.

    Disclaimer: The information provided in this seminar is general in nature, and may not apply to a specific factual or legal circumstance. An attorney and client relationship should not be implied simply by attending this seminar. Nothing in this seminar is intended to substitute for the advice of an attorney. Therefore, if you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction. The choice of a lawyer is an important decision that should not be based solely upon advertisements. McDonald Hopkins invites you to contact the firm and welcomes your calls, letters and electronic mail. Contacting the firm or attending this seminar does not create an attorney-client relationship. Past results afford no guarantee of future results and every case is different and must be judged on its own merits.

    Next up: How to Avoid a Giant Bill by Misclassifying Employees as Independent Contractors
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  • How to Avoid a Giant Bill by Misclassifying Employees as Independent Contractors

    Follow these helpful tips to help your business avoid all of the extra taxes and penalties that go with misclassifying employees.

    If a worker is misclassified, your company could be liable for an enormous bill for back employment taxes plus penalties, interest and legal costs. In assessing whether a worker is an employee or an independent contractor, the IRS has concluded that such a determination revolves around control.

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    First, if your company is exercising behavioral control over a worker by dictating when and where to do work, the sequence in which to perform the work, and providing training regarding required procedures and methods, that worker should most likely be classified as an employee. Second, if you are in financial control of a worker by directing the financial and business aspects of a worker’s job, they are also more likely to be an employee.

    Below are 10 helpful tips that will help ensure that you’re not treating your independent contractors like employees.

    1. Don’t closely supervise the independent contractor or their assistants.
    2. Don’t let the independent contractor work at your office, unless the nature of the service they’re providing requires it.
    3. Don’t give the independent contractor employee handbooks or company policy manuals.
    4. Don’t establish the working hours.
    5. Don’t provide ongoing instructions or training.
    6. Don’t provide equipment or materials unless it’s necessary.
    7. Don’t pay for travel or other business expenses directly.
    8. Require independent contractors to sign documentation stating that they are not entitled to, and will not seek, unemployment benefits, and don’t provide any other form of benefits to them.
    9. Don’t provide business cards or stationary with your company’s logo for the contractor to use or distribute.
    10. Require that they submit invoices for their time and expenses and pay them like a vendor, as opposed to weekly or biweekly.

    Ending the relationship

    There is not a single rule or test for determining whether an individual is an independent contractor or an employee, but these tips highlight factors which have been considered by the courts in worker classification cases. In addition to these 10 tips, it’s also important to note that how the relationship can be ended might determine status. The ability of a worker to terminate the relationship with your company at any time he or she wishes without incurring liability indicates employee status. To avoid this, you should consider documenting an exit protocol to the contrary (for example, requiring 30 days’ written notice of termination between your company and any independent contractor).

    If you find yourself in a situation where you are unsure of how to classify a worker, you can request an IRS determination by filing Form SS-8, “Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding.” However, be cautious to the fact that the IRS usually classifies workers as employees whenever it’s not clear-cut what their status is. Further, employers that request such a determination lose protections against liability for misclassification. Filing Form SS-8 without talking to an attorney is not recommended.

    It’s important to not only be aware of the distinctions that exist between employees and independent contractors, but also to be conscious of them always. If you’re not careful in how your treat independent contractors, you’ll likely find yourself handing over a wad of cash to Uncle Sam instead of to your next big project!

    For more information on this topic, contact Alex Gertsburg at 440-571-7775 or ag@gertsburglaw.com.

    Get more legal tips for your business on The Gertsburg Law Firm blog, with new articles every week. 

    Next up: How to Balance Recreation and Liability When Planning a Company Social Event
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  • How to Balance Recreation and Liability When Planning a Company Social Event

    Putting on social events for employees is a great way to boost morale and increase staff retention. But there could be legal ramifications to these events. Here are some points to consider.

    Good work culture tops most employees’ wish lists (and most employers’, too), especially in a time when employers must compete by offering remote jobs, freelancing, and other worker-centric setups. Company social events such as holiday parties can promote a winning work culture. But mixing business with pleasure comes with risks: successful company events invite an element of social life, as well as the risk of social pitfalls that may be inappropriate, dangerous, or even illegal.

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    Forewarned is forearmed

    Employers and their HR teams must be aware of the risks and potential liabilities associated with company events to protect themselves and their employees.

    The most prevalent risk comes from inappropriate social interactions, namely, sexual advances among co-workers. Title VII of the Civil Rights Act of 1964 prohibits sexual harassment by an employer, including conduct that is unwelcome and sufficiently severe or pervasive. Though the Act offers no protection as between workers, an employer who fails to provide a safe work environment can run afoul of this federal law.

    Dangerous conduct by employees creates the risk of physical damage to person or property. When an employee is injured at a company event, he or she may have recourse against the employer for unsafe work conditions. An injured third party may also be able to sue an employer for an employee’s actions under Ohio’s social host or dram shop laws or other legal theories, such as the doctrine of respondeat superior (let the master answer).

    Often overlooked, loss of good will is a serious matter and is more likely to happen to employers with undeveloped social media policies. Social media gives employees a platform to post company party interactions, both good and bad, and negative publicity can tarnish any company’s reputation.

    Neutralizing the alcohol factor

    Unsurprisingly, the greatest contributor to risky behavior is alcohol. If you decide to permit alcohol at your company’s social event, consider taking the following steps to mitigate risks associated with alcohol:

    • Distribute drink tickets or set a drink limit for attendees.
    • Skip the liquor—limit drink selection to “softer” alcohols like wine or beer.
    • Make it a cash bar.
    • Close the bar early to limit access to alcohol.
    • Ask bartenders and/or supervisors to be on the lookout for intoxicated attendees.
    • Arrange for transportation to and from an event.
    • Incentivize employees to be designated drivers.
    • Provide hors d’oeuvres to curb alcohol consumption.
    • Limit attendance to 21 and over.

    Accounting for venue

    Incidents are more likely when company events are held off-site. This is due in part to preconceived standards of behavior in a familiar work setting, given that employees are used to behaving professionally in the office. However, keeping things in-house does place a bigger burden on the employer to monitor alcohol consumption and other activities.

    For company socials held on-site, consider hiring a professional bartender or food vendor, and assign supervisors to monitor the festivities. For outside venues, be sure to choose one that sends the right message about the type of event it will be. Consider choosing a restaurant instead of a karaoke bar, for example. Always be sure to confirm that all venues and service providers have the proper licenses.

    Another good way to set standards is with an appropriate dress code. A black-tie affair necessarily invokes a different atmosphere than a business casual event, and in most cases, a clear dress code can nip inappropriate or suggestive behavior in the bud. You should also have a keen eye for decorations, which should be neutral and considerate of the religious and cultural beliefs of your employees—especially during holiday parties.  

    Building the guest list

    First and foremost, employers can avoid the risk of workers’ compensation and/or wage and hour claims by drawing clear distinctions between social events and employment functions. Employers should make it clear to employees that there is no work purpose for the social event and that attendance is always optional. Toward that end, employers should try to schedule events outside of normal work hours and avoid talking business or handing out performance awards during the event.

    Employers should also consider whether to invite guests such as significant others, family members, or general plus-ones. A strictly in-house social lends itself to riskier behavior because of the obvious familiarity that already exists between attendees. A broader guest list, in contrast, can foster a more reserved, conservative dynamic which, in turn, may deter unwanted behavior.

    Employers should also strongly consider omitting their independent contractors from the guest list if the social event is “company only.” An employer’s everyday liability is generally higher for an employee than it is for a contractor, and the main distinction between the two boils down to how the employer interacts with its employees versus its independent contractors. In other words, inviting independent contractors to company events invites potential liability for misclassification of contractors as employees.

    Setting expectations

    Before company events, employees should be reminded that the setting will be social but still professional. Any well-written employee handbook will set this expectation as a matter of course.

    Event policies, for that matter, should be clear and consistent with all other policies. Social media policies, for example, should set consistent standards for posts related to or depicting alcohol and other potentially inappropriate media. To the extent that social media posts are fully public, employers may consider monitoring and requesting removal of posts that may suggest affiliation with the company but fail to adhere to its policies.

    More touch points can be an effective way for employers to reinforce expectations leading up to company events. For example, pertinent sections of the employee handbook can be recirculated to employees via email, or these policies can be discussed at regular meetings, or included on inserts that accompany paychecks.

    Investing in a failsafe: Insurance

    The best-laid preparations can still be undermined. Insurance should be a last line of defense against liability but it may be desirable, even if only for peace of mind. Employers might consider the following policies when budgeting for an event:

    • General event insurance—protects against losses due to injury or damage by insured’s employees or agents.
    • Liquor law liability insurance—covers insured against accidental furnishing of alcohol to underage or already intoxicated patrons.
    • Cancellation insurance—helps cover costs when an event must be cancelled for a variety of reasons.
    • Venue insurance—covers for damage to a location while it is under the insured’s control, effectively insuring against repair costs to the venue.
    • Hired/non-owned auto insurance—provides liability coverage for vehicles rented for the event, as well as auto-related injury or damage to third parties.
    • Employment practices liability insurance (“EPLI”)—covers businesses against claims by workers that their legal rights have been violated.

    EPLI can be a good catchall insurance that might protect employers from losses occasioned by activities that compromise a safe work environment, including sexual harassment, discrimination, wrongful discipline, and wrongful infliction of emotional distress, among others.

    This article is meant to be utilized as a general guideline for company social events. Nothing in this blog is intended to create an attorney-client relationship or to provide legal advice on which you should rely without talking to your own retained attorney first.  If you have questions about your particular legal situation, you should contact a legal professional. Max Julian is an attorney at The Gertsburg Law Firm. Julian’s practice is focused on commercial litigation. He can be reached at mj@gertsburglaw.com or by phone at (440) 571-7541. The Gertsburg Law Firm blog has more than 80 articles on topics covering Employment Law, Consumer Law, and ways to protect your business.

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