It’s Bonus Time ! Top 10 Legal Tips for Business Owners to Follow

This is the time of year where companies begin the process of evaluating their employees, their businesses and their future.  It is often a period in the life of a company where managers take stock of themselves and analyze those employees who have excelled and those who have not.   Compensation is often tied to an employee’s ability to excel during the course of the year and there are several things which companies can do in order to maximize employee efficiency and insulate themselves from future legal problems.  Here are some time worn techniques for preventing legal problems with your employees during  the coming year.

  1. Provide Written Job Descriptions.

The first question a new employee will ask is – what am I supposed to do?  This is a reasonable question and one which an employer should be readily able to answer.   An employee’s job should not be a guessing game.   Instead, the employer should be able to provide a written job description setting forth, in detail, what is expected.   The job description should be specific but not too restrictive so as to preclude an expansion of the employee’s responsibilities at a later time if necessary.   The job description should clear up issues regarding the employee’s responsibilities and will likely lessen friction between the employee and his or her co-workers.

  1. Do a Background Check.

Convicted felons will want a job at your company.   When these people walk into your office, they may not look like convicted felons but it is up to you to determine that.  You can usually find this out by doing a background check which may not cost more than $100. (A Google search and a check of a prospective employee’s Facebook page may also help).

Naturally, there are convicted felons who have reformed themselves and are entitled to a second chance.   The question you have to ask is whether you want to be the person who gives it to them.   You take on additional risk when you hire somebody from this category because, in a subsequent lawsuit, it is likely that a lawyer will use this against you in the event that it turns out that this particular employee engaged in wrongdoing while employed at your company.   Counsel’s argument will be that you should have known better.

  1. Provide Training

There is nothing that a new employee will like less than being dumped into a cubicle by their new supervisor without any training. This sends the employee an implied message – “we don’t care about you” or just “figure it out.” No employee wants to believe that their new employer does not care about them; after all, if the employer does not care about the employee, than why should the employee care about the company ? Someone needs to walk the employee through an average day at the office. How to work the computer programs, the copy machines, the fax machine (if you still use one). This will ultimately save the company time and trouble.

  1. Consider a Non-Compete Agreement.

Depending on the type of business you run, Non-Compete Agreements can be extremely valuable.   After all, you do not want your employee walking off with all of your clients in the event that you determine that the employee has to be terminated or that the employee leaves on his or her own accord after receiving an unsatisfactory bonus ?[1] Non-Compete Agreements generally have to be tailored reasonably to a limited area and time in order to prevent the employee from later arguing that you are trying to prevent them from working altogether and forever (Courts don’t like that).   The Courts have the power to strike down agreements which are overly restrictive.   Accordingly, before having an employee sign a Non-Compete Agreement you should consult with counsel.

  1. Maintain Clear Lines of Authority.

In some companies, it is often unclear who is the boss.   This is a circumstance that is fraught with peril.   Someone has to be the boss and it should be clear who that person is.   Each employee should have a supervisor to whom they report and who can supervise their work.   An employee working alone is a recipe for a problem.

  1. Provide Constant Feedback.

No employee wants to be surprised at their annual performance review.  There is certainly a risk that this will occur if the employer fails to provide proper feedback during the course of the year.   In many companies, an annual performance review is simply insufficient and reviews should be conducted more than once per year.   In this manner, there is a greater likelihood that an employee who may be underperforming will improve.  Why wait until December to give an employee feedback when you already know what you may want to tell them in June? 

  1. Maintain an Employee File.

Even the smallest companies should maintain a personnel file for each employee.  In the file your company should include the employee’s application, health insurance information and related data.  It is also important that written performance reviews be placed into the file together with any memoranda created by the company regarding the employee’s performance (good or bad).

It is important that the employee’s file be “papered” before termination takes place since this will likely assist you in later combating a discrimination claim.

  1. Be careful about discriminating and/or retaliating.

Federal law creates certain protected categories of individuals.   The law protects against discrimination based upon age, gender, race and disabilities, to name a few.   Accordingly, the employer should be careful to make certain that if an employee is being terminated, or is being discriminated against in some other way, that an even handed approach be utilized. In these circumstances, the employee’s employment file will be critical.   That is the first question an employment lawyer will ask after a lawsuit is filed – – is there an employee file and what exactly is in there?

  1. Maintain an Employee Handbook.

Employee handbooks can be a wonderful tool to settle all sorts of issues.   An employee handbook will detail the company’s non-discrimination policies and provide options for the employee to complain if he or she is having a problem with his or her supervisor.   It will also provide a place where sexual harassment complaints can be channeled.   The employee handbook is often a useful exhibit to be used in an employment discrimination trial and allows the employer to state:   “We provided mechanisms for complaint and the employee did not follow them.  We are a non-discriminatory company and that point is emphasized in our employee manual.”  See Exhibit “A”.  This type of evidence can be very persuasive in an employment discrimination trial in which the company’s culture and attitude are at issue.

  1. The Humane Termination.

Sometimes it is necessary to terminate an employee from their job.  While this is, most often, a difficult decision, and a task that almost no one wants to perform, there are ways to handle this which will make it less likely to result in a lawsuit.  It is often a good idea to contact counsel prior to an employee termination particularly in a case in which you believe there may be some difficulty.   As a general rule, it is always a good idea to have more than one person present. Therefore, there will be some corroboration as to what the employee is told during this difficult moment.

Generally, it is a good idea to offer an employee severance pay.   This will help minimize the employee’s anger or surprise. In exchange, it is reasonable to ask the employee for a release. In cases of older workers (over forty), it is important to include certain language in the severance agreement and release which complies with the Older Worker’s Benefit Protection Act.   Accordingly, terminating an employee of an advanced age is often not a simple matter and should not be taken lightly.  


In sum, there are certain rules to follow when hiring, supervising and terminating employees which will prevent litigation and massive expenses later on.   Regular communication with competent counsel on this point could prove invaluable.

[1] These types of agreements may be unenforceable in the legal profession.


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2 responses to “It’s Bonus Time ! Top 10 Legal Tips for Business Owners to Follow

  1. Colin Thomas

    Hello Roger,

    Great article! As an HR training professional, you are correct that employees perceive training personally as an investment in them. In the knowledge economy of the United States, it is important that employees learn new skills that pertain directly to their job in a formal training setting and embrace the opportunity to learn skills that will help them now and in the future.

    In a dispute to determine the reasons why an employee leaves an company, training records are often requested. It is helpful to have a learning management system with records of training, results from certification tests and samples of the training materials to determine the burden of accountability.

    Employees need to embrace training opportunities to learn how to do their job effectively and employers need to embrace training in helping employees do their jobs effectively. Both have a stake in the outcome and the one that has the better documentation between training, performance and job description will always come out ahead.

    Keep up the great work and keep learning!!


  2. Pingback: Dog Training is All About Who is the Boss - The Dog Newspaper | The Dog Newspaper

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