Protecting Employer Interests

Many employers try to protect confidential information, customer and employee relationships, inventions, and company property as an employee is going out the door.  While these issues can be addressed as part of a separation agreement and release (see posting on Safe Separations, January 27, 2009), if an employee refuses to sign, then the employer is left without important protections.  An employee is much more likely to be willing to agree to certain restrictions at the inception of the relationship rather than at an involuntary end.

As part of an employment agreement or stand-alone confidentiality and/or non-solicitation, invention, and covenant not to compete agreement, an employer can require an employee to maintain confidentiality of confidential and proprietary information; assign invention rights; refrain from soliciting other employees, vendors and customers; and, refrain from competing.  

Initially, an employer must make sure that there is adequate consideration for the agreement. Commencement of employment, a bonus, or increase in compensation is generally sufficient.  Some states recognize continued employment as adequate consideration.

The enforceability of these agreements also differs from state to state, and depends on the breadth of the restrictions.  Generally, courts balance the restriction on an employee's ability to find future employment against the employer's interests in protecting its employee and customer relationships and competitive edge.  Employers will need to prove that the restrictions are reasonable in duration and geographic scope and that they have protected the information or property they seek to protect, such as by implementing safeguards to restrict access to confidential information.

Some states will not enforce agreements against employees who are terminated for poor performance, under the rationale that if the employee is a poor performer his/her employment elsewhere does not pose a threat.  Courts in California will not enforce restrictions on competition, although non-solicitation and confidentiality agreements may be permissible.  Other states will blue line an agreement that is too broad in duration or scope by crossing out unenforceable language, while other states will revise overly broad language.   Employers implementing these agreements in different states must understand the applicable law.  Multi-state agreements should be drafted in such a way that courts can either remove or revise the language as applicable (with the exception of California). 

Based on the foregoing state law issues, employers should carefully consider what law will apply to the agreement.  Agreements also should provide for injunctive relief, meaning that the employer can restrain an employee from violating any of the restrictions.  The employer should reserve its right to assign the agreement, such as in the event of a sale of the business, so the new entity will be protected as well.

Employers also should take steps to provide for the return of company property upon the termination of employment. Employees should agree to do so, and, where permitted by applicable law, agree that the employer may deduct the cost of unreturned property from final pay.  However, some states do not permit such deductions.

Finally, any agreement should clearly state that employment is at-will, which means that the employer and employee can terminate the employment relationship at any time with or without reason. If the parties intend that the relationship last for a certain time, the duration (and reasons to end the agreement earlier) should be defined clearly.

 

Loss of Benefits Can Mean Loss of Talent

In an effort to reduce costs, many employers are cutting employee benefits, including health insurance, 401k matches, cost of living increases, bonuses, company cars, and tuition reimbursement. Employers may be cutting severance packages as well.  

Benefits matter to employees. A recent MetLife study (Study of Employee Benefit Trends: Findings From the National Survey of Employers and Employees) concluded that there is a "perception gap" between employers and employees on the role of benefits, especially health and retirement benefits, in building loyalty. Employees also value the availability of voluntary benefits, such as long term or elder care.

Employers looking at cutting benefits should consider the following:

- Reducing benefits can have a negative impact on employee morale and loyalty.

- Benefits must be offered in a non-discriminatory manner. Employers should make sure that the elimination of any type of benefit does not have a disparate impact on any protected group.

- Benefits must be offered consistent with plan documents or an employee may have a contractual claim for the benefits and possibly even uncovered expenses (such as medical expenses).

- Employers may also be contractually bound to offer benefits pursuant to individual agreements, such as employment or severance agreements.

- Employers should make sure their employee handbooks do not create a contractual obligation to pay benefits by including the appropriate disclaimers in the handbook.

- Eliminating benefits could hurt an employer's ability to attract and retain talent. There is a wealth of talent available, and this market may be a good opportunity for businesses to attract stronger candidates. A good benefits package could be a draw.

- Finally, unions may be more attractive to employees who experience a loss or reduction in benefits.

A choice between layoffs and cutting benefits for existing employees may be a decision between the lesser of two evils. If an employer is unwilling to lose talent through a reduction in force, it should make sure it does not inadvertently cause the same result by cutting benefits that are so important to employees.

Evaluating Employee Evaluations

Posted by: Anne Ciesla Bancroft, Esq. and Najeeb Ahmad, founder of Pennington Human Dynamics, specializing in talent management consulting.

Accurate evaluations are critical in supporting performance-based adverse employment decisions, whether an employee is terminated for poor performance or chosen for a reduction in force as a relatively poor performer.  Too often evaluations are missing, sugar-coated, or, based on unsupported assumptions and stereotypes.   In contrast,  businesses that treat evaluations as an investment in employee talent can reap significant benefits.

Employers can use evaluations to:

Manage talent: The evaluation process presents an ideal opportunity to identify the strongest performers, those with the greatest potential, and those whose career development and impact in the organization will benefit from new opportunities. Well-grounded evaluations provide critical data to assess whether key employees are appropriately matched to the right opportunities, as well as to identify potential successors for critical vacancies or openings created by employees who change roles. Avoid the common mistake of focusing on form over substance, which can lead to the creation of lists that simply get placed in a file. Whenever possible, ensure that specific action steps and accountabilities are identified and periodically reviewed to assess progress.

 

Improve employee performance: In order to be an effective tool in improving performance, evaluations must be constructive, specific, and performance-focused. Providing positive feedback is easy. It is also important. Employees can find positive evaluations rewarding and motivating. More challenging is an assessment that an employee does not want to hear. Employers need to emphasize the importance of constructive, objective feedback to the evaluation process, even in the face of employee opposition.

 

Employees must be given the opportunity to review and sign off on their evaluations.  Employers should have a written policy that refusal to sign an evaluation can subject an employee to discipline, including termination. An employee is not indicating that s/he agrees with the evaluation; his or her signature is simply an acknowledgement of review and receipt. Signed evaluations should be maintained in an employee’s personnel file.

 

Improve employer performance:   360 degree reviews can give employees an opportunity to evaluate their supervisor.   It can provide an invaluable tool for supervisors to understand how they can lead more effectively and develop their employees, as well as to reinforce effective behaviors. Employee feedback can also assist employers in identifying abusive and even unlawful conduct, such as workplace bullying or sexual harassment. 

 

Improve morale and engagement:   One of the clearest paths to enhancing morale is to create an environment where employees know what is expected of them, where they stand, and what they can do to improve; an effective evaluation process helps accomplish all of these objectives. At the same time, a process that is perceived as “going through the motions,” unclear, or focused more on filling out forms than having meaningful discussions with employees can dramatically erode morale and lead to cynicism about the employer’s commitment to employee development. 

 

Communicate expectations:       Clear goals, mutually created by supervisors and employees, or more formal performance improvement plans, should be included in evaluations, and acknowledged by the employee. These can be used as indicia against which to assess the employee’s performance and track progress the next year. However, evaluations should not make any representations regarding continued employment or advancement that could be used as the basis for a contractual claim by an employee. Remember the acronym S-M-A-R-T, which stands for specific, measurable, achievable (or actionable), realistic, and time-bound, to guide the creation of effective expectations.

 

Provide a defense:   Accurate evaluations demonstrating a progressive effort to improve employee performance can be an essential component of an employer’s defense to a discrimination, retaliation or other unlawful termination claim. In contrast, the absence of evaluations; inaccurate or white-washed evaluations; or, inappropriate comments in an evaluation can be used to support an employee claim. Employers should use the “what not who” test. Evaluation comments should be related to what an employee does, not who s/he is. Evaluations must be free of comments related to an individual’s protected classification, need for accommodation of a disability or religious belief, caregiving responsibilities, stereotypes, or other potentially improper areas.   Those employees conducting evaluations should receive guidance and training to make sure they prepare evaluations properly.  

 

Open communication:   Employers may avoid employee claims all together if employees have open lines of communication with management. Evaluations present an opportunity to solicit information from employees about their work environment that can help an employer address problems before they lead to formal or external complaints.

 

What can an employer do to meet these goals?

 

 ∙           Implement an evaluation policy that provides for a regular process for review

∙           Develop an evaluation which is tailored to the employer’s needs – cookie-cutter forms will not result in useful feedback.

∙           Use job descriptions when conducting reviews to assess performance and develop goals.

∙           Conduct reviews from the top down – higher level managers should not expect their reports to evaluate subordinates if they are not evaluated.

 ∙           Train those conducting reviews how to provide constructive feedback and to communicate reviews effectively

∙           Ensure that evaluations are free of discriminatory or improper comments unrelated to performance.

           

Performance evaluations provide a powerful opportunity to allow employees to understand what is expected of them, how they are doing, and how they can improve. At the same time, they enable employers to manage their talent effectively and to create a climate that fosters open communication and mutual respect. Employers should stay focused on these simple objectives, ensure that documents and conversations are well-grounded in fact, and engage employees in the process to ensure success.

 

Leadership Through Lay-Offs

Leaders by their actions, not their words, establish a sense of justice in the system - Max Depris.

Yes, lay-offs are about loss. But lay-offs also can also create opportunity for decision-makers, by their actions, to inspire Loyalty, Enthusiam, Achievement, and Direction - in other words, to LEAD. How?

Try bringing employees into the "world of decision-making."  Listen to what they have to say.  When cost-saving measures are needed, how can you help? For employees who are laid-off, consider outplacement services, mutually agreeable reference language, a willingness (but not a promise) to rehire, or access to company resources and networks.  For employees who are retained but may be required to assume additional responsibilities for the same or less pay, think about what else you can offer. Positive feedback? A day off? Training? Technical support? An extended deadline? Thank you?

Most employment litigation comes down to fairness.  Taking steps to establish a sense of justice in the workplace can be the best defense.

For more on leadership skills in a challenging economic climate, see "Honoring Employees in a Poor Economy - Handling Promotions and Raises" at www.menoconsulting.com/docs/HonoringEmployees.pdf.