Laboratories of democracy. That’s what U.S. Supreme Court Justice Louis Brandeis once called states. According to Brandeis, states could afford to experiment with their laws – for better or worse – without impacting the rest of the country. But Brandeis died in 1941 and couldn’t have imagined the world we know. National and international companies are the norm. And even small businesses in Michigan now hire a Californian here and a Virginian there. The patchwork of U.S. state laws is no boon to those employers, and every year state legislatures pass more laws. Those efforts present real and costly risks to even the most well informed businesses.

The bottom line is that it is hard for a business to maintain complete legal compliance in one state. Add employees in a few other states? The task becomes nearly impossible. But the savvy business will train its HR personnel to keep an eye out for the areas that are most likely to cause problems. Those issues generally fall under three categories – pre employment transparency and inquiry limits, employee pay and leave policies, and separation agreements. Let’s take those one at a time.

Pre-Employment

Employment laws start before an employer hires an employee. Most pre hire laws to keep in mind come down to this: what must an employer say, and what can’t the employer say? Consider the following:

• Ban the Box Laws. Most employers know that many states and localities bar some questions about an applicant’s criminal history. These laws have many nuances – some only restrict questions about arrests without convictions, some prohibit questions about misdemeanors but not felonies, some don’t allow questions about criminal history at all until a first interview is held, and some only allow convictions to be used if there is a strong link between the conviction and job duties. To avoid potential liability, multi-state employers often must decide to either (1) tread carefully to navigate the complex maze of laws or (2) take a hands off approach to criminal history inquiries.
• Wage History Inquiries. Wage history is an increasingly hot topic for states and localities. Similar to ban the box laws, these laws mean that an employer may not ask an applicant about their wage history, or they at least control when and how employers may ask those questions.
• Wage Transparency Laws. On the other side of the coin, another trend in many states and localities is the requirement that employers affirmatively disclose wage or salary ranges for posted positions. The idea is that posting ranges, and then being held to them, will avoid sex, race, and other discrimination.

Employee Pay and Leave Policies

Although hiring laws are important, the rubber meets the road once an employee actually begins work. The list of important issues an employer must know and weigh is far beyond the scope of this article, but every employer should think about these highlights:

• Restrictive Covenants. Many employers treat noncompetition, nonsolicitation, and nondisclosure agreements as one-size-fits-all requirements for new hires. However, noncompetition agreements (and, to a lesser extent, nonsolicitation agreements) are currently one of the hottest issues in the U.S. The Federal Trade Commission has attempted to essentially eliminate them, and challengers have predictably attempted to convince courts to push back on the FTC. No matter what happens at the federal level, many states are not content to sit on the sidelines. Thus, employers are sometimes surprised to learn that many states already greatly restrict when an employer can offer, let alone require an employee to sign, a noncompetition or nonsolicitation agreement.
• Leave Laws. Federal law provides relatively little paid leave for workers. There’s no entitlement to vacation time or sick time, and the FMLA doesn’t automatically require paid leave. To fill that gap, many states have enacted leave laws of varying degrees. What kind of leave might a state require? PTO, sick leave, jury duty leave, crime witness leave, school leave, voter leave, and more. And, in some states, state-level family leave is funded by insurance paid into by both employers and employees. For multi state employers, how to manage and track leaves is often an administrative nightmare. But because federal law in this area is unlikely to change for the foreseeable future, we should expect that more states will pass more laws in this area – not less.
• Harassment Training. In the wake of #MeToo, many states passed laws designed to protect workers (and especially women). Some states and localities now require harassment training, which usually includes at least sexual harassment training. These trainings may be one time requirements, or they might be required on periodic basis (e.g., annually).
• Meal and Rest Breaks. Not every state requires meal periods or even rest periods. Others tightly regulate them. For example, a state might require a meal period be given in the first 5 hours of a worker’s shift if the employee is scheduled to work at least 7.5 hours. Another state might require at least one break in an 8 hour shift, with an extra break for every additional 4 hours worked. Some states require that a worker receive an entire 24-hour period free from work within a 7-day period.
• Pay Dates, Pay Methods, Deductions, and Pay Stub Information. Unsurprisingly, states have a lot to say about how and when workers are paid. Most states require at least bi monthly pay for FLSA non-exempt workers, and many at least technically require an employer to formally set pay days. Further, some states will control pay methods, such as when and under what conditions an employer may require direct deposit and what alternatives must be offered. And nearly every state legislates strict requirements that control how and when an employer may deduct from an employee’s paycheck. Speaking of paychecks, several states have recently amended wage laws to require employers to provide more information on pay stubs – often, but not always or only, information about how much PTO and other leave an employee has available. The point is, employee pay is subject to many laws that require an employer to stay sharp. The good news is that these laws often are not new or are already consistent with ordinary business practices and are handled quickly.

Separation and Post-Employment

All good things must come to an end. So do bad things. And sometimes good things come to an end badly. Whatever the situation, employers need to watch out for a few issues as an employee’s tenure ends:

• Accrued, Unused PTO. Wise employers will include in their PTO policy how the employer handles accrued but unused PTO upon termination. Some states require PTO to be paid out at termination, and employers’ hands are generally tied if that is the law. But many states that do not strictly mandate payout will still require it if the employer’s handbook or policy is silent about the issue. So, spell it out for employees.
• Separation Agreements. States have recently placed a renewed focus on requirements related to employee separation agreements. The most visible changes touch on confidentiality – particularly for states that have run with the concept that employees shouldn’t have to keep silent about sexual harassment. But confidentiality is just one issue. Other states have implemented procedural requirements similar to those found, for example, in the federal Age Discrimination in Employment Act. A state might require that an employer allow an employee to consider an agreement for a period of time before signing it (e.g., 14 days) or that the employer advise the employee to consult an attorney to review the agreement.

These are only a handful of the issues that multi-state employers should know to consider, and a comprehensive list would cover dozens of pages to summarize. But an employer who tackles these issues will be in good position to avoid much of the liability others often wish they knew about before it became an issue. For employers who wish to maximize their knowledge and minimize their risk, these (and other) topics are often covered by law firms committed to staying up-to-date on multi-state development. We happen to know of one! (Learn more)

Questions?

Contact the author Adam Walker.