A comprehensive resource

The Manager's Legal Handbook

Successfully manage employees while avoiding legal trouble

Supervise employees and independent contractors effectively and legally with this easy-to-use reference guide to employment law. Presenting legal information and practical tips in Nolo's plain-English format, The Manager's Legal Handbook answers your questions about hiring, firing, and everything in between. The latest edition includes up-to-date information on federal and state laws, including:

  • discrimination and sexual harassment laws
  • misclassification of independent contractors
  • ban-the-box laws and other hiring rules, and
  • paid sick leave and paid family leave.

See below for a full product description.

  • Product Details
  • If you supervise employees or independent contractors, The Manager’s Legal Handbook is the perfect resource.

    Need information about overtime? Want useful ideas on workplace policies? Have a question about trade secrets and need the answer now? This book provides everything you need to stay within the bounds of the law, including information on:

    • hiring
    • discrimination and harassment
    • wages and hours
    • privacy
    • time off
    • workplace policies, and
    • firing and layoffs.

    Designed for managers, business owners, and human resources professionals who need answers on the go, The Manager’s Legal Handbook covers the most common issues employers face.

    The 10th edition is completely updated to reflect changes to discrimination laws, overtime rules, minimum wage laws, and more. It also provides updated information on the laws of each state, including paid sick leave and paid family leave laws.

    “Takes everyday employment topics, such as hiring and firing, and breaks the issue down into understandable legal segments.” -American Reference Books Annual

    Number of Pages
  • About the Author
  • Table of Contents
  • I. Introduction: Navigating the Maze of Employment Law

    • How to Use This Book
    • Additional Resources

    1. Hiring

    • Job Postings
    • Interviews
    • Making Promises
    • Applicants With Disabilities
    • Testing Applicants
    • Background Checks
    • Ordering Consumer Reports
    • Young Workers
    • Offer Letters
    • Written Employment Contracts

    2. Compensation and Hours

    • The Fair Labor Standards Act
    • Deciding What to Pay People
    • The Minimum Wage
    • Overtime
    • Meal and Rest Breaks
    • Lactation Breaks
    • Travel Time
    • On-Call Time
    • Flexible Work Schedules
    • Pay Docking and Unpaid Suspensions
    • Garnishments
    • Equal Pay
    • Record-Keeping Requirements

    3. Discrimination

    • Antidiscrimination Laws
    • Race and National Origin
    • Age
    • Gender, Pregnancy, and Sexual Harassment
    • Genetic Information
    • Sexual Orientation and Gender Identity
    • Religion
    • Expression of Religious Beliefs
    • Disability

    4. Personnel Basics

    • Personnel Policies and the Law
    • At-Will Employment
    • Employee Handbooks
    • Preventing Sexual Harassment
    • Communicating With Employees Effectively
    • Performance Appraisal
    • Creating and Maintaining Personnel Files
    • Family-Friendly Workplace Policies

    5. Time Off

    • Vacation and Sick Leave
    • Family and Medical Leave
    • Pregnancy and Parental Leave
    • Jury Duty and Voting
    • Military Leave
    • Domestic Violence Leave
    • Other Types of Leave

    6. Privacy

    • The Right to Privacy
    • Testing Current Employees
    • Internet Monitoring
    • Why Your Company Needs an Email Policy
    • Employee Posts and Social Networking
    • Off-Duty Conduct
    • Workplace Searches

    7. Health and Safety

    • Health and Safety Laws
    • Workers’ Compensation
    • Health Care Reform
    • Cell Phones and Driving
    • Smoking
    • Drugs and Alcohol

    8. Unions

    • The National Labor Relations Act
    • Representation Elections and Organizing Campaigns
    • Election Statements
    • Shop Talk
    • Protected Concerted Activity
    • Union Shops and Union Dues
    • Collective Bargaining
    • Company Unions and Employee Committees
    • Strikes

    9. Independent Contractors

    • Classifying Workers
    • Benefits and Drawbacks of Using Independent Contractors
    • Important Documents When Hiring Independent Contractors
    • Written Agreements With Independent Contractors
    • Copyright Ownership

    10. Trade Secrets

    • The Law of Trade Secrets
    • Protecting Trade Secrets
    • Nondisclosure Agreements
    • Noncompete Agreements
    • Nonsolicitation Agreements
    • Hiring From Competitors

    11. Handling Workplace Problems

    • Disciplining Workers
    • Investigating Complaints
    • Retaliation
    • Workplace Violence
    • Liability for an Employee’s Actions

    12. Firing Employees

    • Illegal Reasons for Firing Employees
    • Firing Employees With Employment Contracts
    • Making the Decision to Fire
    • How to Fire

    13. Layoffs

    • Before Conducting a Layoff
    • Alternatives to Layoffs
    • Making the Cut
    • Conducting a Layoff
    • Notice Requirements for Layoffs

    14. Departing Workers

    • References
    • What to Tell Coworkers When an Employee Leaves
    • Health Insurance
    • Severance
    • Releases
    • Unemployment Benefits

    Appendix: Resources

    • Federal Agencies


  • Sample Chapter
  • Chapter 1: Hiring

    Hiring can be a tough task for managers. It’s challenging enough to find the right person for the job, someone with the skills, attitude, personality, and other important qualities to be a success at your company. When you add legal concerns into the mix, hiring can seem like a truly daunting responsibility.

    But you can’t just ignore your legal obligations when interviewing applicants and hiring new employees. Federal and state employment laws reach beyond current employees; many also protect those who apply for jobs. For example, such laws might prohibit discriminatory job postings, put limits on the information you can gather in a background check, or outlaw certain kinds of applicant screening tests. What’s more, the things you say and do during the hiring process could come back to haunt you and your company, particularly if an employee claims that you offered a job contract or promised job security.

    The good news is that following sensible and careful hiring practices will keep your company out of immediate legal trouble, will help you find the most qualified employees, and—by screening out problem employees from the get-go—will help prevent management headaches and possible lawsuits down the road.

    This chapter explains the legal ins and outs of hiring and provides practical advice on how to find, interview, and seal the deal with your lucky new hire.

    Job Postings

    Your legal obligations start at the very beginning: advertising for an open position. Although a job posting might seem innocuous, the words you use can get your company in trouble. In particular, it’s important to watch out for language that could be interpreted as discriminating against applicants based on a characteristic protected by federal or state law, such as race or gender. (To learn which characteristics are protected by federal and state law, see Chapter 3.)

    Some off-limits topics are obvious: Most managers know that a job ad can’t state “Only white males need apply.” But companies can also get into trouble by posting an ad that discriminates on a more subtle level, even if that wasn’t their intention.

    For example, let’s say you want to hire a technician for your company’s information ­systems department. Almost all of the technician’s day would be spent at a computer. On occasion, however, technicians at your company have to install new equipment, which might require them to carry computers, monitors, printers, and so on. Should you write a job posting saying that applicants must be able to lift at least 50 pounds? Well, that kind of requirement would screen out applicants with certain disabilities, as well as disproportionate numbers of women. Because the lifting is only occasional and could be accomplished by other means—using machinery, for example—including such a requirement in your ad could be found to be discriminatory.


    Frequently Asked Questions About Hiring

    Do I have to advertise open positions?

    No. Although federal, state, and local governments are typically required to post openings, private companies are not. Nonetheless, there are some very good reasons to advertise:

    • You can choose from a larger pool of applicants, which increases your odds of finding the best person for the job.
    • You avoid unintentional discrimination. For example, if you rely solely on word of mouth when looking for applicants, and you only know people of your own race or ethnicity, then your hiring process might be biased.
    • You can avoid the appearance of nepotism or favoritism. If you hire your friends, family members, or neighbors to come work for you, the employees who currently report to you might think you’ll play favorites. By posting open positions and choosing your hires from a broad range of applicants, you can show your employees that you hire—and manage—based on merit alone. (For advice on effective and legal job advertisements, see “Job Postings,” above.)

    Are there questions I can’t ask during a job interview?

    Yes. Several topics are off limits. For example, you may not ask whether an applicant has a disability, what country an applicant comes from—and, in some states—whether an applicant has ever been arrested. (To learn what questions you can and cannot ask an applicant during an interview, see “Interviews,” below.)

    Are there things I shouldn’t say when I’m trying to convince a really strong applicant to take a job?

    Absolutely. Although you might be tempted to sell your company during a job interview with a hot prospect, don’t overdo it. If you exaggerate—or flat out lie—about the position, the company’s future, or other important facts, and the applicant takes the job based on your statements, he or she can sue the company if your statements turn out to be false. Likewise, avoid any statements that promise job security or continued employment if the applicant takes the position. (For more information on statements to avoid when hiring, see “Making Promises,” below.)

    Can I ask whether an applicant has a disability?

    No. The Americans with Disabilities Act (ADA) prohibits you from asking whether an applicant has a disability. Instead, you should focus your interview questions on the applicant’s abilities. For example, you may ask whether and how an applicant would perform each essential function of the job. If you know that an applicant has a disability (because it is obvious or the applicant has told you about it), you may ask whether the applicant will need an accommodation to perform the job. (For more on avoiding disability discrimination when hiring, see “Applicants With Disabilities,” below.)

    Can I ask every applicant to take a lie detector test?

    No. The Employee Polygraph Protection Act (EPPA) prohibits lie detector tests by all but a few types of employers, such as those that provide certain types of security services or those that manufacture pharmaceuticals. (For more information on what tests you can ask applicants to take, see “Testing Applicants,” below.)

    Can I run background checks on applicants?

    It depends on the information you plan to collect and who collects it. In general, you can check information that is relevant to the job for which you are hiring. However, state and federal laws restrict you from gathering or using certain types of records (such as medical records or criminal records). And, if you plan on having a third party run a background check, you must get the applicant’s written consent in advance. (See “Background Checks,” below, for more information.)

    Can I hire teenagers to do clerical work?

    Generally, yes. Teenagers who are at least 16 years old may work unlimited hours in any profession that the government has not deemed hazardous. You can also hire younger teens, although the law restricts how many hours they may work and the types of jobs they may do. (For more information, see “Young Workers,” below.)

    If I want to offer someone a job, do I have to do it in writing?

    There is no law that governs how you offer someone a job. You can do it in person, over the phone, or with a formal letter. However, you should probably send written offer letters to make sure potential hires understand exactly what you are offering. Offer letters aren’t without their pitfalls, however, so be careful what you write. (To learn more, see “Offer Letters,” below.)

    When I hire someone, should I use a written contract?

    It depends on the circumstances. In most cases, you probably won’t want to use a contract

    because it will give up your right to fire at will. However, there might be times when a written contract is a good idea, such as when you want the employee to make a long-term commitment to the company. (To learn about when you should use an employment contract, see “Written Employment Contracts,” below.)

    What forms or paperwork do new employees have to complete?

    In addition to paperwork your company requires—such as an acknowledgment form for the employee handbook, a confidentiality agreement, or an emergency contact form—you should also ask employees to complete the following documents:

    • IRS Form W-4, Withholding Allowance Certificate. Employees use this form to tell you how many allowances they are claiming for tax purposes and, therefore, how much you should withhold from their paychecks.
    • USCIS Form I-9, Employee Eligibility Verification. You and the employee must each complete a portion of this form to verify that the employee is eligible to work in the United States.
    • New Hire Reporting Form. The new hire reporting program requires employers to report basic identifying information on all new employees to a state agency, to be used to locate parents who owe child support.

    (For more on these requirements, see “Checklist: First-Day Paperwork,” below.)


    Similarly, avoid words or descriptions that imply you have a discriminatory preference. For example, let’s say you are looking for a sales representative. If you use the term, “salesman” in your ad, it implies that you are only looking for men (and therefore that you would discriminate against female applicants). The same precaution applies to terms like “handyman” or “waiter.”

    So what can you say? If you follow two basic rules, you should steer clear of trouble:

    • Focus on the essential functions of the job. In other words, advertise only for the skills or characteristics that the job absolutely requires. For example, if you are looking for someone to proofread magazine articles, you probably don’t need someone with a B.A. in science unless your magazine is a professional scientific journal. If there is an up-to-date job description for the position, you can use it to focus the ad appropriately.
    • Pay attention to the literal meaning of the words you use. This is particularly important with the suffix “-man”—as in “salesman,” “repairman,” and so on (try “salesperson” and “general repair person” instead)—or gendered positions such as “waiter” (use “server” or “wait staff” instead). It is also important to be cautious when using words that refer to age. For example, targeting your job ads to “recent college grads” would likely discourage older workers from applying for the position, which could lead to an age discrimination lawsuit.

    Ban-the-Box Laws Restrict Inquiries About Criminal History

    In the last several years, an increasing number of states and cities have passed laws prohibiting employers from asking an applicant about criminal history early on in the hiring process. Called “ban-the-box” laws, these laws were originally aimed at removing a common question on job applications that required applicants to check a box if they had a criminal record. Nearly ten states, and many cities, have adopted ban-the-box laws. While these laws vary in the particulars, employers are generally not allowed to ask about criminal history—on a job application or otherwise—until the applicant comes in for an interview or receives a conditional offer of employment. Some of these laws also require employers to give the applicant an opportunity to explain any criminal history or require employers to consider certain criteria in evaluating criminal history. To learn if your state has such a law, see “State Laws on Employee Arrest and Conviction Records,” at the end of this chapter.



    The spontaneous and unpredictable nature of the job interview makes it rife with traps, even for managers with the best of intentions. Well-meaning, innocent comments could be construed by an applicant as prejudicial or used as the basis of a discrimination lawsuit.

    For example, let’s say an applicant speaks with an accent you’ve never heard before. You might be curious about where the applicant is from. However, if you ask about the applicant’s national origin, and the applicant doesn’t get the job, your question could make the applicant wonder whether ethnicity played a role in your decision.

    On the other hand, you don’t want to get so hung up on every word you say that you defeat the purpose of the interview: to learn about the applicant’s skills and experience so you can choose the best-qualified candidate for the position.

    Here are some tips that will help you stay out of legal trouble while also getting the information you need to make the right choice:

    • Don’t ask about any characteristic that the law prohibits you from considering in making your decision. (To learn about these protected characteristics, see Chapter 3.) For example, you can’t base your hiring decisions on an applicant’s religious beliefs or race, so you shouldn’t be asking about those things in your interviews. For ideas on how to get information while staying within the bounds of federal law, see the “Preemployment Inquiries” chart at the end of this chapter.
    • Respect the applicant’s privacy. Although federal law does not require you to do so, many state laws and rules of etiquette do. For example, asking applicants in California about their sexual fantasies (yes, that actually happened in a real-life case) violates their state-protected right to privacy. (For more information on privacy in the workplace, see Chapter 6.)
    • If an applicant raises a delicate subject, it’s usually best to skirt the issue. Unless the topic is directly related to the position—for example, the applicant reveals that he or she has a disability and will need an accommodation to perform the job—politely steer the conversation in another direction. Although it might seem a bit awkward, you’ll be better off in the long run if you don’t take the applicant’s comments as an invitation to pry into his or her relationship troubles or political beliefs.
    • Ask open-ended questions to get the candidate talking. There’s a big difference between a closed question (such as “How many supervisory positions have you held?”) and an open one (such as “Tell me about your most recent experience supervising others”). The more open your questions, the more you invite the candidate to talk. This will not only give you the factual information you need to make a decision, but will also let you see how well applicants express themselves and think on their feet.
    • Ask behavioral questions, if possible. It can be tough to find out whether applicants possess important, yet somewhat intangible qualifications, such as problem-solving skills or the ability to work well as part of a team. If you just come out and ask, all but the most dim-witted applicants are going to know the correct answer. (“Are you good at solving problems?” “You bet!”) On the other hand, if you ask the applicant to describe specific instances in which he or she had to use those skills, you’re more likely to get a helpful response. To find out about a candidate’s problem-solving skills, for example, you could say, “Tell me about a problem you recently faced in your current position and how you handled it.”
    • Focus on what the job really requires. If you have a job description for the position, use it to script some interview questions that will help you find out whether the applicant has the necessary skills and experience. If you don’t have a job description, create a list of the essential tasks for that position, then craft questions that will help you figure out whether the appli­cant can meet these requirements. Remember, the law absolutely allows you to ask questions that directly relate to the requirements of the job you are trying to fill.
    • Cover similar ground with each applicant. You can’t ask exactly the same questions of each applicant, nor should you. After all, you don’t want to miss the opportunity to ask spontaneous follow-up questions or delve more deeply into particular topics. On the other hand, you should try to cover the same basic topics and general questions with each applicant. This will help you compare candidates when it’s time to choose your hire; it will also help you avoid claims of discrimination by applicants who don’t get the job.
    Asking for Social Media Account Passwords

    Many companies look online for publicly available information on job or promotion applicants, including on Facebook and other social networking sites. But the Maryland Department of Corrections took this common practice a step further when it asked employee Robert Collins to hand over his Facebook password during a job recertification interview.

    The situation was publicized when the American Civil Liberties Union filed a lawsuit on Collins’s behalf in 2011. Soon after, Maryland passed a law banning this practice, and several states have followed suit.

    Over two dozen states now have laws that prohibit or place restrictions on this practice. In most of these states, it is illegal for an employer to make an applicant hand over the password to his or her private social media account or pull up the account in the employer’s presence. (Check out the website of the National Conference of State Legislatures, www.ncsl.org, for current information on state laws in this area.)

    Facebook has weighed in on the issue, making it a violation of the site’s code of conduct to “share or solicit a Facebook password.” In response to the publicity surrounding the Maryland case, Facebook’s Chief Privacy Officer warned employers that they could expose themselves to “unanticipated legal liability” by demanding user passwords.


    Making Promises

    A common mistake managers make during the hiring process is to exaggerate the prospects of the business (“We’re expanding like wildfire; those stock options will be worth millions in no time!”) or play up the security of the job (“As long as you do good work, you won’t lose your job”). Lots of companies and managers embellish when they’re trying to sell an especially desirable applicant on a job. No harm in that, right?

    Wrong. If you tell a prospective employee something about a job, you’d better be able to back it up. If the employee takes the job in part because of what you said, then that employee may be allowed to sue if your promises or statements later prove false. Courts sometimes decide that a promise or statement you make to a prospective employee turns into a contract if the employee accepts the job offer because of what you said. If the position doesn’t live up to your statements, your company has broken the contract and might have to pay damages to the employee.

    It’s easy to avoid making inflated promises if you follow one simple rule: Tell the truth. After all, job applicants are trying to figure out whether the job will fit with their career goals, skills, and lives outside the workplace. They deserve to know the truth so they can make the right decision.

    This strategy will not only keep you out of legal trouble, but will also increase your chances of finding an employee who is right for the job and for your business. No one wants a disgruntled employee on the payroll. If you’ve told the applicant the truth and he or she still wants the job, then you’ve probably found a good fit.

    Lessons From the Real World

    A California company paid the price for aggressively recruiting an employee with promises it couldn’t keep. Rykoff-Sexton, Inc., promised Andrew Lazar job security, significant pay increases, an eventual executive position, and a bright future with a company that was financially strong. Lazar took the bait and left a lucrative job in New York City, his home of 40 years.

    Although Lazar excelled in his new job, the pay increases and bonuses never came. Eventually, Rykoff fired Lazar because of a “reorganization.”

    Lazar sued and won. He argued to the California Supreme Court that Rykoff should have to keep the promises it used to recruit him, and the court agreed. The court decided that Rykoff’s broken promises amounted to fraud because it knew the promises were untrue when it made them.

    Lazar v. Rykoff-Sexton, Inc., 12 Cal.4th 631 (1996).


    Here are a few rules that will help you avoid common promise pitfalls:

    • Don’t make predictions about your company’s financial future. Even if you honestly believe that your company is headed for the Fortune 500, keep your optimism to yourself. If the applicant asks about the company’s prospects, stick to the facts. If you make any statements about what the future might bring, clearly identify them as hopes, not predictions. For example, you might say, “Our business has continued to grow despite the economic downturn, and we’re hoping that trend will continue,” but you shouldn’t say, “We’ll be the industry leader by this time next year.”
    • Don’t estimate the future value of stock options. Let’s face it: You simply can’t know what your company’s stock options will be worth in the future. It’s fine to explain the stock option program to applicants and to tell them that you hope the options will be valuable, but don’t say things like, “When these options vest, we’ll all be millionaires!”
    • Don’t say anything that might limit your right to make personnel decisions in the future. If you tell an applicant that your company fires workers only for poor performance, this will limit your ability to terminate that person for any other reason—such as personality conflicts or economic downturns—if he or she accepts the job. Similarly, if you promise pay increases at regular intervals, the employee could hold you to that promise, even if the flagging economy or the employee’s performance don’t justify a raise.
    • If layoffs are likely, say so. If your company is considering staff reductions and there is even a remote chance that the applicant you are interviewing might lose that new job as a result, disclose this before the applicant accepts the job. Otherwise, you may find your company slapped with a lawsuit, especially if the employee left a secure job elsewhere to come work for your company. Of course, this strategy might make it difficult to find new employees, but it really isn’t fair (or legal) to hire people on false pretenses.
    • Be accurate in describing the position. Don’t exaggerate to land an applicant, and don’t play bait and switch by offering an applicant one job, then placing him or her in another. It might not matter much to you who does what, but it will matter a lot to the employee. An employee who accepts the position based on statements that turn out to be false might have grounds for a lawsuit.

    Applicants With Disabilities

    Of all the antidiscrimination laws, perhaps none confuses managers more than the Americans with Disabilities Act (ADA), especially when it comes to hiring. Managers want to find out if the person they hire can actually perform the job but often aren’t sure how to explore this issue without running afoul of the law. (For information on how the ADA applies to employees, see Chapter 3.)

    If you remember one simple rule, you’ll be in good shape: You can ask candidates about their abilities, but not about their disabilities. This means that you can ask how an applicant would perform each function of the job, but you can’t ask whether the applicant has any disabilities that will prevent him or her from performing each function of the job.

    One way to ensure that you stay within the rules is to attach a detailed job description to the application or describe the job duties to applicants during the job interview. Then ask how the applicant plans to perform the job. This approach gives applicants an opportunity to talk about their qualifications and strengths. It also gives them a chance to let you know if they need reasonable accommodations to do the job.

    If you choose to ask applicants how they would perform the job duties, you should ask these questions of all applicants. It’s illegal to single out those whom you suspect might have a disability. If an applicant has a “known” disability—a disability that the applicant has disclosed or that is obvious (for example, if the applicant uses a wheelchair)—and it reasonably appears that the applicant might not be able to perform the job’s functions, you may ask how the applicant would perform those functions or whether the applicant would need an accommodation to do so.

    Generally, you may not ask an applicant questions—on an application or during a job interview—that are likely to require the applicant to reveal a disability. The Equal Employment Opportunity Commission (EEOC), the federal agency that interprets and enforces the ADA, gives the following examples of questions you should not ask:

    • Do you have a disability that would interfere with your ability to do the job?
    • How many days were you sick last year?
    • Have you ever filed for workers’ compensation? Have you ever been injured on the job?
    • Have you ever been treated for mental health problems?
    • What prescription drugs are you currently taking?

    You may, however, ask questions like these:

    • Can you perform all of the functions of this job?
    • How would you perform each of the job functions?
    • What certifications and licenses do you hold?
    • Tell me about your education and work history.
    • Can you meet the attendance requirements of this job?

    If you have no reason to believe that the applicant has a disability, you may not ask whether the applicant will need an accommodation to perform the job. If, however, you know that the applicant has a disability—because it is obvious, for example, or because the applicant has told you about it—you may ask about accommodations.

    Testing Applicants

    Many companies like to use preemployment tests as a way to screen out applicants who are not suitable for a job. These tests include skills tests, aptitude tests, psychological tests, personality tests, honesty tests, medical tests, and drug tests.

    Although you are allowed to do some testing of applicants, both state and federal law impose numerous restrictions on what you can do. Because these restrictions are often vague and open to conflicting interpretations, you should use only the tests that are absolutely necessary. You should also consult with a lawyer before administering the test to make sure that it will pass legal muster in your state.

    Avoiding Disability Discrimination

    For all tests—including those described below—you must take care to avoid discriminating against applicants who are protected by the Americans with Disabilities Act (ADA). (For information on the ADA, see Chapter 3.) To ensure that a test does not unfairly screen out people with disabilities, it must accurately measure people’s skills, not their disabilities. For example:

    • Avoid testing mental, sensory, manual, or speaking skills unless they are job-related. For example, even though a typing test is a manual test that will screen out people who have particular impairments, it is acceptable if you are filling a job for a typist. However, requiring a typing test for a janitorial position probably won’t fly.
    • Accommodate people with disabilities by giving them a test that is “disability neutral” whenever possible. For example, if you are giving a written test to applicants for a sales position to test their knowledge of sales techniques, you can administer the test orally to a blind applicant. This is a reasonable accommodation because sight is not required for the job, but it is required to take the test.

    Skills Tests

    Skills tests range from something as simple as a typing test to something as complicated as an architectural drafting test. Generally speaking, these tests are legal as long as they genuinely test a skill necessary to perform the job, do not violate the ADA (see above), and do not unfairly exclude anyone based on a protected characteristic.

    Aptitude, Psychological, and Personality Tests

    Some companies use written tests—often in a multiple choice format—to learn about an applicant’s general abilities, personality, and work style. However, using these tests leaves you vulnerable to various types of lawsuits. For example:

    • A multiple-choice aptitude test might discriminate against minority applicants or female applicants because it really reflects test-taking ability rather than actual job skills. (Studies have shown that some aptitude tests are biased against women and minority test takers.)
    • A personality test can be even riskier. Such a test might invade a person’s privacy by inquiring into topics that are personal in nature, such as sexual preferences or religious beliefs. (Many states specifically protect a person’s right to privacy, even from inquiries by employers.) In addition, these tests can lead to discrimination lawsuits. For example, if you decide not to hire someone based on his or her answers to questions dealing with religious issues, the applicant could argue that you illegally discriminated based on his or her religion. (For more about discrimination, see Chapter 3.)
    • Psychological and personality tests are treated like medical tests (see below) when they ask for answers that would indicate whether the applicant has a mental disorder or impairment. If they do, they will be governed by the Americans with Disabilities Act (ADA) and all of its restrictions. (For more on hiring and the ADA, see “Applicants With Disabilities,” above.)

    If you decide to use one of these types of tests, proceed with extreme caution. Make sure that the test has been screened scientifically for validity and that it genuinely correlates to necessary job skills. Review the test carefully for any questions that might intrude into an applicant’s privacy. And, depending on the complexity and purpose of the test you use, your company might need to hire an expert to interpret the results.

    Lie Detector and Honesty Tests

    The federal Employee Polygraph Protection Act (EPPA) generally prohibits employers from requiring applicants to take a lie detector test or from asking applicants about the results of previous lie detector tests. The law contains a few narrowly defined exceptions for certain types of employers, including those that provide armored car, alarm, or guard services, and those that manufacture, distribute, or dispense pharmaceuticals.

    Even though no federal law specifically outlaws written honesty tests, these tests sometimes violate federal and state antidiscrimination or privacy laws. Plus, the tests can be unreliable.

    Some states have adopted their own rules about polygraph tests, some of which are stricter than the federal law. To find out what your state requires, see “Employee Polygraph Examination Laws,” at the end of this chapter.

    Lessons From the Real World

    Rent-A-Center, Inc., a company that offers furniture and other household goods on a rent-to-own basis, required applicants for certain management positions to take the Minnesota Multiphasic Personality Inventory test (MMPI), answering questions such as:

    • I see things or animals or people around me that others do not see.
    • My soul sometimes leaves my body.
    • At times I have fits of laughing and crying that I cannot control.
    • I have a habit of counting things that are not important such as bulbs on electric signs, and so forth.

    Applicants who were required to take the test sued, arguing (among other things) that the test violated the ADA because it was a medical examination designed to reveal mental impairments. Although the trial court rejected this argument, the federal Court of Appeals agreed with the applicants. Rent-A-Center stopped using the MMPI and was ordered to destroy all test results in its possession; it also had to pay the plaintiff class’s attorneys’ fees.

    Karraker v. Rent-A-Center, 492 F.3d 896 (7th Cir. 2007); Karraker v. Rent-A-Center, 411 F.3d 831 (7th Cir. 2005).


    Medical Tests

    Medical testing is tricky. To avoid violating the Americans with Disabilities Act, you shouldn’t ask for an applicant’s medical history or conduct any medical exam before you make a job offer.

    However, once you decide to offer the applicant a job, you can make the offer conditional on the applicant’s passing a medical exam. However, you must require the exam for all entering employees doing the same job. If you only require people whom you believe or know to have disabilities to take the exam, you will be violating the Americans with Disabilities Act. If the exam would screen out disproportionately large numbers of applicants with disabilities, you may administer it only if it is job related and correlates to necessary job skills.

    The Genetic Information Nondiscrimination Act (GINA) prohibits employers from asking or requiring applicants to provide genetic information, including through genetic tests. Even though the ADA allows employers to require a post-offer medical exam, as described above, that exam may not include genetic testing, nor may it include the collection of family medical history. Employers must instruct their health care providers not to collect genetic information as part of any employment-related medical exam. If an employer discovers that a health care provider is nonetheless requesting this information, it must take reasonable steps to put a stop to it by, for example, no longer using that provider.

    Drug and Alcohol Tests

    The laws on drug testing vary widely from state to state. In general, employers have much more leeway to test job applicants than current employees. However, several states have imposed certain procedural requirements that employers must follow. For example, you might be required to give notice to applicants that the job is a drug-tested position, to test only after making a conditional offer of employment, or to provide applicants with a copy of positive test results. And, a minority of states restrict the occupations for which you may drug test, such as safety-sensitive positions. Consult “State Drug and Alcohol Testing Laws,” at the end of this chapter, for information on your state’s rules.

    Background Checks

    When you are making hiring decisions, you might need a bit more information than applicants provide. After all, some folks—surveys estimate between 30% and 40% of applicants—give false or incomplete information in employment applications. And workers probably don’t want you to know certain facts about their past that might disqualify them from getting a job. Generally, it’s good policy to do a little checking before making a job offer.

    However, you do not have an unfettered right to dig into applicants’ personal affairs. Workers have a right to privacy in certain personal matters, a right they can enforce by suing your company if you pry too deeply. How can you avoid crossing this line? Here are a few tips to keep in mind when gathering information on an applicant:

    • Make sure your inquiries are related to the job. If you decide to do a background check, stick to information that is relevant to the job for which you are considering the worker. For example, if you are hiring a security guard who will carry a weapon and be responsible for large amounts of cash, you might reasonably check for past criminal convictions. (However, see “Criminal records,’’ below, for some restrictions.)
    • Ask for consent. You are on safest legal ground if you ask the applicant, in writing, to consent to a background check. Explain clearly what you plan to check and how you will gather information. This gives applicants a chance to take themselves out of the running if there are things they don’t want you to know. It also prevents applicants from later claiming that you invaded their privacy. If an applicant refuses to consent to a reasonable request for information, you may legally decide not to consider that applicant for the position.
    • Be reasonable. Managers can get their employers into legal trouble if they engage in background check overkill. You will not need to perform an extensive background check on every applicant. Even if you decide to check, you probably won’t need to get into excessive detail for every position. If you find yourself questioning neighbors, ordering credit checks, and performing exhaustive searches of public records every time you hire a clerk or counterperson, you need to scale your efforts back.

    In addition to these general considerations, specific rules apply to certain types of information:

    • School records. Under federal law and the laws of some states, educational records—including transcripts, recommendations, and financial information—are confidential. Because of these laws, most schools will not release records without the consent of the student. And some schools will only release records directly to the student.
    • Consumer and credit reports. If you hire an outside party—such as a consumer reporting agency or private investigator—to conduct a background check or credit check on an applicant, you will need to follow special rules. Among other things, you’ll need to get the applicant’s written consent and inform the applicant if you decide not to hire him or her based on something you found in the report. (See “Ordering Consumer Reports,” below, for more information.)
    Lessons From the Real World

    After a handful of interviews and long-distance communications, including half a dozen phone calls and 20 email exchanges, Microsoft’s Associate General Counsel, Michele Gammer, offered Mitchell Schley a job as a senior attorney. The offer letter, which Schley signed and returned, said that the job was at will, and that his employment was contingent on the successful completion of a background and reference check, among other things.

    At the time, Schley was living and working in New Jersey. Gammer encouraged Schley to give notice to his current employer, recommended a real estate agent, and helped facilitate his purchase of a home in Washington from someone she knew. After Schley put down a deposit of $30,000 on the new home, put his New Jersey home on the market, and began to relocate, Gammer told him that his start date would have to be delayed while the company investigated a felony charge that came up in his background check. Schley told Gammer that the charge was frivolous and that the person who made the complaint had dropped it; he also sent Gammer documents supporting his claims. A few days later, Gammer contacted Schley to tell him that Microsoft was revoking the job offer. Schley had to immediately resell the home he purchased in Washington and was out of work for two years afterwards. He sued Microsoft.

    The court threw out Schley’s claim that Microsoft broke an employment contract, because the job was to be at will. Because Microsoft had reserved the right to fire him at any time, the company had the legal right to revoke the offer. However, the court allowed Schley to bring his claim of promissory estoppel: Because he was promised the job and was encouraged to quit his job and buy a new home based on that promise, Microsoft could be legally held liable for the damages he suffered as a result.

    Schley v. Microsoft, Civ. No. 08-3589 (D. New Jersey, 2008).

    • Criminal records. The law varies from state to state on whether, and to what extent, a private employer may consider an applicant’s criminal history in making hiring decisions. Some states don’t allow you to ask about arrests that did not lead to convictions, convictions that occurred well in the past, juvenile crimes, or sealed records. Some states allow you to consider convictions only if the crimes are relevant to the job or only for certain positions (such as nurses, child care workers, private detectives, and other jobs requiring licenses). And, some states allow you to consider criminal history only at certain times in the hiring process (see “Ban-the-Box Laws Restrict Inquiries About Criminal History,” above). To learn more about your state’s laws, see “State Laws on Employee Arrest and Conviction Records,” at the end of this chapter.
    • Workers’ compensation records. You may only consider information contained in the public record from a workers’ compensation appeal in making a job decision if the applicant’s injury might interfere with his or her ability to perform required duties.
    • Medical records. Under the Americans with Disabilities Act, you may inquire about an applicant’s ability to perform specific job duties, but you may not request medical records. Companies cannot make job decisions (on hiring or promotion, for example) based on an applicant’s disability, as long as the employee can do the job, with or without a reasonable accommodation. Employers also can’t discriminate on the basis of genetic information, nor may they request or require that applicants provide such information. Some states also have laws protecting the confidentiality of medical records.
    • Social media profiles. Many employers consider public posts on Facebook or other social media websites when making hiring decisions. While employers are generally free to view posts that applicants have made available to the public, there is the potential for an employer to come across information that it is not allowed to consider in making job decisions—such as the applicant’s religion, ethnic background, or disability. An applicant who is turned down for a job might argue that the decision was based on improper criteria. To avoid this dilemma, you might want to have someone other than the decision maker view social media pages and weed out any information pertaining to a protected class. (Different rules apply to applicants’ private social media profiles; see “Asking for Social Media Account Passwords,” above, for more information.)
    • Records of military service. Members and former members of the armed forces have a right to privacy in their service records. These records may be released only under limited circumstances, and consent is generally required. However, the military may disclose name, rank, salary, duty assignments, awards, and duty status without the member’s consent.
    • Driving records. You should check the driving record of any employee whose job will require large amounts of driving (delivery persons or bus drivers, for example). These records are available, sometimes for a small fee, from the state’s motor vehicles department.

    Ordering Consumer Reports

    Employers that use an outside agency to gather background information on an applicant must follow the guidelines set forth in the Fair Credit Reporting Act (FCRA). Contrary to its title, the FCRA applies to a lot more than just credit checks. The FCRA applies to all “consumer reports,” which is defined broadly to include any information about an applicant’s credit, character, reputation, or mode of living.

    Many employers hire consumer reporting agencies to gather information about an applicant’s credit history, job history, criminal record, driving record, or other information. Before ordering this type of report, though, you need to follow certain procedural steps required by the FCRA. The same is true if you plan to hire a private investigator, or any other party, to look into an applicant’s background.

    The FCRA, which is enforced by the Federal Trade Commission (FTC), requires that you do all of the following:

    • Get the applicant’s written consent in advance.
    • Warn the applicant if you plan to reject him or her based on the report (called a “pre-adverse-action notice).
    • Give the applicant a final notice (called an “adverse action notice”) if you ultimately decide to reject him or her based on the report.

    The purpose of these rules is to ensure accuracy in the reporting of a consumer’s credit history and other personal information by letting consumers know when these reports are checked, whether the reports include dis­qualifying information, and how consumers can challenge incorrect entries. Given how often credit and consumer reports are consulted by employers, lenders, and landlords—it makes sense that the law builds in a few consumer protections.

    Get Written Consent

    Before you order a background check, you must notify the applicant that you plan to do so and get the applicant’s written authorization. This notice and authorization must be set forth in a separate document that doesn’t include other information. In other words, it can’t be a section of your employment application.

    Send a Pre-Adverse Action Notice

    If you plan to reject the applicant based on something in the report, you must send the applicant a notice stating your intention to do so. This notice, called a “pre-adverse action notice,” must also include two documents: (1) a copy of the consumer report, and (2) a copy of a notice from the Federal Trade Commission entitled “A Summary of Your Rights Under the Fair Credit Reporting Act,” which tells the applicant how to challenge any incorrect information in the report, among other things.

    (The consumer reporting agency that sent you the report should also give you a copy of the FTC’s Summary of Rights; if it doesn’t, you can find a copy at the FTC’s website, www.ftc.gov.)

    Send an Adverse Action Notice

    Once you have made a final decision not to hire the applicant based on information contained in the report, you must send the applicant another document called an “adverse action notice.” This notice explains that you are not hiring the applicant and provides additional information on the applicant’s rights, including the right to dispute the accuracy of the report and the right to obtain an additional copy.

    State Law Restrictions on Credit Reports

    Other than the FCRA, federal law does not place restrictions on an employer’s use of credit reports in making hiring decisions. As long as employers follow the notice and consent requirements, they are free to check credit reports and use them as the basis for denying employment.

    However, several states have passed laws prohibiting employers from pulling credit reports or limiting the use of credit reports in making employment decisions. In addition to the District of Columbia, the following states have such laws: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. Although the rules vary from state to state, many of these laws limit credit checks to managerial or other sensitive positions where the applicant will have significant financial responsibilities or access to large sums of money.

    Young Workers

    Many jobs around an office and in a business are perfect for younger workers. For example, if you need someone to photocopy documents for an hour or two a day, a high school student who comes in after school might be just what you’re looking for. The student gets experience and extra pocket money, and your company gets someone who is willing to work just a few hours a week on the cheap.

    The history of child labor in this country isn’t quite so benign, however. Children once worked long hours in hazardous jobs—such as manufacturing and mining—for very little money. They didn’t attend school, and they often suffered serious—even fatal —health problems.

    To protect child workers, the federal and state governments passed laws regulating the type of work children can do, the number of hours they can work, and the types of businesses that can employ them.

    Before you hire any worker younger than 18, you should check both federal and state law. We describe the federal law here. To find out about your state child labor law, contact your state department of labor. (Find contact information at www.dol.gov/whd/contacts/state_of.htm.)

    The Fair Labor Standards Act (FLSA) is the federal law that governs child labor. Virtually all employees and businesses must follow the FLSA, except for a handful of businesses, including small farms. To learn out about exceptions to FLSA requirements, check out the website of the U.S. Department of Labor—the federal agency that enforces the FLSA—at www.dol.gov.

    Hazardous Jobs

    According to the U.S. Department of Labor, workers younger than 18 may never perform the following types of hazardous jobs (some exceptions are made for apprentices and students):

    • manufacturing or storing explosives
    • being an outside helper on a motor vehicle
    • coal or other mining
    • logging and sawmilling
    • anything involving power-driven, wood-working machines
    • anything involving exposure to radio­active substances and ionizing radiations
    • anything involving power-driven hoisting equipment
    • anything involving power-driven metal-forming, punching, and shearing machines
    • meat packing or processing (including anything involving power-driven meat slicing machines)
    • anything involving power-driven bakery machines
    • anything involving power-driven paper products machines
    • manufacturing brick, tile, and related products
    • anything involving power-driven circular saws, band saws, and guillotine shears
    • wrecking, demolition, and shipbreaking operations
    • roofing and work performed on or near roofs, including installing or working on antennas and rooftop appliances, and
    • excavation operations.

    Jobs That Involve Driving

    Special rules apply to jobs that involve driving. As noted above, employees younger than 18 may not work as outside helpers on a vehicle. Employees who are 16 and younger also may not drive on public roads as part of their jobs. An employee who is at least 17 may drive on public roads as part of a job only if all of the following are true:

    • The driving takes place during daylight hours only.
    • The minor has a valid state driver’s license for the type of driving involved.
    • The minor has completed a driver’s education course and has no moving violations.
    • The vehicle weighs no more than 6,000 pounds.
    • The vehicle is equipped with seat belts, and the employer has told employees to use them when driving.
    • The driving is only occasional and incidental to the job, defined as taking up no more than a third of the workday and 20% of the minor’s total weekly hours.

    Even if all of the above conditions are met, a 17-year-old is legally prohibited from driving:

    • a towing vehicle
    • any vehicle other than a car or truck
    • route deliveries or sales
    • to transport property, goods, or passengers for hire
    • to make urgent, time-sensitive deliveries (including pizza)
    • with more than three passengers, even if they are also employees
    • beyond a 30-mile radius from the workplace, or
    • more than two trips per day to deliver goods to customers or to transport passengers (other than other employees).

    Agricultural Jobs

    If you own or operate a farm or another type of agricultural business, the following child labor rules apply to you:

    • You may hire a worker who is 16 or older for any work, whether hazardous or not, for unlimited hours.
    • You may hire a worker who is 14 or 15 for any nonhazardous work outside of school hours.
    • You may hire a worker who is 12 or 13 for any nonhazardous work outside of school hours if the child’s parents work on the same farm or if you have their written consent.
    • You may hire a worker who is ten or 11 if you’ve been granted a waiver by the U.S. Department of Labor to employ the youngster as a hand-harvest laborer for no more than eight weeks in any calendar year.
    • You can hire your own children to do any kind of work on the farm, regardless of their ages.

    Nonagricultural Jobs

    • If you seek to hire a youngster for work that is nonagricultural, the following rules apply:
    • You may hire a worker who is 18 or older for any job, hazardous or not, for unlimited hours.
    • You may hire a worker who is 16 or 17 years old for any nonhazardous job, for unlimited hours.
    • You may hire a worker who is 14 or 15 years old outside school hours in various nonmanufacturing, nonmining, and nonhazardous jobs, but some restrictions apply. The teen cannot work more than three hours on a school day, more than eight hours on a nonschool day, more than 18 hours in a school week, or more than 40 hours in a nonschool week. Also, the work cannot begin before 7 a.m. or end after 7 p.m., except from June 1 through Labor Day, when evening hours are extended to 9 p.m.

    Offer Letters

    Offer letters are typically used with at-will employees to state the basic terms of employment, such as job title and rate of pay. When done right, an offer letter does not restrict an employer’s ability to change the terms of employment or terminate the employee for any reason, at any time.

    When it comes to offer letters, keep them short and sweet. The same rules that apply to job interviews apply to offer letters: Stick to the facts and don’t make promises you can’t keep. Applicants might some day try to turn an offer letter into a contract that sets the terms and conditions of the job or limits your company’s right to fire or discipline them.

    Avoid using language that makes promises or assurances about the employment relationship. For example, if you tell the applicant “We look forward to a long and happy relationship with you” or “We think you have a bright future at this company,” the applicant might assume that you’re offering more than the normal “at-will” employment and that you won’t end the employment relationship without good cause. If you want to fire the employee in the future, these words might come back to haunt you.

    Similarly, don’t specify job duties, benefits, pay schedules, vacation/sick leave, or any other benefit you might want to change in the future. The employee might argue that your letter created a contract and try to hold the company to it.

    So what can you say? You might want to:

    • congratulate the applicant
    • confirm the job title
    • name the applicant’s supervisor
    • state the starting salary or hourly rate, and
    • establish a start date.

    In addition, if you haven’t or won’t offer the applicant a written contract for employment (the vast majority of employees don’t have written employment contracts), confirm in writing that employment is at will, meaning that there is no employment contract and you can fire the employee at any time for any reason that isn’t illegal. It’s also a good idea to have the employee sign an acknowledgment at the end of the letter, to show that he or she read and understood its contents. (For more about at-will employment, see “At-Will Employment” in Chapter 4.)

    Written Employment Contracts

    A written employment contract is a document that an employer and an employee sign, setting forth the detailed terms of their relationship with each other. In addition to clearly describing what the employee is going to do for the employer (the job) and what the employer is going to do for the employee (the salary), the contract can address many other issues, including:

    • the duration of the job (for example, one year, two years, or until a certain project is complete)
    • the specifics of the employee’s responsibilities
    • the employee’s benefits (for example, health insurance, vacation leave, or disability leave)
    • grounds for termination
    • limitations on the employee’s ability to compete with your company once the employee leaves
    • protection of company trade secrets and client lists
    • who will own the employee’s work product (for example, if the employee writes books or invents gadgets for your company), and
    • a method for resolving any disputes between the employee and the company.

    The distinguishing feature of an employment contract is that it binds the company to hire the employee for a set period of time. You should carefully consider the advantages and disadvantages of this type of arrangement before committing your company.


    Employment contracts can make sense if you want or need to control the employee’s ability to quit. For example, if the employee is a high-level manager or executive, or if the employee is especially valuable to the company (such as the administrator who is the organizational backbone of the office), then a contract can protect the company against the sudden, unexpected loss of the employee. It can lock the employee into a specific term (for example, two years), or it can require the employee to provide enough notice to allow your company to find and train a suitable replacement.

    Employment contracts can also protect your company if the employee will have access to confidential and sensitive business information. You can insert confidentiality clauses into the contract that prevent the employee from disclosing this information or using it for personal gain. (For more on this topic, see “Nondisclosure Agreements” in Chapter 10.)

    Similarly, a contract can prevent employees from competing against your company after they move on to other pursuits, at least in some states. (For more on this topic, see “Noncompete Agreements” in Chapter 10.)

    Sometimes, you can also use an employ-ment contract as a way to entice a highly skilled individual to accept a job offer. Job security and beneficial terms often sweeten the deal enough to convince a highly desirable applicant who is on the fence to join your team.

    Finally, an employment contract can give the company greater control over the employee. If you specify the standards for the employee’s performance and grounds for termination, you might have an easier time terminating an employee who doesn’t live up to those standards.


    An employment contract is a two-way street: Just as the contract requires the worker to stay for a certain period of time, it limits your company’s right to fire the worker during the same period (except for the reasons stated in the contract). Your company also won’t have the ability to alter the terms of the employment as its business needs change. To alter the terms, you’ll have to renegotiate the contract and offer the employee some new benefit in exchange for the alteration to make the new agreement binding. And, no matter what you offer, the employee is free to reject any proposed new terms. These factors can make the renegotiation process time-consuming and complicated.

    For example, let’s say you sign a two-year contract with a new employee. If, six months later, you decide you don’t need the employee after all, you can’t terminate the relationship. If you do, you will set your company up for a breach of contract lawsuit. Similarly, if you promised benefits in the contract, the company can’t stop paying for them before the term is up without breaching the contract and risking a lawsuit.

    Another disadvantage of employment contracts is that they always contain an unwritten obligation, imposed by law, to deal fairly with the employee. In legal terms, this is called the “covenant of good faith and fair dealing.” If you treat an employee with whom you have signed a contract in a way that seems unfair, your company could end up in court.

    Finally, there are ways to protect the company’s sensitive information and business interests without using an employment contract for a specific period of time. For example, you can have an at-will employee sign a stand alone confidentiality agreement to prevent disclosure of the company’s trade secrets. (For more information, see Chapter 10.)

    We hope you enjoyed this sample of The Manager's Legal Handbook. To read the rest of this chapter, please purchase the book.

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