Many employers who have delayed new hiring over the past few years may be less familiar with some practices either required or advisable upon the hiring of a new employee. As the economy continues its slow rebound, employers in many industries have increased hiring. Correctly completing paperwork and complying with legal obligations upon the hiring of a new employee will save both money and headaches down the road.
Conditional Job Offer Letter and Statement of Hire
The cornerstone of the employment relationship is the written offer letter. For a variety of reasons, it is advisable for employers to communicate job offers in writing in a formal “offer letter.” Among other reasons, Minnesota Statutes section 181.155 provides that when a contract of employment is consummated between an employer and an employee for work to be performed in the State of Minnesota, or for work to be performed in another state for an employer localized in the State of Minnesota, the employer shall give to the employee a written and signed agreement of hire, which shall clearly and plainly state:
- the date on which the agreement was entered into;
- the date on which the services of the employee are to begin;
- the rate of pay per unit of time, or of commission, or by the piece, so that wages due may be readily computed;
- the number of hours a day which shall constitute a regular day’s work, and whether or not additional hours the employee is required to work shall constitute overtime and be paid for, and, if so, the rate of pay for overtime work; and
- a statement of any special responsibility undertaken by the employee, not forbidden by law, which, if not properly performed by the employee, will entitle the employer to make deductions from the wages of the employee, and the terms upon which such deductions may be made.
In addition to these minimum required elements, the offer letter should typically include a statement that the employee is being hired “at will,” and that either the employer or the employee may terminate the employment relationship at any time, for any or no reason, with or without advance notice, and with or without cause.
As discussed in more detail below, the offer letter should also specify whether the offer of employment is conditional upon completion of a criminal background check, medical examination, drug testing, or execution of a written non-competition, non-solicitation, and/or non-disclosure agreement.
Criminal Background Check and FCRA Disclosures
If you intend to conduct a criminal background check, you should state this explicitly in the conditional offer of employment. In addition, you should require the candidate to complete and sign a written authorization form which authorizes the employer to conduct the criminal background check. If you are using a third party screening agency to conduct the background check, in most cases you will also need to comply with the Fair Credit Reporting Act (“FCRA”), which imposes a number of onerous requirements beyond the scope of this article. Ideally, you should receive the results of the criminal background check before permitting the job applicant to begin performing work. If you choose to withdraw the job offer based on the results of the criminal background check, you should ensure that the job applicant’s criminal record has a close relationship to the expected job duties of the position. In some cases, employers may violate federal and state laws prohibiting racial discrimination by adopting a blanket rule that excludes job applicants with any type of criminal record. Such a blanket exclusion can have a disparate impact on minorities.
If you intend to require the job applicant to complete a medical examination as a condition of hire, you should state this explicitly in the conditional offer of employment. The Americans with Disabilities Act (“ADA”) and Minnesota Human Rights Act (“MHRA”) contain detailed requirements governing medical examinations and inquiries of job applicants and employees. Among other things, employers are generally prohibited from requesting a medical examination of job applicants until a conditional offer of employment has been made. The question of whether the employer can refuse to hire the job applicant based on the results of the medical examination is beyond the scope of this article.
If you intend to conduct drug testing for the job applicant, this must be explicitly stated in the conditional offer of employment. Under the Minnesota Drug and Alcohol Testing in the Workplace Act, employers cannot test job applicants for drugs or alcohol unless the employer has adopted a legally compliant written drug and alcohol testing policy. Further, the employer cannot require testing of a job applicant until a conditional offer of employment has been made. Employers are strongly discouraged from requiring pre-employment alcohol testing.
Non-Competition, Non-Solicitation, and Non-Disclosure Agreement
If you want the job applicant to sign a non-competition, non-solicitation, and/or non-disclosure agreement, you should make this a condition of hire, attach the agreement to the formal job offer, and state that the job offer is expressly conditioned on the job applicant accepting and signing the agreement on or before the first day of employment. If at all possible, you should insist that the job applicant sign and return the non-compete agreement before the first day of work; but certainly no later than the first day of employment. Under Minnesota law, non-compete agreements generally are not enforceable unless (1) the non-compete agreement was contained in the employer’s initial job offer and was entered into ancillary to commencement of the employment relationship; or (2) the employer gave the employee independent consideration (something valuable) beyond mere continuation of employment (e.g., bonus, raise, stock options, etc.) in exchange for an agreement entered into after the initial job offer was accepted. To avoid the need to provide independent consideration, it is essential that the employer’s very first job offer make it clear that the job applicant will need to sign and return the non-compete agreement as a condition of hire.
Personnel Records Act Notice
Effective January 1, 2008, the Minnesota Legislature amended the Minnesota Personnel Records Act to require Minnesota employers with 20 or more employees to notify each new hire of the “rights and remedies” provided in the Act. While the existence of the rights and remedies is not new, the requirement to notify new hires in writing of their rights and remedies is. Thus, employers that are not already in compliance with this requirement should immediately change their hiring practices to ensure that all new hires receive this written notice. Among other things, the notice should advise the employee of (1) the employee’s right to review his personnel records; (2) the employee’s right to dispute information contained in those records; and (3) procedures for resolving disputes about the contents of those records. The Minnesota Personnel Records Act contains other requirements that are beyond the scope of this article.
Employers should always verify that a prospective employee is legally eligible to work in the United States. Both employer and employee must complete parts of Form I-9, Employment Eligibility Verification. Form I-9 must be completed by the third business day after a new employee’s first day of work. An employee is required to show original documents to prove identity and work authorization. Employers will find information, including a downloadable Form I-9, at www.uscis.gov/i-9.
Withholding Allowance Certificates
A new employee should complete an employee’s withholding allowance certificate, which is federal Form W-4. Form W-4 can be found here.
Confirming Employee’s Name and Social Security Number
The Social Security Administration recommends that an employer verify an employee’s name and social security number. Employers can do this via the Internet here. Prior to verification, an employer will need to register to use this free service.
Minnesota New Hire Reporting
Federal and Minnesota law require that new hires be reported to the Minnesota New Hire Reporting Center within 20 days of hiring. Among other reasons, new hire reporting allows Minnesota and its counties to pursue child support claims against non-paying obligors. Information for employers, including instructions on electronic submission of the new hire form, is available here.
Following a few basic procedures at the time of an employee’s hiring will help integrate a new employee into your workplace, ensure legal compliance, and minimize the risk of employment-related litigation down the road. For more information about new hire paperwork or the hiring process, please contact Trepanier MacGillis Battina P.A.
About the Author:
Minnesota business litigation attorney James C. MacGillis, in his role as outside general counsel to numerous companies, advises Minnesota employers on hiring practices and strategies, including the implementation of non compete agreements, confidentiality agreements, and employee handbooks. Jim may be reached at 612.455.0503 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota commercial litigation law firm located in Minneapolis, Minnesota.