Counseling the HR Function - The Legal and Regulatory Landscape

In my last post I tried to set a foundation for counseling the human resources function, or "HR", by explaining just what HR does. It's important to understand the strategic importance of HR, how the HR function evolves and the scope of activities that HR professionals are called upon to carry out.

As a lawyer counseling the HR function you'll be primarily concerned with compliance issues and this means that you need to be aware of the various federal and state laws and regulations apply to a business' employment practices, from recruitment and hiring through discipline and possible termination. Time and space does not allow an extensive discussion of what is a very complex body of statutes, regulations and cases; however, in this post I'd like to take a little time to review how the "legal environment" impacts some of the basic HR activities.

Recruiting and Hiring
Generally, as long as companies avoid illegal hiring practices they are free to establish qualification and hiring standards. However, there are certain limits on a company's discretion. For example, if a company promises to follow some procedure for hiring, such as a procedure included in a collective bargaining agreement, the company will be bound by that agreement. Most importantly, companies must comply with federal and state discrimination laws which cover, among other things, recruiting and advertising, applications and interviews, collecting and using applicant records and pre-employment tests. In addition, of course, the requirements of federal immigration laws must be satisfied.

Collecting and Using Employee Information
When people become employees, they do not give up their privacy rights. However, the privacy rights of employees are not absolute. Companies have the right to gather information about applicants and employees to properly operate their businesses and to protect their property, customers, employees, and the public. The key for companies is establish procedures for insuring that information regarding employees is lawfully collected and used only for the purposes permitted by law. Companies should develop forms which can be used to obtain the requisite consents from employees to obtain desired information, such as consents to do a personal background check and/or credit check and conduct tests for drug and alcohol use.

Investigation of Wrongful Conduct
When companies receive complaints about employees or suspect that employees are engaged in wrongful conduct, companies should not rely on the problem simply going away without affirmative review and action. Companies need to be conscious of the fact that they may be held liable for their employees' misconduct, including harassment and acts of violence, and should establish a standard investigation procedure for complaints received regarding wrongful conduct.

Discipline Programs
When employees violate company rules, are dishonest or disloyal, or fail to perform satisfactorily, companies may wish to impose some type of punishment. Generally, companies are free to discipline employees for any reason companies consider legitimate, and are not required to prove that they had "good cause" to justify the discipline. However, companies may be liable for wrongful discipline if disciplinary action is contrary to state or federal laws, the terms of their employment contracts or company policies and practices. Therefore, companies should proceed with caution in disciplining employees and make sure that certain steps are followed.

Termination of Employment Relationship
As a general rule, the employment relationship in the US is said to be "at will", which is typically understood to mean that employees and companies are free to end the relationship without notice and without a showing of cause. However, courts have been known to protect employees against termination of the employment relationship under a variety of theories, sometimes referred to as "abusive, retaliatory, or wrongful discharge." Therefore, companies should establish and follow formal procedures for terminating employees, including a review and investigation of the circumstances surrounding the proposed termination and documenting the reasons for the decision and how it was communicated to the employee.

Harassment and Discrimination
As a matter of both federal and state law, companies are subject to liability for sexual harassment and other acts of discrimination of their employees by supervisory personnel. Actionable sexual harassment can take a variety of forms, including creation of a hostile work environment, and is not limited to adverse employment actions against the affected employee such as demotion or termination. In order to avoid or reduce the possibility of liability, which costs larger companies significant amounts of money each year, prudent companies should adopt a compliance program which includes a written sexual harassment policy and processes to ensure that the policy is effectively communicated to all supervisors and employees and a complaint procedure to encourage reporting and full and discrete investigation of discrimination or harassment claims. In addition, many states now require that companies offer both supervisors and employees training and educational programs focusing on prevention of sexual harassment and other forms of discrimination.

Creation and Maintenance of Employment Records
Every business, regardless of its size, must keep accurate and complete records regarding its employees from the date of the employee's application for employment through the employee's termination and thereafter for at least the applicable statute of limitations period.

In my next post on counseling the HR function we'll get into "nuts and bolts" of creating your "tool kit" including HR documents and systems, compliance programs and audits, employee handbooks and policy statements.

Alan S. Gutterman is the founder and principal of Gutterman Law & Business (, a leading provider of timely and practical legal and business information for attorneys, other professionals and executives in the form of books, online content, newsletters, programs, training and consulting services. Mr. Gutterman has three decades of experience as a partner and senior counsel with internationally recognized law firms counseling small and large business enterprises in the areas of general corporate and securities matters, venture capital, mergers and acquisitions, international law and transactions, strategic business alliances, technology transfers and intellectual property, and has also held senior management positions with several technology-based businesses including service as the chief legal officer of a leading international distributor of IT products headquartered in Silicon Valley and as the chief operating officer of an emerging broadband media company. All editions of the Business Counselor Advisor are compiled into Business Counselor Update, which is released monthly and available along with other publications by Mr. Gutterman on the Westlaw Web site or at Westlaw Next at Business Counselor. For further information on the topics covered above, see the chapter on Human Resources in Mr. Gutterman's Business Counselor's Guide to Organizational Management. Mr. Gutterman can be reached at

Copied to clipboard