COBRA Assistance

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended, provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. The premium assistance is also available for continuation coverage under certain State laws. “Assistance Eligible Individuals” pay only 35 percent of their COBRA premiums; the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

Eligibility for the Premium Reduction

An “assistance eligible individual” is the employee or a member of his/her family who elects COBRA coverage timely following a qualifying event related to an involuntary termination of employment that occurs at any point from:

· September 1, 2008 through May 31, 2010; or

· March 2, 2010 through May 31, 2010 if:

the involuntary termination follows a qualifying event that was a reduction of hours; and

the reduction of hours occurred at any time from September 1, 2008 through May 31, 2010. (A reduction of hours is a qualifying event when the employee and his/her family lose coverage because the employee, though still employed, is no longer working enough hours to satisfy the group health plan’s eligibility requirements.)

· Generally, the maximum period of continuation coverage is measured from the date of the original qualifying event (for Federal COBRA, this is generally 18 months). However, ARRA, as amended, provides that the 15 month premium reduction period begins on the first day of the first period of coverage for which an individual is “assistance eligible.” This is of particular importance to individuals who experience an involuntary termination following a reduction of hours. Only individuals who have additional periods of COBRA (or state continuation) coverage remaining after they become assistance eligible are entitled to the premium reduction.

· For purposes of ARRA, COBRA continuation coverage includes continuation coverage required under Federal law (COBRA or Temporary Continuation Coverage) or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws).

· Those who are eligible for other group health coverage (such as a spouse’s plan or new employer’s plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for periods of coverage that began prior to February 17, 2009.

· Assistance eligible individuals who pay 35 percent of their COBRA premium must be treated as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes.

What is COBRA?

COBRA gives workers and their families who lose their health benefits the right to purchase group health coverage provided by the plan under certain circumstances.

If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates. The COBRA premium may be higher than what the individual was paying while employed, but generally the cost is lower than that for private, individual health insurance coverage.

The plan administrator must notify affected employees of their right to elect COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage; otherwise, they lose all rights to COBRA benefits.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have similar requirements for insurance companies that provide coverage to small employers. The premium reduction is available for insurers covered by these State laws.

Period of Coverage

The premium reduction applies to periods of coverage beginning on or after February 17, 2009. A period of coverage is a month or shorter period for which the plan charges a COBRA premium. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 15 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.

Notice Requirements

ARRA, as amended by the Continuing Extension Act of 2010 (CEA), mandates that plans notify certain current and former participants and beneficiaries about the premium reduction. The Department has updated its existing models to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of individuals and contains information to help satisfy ARRA’s notice provisions, including those modified by CEA.

Plans subject to the Federal COBRA provisions must provide a General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through May 31, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. Plans must provide the updated General Notice within the required timeframes for providing a COBRA election notice. The updated model General Notice includes information on the premium reduction as well as information required in a COBRA election notice.

Plans that are subject to COBRA continuation provisions under Federal or State law should provide a Notice of New Election Period to all individuals who:

· experienced a qualifying event that was a reduction of hours at any time from September 1, 2008 through May 31, 2010;

· subsequently experience a termination of employment at any point from March 2, 2010 through May 31, 2010; and

· either did not elect COBRA continuation coverage when it was first offered or elected but subsequently discontinued COBRA.

Generally, individuals who have experienced a qualifying event that consists of a reduction of hours and who, from March 2, 2010 through May 31, 2010, experience an involuntary termination of employment must be provided this notice within 60 days of the event. Pursuant to CEA, for the April 1, 2010 through April 14, 2010 period, the notice requirement attaches to any termination of employment. The Department strongly recommends that notice be provided to individuals who experienced any termination of employment because employers may be subject to civil penalties if it is later determined that the termination was involuntary and notice was not provided. The Department has updated its model Notice of New Election Period. Using this model to provide notice to these individuals satisfies the requirements of ARRA, as amended by CEA.

Plan administrators must also provide notice to certain other individuals who have already been provided a COBRA election notice that did not include information regarding ARRA, as amended by CEA. The Department has updated two existing models to assist plans in these areas.

Plans that are subject to COBRA continuation provisions under Federal law and insurers subject to continuation coverage requirements under State law must provide the Supplemental Information Notice. It should be provided to all individuals who elected and maintained continuation coverage based on the following qualifying events:

· terminations of employment that occurred at some time on or after March 1, 2010 through April 14, 2010 for which notice of the availability of the premium reduction available under ARRA was not given; or

· reductions of hours that occurred during the period from September 1, 2008 through May 31, 2010 which were followed by a termination of the employee’s employment that occurred on or after March 2, 2010 and by May 31, 2010.

For the first item above plans must provide this notice to all individuals with a qualifying event related to any termination of employment if they have not already been provided notice of their rights under ARRA. This notice must be provided before the end of the required time period for providing a COBRA election notice. For the second item above, generally, individuals who experience an involuntary termination of employment from March 2, 2010 through May 31, 2010 after experiencing a qualifying event that consists of a reduction of hours must be provided this notice within 60 days of the termination of employment. However, as has been noted, CEA requires plans to provide notices to all individuals with qualifying events related to any termination of employment that occurred from April 1, 2010 through April 14, 2010. In those cases, this notice must be provided before the end of the required time period for providing a COBRA election notice.(1) Because employers may be subject to civil penalties if it is later determined that the termination was involuntary, the Department strongly recommends that notice be provided to individuals who experienced any termination of employment. The Department has updated its model Supplemental Information Notice. Using this model to provide notice to these individuals satisfies the requirements of ARRA, as amended by CEA.

Plans that are subject to COBRA continuation provisions under Federal law and insurers subject to continuation coverage requirements under State law must provide the Notice of Extended Election Period. It must include the information described above and be provided to all individuals who experienced a qualifying event that was a termination of employment from April 1, 2010 through April 14, 2010, were provided notice that did not inform them of their rights under ARRA, as amended by CEA, and either chose not to elect COBRA continuation coverage at that time or elected COBRA but subsequently discontinued that coverage. This notice must be provided before the end of the required time period for providing a COBRA election notice. The Department has updated its model Notice of Extended Election Period. Using this model satisfies the requirements of ARRA, as amended by CEA.

Insurance issuers that provide group health insurance coverage must provide notice to persons who became eligible for continuation coverage under a State law. The Department updated its model Alternative Notice to assist issuers with satisfying this requirement. However, continuation coverage requirements vary among States and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find one (or more) of the other models appropriate for use in certain situations.

Expedited Review of Denials of Premium Reduction

Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the premium reduction (whether by their plan, employer or insurer) may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The official application form can be filed online or submitted by fax or mail.

Switching Benefit Options

If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the ARRA premium reduction, the different coverage must have the same or lower premiums as the individual’s original coverage. The different coverage cannot be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.

Income limits

If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at www.irs.gov.

New Penalty Provision

ARRA provides that the appropriate Secretary may assess a penalty against a plan sponsor or health insurance issuer of up to $110 per day for each failure to comply with such Secretary’s determination 10 days after the date of the plan sponsor’s or issuer’s receipt of the determination.

Footnotes

1. ARRA section 3001(a)(7) provides that COBRA election notices provided for qualifying events occurring during the effective dates of the premium reduction program are not complete if they fail to include information on the availability of the premium reduction.

For further information, visit www.dol.gov/COBRA, contact EBSA electronically at www.askebsa.dol.gov, or call a Benefits Advisor toll-free at 1.866.444.3272.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

Tax Benefits to Hiring New Employees

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire certain previously unemployed workers (“qualified employees”).

The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.

In addition, for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

Business Registered Agent

Holden Law Firm can assist businesses in making the necessary filings with the Minnesota Secretary of State in order to remain in good standing, preserve liability shields and avoid corporate veil piercing claims, and can assist with annual meeting minutes which record the business activities of the company. Holden Law Firm can also operate as your registered agent. As your registered agent, we will receive all legal documents for the company and forward them to a designated contact for handling. These legal documents may include a notice of a lawsuit against your business. Failure to maintain a registered agent and registered office in Minnesota may result in the corporation or LLC not receiving notice of a lawsuit and being liable to pay damages in a lawsuit without ever having the opportunity to defend itself.

Information about the Americans with Disabilities Act Amendments Act (ADAAA)

The Americans with Disabilities Act Amendments Act of 2008

On September 25, 2008, the President signed the Americans with Disabilities Act Amendments Act of 2008 (”ADA Amendments Act” or “Act”). The Act emphasizes that the definition of disability should be construed in favor of broad coverage of individuals to the maximum extent permitted by the terms of the ADA and generally shall not require extensive analysis.

The Act makes important changes to the definition of the term “disability” by rejecting the holdings in several Supreme Court decisions and portions of EEOC’s ADA regulations. The effect of these changes is to make it easier for an individual seeking protection under the ADA to establish that he or she has a disability within the meaning of the ADA.

Learn to Negotiate Anything

“Getting To Yes” by Roger Fisher and William Ury is a powerful and persuasive argument for principled negotiations. Anyone dealing with situations of conflict should read this primer on principled negotiations. The authors have designed a systematic method of negotiating and dealing with conflict. The method of principled negotiation emphasizes mutual gain and understanding, and creating a shared powered arrangement.

The principled negotiation method is a helpful tool to anyone seeking an approach to deal with conflict resolution. The book is a theoretical framework for dealing with negotiations, but is practical and the techniques taught in the book can be used by anyone. Whether you are negotiating a contract for your business or trying to negotiate a raise with your boss this method of negotiation would be effective.

The book argues convincingly that thinking of negotiations as either winning or losing is not an effective strategy, but rather seeking a win-win negotiation strategy will be more successful and effective. The authors support their arguments with examples from international political crisis, union negotiations, landlord and tenant disputes, and other disputes to illustrate how principled negotiations have been successful or how positional negotiations have resulted in further difficulties. The authors state the greatest benefit of using principled negotiations is it results in better relationships between the negotiators and the examples illustrate this.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2009 Holden Law Firm. All rights reserved.

Non-Compete Agreements

Non-competes have become commonplace in the workplace and are used to protect the employer’s business, confidential information and trade secrets.  In Minnesota, employment non-compete agreements are looked upon with disfavor and are cautiously considered, and carefully scrutinized. However, non-compete agreements are enforceable if they serve a legitimate employer interest and are not broader than necessary to protect this interest.

In determining whether to enforce a non-compete agreement or provision, the court balances the employer’s interest in protection from unfair competition against the employee’s right to earn a livelihood.  If the employer’s interest outweighs, the non-compete agreement is valid and enforceable.

Minnesota courts will review the facts of each case to determine if a non-compete is valid and enforceable. The first thing to determine is whether the employer provided the employee with adequate consideration for the non-compete. Consideration means the employee received something in return for signing the non-compete. If the non-compete agreement is entered into at the beginning of the employment relationship, the promise of employment will be considered adequate consideration to make the agreement valid.  If the non-compete agreement is entered into after the employment relationship begins, it is not valid unless the employer provided some additional consideration, which would be additional money or another benefit to which the employee was not otherwise entitled. 

Second, the Minnesota Courts will review whether the non-compete protects a legitimate business interest.  A non-compete clause will be held valid if it is necessary for the protection of the business or goodwill of the employer and is not broader than necessary to protect this interest. 

The types of legitimate business interests that the courts have said are permissible to protect by a non-compete include protecting an employer against an employee capitalizing on the relationship established with the employer’s customers.  Other legitimate business interests that have been protected by a non-compete include preventing the disclosure of confidential information or the potential disclosure or disclosure of trade secrets.  Finally, employers may protect any specialized investment or training that they provide to their employees with non-compete agreements.  The employer must show that it provided the employee with extensive and specialized training. In all cases the court must find that the employer will be irreparably harmed if the business interest is not protected before the non-compete will be held valid and injunctive relief granted.

The third issue the courts review to decide whether a non-compete is enforceable is whether the non-compete is not more restrictive than reasonably necessary to protect the employer’s business given the nature of that business, and the extent of the duration and the geographic scope of the restraint.  If the non-compete is not for a reasonable duration and a reasonable geographical area, the non-compete may be held to be overly broad and not valid and unenforceable.

Almost all non-compete cases are decided in the context of a motion for either a temporary restraining order (TRO) or a temporary injunction.  The courts will decide if the employee should be prevented from engaging in competitive activities and may award damages including, in certain cases, legal expenses.

If you have questions about non-competes, you should contact an employment attorney.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2009 Holden Law Firm. All rights reserved.

Form A Minnesota LLC Today

Form a Minnesota LLC Today.

Many solo business owners chose to forego filing as a Limited Liability Company or creating a Corporation, and instead operate as a sole proprietorship.  If your business is owned and controlled by one person and you do not file with the Minnesota Secretary of State, you will be considered by default to be a sole proprietorship unless you start working with a partner.

As a sole proprietor, you are personally liable for the debts and losses of your business.  An owner of this type of business can lose their personal assets in a lawsuit.  There is also less credibility since your business does not have the prestige of having “Inc.” or “LLC” attached to your name.  Many small businesses are choosing to form an “LLC” Limited Liability Company because of the ease of forming this type of entity and the insurance and prestige that it provides.  A Minnesota LLC is governed by Minnesota Statutes Chapter 322b.

The LLC is fast becoming the entity of choice for closely held businesses in Minnesota and throughout the United States.  The LLC provides easy management, limited liability protection and pass-through taxation.  The LLC may have one or more owners who are called “members.” Members of the LLC own a pro-rata share of the LLC, and therefore have rights to a pro-rata share of the LLC’s profits and losses.  Members may elect a manager to run the LLC.  The manager may be a member or a nonmember, and can be an individual or separate entity.  Most states do not restrict ownership and members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members for an LLC.  Be advised that there are special rules for foreign LLCs.

In order to form an LLC, you must first file the “articles of organization” with the Minnesota Secretary of State and pay a filing fee of $160.  The LLC is created once the articles are filed. The articles of organization must disclose certain basic information, including the LLC’s name (which must contain the words “limited liability company” or the abbreviation “LLC”), the address of the company, along with the names and addresses of each organizer, and the period of existence of the LLC if other than perpetual.  The LLC must register with the Minnesota Secretary of State annually.  A Minnesota LLC that fails to file their annual registration is administratively terminated. Foreign LLCs (those organized under LLC statutes of other states) will have their authority to do business in Minnesota revoked.

The main benefit to forming a LLC is to obtain the “limited liability” so that if the owner of the business is sued for something related to the business, only the business assets are at risk and the owner’s personal assets are protected.  The LLC would be liable rather than the small business owner and the small business owner’s assets such as home, car and personal assets are protected from any judgment.

In certain circumstances, a creditor or other litigant may try to impose personal liability on the business owner by claiming that the LLC is a sham and was created merely to defraud creditors, or is being run as a sole proprietorship and has commingled funds of the LLC and the business owner.  The process of imposing personal liability is referred to as “piercing the corporate veil,” or disregarding the corporate entity. For these reasons, it is wise for the LLC to obtain a business banking account separate from the business owner’s personal banking account and not commingle funds. The LLC should also obtain a federal employer identification number FEIN and a Minnesota Tax ID.

LLC’s can elect to be taxed as a sole proprietorship, a partnership, a corporation, or an S-Corp, as long as the LLC meets legal requirements and files the proper documentation.

A domestic LLC with only one member is disregarded as an entity separate from its owner and must include all of its income and expenses on the owner’s tax return.  This is called a pass-through entity.  Pass-through taxation means that unless the LLC chooses to be taxed as a corporation, it will be taxed as a sole proprietorship or a partnership. Pass through taxation means that the company itself does not have to pay taxes to the IRS, unlike a corporation which receives a double taxation.  Instead, each owner of the company will report their own profits or losses in the company on their tax returns.

A domestic LLC may file IRS Form 8832 to avoid either default classification and elect to be classified as an association taxable as a corporation.  If the LLC is eligible to be treated as a corporation that meets certain tests and wants to elect to be treated as an S corporation, it must timely file IRS Form 2553.  The LLC is like a corporation with fewer formalities.  The LLC is not required to hold board meetings, shareholder meetings, or prepare minutes that a corporation has to.

LLCs are not required to hold annual member meetings or manager meetings.  However, an LLC may chose to require such meetings in what is called the Operating Agreement. The Operating Agreement of the LLC is the equivalent of the bylaws of a corporation and determines how the LLC is governed.  LLCs are also not required to distribute an annual report to members advising of the status of the business.  However, LLC’s must make information available to members upon request.

By letting a corporation attorney set up a limited liability company for you, you will create a legal barrier between your business and your personal assets.  As a business owner, you can protect your personal assets and property, but you must take the appropriate actions. There are many laws which govern a Limited Liability Company that can seem very complex to the average person.  A business lawyer can discuss your options and help you start your business the proper way.  Our business attorneys are experienced in business law and can help you form a LLC and can also assist you with contracts, leases and employment law issues as your business grows.   

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2009 Holden Law Firm. All rights reserved.

Why Use A Lawyer To Start Your Business

If you use an online legal document service provider, be aware that the online provider cannot provide legal or financial/tax advice. Some online legal document services provide a wealth of information on their websites, allowing you the opportunity to learn more about your legal issue and help you to prepare the document on your own.  However, these online services can only provide general information to help you make an informed decision and can not provide legal advice.

A lawyer can assist you with the preparation of your legal documents, and may even use a service to help file the documents, but contacting an attorney when you begin your business is a good way to develop a relationship with an attorney who can assist your business in avoiding potential trouble down the road.

The reason a small business should use an attorney as opposed to an online legal document service is that using an attorney can help with the process of starting a new business by assuring that the on-going legal requirements to maintain the corporation status are completed and maintained. Annual shareholder, director and partner meetings need to be held, and recording of minutes and election of officers must conform to state requirements. Failure to do these things can jeopardize corporate status and result in “piercing of the corporate veil” in the event of a lawsuit or other legal action, exposing corporate officers to personal liability or other legal problems.

This article may not be reproduced in any form without the permission of Holden Law Firm. © Copyright 2009 Holden Law Firm. All rights reserved.

Employee Investigations

Every business, no matter what size, should have an Anti-Harassment/Discrimination policy prohibiting harassment or discrimination in the workplace.  Even an employer of a few employees should have policies prohibiting harassment and discrimination in the workplace.  Larger employers are bound to run into situations which will require addressing complaints of harassment, discrimination, workplace violence, theft, drug use and other employee problems.  When the employer becomes aware of these problems, they cannot bury their head in the sand and hope it resolves itself.  Under the discrimination laws, an employer who becomes aware of alleged workplace harassment is required to conduct an investigation and take prompt, effective remedial action. Many employers (and managers) believe the problem will go away if they just ignore it.  This is a huge mistake which leads to frustration on the part of the employee, and eventually ends in a lawsuit.

As an employer, you want to conduct an internal investigation that is thorough, expeditious, discreet and confidential, so you can take an action which responds to the problem without exacerbating the situation.  There are a variety of ways to investigate an employee complaint in the workplace, but following certain general guidelines can assist your company in developing an investigation policy.  

Here are ten guidelines to consider when investigating employee complaints:

1.  Develop Policies and Procedures for an Internal Investigation:

The first step is to establish policies and procedures for investigations so that all investigations are uniform.  This should include an understanding of who is in charge of the investigation, who will receive the investigation report and who will make conclusions about the investigation report.  It should be determined who will follow up on corrective action or discipline, and if any training is deemed necessary based on the conclusions of the report.  Conducting regular training for employees and managers on company policies prohibiting discrimination and harassment in the workplace can prevent claims.  Finally, there should be a policy about where and how long the investigation report, investigation interviews and documents are kept.

2.  Choosing the Investigator:

The second step to addressing employee complaints is to have an objective person conduct the investigation.  The person conducting an investigation needs to be credible, respected, and regarded as fair and impartial. One of the most difficult aspects of an internal investigation is obtaining an impartial investigator, because the parties may be too personally involved.  The parties may have known each other as colleagues, manager/employee or co-workers, and have impressions and personal biases of each other making it almost impossible to conduct an objective investigation.

In some circumstances, such as when the manager is the alleged offender or if the manager had many problems with the complainant, it is a good idea to use a manager from a different department or an outside investigator to investigate the complaint.

It is advisable to have someone investigate the matter who is not involved in the workplace dispute.  Sometimes this is not feasible given the size of a company, but if possible, having an objective point of view can help the employer determine how to resolve the problem.

3.  The Investigator Needs to Know Employment Law:

The person conducting the investigation needs to be credible, respected and regarded as fair and impartial, but also knowledgeable about company policies, practices and employment law issues.  The investigator must be familiar with the state and federal employment laws.

Investigators will need to identify potential witnesses and documents for review in an efficient manner.  If the investigator is not familiar with the employment laws, they can make the matter worse by investigating matters which do not need to be investigated; or unnecessarily interviewing witnesses and wasting the company and employees’ time.  If the investigation is not done timely and efficiently, it can be a distraction to employees, lead to gossip, cause morale problems and slow down production.

4.  The Investigation needs to be Timely:

The fourth step to conducting an investigation into employee complaints is to begin and complete the investigation in a timely fashion. The employer needs to start an investigation, talk to the complainant and the alleged offender and any alleged witnesses, and reach a conclusion based on the investigation in less than sixty days. This will help avoid many lawsuits filed by employees.

Many employment lawsuits result because the employer does not act in a timely fashion when an employee complaint is received.  Many employers begin an investigation, but don’t tell the employee who filed the complaint that any action has being taken.  It is good practice to advise the complainant in writing that an investigation is underway, and that the employee will be notified when the investigation is completed.  The employee can and should be contacted shortly after they file a complaint and an interview scheduled.  The alleged offender should also be given reasonable notice before being interviewed as well.  The witness should be contacted, and an interview scheduled in a timely manner.  It is not a good practice not to give notice to employees who are being interviewed.

Most investigations should be concluded in less than sixty days.  There are rare circumstances where an investigation will last over sixty days, such as complaints that involve documentation of FMLA violations or where there is a need to compile, review and analyze a large amount of documentation.  In those circumstances, the employee who made the complaint should be contacted every thirty days and notified that the investigation is still on going.

When the investigation is concluded, notify the complainant that the investigation has been completed and the matter was handled appropriately based on the conclusions of the investigation.  If an investigation is inconclusive, provide an explanation of why further investigation is not merited or why the investigation is inconclusive. The more responsive the employer is in handling the complaint, the quicker the company can get back to its business.

5.  Encourage Cooperation:

An iinvestigator needs to encourage cooperation. The investigation process is for the purpose of resolving a complaint, not to discipline or punish poor performing employees. The employees need to know that this process is to resolve legitimate complaints and not to make false claims or to retaliate against other employees.  The investigator must create an atmosphere where employees feel it is in their interest to cooperate and to tell the truth.  All employees should be told that the investigation is a company investigation, and failure to provide honest and truthful statements or to provide misleading information can lead to discipline.

6.  The Investigation needs to be Confidential:

Make certain any investigation is done in a confidential manner.  The witnesses should be told that the investigation is confidential and they are expected to keep the investigation confidential, and that a breach of confidentiality can lead to discipline.

All witnesses must be made aware of the importance of keeping the investigation confidential, and the ramifications in the event the investigation is not kept confidential. It is important that employees not gossip about the investigation or talk to each other to compare answers to the investigator’s questions.

In an initial letter to the employee telling them you are investigating the complaint it is important to tell the employee to keep the matter confidential, and not to speak to anyone other than an appropriate manager or union representative.  The employee can also be told that any discipline issued as a result of the investigation will be kept confidential. Confidentiality is important in order to avoid claims of defamation and to insure the integrity of the investigation by minimizing any disruption to the workplace.

7. The Investigator’s Report:

The seventh step in responding to employee complaints is developing a record which can be reviewed a year from the investigation to understand what the complaint was, what was done to investigate it and what conclusions were made as a result of the investigation.  Each step of the investigation needs to be documented by the investigator. Many managers who investigate employee complaints waste time talking to employees, and never documenting anything that was said.

The investigator needs to keep good notes documenting each step of the investigation. The report that is put together should include the following:  A summary of the allegations made; which witnesses were interviewed by noting who was present, including dates and position of the employees interviewed; a list of documents reviewed; an executive summary; the body of the report setting forth the facts and what the witness said along with conclusions for each allegation; and a summary of the findings.  Finally, the employer needs to document that it took appropriate remedial action if an allegation is substantiated.

8.  The Investigator Needs to Gather Facts:

The investigator can best obtain facts by avoiding questions that are confrontational, argumentative, leading, judgmental or opinionated. The investigator should use open ended questions to allow the person tell their side of the story.  The investigator needs to make sure they don’t get just one side of the story, but rather obtain responses to all allegations made.  It is helpful to have the complainant fill out a complaint form, but this is not mandatory.

Some investigators begin the interviews with the complainant. This may be appropriate if there is a written complaint and the investigator knows what the issues of the complaint are. However the complaint is vague and broad in many situations. The complaint may say, “I was discriminated against by my manager when I was disciplined for my attendance.” In this example, it will be helpful to interview any managers of the complainant first before actually interviewing the complainant so you know the dates and policies involved.  It is also advisable to explain to the complainant that a follow up interview may be necessary.  An investigator should not disclose any witnesses who have been interviewed, or the order of the interviewees.

The investigator should take careful notes of each interview and ask questions several different ways to ensure each witness’s side of the story is fully understood. The investigator must ask the complainant about all relevant allegations and not assume answers while remembering that the investigation is to document what was said and to assist the company in resolving and documenting the investigation. The investigator who gathers the facts, and keeps everything in their head and then comes to you and saying they solved the problem is of no help.  The employer needs to document what it did to investigate the matter.

9.  No Retaliation Allowed:

The ninth step to investigating employee complaints is to ensure all participants know there is zero tolerance for retaliation against someone making an allegation or against any other employee.  It is important to tell employees interviewed that the company has a policy to investigate all complaints, and this is the process to resolve employee complaints.  Inform employees that under no circumstances should employees retaliate against someone for making a complaint. The employees must be advised that if an employee feels retaliation, or if an employee retaliates against someone else, they may be disciplined.

10.  If Discipline is Implemented, Ask Questions:

Always ask six questions at the conclusion of the investigation. After reviewing the investigation file, there should be answers to these questions: 

• What were the allegations made by the employee?
• What were the facts involved with regard to each allegation?
• Did the facts substantiate, not substantiate or was there not enough evidence to substantiate or not substantiate the allegations and why?
• Were there any violations of company rules, policies or procedures?
• What action was recommended and was that action taken.
• If discipline action was taken, was the employee treated similarly to other employees in accordance with the company policies and procedures?

Addressing these questions ensures that employees are treated in a consistent and fair manner.  If an employer makes a decision that leads to a possible termination, it is advisable to have another manager outside the complaint review the file to determine whether these questions can be answered by looking at the file.

These are ten important guidelines to consider when handling employee complaints. These are general parameters, and will not guarantee that an employee who files a complaint would sue the company - even if you follow these guidelines.  But the company’s response to employee complaints can mean the difference between resolving an employment issue in a couple of months, or spending the next three years paying attorneys, and possibly a former employee, ten times what it costs to do an investigation of the complaint.

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