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					                  hr & employment law

Protecting Clients’ Property and Preventing
Liability When Employees Terminate
Dawn Davidson Drantch, Esq.


She is an excellent employee. The PEO
client gives her the keys to the kingdom
(and the laptop, the cell phone, the
Blackberry, etc.). She gets a better offer and
dashes off to a new kingdom. The client
needs to retrieve those keys (and the laptop,
the cell phone, the Blackberry, etc.), not to
mention all of the company’s information
that may be contained in those devices and
otherwise in her possession.
      Unfortunately, this is an all-too-com-
mon problem for today’s employer, which
becomes even more complicated for the
PEO when wage and hour and other lia-
bilities may be implicated. How then can
the PEO and its clients protect themselves
from disaster in these situations?
      An elemental good practice on which
the PEO should counsel the client is obvi-       from the employer, and no question that           involuntary. Oftentimes, those payments
ously that the client should seek advice         the employee knew the equipment must be           must be made very quickly. In California,
from the PEO prior to initiating any ter-        returned.                                         Hawaii, and Colorado for example, final
mination. However, in the many cases in               A common knee-jerk reaction to               pay is required to be made immediately in
which that unfortunately does not occur,         retrieving equipment from an employee             the case of involuntary terminations. Only
or in the case of voluntary separations, the     who is terminating is to withhold the final       South Dakota expressly permits an
following may assist the PEO.                    paycheck until the return of the listed           employer to withhold final pay until the
      When the client is in the practice of      equipment. However, generally, every state        employee returns all employer property in
giving equipment to the employees in the         has a law pertaining to how quickly an            her possession. And in fact, Illinois’ law
course of their employment, it is helpful for    employee must be paid upon termination,           expressly prohibits the withholding of
the PEO to advise the client to inventory        whether the termination is voluntary or           final pay because an employee has not
all such items. Each item should be specifi-
cally listed, dated, and signed for. This list
should be updated as equipment is                   in a nutshell
returned, changed, or added to the list with
                                                  • When the client is in the practice of giving equipment to the employees in the course of
the employee’s signature and date on each
                                                    their employment, it is helpful for the PEO to advise the client to inventory all such items.
amendment. Of course, in today’s technolo-          A sentence should be included that the employee understands that she is required to
gy-saturated workplace, this list must also         return all listed equipment upon separation of employment.
include any software programs licensed to         • A common knee-jerk reaction to retrieving equipment from an employee who is terminat-
the employee through the employer. A sen-           ing is to withhold the final paycheck until the return of the listed equipment. However,
tence should be included that the employee          generally, every state has a law pertaining to how quickly an employee must be paid
                                                    upon termination, whether the termination is voluntary or involuntary.
understands that she is required to return
                                                  • A related technological consideration when employees resign or are terminated is
all listed equipment upon separation of
                                                    access to information and information systems. It is advisable therefore, that the PEO
employment. If this procedure is followed,          educate its clients generally on what steps to take when an employee gives notice or
there can be no question about what equip-          when the client is contemplating terminating an employee with critical access.
ment the employee did, or did not, receive

             REPRODUCED WITH PERMISSON OF THE NATIONAL ASSOCIATION OF PROFESSIONAL EMPLOYER ORGANIZATIONS
                                                PEO INSIDER | MAY 2008
returned an employer’s equipment. In the          company policy. In this case, the handbook         PEO knows an employee has resigned from
ideal world, as part of a client orientation,     acknowledgement would serve as the                 a client, critical time is lost in protecting the
educating the client on these requirements        employee’s written concurrence of any              client. It is advisable therefore, that the PEO
in the states in which they operate would         such deduction should the deduction have           educate its clients generally on what steps to
be beneficial, but unfortunately sometimes        to be made.                                        take when an employee gives notice or when
impractical. It is therefore essential that             This topic gets more complicated             the client is contemplating terminating an
the PEO train its payroll and human               when we begin to consider the protection           employee with critical access. This can be
resources staff to understand these various       of the client’s intellectual property as           accomplished in the client orientation
state requirements so they can assist the         opposed to tangible equipment. Certainly           process, as an information sheet accessible to
client in remaining compliant even when           provisions to protect things such as confi-        client management on the PEO’s Web site,
the client insists on doing otherwise, as the     dential information and trade secrets must         or during human resources overview training
client’s education in this area usually           be in place far before there is any indication     for the client. At the very least, the PEO
occurs on an as-needed basis.                     that an employee will abscond to another           should advise clients to not only change the
      Along the same lines is the situation in    kingdom. Although this author does not             locks if the employee has keys, but to imme-
which the client would like to deduct the         recommend that the PEO advise its clients          diately disable the employee’s systems access
value of the outstanding property from the        in this area because of the many legal issues      and change all passwords to the extent prac-
final pay. This issue is not as cut and dry as    involved, it is good practice for the PEO to       tical. If the client has given the employee
the withholding of the paycheck because           suggest the client seek the advice of its own      access to certain online services during the
state laws vary much more on this topic than      employment counsel on these protections.           employee’s employment, the client should
on the timing of the final pay. For example,      Of course, as the human resources provider,        immediately advise those vendors that the
New York employers can deduct amounts             the PEO should suggest that any agree-             employee has separated and is no longer per-
from employee wages as authorized by law          ments that restrict the use of a client’s intel-   mitted to have such access.
or regulation or by employees in writing.         lectual property should be contained in sep-             To protect against potential liability
However, deductions authorized by employ-         arate agreements with the employees as             for the PEO as well as the client, the
ees in New York are limited to: payments for      opposed to simply having such a policy in          essential hurdle in the PEO situation is to
insurance premiums, pensions, or health-          the handbook. Although having these poli-          be able to ensure that the client is compli-
welfare benefits; amounts for charitable con-     cies in the handbook would always be rec-          ant before the fact. As those of us in the
tributions; amounts for U.S. bonds; amounts       ommended when appropriate, individual              industry know, educating the client and
for labor dues or assessments; and amounts        agreements tailored to the job descriptions        our internal staff is fundamental.l
for similar payments for the benefit of           of the employees are easier to enforce
employees. As such, an employer cannot            should the time come. If a PEO wishes to           Dawn Davidson Drantch, Esq. is director of
deduct for loss of equipment and would be         provide such sample agreements to its              employee relations and internal counsel for
in violation if it did so in this circumstance.   client, an express caveat should be added up       the Alcott Group in Farmingdale, New York,
In states such as New York, a strong letter       front, in bold, italic letters in a different      and a member of NAPEO’s Legal Advisory
from the client’s employment counsel or a         font and color stating that: the PEO does          Council.
legal action in small claims court may be the     not provide legal advice; matters such as
only leverage a client has. Certainly the         these pertain to the control of the client’s       This article is designed to give general and timely
equipment inventory as suggested above            business; the PEO is providing a sample            information on the subject covered. It is not intended
                                                                                                     as legal advice or assistance with individual prob-
with the employee’s signature would go a          only as the client’s human resources repre-        lems. Readers should consult competent counsel of
long way in proving the loss.                     sentative; and due to the varied legal issues      their own choosing about how the matters relate to
      On the other hand, some states, such        implicated, the PEO strongly urges the             their own affairs.
as Florida, have virtually no prohibitions        client to seek the advice of employment
against wage deductions. Deducting for            counsel on this matter.
equipment not returned in those states                  The PEO should also advise the client           further reading
would probably not violate applicable law,        that, to the extent practical, the separating         Related and similar articles are available to
in this case the federal Fair Labor               employee should sign an acknowledgement               NAPEO members on the NAPEO Web site
                                                                                                        and in the PEO Insider article library:
Standards Act, as long as the deduction           as a reminder of the employee’s ongoing
                                                                                                        • Improper deductions:
did not cut into the employee’s minimum           duty to protect the client’s confidential               www.napeo.org/members/insider/jun-
wage or overtime pay. In states where             information and/or trade secrets.                       jul07/hrpractices.cfm
deductions for this type of situation are               A related technological consideration           • FLSA issues: www.napeo.org/mem-
permitted, it would be beneficial for the         when employees resign or are terminated is              bers/secureDocument.cfm?docID=762
PEO to advise the client to include the           access to information and information sys-            • Proprietary information:
                                                                                                          www.napeo.org/members/insider/apr05/
possibility of this deduction in the              tems. An inherent obstacle in the PEO                   salesmktg.cfm
employee manual and make it a uniform             world is that oftentimes, by the time the


              REPRODUCED WITH PERMISSON OF THE NATIONAL ASSOCIATION OF PROFESSIONAL EMPLOYER ORGANIZATIONS
                                                 PEO INSIDER | MAY 2008

				
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