3 Key HR Policies That Help Your Small Business Avoid Costly Litigation

An essential part of planning for success, avoiding regulatory penalties and/or litigation is making sure your small business is current and compliant with state and federal employment regulations and human resource (HR) compliance.

Small businesses are often not prepared for the financial impact of litigation let alone the emotional and personal toll the litigation process can have. Having solid, up to date and compliant employment policies and procedures should be a yearly priority for all Louisiana small businesses.  While there are many areas of employment policies and procedures that your small business should be aware of, we have identified three key areas of focus small businesses can target in their planning for success.  

Planning for Success:  3 Key Employment Practices

1. Employee Handbook (aka Employee Manual):

Small businesses should make sure that they have a comprehensive Employee Handbook that is a cornerstone of communication with employees regarding such things as the business’s:

  • Equal opportunity statement
  • Anti-harassment and nondiscrimination policies
  • Family and Medical Leave Act (FMLA)/medical leaves of absence policy
  • Americans with Disabilities Act (ADA) policy
  • Exempt/Non-exempt employee definitions
  • Contractual disclaimer and at-will policy/statement 
  • Acknowledgment form (signed by each employee)

A well-written Employee Handbook tailored for Louisiana businesses is an absolute essential part of planning for success 

2. Independent Contractor versus Employee:

Making sure that your Louisiana Small Business is correctly classifying its workers will help your business avoid stiff regulatory penalties and the risk of having to pay an incorrectly classified employee back pay and benefits. In 2021 the Louisiana Legislature significantly increased the penalties for misclassifying employees independent contractors and incorporated a three-fold test that the Louisiana Department of Labor to use for assessing whether or not an employee has been misclassified. Here is the Louisiana statutory test:  

THREE FOLD TEST (INDEPENDENT CONTRACTORS) Services performed by an individual for wages or under any contract of hire, written or oral, expressed or implied, shall be deemed to be employment subject to this Chapter unless and until it is shown to the satisfaction of the administrator that:
1. Such individual has been and will continue to be free from any control or direction over the performance of such services both under his contract and in fact; and 
2. Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and 
3. Such individual is customarily engaged in an independently established trade, occupation, profession or business.”  La. R.S. 23:1472 (12) (E) I, II, III 
Misclassifying an employee as an independent contractor can cost a Louisiana Small Business tens of thousands to hundreds of thousands of dollars in penalties and back pay.

3. Performance Reviews:

Small businesses should not neglect the importance of creating a structured performance review policy that is consistently utilized. Documenting employee successes and failures can be the key to planning for success. Helping employees understand the areas where they are succeeding and the areas in which they need to improve will help your Louisiana Small Business grow. Having written records of employee infractions is also a part of performance reviews that will assist your small business with avoiding litigation.

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Landreneau & Associates was founded in 2019 by lawyers with a combined experience of 60 years representing Louisiana businesses and individuals across a variety of areas, including:

Our boutique law firm advises clients on how to optimize business processes and procedures, plan for the future, and avoid litigation.

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