Basics of Being an Employer
- Aug 1, 2002
You probably know the employment drill all too well--you place an ad in the local newspaper or on the bulletin board at the feed/tack store, ask your friends for a few names, interview some job prospects, review your budget, review your budget again, make an offer, get a "yes," start the paperwork, and hope for the best.
Congratulations! You're an employer. Now what? Unless you can do all the work associated with your horse operation by yourself, locating and keeping competent employees probably will be one of your most daunting tasks. Even a true "backyard" horse owner might need to employ someone to help feed and care for the animals, clean stalls, and help out at competitions or during breeding and foaling seasons.
First you must decide what this particular job will entail, then you must advertise the position. The first step in the actual hiring process after you identify a few job prospects through responses to want ads, personal referrals, or job applications usually will be a personal interview. The interview can be as formal or as informal as you think is appropriate, with the goal being to learn as much pertinent information about the prospective employee as possible.
You should keep in mind that the laws that prohibit discrimination in the workplace also restrict the types of questions you are permitted to ask an applicant about quite a variety of things, including disability, age, and some gender-related questions.
You should develop a list of possible interview questions in consultation with your attorney. If this sounds like too much trouble, then consider the possible consequences of running afoul of the law. This could include, among other things, a discrimination lawsuit that could put you out of business even if you win.
One of the most valuable sources of potential information are previous employment references provided by the applicant. You should always require references from potential employees, and you should always check them.
Many employers are reluctant to give out anything other than basic information on a former employee, fearing a bad reference will result in legal action by the employee. Nevertheless, you should check the references. For example, if an employee's violent behavior on the job later becomes an issue, you might be legally liable for negligent hiring if you knew, or reasonably should have known, about the worker's violent character.
Some employers also conduct background checks on their potential employees. Most cities have one or more private investigative agencies that can retrieve police and court records for you at a fairly reasonable cost. Some information is available, either for free or for a fee, on the Internet. If an employee will be driving a farm-owned vehicle, then a valid driver's license is an absolute must.
Working At Will
One of the most important decisions an employer must make after deciding to hire any job candidate is whether to formalize the employment agreement in a written contract. The fundamental nature of the employer-employee relationship is shaped, in large part, by your initial decision of whether to use or to forego a written employment contract.
Written contracts are preferable to oral ones in most situations because the act of reducing the important terms of an agreement to writing forces the parties to understand, and agree on, their respective obligations and expectations. An oral contract can be enforced in court to the same extent as a written contract, but only after the existence of the oral agreement and its terms are established. These preliminary steps can be avoided through use of a written contract.
There are some drawbacks inherent in the use of written contracts, however, and your decision about their use should be based on advice from legal counsel familiar with the laws in your state.
The vast majority of horse-related business is, always has been, and probably always will be, conducted on trust and a handshake, without the formality of written contracts. Most hiring is done the same way. A job prospect stops by a farm and announces: "I need a job." The owner or manager says, "You're hired," and hands over a lead shank or pitchfork.
A worker without an employment contract, in most states, is considered an "employee at will." Employee-at-whim might be a better description, however, because traditionally an at-will worker can be fired by his or her employer at any time, for any reason or for no reason at all. In recent years, however, the balance of power has shifted slightly in favor of an at-will employee.
Federal and state anti-discrimination laws now protect employees from being fired solely because of their race, gender, nationality, religion, and often disability. Flaunting such laws, either during the hiring process or after the employee starts work, invites a costly lawsuit.
Such so-called "protected classes" should be fairly obvious to employers, but some others might not be, and knowledge of your state's laws is essential. Kentucky, for example, prohibits job discrimination for the usual reasons (race, sex, etc.), but also prohibits an employer from discriminating against an employee who smokes, so long as that person follows a workplace smoking policy. Generally, though, an at-will employee has few protections.
If you intend to employ a worker on an "at-will" basis, you need to be careful that you do not unintentionally create a contractual relationship with the employee. An oral promise by an employer that an employee is being hired for a certain, well-defined period of time might be construed by a court as a binding contract, for example. This is most likely to occur in a lawsuit alleging wrongful discharge.
A contractual relationship also might be created through the use of a written employee handbook. Although uncommon on horse farms, employee handbooks are routinely used in many other businesses, and they can be a valuable tool for farm owners and managers. Handbooks can be elaborate, commercially printed documents, or just a few photocopied pages stapled together. They can cover a wide range of topics, including business policies for working hours, vacation and sick leave, emergency procedures and contact numbers, a business map, and so on.
There are dangers in a poorly written handbook, however. Employees in some states have successfully altered their at-will status by raising legal claims based on a contractual relationship created solely by language in a handbook, even in the absence of a written employment contract.
If you intend to preserve the at-will status of your employees, and also want to distribute a handbook for your workers, the manual must be carefully drafted to reflect your state's laws, preferably with the advice of an attorney. The handbook should state explicitly that the employment relationship is at-will, for example, and language that implies any sort of commitment to continued employment should be avoided. You should require each employee to indicate in writing that he or she received a copy of the handbook, and notice of receipt should be kept in the employee's personnel file.
Despite the nearly unbridled freedom enjoyed by an employer who does not use written employment contracts to discharge an at-will worker, you still might be well advised to use a written contract. Basing the employment relationship on a written agreement will greatly reduce the risk of any misunderstandings between the parties, and still allows the discharge of an unsatisfactory employee for good cause.
A written employment contract does not have to be a complicated document filled with incomprehensible legalese, but the contract should set out in detail every condition of employment the parties think is important. (It should go without saying that these items also should be discussed at the initial job interview, whether you intend to rely on oral or written employment agreements.) At a minimum, the contract should include:
- When the employee is expected to work (which days of the week, the working hours, the business policy regarding tardiness, the time allowed for lunch and breaks);
- What the employee is expected to do (does a "groom" also clean stalls and stack hay in the barn loft, for example, or does the job include work at the farm and at horse shows?);
- How much and when the employee will be paid (are there time cards or an honor system; will the employee be paid on an hourly or salary basis; will he or she be paid weekly, every other week, or monthly; will there be an opportunity for bonuses or overtime?);
- The policy regarding sick days and vacation;
- Any other benefits provided by the employer;
- Other pertinent policies and regulations of the business; and
- Grounds for dismissal (these should include a zero-tolerance policy for drug and alcohol use; violent or abusive behavior directed at other employees, visitors, or animals; sexual harassment; or other good cause).
No written employment contract can guarantee a smooth-as-silk working relationship between employers and employees that's free of disagreements and misunderstandings. But a well-drafted contract can reduce both the number and severity of conflicts and disputes because the parties are more likely to have a clear understanding of what each expects of the other. In an employee-employer relationship, the fewer surprises, the better.
Even if you have only one person working for you, as an employer you are subject to a bewildering array of federal, state, and local laws and regulations, all beyond the scope of this article. The wide range of wage and tax laws and anti-discrimination statutes are prime examples. While it might be tempting to ignore these, you do so at your peril. The advice of an attorney and possibly an accountant might be necessary, and the money spent avoiding a problem will be small in comparison to civil penalties for losing a discrimination lawsuit.
Se Habla Español?
There also are particular legal obligations inherent in hiring workers who are not United States citizens, and these requirements take on added significance as the horse industry's reliance on foreign nationals grows. The Immigration and Naturalization Service (INS) was swamped with bad press earlier this year when it posthumously approved student visas for two of the foreign nationals who died during their Sept. 11 attacks on the World Trade Center--six months after the attacks. Congress now is in the process of overhauling the agency.
Regardless of the current reputation of the INS as a bumbling bureaucracy, the group does check occasionally on the status of foreign workers, and strict requirements are imposed on employers to be certain that all employees are eligible to work in the United States. Any new regulations accompanying the reorganization of the INS likely will be at least as strict as those currently in place.
Employers currently must verify the identity and employment eligibility of all workers, either before a job offer is made (the preferable option in case a job prospect is not eligible for employment), or within three days after the employee starts work. This verification requires an INS Form I-9, and the employer must state under penalty of perjury that he or she has examined the identity documents of the worker and that they appear genuine on their face. This verification is required for every employee, not merely those who appear to be foreign nationals.
Acceptable documents for the verification of both identity and employment eligibility include a U.S. passport, a certificate of U.S. citizenship, a certificate of naturalization, or an unexpired temporary resident or employment authorization card. Identity alone can be verified with a photo driver's license, government identity card, school identification card with photograph, or voter registration card. Eligibility to work can be verified with a Social Security card or other government-issued document. A complete list of acceptable documents can be obtained from the INS (www.ins.usdoj.gov).
If you find it necessary to fire an employee, you should document in writing the reasons for your action. If appropriate, you should first warn the employee and give him or her an opportunity to correct the problem, unless the behavior falls into one of those categories for which you have established a zero-tolerance policy (such as drug or alcohol abuse, violence, or sexual harassment).
Most everyone would rather work with their horses than deal with the paperwork and other headaches of being an employer. Your expertise in dealing with your workers can be the difference between success and failure for your horse operation, however, and it is easier to avoid problems in the first place than repair the damage later.
EMPLOYING INDEPENDENT CONTRACTORS
Not everyone who does work for your horse operation is an employee. Some are considered independent contractors, and it is important that you know the difference.
An employer is responsible for withholding federal, state, (and possibly local) income taxes, social security, and Medicare payments from the wages of an employee, but not from money paid to an independent contractor. State worker's compensation laws generally apply to employees, but not to independent contractors. The Fair Labor Standards Act, enacted in 1938 to set minimum wages and maximum working hours, does not apply to independent contractors (and some farm employees also might be exempted, depending on whether a horse operation is considered "agriculture"). Finally, most anti-discrimination laws generally do not apply to independent contractors.
Considering the relative freedom accorded an employer when dealing with independent contractors, you might be tempted to treat all your workers as independent contractors. That wouldn't be a good idea, however. An independent contractor has a particular legal status, which requires more than a label applied by an employer. Generally, an independent contractor agrees to perform certain specified work at his or her own risk, with no intermediate control exercised by the employer.
Courts in many states have wrestled with the question of whether a particular worker, or class of worker, is an employee or an independent contractor. The question usually arises in a worker's compensation case or in a lawsuit in which a worker claims that a farm owner is financially responsible for injuries.
Farriers and veterinarians generally are considered to be independent contractors, as are workers hired for particular construction projects, while grooms and other regular farm workers typically are considered employees. On the other hand, courts are split on whether jockeys and exercise riders (at the track or on the farm) are employees or independent contractors. You must refer to laws and court decisions in your state to resolve questions about the status of workers in your business.--Milton C. Toby, JD
About the Author
Milt Toby is an author and attorney who has been writing about horses and legal issues affecting the equine industry for more than 40 years. Former Chair of the Kentucky Bar Association's Equine Law Section, Milt has written eight nonfiction books, including national award winners Dancer’s Image and Noor. He teaches Equine Commercial Law in the University of Louisville's Equine Industry Program.
POLL: University Equine Hospitals