If small businesses fail to leave the right kind of paper trail when hiring, managing, or firing employees, they may be setting themselves up to be defendants in a lawsuit. To protect against charges of discrimination, companies need to set down on paper their criteria for hiring employees and the standards by which employees will be judged, promoted, and let go.

But creating the necessary documentation can be a challenge for smaller companies. “In a lot of cases they are in growth mode, or just setting up, and they haven’t sat down and thought about standards,” says independent arbitrator and mediator #b#Lisa Charles#/b# of Labor Management Consulting Services based at her Princeton home. “They are so focused on getting people in and trained, they don’t take the next step until there’s a problem.”

Charles will present “Fair, Square, and Legal: A Manager’s Guide to Safe Hiring, Managing, and Firing Practices,” on Thursday evenings, July 1 through July 29, at 6:30 p.m. at Mercer County Community College in West Windsor. Cost: $295. For more information, call 609-570-3311.

#b#Recruiting and hiring employees#/b#. “The first thing you are liable for is to make sure that the process is fair,” says Charles. “People can sue if they feel discriminated against in the recruiting process.”

To protect itself, a company should write down exactly what criteria it uses when hiring for a particular position. Of course the documentation should include the job’s title, salary, and requirements, but it should also indicate who did the interviewing, who was interviewed, and why the hiree was selected from all who applied.

To be fair, each applicant should be asked the same set of questions — and these should be written down as a checklist to prevent too much deviation. Fairness also means not asking a question that is not applicable to the whole population of interviewees. For example, “What is your maiden name?” “It may sound innocuous,” says Charles, “but it is only applicable to women.”

Sometimes an apparently innocent question may be discriminatory. An interviewer who asks, “When did you graduate from high school?” can get a good approximation of the candidate’s age and that can be considered discriminatory.

Once all the questions have been asked, the company must be able to justify its choice or choices based on its written criteria. “For employers, if they focus on what is critical for the job to be completed, that is the best determination they can have as to why they hired person A over person B,” says Charles. “An employer should be able to say, ‘This is what we were looking for, and, based on the responses to these questions, this is how we narrowed down the list to this or these candidates.’”

Rather than sticking to the match between the candidate’s strengths and the written criteria for the position, some employers make the mistake of hiring based on their personal response to a candidate.

“You can have great chemistry with someone, but that doesn’t mean they are right for the job,” says Charles. “You want to go with more than a gut feeling. You have to be able to articulate and prove, if challenged on it, why you hired one person over another.”

#b#Managing employees#/b#. Once employees are hired, the employer must keep track of what skills they have gained and decide when they deserve a raise or a promotion. Usually liability comes into play when one person sees another moving up in the company and asks, “Why did this person get a raise (or a promotion), and I didn’t?” In this case, the employer must be able to show that the person promoted had met measurable criteria, which is best done through a performance review. Charles says this is distinct from a disciplinary process initiated for people who violate company rules.

A performance review measures an employee against criteria that set an acceptable level of performance. “Each and every department has to determine the standards for the group and explain them,” says Charles. “Either you’re meeting the standards or you’re not, and it has to be clear enough so people can readily determine whether they are close to, have exceeded, or haven’t quite made it up to the standard.”

For a salesperson, for example, an employer may expect 10 sales each month. A person who makes 8 hasn’t quite made the grade, and one who does 12 is doing a great job. For a production job, the standard usually relates to the number of products produced in an hour or a week. The accounting department may expect the books to be closed every 30 days, with no more than two errors. For customer service, an employee may be expected to spend no more than a certain amount of time on a call and to resolve problems a specific percentage of the time.

“There has to be something that determines whether somebody is doing a job well,” says Charles, “and the management team is responsible for setting those standards.”

#b#Firing employees#/b#. Eventually everyone leaves, and the company must document the circumstances and conditions under which people leave. If there is a reduction in force, and the whole department goes, that’s less of a liability problem, but if an employer decides to lay off one person and not another, the employer must be clear why.

“It can’t be, ‘I like this person better,’” says Charles. “It has to be that this person is more qualified for what I need done, or has seniority, or some other criteria that can be relied upon for the reason for termination.”

Charles always cautions people to vet a layoff list one extra time to make sure that somehow the people are not, say, all over 50 or all women. “If someone else can determine those types of patterns, the employer leaves himself open for a claim of discrimination,” she says.

Charles grew up in Lorain, Ohio, where her mother was a nurse and her father a laborer in the steel mill. She earned her bachelor’s in journalism at Ohio State University.

“My original idea was to be a writer for a magazine,” she says, “but after working for two years for the school newspaper, I realized the deadlines were overwhelming for me.” Instead she decided to move into human resources recruiting, which was a good fit for the skills she had developed in journalism — interviewing people, assessing situations, making determinations, and writing them up. Her first job was as a recruiter of engineers, sales, and manufacturing personnel for InteCom, a telephone switching system company.

In 1987 she moved to Dow Jones, where she started as a recruiter and assistant to a human resources manager and eventually became director of human resources; her special area of expertise was dispute and grievance resolution in union and non-union locations.

Since 2008 Charles has been self-employed as an arbitrator and mediator.

A major lesson she has learned: the only surefire way that employers can prove that they are acting legally is to be able to explain their actions, which requires some kind of documentation. “You have to sit down and have every department come up with something,” says Charles. “It doesn’t have to be volumes of standards. Even if you get one or two things down, it can grow or change as time goes on. It doesn’t have to be elaborate; it needs to be a start that people can readily understand and measure their progress against.”

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