As most employers are acutely aware, additional employee protections, prohibitions, and, most importantly, costs continue to pile on to the employer community every year, particularly in New York City (among other jurisdictions). In addition, this trend shows no sign of abating given the current legislative environment. As a consequence, thoroughly vetting prospective employees has become more critical than ever for employers.
Once an employee is on boarded, it is increasingly difficult, or impossibly fraught with liability, to terminate that employee. Gone is the time when you could simply hire an employee and “see how it works out” during an orientation period with relatively limited liability. Moreover, traditional mechanisms for reviewing employees before hire, such as criminal and credit background checks, or reviewing a candidate’s past unemployment history, have been curtailed in an increasing number of jurisdictions. This has resulted in the need for more and more creative strategies and practices to ensure the right employees are hired from the outset.
One idea we occasionally hear is the possibility of an unpaid trial or try-out period for prospective employees. This can take various forms, however typically a prospective employee, after completing his or her initial interviews, will be asked to “show what he or she can do,” i.e. prove his or her ability to directly perform the job. This could either be a survey, a written test, the preparation of sample work product, a simulated workday (or more), or a combination of all of the above. This practice can be incredibly helpful for a number of professions and industries. A prime example would be for attorneys. If a prospective law firm were to ask me, on the spot, to prove my legal writing ability by preparing a sample motion to dismiss, it would be incredibly difficult for me to fake my claimed abilities. However, like all employment policies, this practice must be well crafted and implemented with caution.
As my fellow labor and employment colleagues here have previously written, laws involving the treatment of unpaid internships have seen heavy scrutiny recently in the federal courts. However, the permissible bounds of unpaid trials, try-outs, simulations, and tests have not yet been explored, and almost no analysis and interpretive guidance exists. As a result, some questions remain. What may I ask a candidate to do? Is a trial period appropriate if unpaid?
One solution is to simply pay the prospective employee for the trial period in order to avoid any unpaid wage liability. However, paying any applicant poses a whole host of other issues. If payment is given for a trial period, it (arguably) indicates an employment or quasi-employment relationship. This is not advisable, as an employer wants to retain the ability to say “yes” or “no” to the candidate after the try-out has concluded, while minimizing exposure under employment and immigration laws (to the extent one can). Furthermore, the proper tax treatment of such pre-employment payments is unclear.
While still an open issue, the better practice, depending on the exact facts, would be to have an unpaid pre-employment trial period or simulation. In theory, the applicant would not yet be considered an “employee.” However, the key is to ensure that any simulation or trial conducted is truly a test, occurs prior to an offer of employment, and that any work product is used for evaluative purposes only. If the simulation or trial involves a cook who must prepare sample dishes, any food that is prepared cannot be served to customers or otherwise benefit the restaurant. If the simulation or trial involves a typist who must transcribe audio recordings, the transcription cannot be a “real” project for a client or business, but simply a sample to be reviewed and evaluated. Any materials and supplies used must also be provided by the employer. The more the process hinders the business and is relatively short in duration, the more likely it will be found to be lawful.
An unpaid trial period or test can be a useful tool to evaluate a candidate and increase the quality of your hires. However, any such policy should simply determine the candidate’s ability to perform the job and not otherwise benefit the business. Before implementing any such policy, it is also critical that legal counsel review it thoroughly. Whether a pre-hire trial, try-out, test, or simulation is appropriate under the circumstances is highly fact dependent and the answer may change depending on the state and/or local laws that may apply.