Advice for Small Employers Hiring in 2010

Owners swimming in résumés should narrow criteria and avoid hiring overqualified workers, say employment lawyers Heverly and Velton

While some economic news has been improving over the past months, unemployment remains at record highs, with more individuals searching for jobs right now than at any time in recent decades. Small business owners who plan to hire in 2010 can capitalize on the expanding labor pool to strengthen their workforce. But they must be mindful of legal issues and practical realities, say Michelle Heverly and Dan Velton, management-side labor and employment attorneys with Littler Mendelson in San Jose, Calif. They spoke recently with Smart Answers columnist Karen E. Klein about how bad news about the economy can mean good news for small employers. Edited excerpts of their conversation follow.

You feel this economic climate can be a boost to small business owners who expect their revenues to increase next year and may consider hiring new staff. Why?

Dan Velton: The positive opportunity for employers, and particularly small employers, is that this environment gives them more leeway to scrutinize applicants. This is an opportunity to reshape the talent at their companies. In the past you might have had an assembly-line-type hiring process for less-skilled workers. Now you can afford to find really skilled people who truly can add a lot to your company.

I don't mean to be cynical, by the way, about this being an opportunity for employers to exploit desperate job-seekers. If a company makes the best hires possible, and stays open and is able to grow, that's a win-win for the employer and the employees who keep their jobs.

One repercussion of the over-10% unemployment rate is that employers who post job openings are being inundated with applicants, many of them not qualified or overqualified. How should small business owners handle that flood of applications?

Michelle Heverly: In recent years employers have gotten into the habit of posting job offerings all over the place, especially online. They may want to rethink that now and restrict where they're posting. A general post on (MWW) that brings in hundreds of applications may not be necessary. You might want to restrict a job listing to a specific area on online job sites such as Monster, or just advertise within your industry or practice group.

If they do get overwhelmed with applications, how should entrepreneurs sort through them?

Heverly: It's tough. Legally, you can't discriminate in a way that could affect a protected category of employees on the basis of something like their race, age, or gender. It's best to establish some objective criteria such as a college degree or so many years of experience and consider only applicants that meet your criteria.

Velton: If you really do have a huge stack of applications, you might consider putting them aside. Then reframe the job more narrowly, requiring higher qualifications perhaps, and make a new posting to a more restricted audience. Just make sure any changes you make in the job description relate to the actual requirements of the position, rather than solely as a means to cut the number of candidates.

Isn't there a fear that applicants who are overqualified and desperate for work will leave your company immediately when the economy turns around and something better comes along?

Heverly: Yes, that's definitely something to keep in mind. My dad, who's a retired CFO and bored, spends a lot of time at Home Depot (HD). So he applied for a part-time job there, figuring he enjoyed it, and it would give him something to do. But they never even called him back. They must have thought his application was a joke.

Velton: The way to think about it is that this is not a time to hire CFOs to man the cash register, but it's an opportunity to find the right cashier. Before, you might have sped through the interview and application process because you just needed to find somebody. Now, you have so many choices, you should take the time to find exactly the right person.

What about small companies that are still struggling to avoid further employee layoffs. Are there alternatives they should consider?

Heverly: Employers should try to be flexible. Maybe they could consider replacing some full-time employees with independent contractors. They could even ask current employees if they would consider becoming independent contractors. The biggest downside for employees is that they wouldn't get benefits, but there are substantial upsides that many employees might be willing to trade for.

Oftentimes, for instance, the base pay is higher for a contractor because of the lack of benefits. But for someone who can get health insurance coverage from a spouse or some other source, the extra money might be significant. The other advantage for the employee is the leeway in when and where they perform their jobs.

What are the benefits to employers?

Heverly: Basically, the employer can structure his or her relationship with the individual around the work, rather than around the body. You don't have to give employees 40 hours of work or be faced with downsizing them.

Velton: Ultimately it can save the employer a tremendous amount of money, avoid layoffs, and could mean that the worker still has a job.

Aren't there serious legal and tax implications that go along with classifying people as independent contractors?

Velton: Yes, that's an issue that definitely should be examined carefully. There are serious potential consequences that can cost a tremendous amount of money in penalties if you misidentify an employee as a contractor. Different guidelines are issued by difference agencies, so you can't just use the IRS guidelines and think you're good to go. Talk to an employment attorney who is familiar not only with the national guidelines but also with different nuances in state and local jurisdictions.

What other hiring advice would you give small businesses in this economic environment?

Heverly: Don't be caught in the model of 8-to-5 if it doesn't really matter. Working from home might be an option employers should look at if they've got employees they can trust. There are some risks from wage and hour laws and workplace safety perspectives, but that's something you can overcome in many cases.

Another area is to be creative in boosting your employees' compensation bundle with benefits and perks rather than salaries. Stock options, 401(k)s, and even nontangible things, such as a subsidized cafeteria or job sharing, can help retain valued employees and attract new hires without hurting your company's bottom line.

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