You and your top-level managers need to bone up on what's OK and what's not in terms of personnel practices, then train other supervisory staff. You can turn to the Society of Human Resource Managers for guidance, or even hire a consultant who can guide the company through these murky waters, especially in the policy-development stage. But whatever you do, just make sure you address these issues-and quick:

-- Discrimination and sexual harassment. Develop and post a comprehensive policy that prohibits sexual harassment and discrimination based on race, gender, age, physical ability and religion. Court awards are huge in these types of lawsuits -- up to $34 million.

-- Hiring and firing. Be careful about what you say and do. Entrepreneurs say things in the heat of the moment during the interview to get people to join the company. They tell applicants 'You'll have the job for two years if you come to work for me.' [That] can wipe out your ability to let that person go, except [if there was] criminal behavior or extreme incompetence.

When preparing to fire someone, you should document in writing a pattern of poor behavior and opportunities that were given to the employee to improve. Except in cases where the employee was stealing, the courts don't look favorably on cases where someone was given no warning before they were fired.  

Employee Warning Notice

-- Non-compete contracts. If you want employees to sign a contract agreeing not to start a competitive business within a given amount of time or in a given location when they leave, have people sign it when they are hired. Some states won't honor non-compete contracts unless they are signed when an employee is hired or given a substantial raise or promotion. Prevention is the goal in developing personnel policies.

We suggests you create a business climate that will deter lawsuits by following these tips:

-- Behave as you want others to behave. Modeling behavior is one of the cheapest and most effective ways to make sure that everyone in your organization gets the message about what is acceptable and what isn't. Also, provide behavior guidelines, paying particular attention to activities that involve touching, telling jokes, using e-mail inappropriately or browsing adult Web sites.

-- Establish ways for employees to voice concerns and complaints. If they can't do it inside the office, they often turn to a lawyer.

-- Take swift action when informed of an incident. Investigate the allegations, make a determination based on the facts, and respond appropriately.

-- Provide guidance on office romances. Create a policy that lays out what the organization will or won't condone.

-- Expect everyone to act in a respectful manner.

Laying off employees is a reality many businesses are facing these days, but there are proper ways to handle this generally unpleasant task. How you give workers their pink slips may have an impact on whether you have a stronger company at the end of the process.

Here are her five rules for doing it right:

• Give employees the bad news in complete detail as soon as you know it. Start with informing those workers who will be fired, then tell the entire group. Whatever the case, don't sugarcoat the circumstances.

• Don't micromanage. Let managers decide who should go, who should stay and who should break the news. But make sure everyone involved is discreet.

• Cut the cord cleanly and respectfully. Help the discharged workers pack up their things after colleagues have left, offer to be a reference, etc.

• Even though layoffs are meant to conserve money, make sure you budget sufficiently for the layoff process. Have a third party to help workers with outplacement and make sure laid-off workers have two weeks' severance pay, with an additional premium paid for each year of employment.

You may adore the job candidate you just interviewed -- but there's a better than one-in-three chance they lied to you. A 2009 survey by human resource experts says 36 out of every 100 resumes significantly distort a job applicant's work history.

Yes, you say, but that's for resumes, not people personally interviewed. Surely the honesty odds are better during a one-on-one.

Not so. One client recently interviewed a commercial tow truck drivers and recalls he said his driving record was spotless. Turns out he'd been convicted of vehicular homicide.

We cannot tell you how many people lied face to face when asked about their driving records. So, now that we've established the falsehood factor, how do you trust anything a potential job applicant tells you?

You don't. Before letting anyone sign an employment contract, you rigorously check his or her background and employment claims. And if you think the effort is too time-consuming or your company is too small to be affected by a poor hire, think again.

The reason why even a small business would need to take these steps is if you don't, you run the risk of hiring someone who causes some kind of harm. So there's a whole lot of savings and productivity gains if you do it right the first time.

For any potential new hire, be sure you verify the following:

Employment history, including positions held and salary levels.

Licenses or degrees the applicant claims to hold. "Don't take that on faith," You need to get transcripts" or copies of licenses.

Job performance. My suggestion would be to check three references.

The screening needs to go further if the job calls for working with children or the elderly. or if the employee will have access to other people's property. Then, you need to check criminal records.

If a position calls for operating a motor vehicle, delve into driving histories. And if an employee is going to handle money, you need to run a credit check.

The need for such scrutiny is simple: When you hire someone, there's an implicit commitment to your customers and other employees that this person can be trusted to do his or her job. To reduce your chances of that trust being broken. It behooves employers of any size to be checking into backgrounds.

Of course, your job candidate needs to know what you'll be examining. Indeed, some legislation, such as the Fair Credit Reporting Act, requires you to disclose not only what you examine, but if you use that information in a negative way.

When preparing to screen candidates, be very explicit on an application or a separate document saying this is what we're going to look for.

Before ever beginning a background search, do some basic homework. Find out what information your state gives you access to, then develop a company-wide policy for screening potential hires: Pick one way and use it.

For example, don't jot notes on applications in some instances but not in others. If you take notes for 9 applicants but not a 10th, it's going to raise a question of, did you do something. Be consistent.

And here's a surprise in our Internet-heavy universe: We advises against using the Internet to aid your background searches. Laws vary from state to state on the information you have access to, and an Internet service may not reflect those differences. Plus, information needs to be verified, and you don't know that you'll get reliable data via the Web.

Finally, some sites can violate federal laws. We recently viewed a site that includes health information on people -- something the Americans With Disabilities Act forbids. You wouldn't even want to run against it accidentally.

If you need help conducting a background search, check with the merchants' association in your area. Often, they'll do criminal checks. Go to trade associations for your particular industry. Talk to the agency that regulates your business.

Those groups can help you with outside screenings. But remember that one of the most effective ways to weed out potential hiring problems is to talk to past employers. By all means, call the references on your candidate's list, but talk to people the applicant hasn't listed as well. During the interview process, ask whom they worked with, whom they reported to on a particular project, even who that person's boss was. Then call those people.

It doesn't mean you won't check (references with) somebody from their list, but you want to get a balanced picture.

But what happens if the possible references, either those you've sought out or those your applicant has listed, will verify only that your job candidate worked at the company from date A to date B? It's up to you to draw them out.

First of all, fears of defamation lawsuits resulting from job reference discussions are probably overblown. Several states have passed job reference immunity statutes. But the fact remains that people have just been reluctant to test that.

Given the reluctance, there still are some steps you can take to help past employers and supervisors warm to you. Among them:

• Get written consent from job applicants to check their references. Include a release of any liability that might occur. Then tell references that you have this signed form and fax them a copy. You really do want to have this written consent and release of liability is one of the best things you can do on either side to protect yourself.

• Create a company policy that you will not hire an applicant unless you can obtain satisfactory references those that go beyond "name, rank and serial number." Explain that policy to the references you call.

• Call the person's supervisor, not the HR department. Not only will you get a fuller response. The supervisor is going to be the one who has direct knowledge of the employee's performance.

Tell the reference that you'll have to assume the employee had a problem if no one will talk to you about performance specifics. If they say absolutely not, that just means they're really strict with their policy. If they waffle, then you're probably right. That initial reaction, no matter what it is, I think is going to really tip you off.

Ask "scale" questions: On a scale of 1 to 10, how would you rate attendance? How would you rate the quality of work? It appears they seem to get a better response from that than "describe their performance.

Yes, a thorough background check and diligent phoning of references will take time. It may even cost you some money if you ask for help from a third party. But balance the upfront costs with the headaches you'll face if you hire the wrong person: absenteeism, discipline problems, turnover, even theft or behavior injurious to others.