By Blake DuBose and Mike DuBose
They strike fear into the hearts of business leaders everywhere: letters and summons from the IRS, EEOC, or litigation attorneys. Organizations can spend hundreds of hours and huge amounts of money defending against these accusations, which often come out of nowhere.
Employers can’t afford to be ignorant of such risks, especially as employment lawsuits continue to grow in number. The EEOC received nearly 100,000 discrimination charges nationwide in 2011, up 25% from 2006 (excluding complaints settled before formal charges were made). Damage awards have also reached new heights: in 2011, Verizon paid $20 million to settle complaints alleging discrimination against disabled workers. With the onset of new labor laws and amendments, managers must understand proper ways to advertise for, interview, treat, and fire employees.
Sadly, most small business owners and leaders are unprepared to face business lawsuits. Common mistakes they make include:
- Flawed Advertising: Some post discriminatory employment notices without even realizing it. For example, a recent classified ad in The State News saying “Lead Man needed for electrical project,” could be construed as excluding female applicants, which is illegal. People of all races, ages, and genders should be welcomed to apply for jobs.
- Inappropriate Questions: During interviews, managers should refrain from asking questions about areas unrelated to the open position (including but not limited to marital status, age, race, childcare, religion, health, disabilities, politics, and housing). Interviewers should document not only why they hired the successful candidate, but also why they didn’t hire others, according to the Manager’s Legal Bulletin. This serves as extra protection against lawsuits from people who believe they were passed over due to discrimination.
- Toxic Work Environments: Leaders may allow (or even promote) hostile workplaces, making staff afraid to report problems—that is, until they leave and launch lawsuits. Promote the Golden Rule within your business and you’ll present a better case to the jury than if your managers are petty and mean.
- Unfair, Unpaid Overtime: According to Federal Judicial Caseload Statistics, 7,000 cases relating to the Fair Labor Standards Act were filed in 2011, compared to 6,000 in 2010. Many workers claimed that businesses illegally reclassified them as overtime-exempt or forced them to work off the clock to cut costs. As USA Today reported in April, the Department of Labor has added 300 investigators since 2010 to deal with the influx of wage-and-hour cases.
- Poor Documentation: Thorough communication records can be used to prove that all employees were treated consistently and fairly. Thus, managers should always speak and write to staff as if their comments will be shown to a jury.
- Failure to Make, Share, and Follow Policies: HR professionals generally agree that, although not without risk, handbooks provide necessary structure and guidance to members of an organization on how they should work, communicate, and act. Therefore, they may actually help prevent lawsuits. Managers should consult their handbook for guidance before disciplining employees.
- Inaccurate or Nonexistent Performance Appraisals: Praising employees for good work is essential, but so is making them aware of performance problems. Lack of disciplinary records or excessive documentation right before a firing can appear suspicious, so managers should keep ongoing logs of employees’ strengths, weaknesses, and actions taken to help them improve.
- Ignoring Complaints: Organizations should have structured, discreet complaint systems in place. Again, good records and detailed handbooks can prove that reports of unfairness, sexual harassment, and discrimination were recognized and dealt with according to policy.
- Retaliation: If a manager punishes, demotes, or fires an employee for reporting illegal, unethical, or improper behavior, the supervisor has retaliated against the employee and may land the company in court. Avoiding the appearance of retaliation is another reason to document ongoing disciplinary issues.
- Lying to Investigators: Some managers exacerbate problems by trying to cover up or misrepresent employment issues to federal investigators. Impress upon your organization’s leaders the importance of being fair and honest in all interactions.
- Failure to Accommodate Disabilities: Federal courts have broadened the definition of people considered disabled under the Americans with Disabilities Act (ADA), making it even more important to comply with regulations governing fair hiring, advancement, firing, accommodation, and compensation of such employees. To avoid lawsuits, employers should work with disabled employees to find mutually-beneficial solutions to their needs.
- Firing Too Fast: Some leaders terminate employees before gathering all the facts, viewing the entire problem, and consulting HR professionals to develop legal termination plans. Leaders should fire based on well-documented performance issues, not emotion. When a person is terminated, he or she should be treated with dignity and respect and (ideally) be given some financial severance to smooth the transition to his or her next job. Attorney Reggie Gay of the McNair Law Firm said, “Often, the way a termination is implemented and communicated to an employee has a huge impact on the way he or she feels about the company and whether a lawsuit is filed.” Although at-will employment states like South Carolina allow both employer and employee to sever their relationship at any time, managers can prevent lawsuits—and do the right thing—by respectfully communicating to the person why he or she is being fired. (In fact, the Wall Street Journal recently cited a study of 1,000 terminated workers that found workers were 10 times likelier to sue when given no explanation.) For further legal protection, always have at least two other people in the room when disciplining or terminating an employee.
- Ignorance: Employers must follow complex employment laws, especially those that pertain to protected groups. Subscribing to legal newsletters, attending seminars, and building relationships with HR and employment experts helps ensure that your business is aware of and compliant with these regulations. Our co-employer, TriNet, provides our companies with guidance on human resources, payroll, and employment issues.
- Settling Too Soon: Consider having an independent consultant assess complaints to gather all the facts without bias. If there is truly a problem, you must address the root cause rather than just the symptoms (rushing to pay off disgruntled employees but not firing a sexual harasser, for example). This may also save you money!
The bottom line: All companies, no matter what size, are in danger of employment-related lawsuits. The best course is hiring the right people, placing them in the right jobs, and then treating them like family. Even then, you must “hope for the best and plan for the worst:” those former employees who were good friends may grow horns and attack if they feel they have been mistreated!
