Avoiding the courtroom - Legal Trends

An employment law specialist offers five practical ways to head off employment litigation.

A national communications firm discharged a 58-year-old male operations manager as part of a workforce reduction. Two years later, a unanimous jury awarded the manager more than $1.8 million on his claim of age discrimination after learning that he was the only operations manager in the district over the age of 50 and that workers with less seniority had retained their jobs. In addition to the settlement, the company paid more than $150,000 in fees to its lawyers.

An HMO fired a 49-year-old professional employee for unprofessional conduct. Before his termination, the employee had been mentally disabled because of depression. His employer ordered him off disability leave and back to work. Two years later a jury awarded the employee more than $7.7 million in damages, plus attorneys' fees and associated costs.

Of course, your company will never find itself in court, right? It's an assumption all too many executives make. Ironically, the costs and time it takes to implement preventive measures are a mere fraction of what companies lose in litigation. But human resource departments can take some basic steps in terms of structure and internal communications to prevent losses like those described above.

MAKE HR THE FIRST STOP

Managers and supervisors need to understand that they can - and must - turn to a human resource professional at the first sign of a possible employment problem. One of the most critical elements in avoiding court is addressing conflicts when they are still only potential problems. Later, the likelihood that a problem will grow into a lawsuit increases.

Department managers do not need to learn the details of every law governing the workplace, but they do need to recognize potential legal problems at the earliest stage possible. Before taking any action, managers should consult with the human resource department to analyze the situation. In turn, the HR departments must devise a formal process for voicing workplace concerns and educate all employees about how the process works.

SPREAD THE WORD

Giving managers constant reminders and updates on the company's policies helps reinforce the importance of preventing workplace problems. The human resource department should designate one person to distribute company-wide notices and updates about harassment and discrimination policies on a regular basis. Without such reminders, those issues lose their immediacy and the first signs of a problem may go unnoticed.

One effective method of reinforcement is to include a statement of the company's policies in an annual letter from the president. Taking the time to distribute such communications reaffirms the company's intolerance of harassment and discrimination and demonstrates a level of commitment beyond rhetoric. And in the event that an administrative agency receives a claim against the employer or a lawsuit is filed, consistent, documented communications can be evidence of the company's responsible approach to those issues.

THE GOLDEN RULE

In one circumstance, it pays to be dictatorial. Companies should establish a blanket rule: no major disciplinary actions or discharges can be undertaken without first discussing the matter with HR. One human resource professional, usually the director of the department, should be designated to handle queries from managers.

This "point person" must be accessible and able to walk managers through prepared checklists. Ideally, this individual will have enough knowledge about the law to accurately judge when a situation is complex enough to justify calling an employment lawyer.

DEFINE MANAGERS' ROLES

Poorly worded job descriptions are one area where a basic structural flaw can lead to financial pain. In California, employers can be required to pay punitive damages in harassment, discrimination and whistle-blower cases if the offensive acts were committed, authorized, or ratified by an employer's officer, director, or "managing agent." Because there is no cap on punitive damages in California, these awards often total hundreds of thousands, even millions, of dollars.

Although this law seems to limit liability for punitive damages to acts by specific persons, until recently there had never been a case where the perpetrator of the bad act was not considered a managing agent. Essentially, the limitation had no real effect. But a state court of appeals case recently changed that.

The case involved the West Coast manager of a St. Louis shoe firm who had sexually harassed an employee. Although the man was the senior management person on the West Coast, the court found that he was not a managing agent because he did not have the authority to determine ultimate corporate policy. The determinative factor in the case, according to the court, was the fact that ultimate corporate policies were set in St. Louis and the harassing manager was required to get approval for any deviation from those policies.

This case illustrates the importance of using care when writing job descriptions. Where appropriate, emphasize that the manager is primarily responsible for seeing that policies and goals set by corporate officers are observed and carried out. Such job descriptions should avoid giving managers significant discretion on matters that might be characterized as ultimate corporate policy.

Following this advice should significantly limit corporate exposure for the acts of mid- and lower-level managers. This is another instance where a 15-minute phone call with employment counsel before a job description is written can help avoid substantial liability.

STRESS THE BOTTOM LINE

Managers need reminders of the consequences of mistakes. Regularly scheduled management meetings should periodically include presentations with a special emphasis on the monetary costs to the company caused by poor personnel practices.

War stories about real cases are a very effective way to teach this lesson. Or you may want to bring in the company's employment lawyer for a one-hour session that stresses the costs of mistakes. Such presentations can pay tremendous dividends in future sensitivity and may result in managers increasing their preventive use of the human resource department.

THE PAYOFF

While cost-conscious executives may hesitate to contact outside employment counsel, advance preparation is well worth the time and money. Many companies spend no more than $10,000 each year on preventive consultation. Compare that amount to the $75,000-$250,000 in legal costs to take just one significant employment case to trial and it is easy to justify the cost of this inexpensive safety net. Taking simple preventive steps in the short run can save your company time, money and heartache in the long run.

Author's Note: This article should not be construed as legal advice or as pertaining to specific factual situations.

Charles Palmer, a partner in the Los Angeles office of the law firm Perkins Coie, specializes in labor and employment law.

COPYRIGHT 1995 Society for Human Resource Management
COPYRIGHT 2004 Gale Group