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Protect Yourself from Employment Lawsuits While the Economy Tanks

America is the middle of an economic crisis.  Many pundits say this is the worst economic downturn since the Great Depression.  Perhaps your business is tightening its belt and considering how to weather this awful period.  I am sure cutting costs is on the top of your list.

Lawyer and employment-law consultant Shanti Atkins warns that one place seniorBlog management shouldn't skimp is on essential employment law training.  Employment law training should never be considered discretionary, especially in a downturn.  In an excellent blog post on the topic, Atkins references a study published in the Stanford law review that points out what happens to employment claims during an economic downturn:

  • When the economy goes into a recession, there is a dramatic increase in the number of employment lawsuits filed in federal court.  A scarcity of alternative employment serves as a catalyst for litigation.
  • The single largest predictor in the long-term growth trend of case filings is the national unemployment rate.  When the economy booms, employment discrimination case filings fall in the next half-year; when the economy slumps, case filings rise over the next half-year.  This phenomenon explains roughly 95 percent of the variance in the number of cases filed.  A modest rise in the current unemployment rate from 4 percent to 5.5 percent could generate a 21 percent increase in the number of employment discrimination claims.
  • The average damage award to a successful plaintiff rises in business downturns, particularly with respect to employment discrimination suits.  Because the length of time it takes for a plaintiff to find another job increases in a recessionary economy, monetary awards are elevated.

These factors should be alarming to business owners.  So what can you do to protect yourself from the rise in employment lawsuits? I recommend building an ark.  Here's how:

  1. Treat Employees with Respect:  Seems like a basic philosophy, but it is amazing how many employers forget to treat their employees with respect.  Employees that are humiliated or treated in a disrespectful way are much more likely to sue your company.
  2. Communicate with Your Employees:  First, make sure you have an effective employee handbook with up-to-date employment policies and publicize your policies to employees.  Make sure you follow your policies.  One of the easiest ways to land in an employee lawsuit is the failure to follow your employment policies.  Also make sure you have an open door policy where employees are allowed to voice their concerns or complaints.  Do not let complaints fester.  Deal with them right away.
  3. Implement an Effective Unlawful Discrimination and Harassment Policy:  Your harassment policy should include more than just sexual harassment.  There may be other forms of harassment based upon race, religion, age or disability.  It is also critical to consistently train employees and supervisors regarding unlawful harassment and discrimination.  You should train employees on harassment and discrimination issues at least once every year.
  4. Document, Document, Document:  The importance of good record keeping cannot be overstated.  If you don't have something in writing, chances are a jury or judge may not believe it happened.  Be sure to document even verbal warnings and maintain an appropriate personnel file in order to make sure the documentation is not lost.
  5. Conduct Honest Employee Evaluations on a Regular Basis:  Unless your company is headquartered in Lake Wobegon every employee is probably not above average.  Evaluations can be valuable proof in an employment lawsuit.  Make sure poor performance is properly documented.  Otherwise, the judge or jury will not believe you when you say the employee performed poorly but all their evaluations are excellent.  You should conduct the evaluations on a regular basis, usually at least once per year.  I recently represented a client sued for discrimination.  A key in defending the case was the honest performance appraisals performed by management.
  6. Do Not Retaliate:  Employers are often blindsided by retaliation claims.  There are a number of proactive measures you can take in order to avoid liability for retaliation claims.  It is important to avoid retaliation because recent cases have lowered the burden for plaintiffs to prove their retaliation claims and the number of retaliation claims from plaintiffs is continually on the rise.
  7. Take Action and Investigate Promptly: If a complaint arises, make sure you take the complaint seriously and investigate promptly.  A quick and thorough investigation may help eliminate problems before you have a real mess.  You will need to consider who should conduct the internal investigation.
  8. Comply with Wage and Hour Laws:  Ensure your exempt employees (i.e., salaried employees) are properly classified as exempt under the law.  Wage and hour claims are also on the rise and could result in a class action against your company.  This is a common area of the law that is ignored by many employers and could result in significant liability.
  9. Review and Update Your Employee Handbook and/or Policies:  You should at least review your policies to incorporate any changes in the law or your manner of doing business.
  10. Conduct Regular Employment Law Training: As Shanti Atkins says, employment law training is so much more than "training" - it is bottom line risk management.

You may not have predicted the economic downturn. But following these steps can help reduce the chances of a successful employment lawsuit.   To ensure that your company has done everything it can to avoid employee lawsuits, you should have your employment policies, training and practices reviewed by your employment lawyer.


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