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10 quick tips to limit the risk of an employment lawsuit

April 6, 2015

gavel moneyWhether you are thinking of starting a business, are hiring your first employee, or have been in business for years, this short list of tips can help you avoid some of the big legal pitfalls that come with employees.  (Adapted from a presentation I frequently give to business groups and anyone else who will listen to me for an hour or so.)

10.  Draft, and use frequently, written job descriptions.  Include the job title, essential duties of the job, and the skills, experience, and physical requirements necessary to do it.  Specify whether it’s an exempt position or hourly.  Use the job description when advertising openings, interviewing candidates, evaluating and disciplining employees, and considering ADA accommodations.  Review your job descriptions at least annually to make sure they comport with reality, and fix them if they don’t.

9.  Publish a compliant employee handbook.  A good handbook is a roadmap for dealing with employee issues and managing employee expectations.  Each state has differing laws, and those laws change with some regularity (paid sick leave in California, anyone), so having a lawyer or HR consultant help with drafting is a pretty good investment.  The internet is not a reliable source of handbook forms.

8.  Train supervisors regularly.  Don’t let that handbook gather dust.  Make sure your supervisors are trained in what it says.  In some states, like California, supervisors must receive certain training (on discrimination, harassment and, new for 2015, workplace bullying) every couple of years.  Well-trained supervisors can help nip potential problems in the bud.  Poorly-trained supervisors can create significant problems for which the business will almost always be liable (after an expensive lawsuit.)

7.  Tell your employees they are “at will”, but don’t rely too much on the concept.  Most states presume employees are employed at will, and can be fired (or can quit) at any time and for any reason or no reason at all.  Put at will language in your handbook and offer letters to confirm that the employees know it.  But also make sure you have a business justification for all your employment decisions, because you’ll need one to defend a discrimination case.

6.  Conduct regular employment practices audits.  Hire a consultant or lawyer to look over your handbook and other practices on an annual or biennial basis, and follow their advice regarding fixes.  It’s a modest expense that can limit major liability down the road. This is particularly true in the wage and hour/overtime area.  Almost by definition, practices problems affect every employee, and there can be long look-back periods in lawsuits.  By some studies $1 billion changes hands in wage suits each year.  Keep your share of that in your pocket.

5.  Evaluate employees regularly, and honestly.  Let everyone know how they are doing — it’s the fair thing to do, and it limits the kinds of surprises that lead to lawsuits.  Use a standardized form in you can, and train supervisors so that grading fluctuations are minimized.  And be honest, about good and bad.  Evaluations can be one of an employer’s best defenses against discrimination suits, but only if they honestly document deficiencies.

4.  Don’t fire a pregnant woman.  State and federal laws are extremely protective of expectant mothers, and juries do not like employers who treat them poorly.  (And the jury will see Mama and Baby at trial, you can be sure.)  Maternity leaves may be disruptive in the workplace, but far less so than a lawsuit.

3.  Get insurance.  There are many good insurance products that will protect against some of the risks of an employment lawsuit.  The market for those products is competitive, and the coverage is not expensive.  Don’t face a five- or six-figure defense bill by yourself if you don’t have to.  Talk to your insurance broker.

2.  Keep your eyes open and act promptly to correct problems.  Lawsuits don’t come without warning.  Train supervisors to look for trouble before it erupts into something that can’t be fixed without a jury.  The ostrich approach to employment risks is not a good one.

1.  Write everything down.  Many employment cases come down to documentation, and it’s always the employers job to keep it.  Juries often find that things that are not written down did not happen — or else they would have been written down, right?  An employer will never be given the benefit of the doubt in this context.  Save yourself the trouble and write down important facts, incidents, and discussions.

As a business owner or manager, you have enough to worry about.  Follow these tips and — hopefully — you can leave defending an employee lawsuit out of it.


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