July 2008

TAKE STEPS TO MINIMIZE RISK OF EMPLOYMENT-RELATED LAWSUITS

If you own a business, the last thing you want to face is a lawsuit filed by a current or former employee. In addition to the obvious financial risk involved in defending a case, a lawsuit can result in lower employee morale and a damaged reputation in the community. Even if you win your case, you’ll lose time and money in the process.

For these and many other reasons, it’s a good idea to be proactive about avoiding employment-related lawsuits. How do you do it? A good approach is to familiarize yourself with situations that can prompt employees to file suit. When you understand the common legal pitfalls, you’ll be in a better position to avoid them and protect your business.

Understanding why employees sue

If you’re like most employers, you try to treat your employees fairly. But complicated situations can arise. And remember, your perceptions might not match those of your employees.

Here are some issues that can result in employment-related litigation:

• Employees feel they have no voice: If you provide employees with a way to express opinions or address problems, you’ll generally have more motivated employees and may also reduce exposure to lawsuits.
• Employees aren’t in the loop: If your business is going through changes, it’s a good idea to keep employees in the loop. Otherwise, their expectations may not match future business plans, which can result in hard feelings.
• Managers don’t understand regulations: There are hundreds of employment-related regulations governing the relationship between employers and employees. Make sure you understand them and abide by them.
• Employees are dissatisfied: When employees are unhappy, they aren’t as productive, and they may also be more likely to resort to litigation to express their unhappiness. Good morale can reduce exposure to litigation and improve business performance.

Avoiding situations that might create a lawsuit

Even employers with the best intentions can make mistakes that result in legal action. There are many regulations that can lead to legal pitfalls, especially in the areas of hiring, managing and firing employees. Employment-related regulations are not only numerous, they change from time to time, so keeping up with them can be challenging, but it’s vitally important. Here are some of the situations you should be aware of as an employer:

• Promotion opportunities: Be sensitive to employee perceptions when you reward good performance or hold employees accountable for short-comings. If a court finds you created barriers to advancement for a protected class of employees, you could be held liable.
• Compensation issues: Employee wage and hour regulations can be complex. Make sure you understand them and follow them to the letter. If you’re unsure, it’s a good idea to seek expert advice.
• Harassment and discrimination: Employers have a responsibility to ensure a harassment and discrimination-free work environment. A sound harassment and discrimination prevention policy is essential.
• Accommodation issues: Employees or potential hires who are disabled or who have accommodation needs due to religion are a protected class. It’s important to understand the regulations around accommodation.
• Leaves of absence: Employers in certain locations and those who employee more than a specific number of employees should make sure they comply with state, local and federal regulations on leaves of absence.

How you can reduce legal exposure for your business

We’ve reviewed why employees might sue and some of the reasons employers get into trouble. The next step is to formulate a strategy to reduce risk for your business. A good first step is to formalize a method to address conflicts. If you have an employee handbook, outlining a way to address problems at work as a policy is a good idea. Another effective step is to implement harassment and discrimination prevention policies and outline how incidents will be addressed.

Taking steps to reduce your exposure to employment-related lawsuits takes some time and effort, but in the long run, it’s worth the effort. Not only will these steps help you stay out of court, you’ll improve morale at your company.