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June 26, 2008
7 Employer Actions that Can Increase Likelihood of a Lawsuit

By Joan Farrell
Legal Editor

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There are steps employers can take to make them less vulnerable to lawsuits brought by employees or former employees; and if they are sued, there are things they can do to avoid making a bad situation worse.

Speaking at SHRM's 2008 Annual Conference, Whitney Warner, an attorney with the firm of Moody & Warner, PC, said some actions make employers more likely targets for a lawsuit, including:

  • Not giving a reason for employment termination. "Most employees believe they're stars," said Warner, and if the employer doesn't give an explanation when it terminates employment, employees will try to figure out why they were terminated and will assume the reason was discriminatory.
  • Bad timing. If an employer takes adverse action shortly after an employee has made an internal complaint, the employer is vulnerable to a claim of retaliation. Warner suggested that HR professionals should ask managers if an employee has made a formal or informal internal complaint within the past few months before approving an employment action that might have a negative impact on the employee.
  • Superficial internal investigations. "Employees expect you to start the investigation the same day," Warner told attendees, and while a same-day start may not be necessary, starting an investigation within a day or two shows that the employer cares about the complaint, which may help in avoiding punitive damages if a lawsuit is brought. During a workplace investigation, employers should be sure to interview relevant witnesses, even if the complaining employee says no one witnessed the alleged incident. For example, employers can ask the employee's co-workers if there have been incidents in the department that made any of the employees uncomfortable. Employers should also take corrective action if needed, and document the investigation.
  • Not providing a thorough response to an EEOC charge. Employers that learn about an employee's allegations for the first time through an EEOC charge should treat the charge like an internal complaint, said Warner. They should conduct a prompt and thorough investigation, even if some of the employees named in the complaint have since left the company. Employers should be sure to refute the allegations of discrimination in their response and clearly state their position that the employer did not violate the law. Although emotions can run high in these situations, Warner cautioned employers not to insult the employee ­ or worse the EEOC ­ in the response because that kind of evidence may work against the employer if the charge becomes a lawsuit.
  • Failing to follow its own policies. Warner described a case in which an employer had some of the best policies and training programs on investigating workplace conduct and harassment. Nonetheless, a manager failed to investigate a harassment complaint and the employer didn't take corrective action against the manager when it discovered the failure. These kinds of actions can appear to a jury as "utter indifference" on the part of the employer and consequently lead to an award of punitive damages.
  • Firing an employee for bad performance when the employee's records show good evaluations. Employers also invite trouble when an employee receives a raise or bonus and is then fired for bad performance. Warner suggested that employers take poorly performing employees out of the merit pool when calculating raises and bonuses. Not surprisingly, it also creates problems for employers when an employee who has been fired for bad performance is given a glowing recommendation.
  • Criticizing an employee for events that pre-date a positive review. Employers should focus performance reviews on the time period covered by the review. If an employee receives a great performance review in January and is then placed on a performance improvement plan in March because of events that occurred the previous December, it may look to a jury like the employer was fabricating performance problems to cover up the real reason it's taking adverse action against the employee. If the employee filed an internal complaint between the two reviews, the March review will look like retaliation.

After a lawsuit is filed, employers can make the situation even worse by being unprepared for depositions, "losing" documents or coming up with "new" documents that don't bear the employee's signature, being overly aggressive at settlement meetings which can cement the employee's resolve to see the lawsuit through, and thinking that the response, "I don't remember" is a better answer than giving the facts. The danger with "I don't remember" responses, said Warner, is that they leave the employee's version of the facts unchallenged.

There are some things employers can do to avoid being targeted for a lawsuit:

  • Discipline the manager who failed to report a complaint of harassment or took no action to stop inappropriate conduct in the workplace.
  • Keep good records of complaints, follow-up meetings, specific examples of an employee's performance problems, e-mails or other documents that show an employee's poor attitude or mistakes.
  • Be candid and empathetic with the employee if the situation was mishandled; if his or her story is corroborated, consider compensating the employee with time off, counseling, or repayment of lost wages--if the employee refuses these offers, it will help the employer's case during litigation.
  • Respond to complaints quickly, take mitigating steps if necessary, keep an open mind during the investigation, and document the process.

Although it may be impossible to avoid litigation altogether, employers may be able to reduce the number of lawsuits brought against them and avoid some of the costlier settlements or punitive damages by implementing some of these steps.

More Resources for Handling Complaints and Investigations

  • Conducting Searches During an Investigation of an Employee Complaint
  • Handling Complaints Related to Employee Conflicts
  • Handling Employee Complaints Training Exercise
  • Taking Employee Complaints Seriously

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