Employers BE(a)WARE…A Look at Employment-Related Litigation During Tough Economic Times

by Patti Dunham, MBA, MA, SPHR

The economy may be resulting in a lot of downsizing for most organizations but the exception to that rule appears to be with employee plaintiff attorneys. The economy, change in political administration, and changes in legislation all appear to be adding fuel to the fire in terms of employment litigation. Now is the time for employers to be(a)ware and ensure that the employment actions they take, even more than before, are well documented and defendable.

I am always a skeptic when people are telling me "it's worse than ever" or "it has never been like this". I need proof, I need data. Well, the numbers have started to come in and 2008 shows some interesting trends that should be enough to put us on our toes. As we look to trends to help determine where we have been and potentially where we are going it is interesting to note that 2008 already showed signs of increased employment litigation. Most disturbing is how much of the litigation shows that employees are bypassing the normal reporting processes (i.e. the Department of Labor to report an FLSA violation) and instead filing private lawsuits, in many instances class action lawsuits. The data from the 5th annual Workplace Class Action Litigation Report by Seyfarth Shaw, LLP demonstrates this. Most notably the report for 2008 shows:

An increase in the number of ERISA class action filings for recovery of 401(k) losses
An increase in the number of age related discrimination cases
An increase in the number of Worker Adjustment and Retraining Notification (WARN) lawsuits
An increase in the volume of wage and hour litigation under the Fair Labor Standards Act (FLSA)

Many experts anticipate this 2008 trend will continue into 2009 and beyond and that the number of lawsuits as well as the awards associated with them will continue to rise. Why such an increase? Well, there is no doubt that our society as a whole has become somewhat more litigious, however this year gives us increased risks. The most notable is the economic downturn. As employers have to make many more tough decisions - restructuring, hiring 'only the best' when filling positions, reducing costs through benefit program changes, etc. employers become more at risk and employees start to ask a lot more questions as concerns about employment impact everyone. In addition to the economic concerns, the government has also expanded the scope of some employment related legislation - specifically the Americans with Disabilities Act (ADA) and Family Medical Leave Act (FMLA). These changes will no doubt result in challenges to the courts as employees and employers "test" what these expansions and changes in the legislation mean. Finally, there is always a potential increase in the amount of litigation as the result of an administration change. In the past there has been an increase in employment litigation after such a change and it is expected that the next few years will play out the same way as many lawsuits are filed to test out government regulation of workplace issues under the new Obama administration.

As a result of these increased threats, employers should arm themselves and their management staff to protect themselves. What can employers do? Keep it simple - this is the time to go back to the basics when it comes to employment. A few easy actions may be the difference in whether or not you become part of the statistics.

Train supervisors and managers. These individuals are our first-line of defense (and many times our biggest legal threat) when it comes to employees' perception of company policies, procedures, and decisions. Be sure they are aware of basic discrimination laws and assist them with increased communication and employee relation skills so they are able to respectfully support company decisions and communicate with employees regarding their concerns or issues. Although Human Resources would always like to be the ones to address employee concerns, our front line managers and supervisors are doing it on a daily basis whether they want to be or not and they should be properly trained on how to handle employee concerns.
Ensure those involved in the employment process are clearly aware of what they can and cannot do from a legal perspective. Those involved should know and document the process used when restructuring or selecting employees for layoff and then use it - consistently. A clear legally defendable (non-discriminatory) reason when selecting "who goes" is the most important aspect of restructuring. In addition, those involved should be guided by Human Resources to ensure an appropriate message is being delivered when HR isn't delivering it.
Maintain a meticulous hiring process. Managers involved in hiring should be even more aware of appropriate interview questions during the employment process to avoid discrimination claims in hiring. With so many people looking for employment, it will be important for hiring managers to look carefully over applications and watch for inflated or fraudulent credentials and to do their homework before selecting candidates.
Maintain good documentation. We all know that documentation is essential for a good legal defense but also remember it can hurt as well. Train your staff on what good documentation looks like and what to avoid. Remind them that everything is subject to review in a lawsuit - employee warnings, performance evaluations, and even those simple notes we write down on a sticky note and throw in their file. Be(A)ware of what you are putting down into writing and make sure it is objective and defendable.
Treat employees the way you would like to be treated…the golden rule still stands in employment. Think about how you would like to be treated during these tough times when decisions are so difficult. Treat your employees with dignity and respect at all times - provide notice of layoff if it is reasonable, provide some type of outplacement if you are able.
Finally, remember to listen to your employees. Employees are more likely to file a claim against employers when they feel like they are ignored or that their concerns are not addressed. Although your message may not always be what they want to hear - allow them to be heard and feel a part of the process.

The present downturn in the economy is likely to continue to fuel employment related litigation as well as many other factors. Financial risks of such litigation can be huge and the need to protect ourselves, our managers, and our companies is more important than ever. It is time to go back to the basics as they are still the most valuable steps in helping organizations stay out of court. Employers should BE(a)WARE and arm themselves with these simple means of protection.

Patti Dunham, MBA, MA, SPHR is a Senior Human Resources Management Consultant and Manager Outsource Solutions with Strategic Human Resources, Inc. (www.strategichrinc.com). If you have questions or comments about this article, you can contact Patti at Patti@StrategicHRinc.com.