Don't Let Economic Stress Become an Employment Lawsuit

None of us can be certain of what to expect in these turbulent economic times but we can be certain most of us will see increased workplace challenges. HR professionals and the labor law community are being advised to anticipate significant increases in work related complaints and lawsuits as the fallout from the current economic downturn continues.

In this volatile business climate employees are anxious to alleviate their economic and emotional pain and an employer may become the focus of employee frustration and anger. The result may be a financially and emotionally draining lawsuit at a time when every business resource is already stretched too thin. The U.S. Equal Employment Opportunity Commission (EEOC) reported 2007 as having the highest volume of incoming private sector discrimination charge filings since 2002 and the largest annual increase since the early 1990's. We can only imagine what the final tally for 2008 and beyond will be given the rapid deterioration in overall economic conditions. Employers who believe this won't happen to them can be seriously wrong; former employees who find their unemployment benefits ending, savings gone and no other job prospects in sight have significant motivation to look for a lawsuit.

Lawsuits can run the gamut from age discrimination to harassment. In a volatile economic climate employers must be extra vigilant to ensure legally compliant employment practices are in place and enforced. Managers and supervisors must be educated on legal employment practices and held accountable for maintaining sound HR practices.

Workforce reductions are a particularly difficult issue and employers often make serious legal mistakes which leave them vulnerable to wrongful termination suits. Some simple advance planning and careful management of the termination process can make all the difference in terms of legal liability.

If a workforce reduction becomes necessary the following steps are critically important:

1. Determine the criteria to be used to establish who will be laid off and be certain it is consistently applied. Carefully evaluate whether your criteria have a disparate impact on protected categories before you implement your plan. If there is any question call on a professional to do an objective evaluation.
2. If you are basing reductions on merit be certain your selection process can withstand scrutiny. Nothing spells lawsuit faster than laying off someone for poor performance when their performance reviews have been positive. This is also not a time to try to rewrite history so be sure if you have a performance appraisal process in place it gives an accurate picture of an employee's performance.
3. Document the workforce reduction process and educate your managers on the process and their responsibilities.
4. Be honest with employees during the process and avoid making promises or sugar coating the truth.
5. Always treat laid off employees with dignity.
6. If at all possible have more than one person present during the termination and document it.

Maintaining solid HR practices during difficult economic times is the key to preventing difficult and costly legal challenges.

Caution: Do Not Let Economic Stress Lead to Careless HR Practices

Several months ago I wrote about the stresses employees may face during an economic downturn. Little did we know then just how much more dire the economic news would become. During these bumpy economic times employees and managers may be faced with complex HR challenges that require careful management to ensure best HR practices are maintained.

Layoffs
An economic downturn may mean layoffs but employers can minimize their risk of wrongful termination claims with good HR practices. The first line of defense occurs when the employment relationship is established. Ideally all new business should have employees sign an agreement that protects the at-will employment status. If layoffs are on the horizon it is time to standardize termination procedures and train supervisors on protecting the at-will relationship. Supervisors must also be clear on the importance of consistency when layoffs occur. Companies should have objective, nondiscriminatory criteria when selecting employees for layoffs. If the layoff involves a worker with an actual or perceived disability employers should seek the advice of an experienced HR professional or legal counsel. The same advice applies if an employee has recently returned from a legally protected leave or if the employee has made harassment claims or reported safety violations.

Proper handling of the layoff process is the best possible way to avoid messy and costly discrimination and wrongful termination suits. It is very important to give an employee accurate information about why you are terminating their employment. Do not tell an employee you are laying them off for economic reasons if the termination is due to performance issues.

Wage & Hour Compliance
A Stanford Law Review article by John Donohue and Peter Siegelman (The Changing Nature of Employment Discrimination Litigation, 43 Stan. Law. Rev. 983 (1991)) has interesting information with regard to the relationship between the economy and employment litigation. Recessionary economies mean increased employment suits and damage awards also increase.
To avoid wage and hour compliance complaints you must carefully track hourly employee's time and accurately track and pay overtime wages. It is also important to enforce meal and rest break requirements. Be certain exempt employees are properly classified as misclassification is one of the most significant areas of employment litigation.

Workplace Violence
Times of economic stress may lead to an increased incidence of workplace violence. Employees may be coping with financial stresses at home and more demands at work as businesses seek to maintain productivity with a reduced workforce. A proactive approach can reduce your risk of workplace violence which can take both a financial and human toll.

Employers need a zero-tolerance policy that addresses violent acts and intimidation in the workplace. The policy should be communicated to all employees and must include reporting procedures as well as disciplinary action up to an including termination as a remedy.

Risk Management
Be particularly aware of risk management practices during an economic downturn. Stressed and overworked employees are less likely to carefully follow safety protocols which can lead to an increase in workplace injuries. Another serious concern is the potential increase in workers compensation claims as employees facing potential layoffs seek to replace their income. An economic downturn is also not the time to reduce safety training and equipment as a cost cutting measure because the long term consequences can be even more expensive.

Serious economic times call for sound HR polices and practices. A commitment to maintaining good HR fundamentals even when the economy is unsteady can help protect your assets and the human capital you rely on to keep your business on track.