Who's Afraid of the Big Bad Lawsuit?

Don't be lulled into thinking you're safe. Avoid legal disaster with solid employment policies and supervisor training.

By Mary Bresnahan
the Bresnahan Group

Employment law - Now that is a mouthful. It can make your hair curl, turn gray or fall out. Employment law is not always considered a high priority for company owners. However, involvement (either directly or indirectly) in a court case is not something most people involved want to deal with. It certainly can cause sleepless nights. And, if you are a small company, it could put you out of business.

The human psyche is a wonderful thing. On one hand, we humans are terribly resilient. When that resiliency is not working well, we typically see many other things happen - illness, suicide, depression or lashing out. On the other hand, that resiliency can also produce some complacency: "If it ain't broke, don't fix it."

In times of disaster, we rush to repair things for now, but we are being reactive. An example would be when a tornado or flood hits, and people reach out to help each other. Once the immediate needs are cared for, everyone goes back to what they were doing before. The Mississippi River has flooded many times, yet people bale out the water and fix up the houses until the next time. A proactive approach would be to move the house to prevent future flood damage.

It's a bit like the story of the Three Little Pigs. The pig with the straw house was not thinking of the wolf and was totally unprepared. The pig with the house of twigs had some protection and gave some thought to the wolf. Nevertheless, it wasn't sturdy enough to protect him when the wolf arrived and began to huff and puff. The third pig with the house of bricks took the time to plan the house and worked hard to build it well. When the wolf arrived and tried to blow his house down, he and his brothers (who moved in) were safe and sound due to his planning and preparation.

Like two of the three pigs, most of us are in denial that a tragedy can befall us at some point or, for that matter, that it could happen more than once. We always think it will happen to the other guy but not us. We take risks that sometimes can be avoided by being proactive and preparing ahead of time.

Of course, we can't walk around fearful of disaster to the point that we are paranoid or paralyzed by the thought of impending doom. There must be some happy medium.

When you set up a strategic plan for your company, you look at the direction in which you wish the company to move, define a goal, set objectives and develop an action plan detailing how you will get there and in what timeframe. Can't the same be done when it comes to personnel issues and employment law?

If you are not adequately prepared in this area, your company could end up as a statistics in some law book or professional journal. Hard to believe? Here are some of the facts:

The employment-discrimination caseload increased 2,166% between 1970 and 1989. It increased another 22% between 1991 and 1993.
From 1992 to 1993, the awards judges and juries gave to plaintiffs in sexual harassment cases increased 98% to $25,2 million. Cases handled by the EEOC between 1992 and 1998 increased to $34.5 million.
Juries award over $600,000 in wrongful-termination cases, and 64% of businesses lose their cases. The company will spend $100,000, on average, defending itself in a wrongful-termination suit, with $50,000 going to attorneys.
The median time spent on a lawsuit is 2.5 years.
Senior executives 20% of their time on litigation activities.

These figures do not reflect this year's litigation activities, as it takes awhile to accumulate statistics. However, I am sure the numbers have not improved.

Still not convinced of the importance of employment practices? Here are some recent statistic taken from a group of 850 human resource specialists:

Three out of five stated that one or more employees had sued their companies last year.
92% said they had dealt with a sexual harassment complaint in their organization.

Harassment cases of all kinds are still the most common type of employment litigation. The dollars spent and the awards by juries are mind boggling.

What are some of the employment-law situations you need to be cautious of? Here are nine of the most common pitfalls:

Not following a standard policy and handling situations inconsistently, thereby causing confusion and misunderstandings.
Asking unlawful questions during the interviewing process, such as, "Do you have any health problems?" or "What nationality are you?"
Not being clear about expectations for performing the job. This frequently causes misunderstandings, which can lead to performance problems and termination of employment by either party.
Not documenting performance issues or policy violations prior to termination.
Wrongful termination for a variety of reasons could be the result of a supervisor reacting at the heat of the moment.
Discrimination because of race, nationality, gender, marital status, and so on.
Not allowing an employee the opportunity to see his personnel file. An employee has the right to see his file twice a year.
Telling an employee that he can only speak English while on the work premises, thereby violating his rights and discriminating according to national origin.
Harassing an employee, particularly sexually.

These are just a few examples of what could occur. If you employ more than yourself, you are bound to have some personnel issues arise. This is no secret or anything to be ashamed of; it happens to everyone at some time. OK, great, so what can you do if you wish to be proactive?

It is important to have an infrastructure established which hooks into the strategic goals of the company. Where to start?

An employee handbook is a good starting place. It establishes a sense of purpose, common expectations and guidelines. It provides the groundwork on which to build. The tone in which it is written sends a message about the company and the relationship between employer and employee.

Next, consider the hiring of employees. Are there job descriptions that define the purpose for the job and the duties to be performed? Are they ranked according to priority and the amount of time spent on each? Are the expectations clear?

Now consider the actual interview to hire people. This is where much of your future begins - with the people you choose to help fulfill your strategic plan. Is there an interviewing plan? Do you know what you can and cannot ask in an interview? For example, "Do you have a family?" is an illegal question. The key is to the questions job-pertinent.

Who will be involved in interviewing? Keep in mind that the candidate should do 80 percent of the talking. Your questions should be open-ended and based on behaviors in the candidate's history. You should have an eye toward your future and how this person can contribute. The process is not always as simple and straightforward as it seems. Take the time necessary. Hopefully, this person will be with you for a while, so you'll want to know as much as possible to make a good decision.

Next is the new employee orientation. This involves more than filling out forms. Studies have shown that, the more thorough the orientation process, the longer the employee will stay with the company. It should be stretched over a period of time and a variety of subject areas, such as company history, meeting key people, and clarification of duties and expectations. If possible, assign a mentor to answer questions and provide the guidance needed to learn your company culture.

The next step is the actual training of the employee. Today's work force wants to receive training, especially the younger generation. This could be an opportunity to keep skills up-to-date or to learn new things.

Don't forget to train your new supervisors as well as new hires. Both the Saratoga Institute (20,000 workers interviewed) and Gallup (survey of 2 million workers at 700 companies) said that poor supervisory behavior is why people quit their jobs. It is important to train people who've been promoted for their technical competence how to be a supervisor and what their responsibilities entail before throwing them into the role. Additionally, supervisors are the people who can get your company into legal hot water because they don't know any better.

After initial training comes career development. Set up a plan to grow your people. Maybe there isn't room for them to move up in the company, but there are possibilities of expanding duties and creating challenges. This might be direct involvement with a customer, expanding equipment knowledge or mentoring someone. Yes, you run the risk of them leaving, but in today's competitive environment, can you afford not to train your people?

An ongoing step in the process is communication. No matter what your industry or company, the standard cries heard by employers and employees are: "Why didn't they tell us?" "I could have helped with that if I had known," or "They never tell us anything." There can never be too much information shared. Many companies have even taken the risk of sharing financial information and met with success. Use memos and e-mail to communicate, but never forget the value and importance of face-to-face contact, especially by the company president.

Finally, let's not forget human resources/relations (HR). Every company needs someone who is designated to deal with the employees. This person should be a strategic partner. The most important requirement for this job is well-developed people skills and the ability to listen without passing judgment. No matter how small you are, someone is needed in this role. It may be someone who can perform in many areas, such as, compensation, benefits, performance reviews, crisis management and so on. In today's world of lean and mean, some of these activities are outsourced. Maybe there is one person who handles the insurance issues and another to call for advice on legal or other matters. In any case, HR contains a lot of different responsibilities, and one person cannot be an expert in all areas entailed.

HR is where most employment-law situations are dealt with and procedures developed. Like your quality programs, it is important to do what you say and say what you do when it comes to employment matters. It is wise to do a periodic audit to see that everything is in place and in line with your corporate goals. This area sometimes needs adjusting and tweaking, just like a machine.

In many small companies, as are found in the springmaking industry, many HR issues go unaddressed or the company owner (who is juggling many balls already) or the CFO (whose expertise is finance, not human resources) handles them. Do not make this mistake. If you are a small company, you cannot afford to leave your people issues to chance. A lawsuit could put you out of business!

Unfortunately, issues surrounding your employees and the law are not always so easily measured as the number of product pieces produced. But if you measured your turnover, absenteeism and rework, just for starters, you would see what I mean. (For example, if someone is earning $15/hour and is absent 10 days in a three-month period, it is costing you $1,200 in straight time. Now factor in lost production and benefit claims, if applicable. The costs begin to add up quickly. Just think about what happens when you have more than one person absent.

Like a piece of equipment, you have made a capital investment in your employees. In today's economy, you can't afford not to leverage that investment as best you can.

Finally, with ISO's new directive to provide customer satisfaction, what better place to start than with your own employees ¾ you're internal customers. Taking care of people issues will not only will it help keep you avoid legal trouble but also will carry over to your external customers. In short, if your people are happy, you will profit. And isn't that the main reason why you are in business, to be profitable.

How well have you built your house? What shape is it in today? Are you safe from the wolf?

This article is at it appeared in the October, 2001 issue of Springs magazine.

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