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Avoiding “Nuisance” Employee Lawsuits

By Don Phin

During a recent CEO workshop, one of the owners complained about an employee lawsuit he was defending. He felt it was of the “nuisance variety,” evidenced by the fact this employee had sued their prior boss as well. Understanding what I do about the “victim mentality,” this does not surprise me. Understanding what I do about the economics of litigation, it also does not surprise me an attorney would take a case for “negotiation purposes” that they have absolutely no intent to litigate.

It is not uncommon for companies to find themselves paying out anywhere from $10,000 to $50,000 to settle one of these nuisance-type claims, with an equivalent amount of money going to their attorneys. I want to share with you some insights I have about these types of cases and what you might be able to do about them.

• Any time an employee feels they have been treated “unfairly,” they will have the propensity to gravitate toward the victim mentality. It is the rare employee who says to themselves, “How did I find myself working for an unfair boss? I best move on and make sure that doesn’t happen again.” It is the rare employee who will take 100% responsibility for their circumstances and not attempt to blame others for their situation. To combat this propensity towards victimization, we have to create an environment that encourages people to speak up, so that they don’t wallow in a “Culture of Silence.” If something is unfair, we want to know about it so we can collectively do something about it.
  
  
• Most employee failures are the result of poor management systems, not because people don’t want to do a good job. Very often times we hire people that do not have the skills or character necessary to succeed in a job position, and thereafter complain about their non-productivity or poor attitude. As Peter Drucker is often quoted as saying, “Nine out of ten employee failures are system failures, not because people don’t want to do a good job.” A classic example is promoting a good performing rank-and-file employee into a management position and expecting them to succeed without assessing whether or not they have managerial skills and without providing them managerial training. The fact is, being good at doing things does not make one good at managing people.
  
  
• I suggest employers take responsibility for the fact that somebody didn’t work out within their organization. Chances are it is not because that person did not want to succeed. Unless you are clear the former employee was villainous, I suggest you provide outplacement and reasonable severance packages so the employee is not put in a worse-off position for having worked at your company. I also suggest that you refer the employee to a temporary staffing agency, which may be able to put them to work immediately. Note: If you provide outplacement and severance packages to employees, make sure to do so on a consistent basis so you don’t open the door to discrimination-type claims. If you are offering a severance of one month or less, I do not suggest you accompany it with a demand for a release of claims. It may simply trigger a response that you are attempting to hide something. However, if you are offering more than a month’s severance, let the employee know that “our attorneys require us to have our employees sign a release under these circumstances.” Blame the lawyers — it works every time. Inform the employee that any severance offered is non-negotiable, and while they certainly have the right to have their attorney review any severance agreement, you will not look kindly on any effort by that attorney to negotiate for a larger severance.
  
  
• Make sure to do exit interviews with all of your departing employees. It may be that the employee was treated unfairly and the basis for that unfair treatment was discrimination or harassment. Don’t assume why an employee was unproductive — make sure you find out. Have the exit interview performed by someone who is not in the direct line of supervision with that employee.
  
  
• During a workshop a CEO asked me if he could ask questions concerning whether someone had filed claims against their boss in the past. The very quick answer is “no,” you may not ask the direct question. And you may not fail to hire them if a past claim is the reason why. But there is no law that says you may not ask the indirect question. For example, “Please share with me the most difficult experience you had with your previous employer. How was that situation resolved?” If they say that they sued their boss and it was settled, then it is appropriate to find out more about the facts. Perhaps they were justified in bringing their lawsuit. Perhaps filing that lawsuit was in fact a responsible action on their part. Don’t get caught in the presumption that all employers are right and all employees are wrong or vice versa.
  
  
• It would then be appropriate to assure the applicant that should similar circumstances arise with your company, you would be intent on getting the problem resolved. Explain that lawsuits are a waste of time, energy and resources. Let them know that you have an open-door policy and should they feel it necessary, they can speak directly to human resources or perhaps even to you. Then make sure that you walk the talk.
  
  
• If in the interview process you get the impression that this person maintains the victim mentality and is a lawsuit waiting to happen then don’t hire them. Simple enough. The odds of their bringing a non-hiring suit are less than one-tenth of their bringing a wrongful termination suit. In addition, any damages they may claim will be far less than if they have some track record of performance with your company. A case in point: After settling a rather large “glass ceiling” claim against a Fortune 500 defense manufacturer, word came down from on high through the attorneys that “next time we just won’t hire them!” That company would rather deal with a lawsuit alleging they don’t hire women into their program than a lawsuit alleging they discriminated against women years after they were hired. From a risk management standpoint, they may be entirely accurate. The down side of this reality is they may be robbing themselves of a very valuable talent pool. Sadly, because of today’s employment laws, many executives tell me in confidence that all things being equal, they will avoid hiring the minority or woman employee every time. Evidence of how today’s employment laws can do more harm than good.
  
  
• If someone reveals that they filed an employment claim in the past and you do not hire them, that does not immediately give them a right to file a lawsuit. They also must show that they were the most qualified candidate. So, if the only qualified candidate you have interviewed to date indicates a litigious past, continue interviewing until you find a more qualified candidate who does not! Again, very few people file non-hiring claims. The risk of this type of claim is even less given today’s extremely low unemployment levels. My advice to employers is always hire the most qualified available candidate and stay clear of any candidate that exhibits a victim mentality regardless of their race, age, sex or employment history.
  
  
• Managing the legal lottery is perhaps a more difficult issue. How do you deal with the “nuisance claim” once it is filed? First of all, get the facts to assure yourself that it really is a nuisance claim. Don’t rely on someone else’s assurances that it is. I cannot tell you how many times I have seen managers knowingly lie to executives, hoping to maintain their favor or to cover up their own misdeeds. I also can guarantee that if you react to bad news with upset, you’ll be left in the dark the next time around.
  
  
• Do not start to justify why you now find yourself being sued by someone you thought was going to add value to your organization. Make sure to take responsibility for your circumstances. Do not over-emotionalize them. If you cannot separate yourself from making a sound business decision, then have the decisions managed by someone who can.
  
  
• Be very cautious about “setting the example” for other employees who may consider suing your organization. There are lawyers out there who will encourage you to fight at all cost so that you send a message to your workforce that you are not to be messed with. These same lawyers will squeeze your existing workforce into testifying on your behalf, even if it is unjustified that they do so. In one case I litigated, this “hardball” approach caused four existing employees (averaging around $60,000 each a year in salary) to quit their jobs. That cost the employer more than $250,000 in turnover costs, a figure that did not show up on the attorney’s bill. Protracted litigation is expensive, time-consuming and highly emotional. Moreover, odds are you will lose the lawsuit no matter how justified you feel.
  
  
• Human resource executives across this country feel 80 percent of lawsuits filed against their companies are frivolous. Hopefully they immediately settle the other 20 percent of suits. Regarding the frivolous 80 percent, chances are 12 jurors will have a different viewpoint based on the same set of facts. Remember, it is not your reference that controls, but that of the judge and particularly the jury.
  
  
• Get your claim to a third party as soon as possible, whether by way of mediation or arbitration. The sooner you can get the matter resolved, the better. If you truly want to resolve a case in mediation, you have to go forward with the approach that we are “both good people” with a relationship that has broken down along the way. Think in terms of win-win resolutions and get the matter resolved. The bottom line is even if you win one of these lawsuits through a protracted battle, you lose in the end.

The best ways to prevent these lawsuits is to circulate an Employee Compliance Survey at least every six months. This eliminates the victim’s argument that “I didn’t know” what the company’s policies and procedures were. It also breaks employees out of their “Culture of Silence” by asking if they have experienced harassment, discrimination or any other problems.

Final note: One of the best reasons for purchasing employment practices liability insurance is so that you don’t have to over emotionalize the “nuisance lawsuit.” Under most scenarios, the greatest payout you will have to make is the $5,000 to $10,000 retention level that you have purchased in your contract. Any additional monies paid out for lawyers or settlement are made by the insurance company. If you would like a checklist for purchasing employment practices liability insurance, send me an e-mail asking for the EPLI Checklist, and I will get it to you right away. 

ABOUT THE AUTHOR

Don Phin is an attorney who for more than 16 years, has specialized in the litigation of employment and business cases. He has represented hundreds of employees, partners and companies in that time. Don has litigated wrongful termination, race and age discrimination, sexual harassment, whistle-blower, trade-secret theft, fraud, partnership dissolution and many other cases to a successful conclusion. In 1995, Don obtained the status of a Certified Professional Consultant to Management (CPCM). Since then, he spends a large part of his time consulting, writing, speaking and coaching.

Don’s seminars, workshops and reports have been delivered to such groups as the International Risk Management Institute, Insurance Marketing and Management Services, The Executive Committee, The CEO Club, The Society for Human Resource Management, Foundation of Enterprise Development, The National Human Resource Association and The National Association of Professional Consultants to Management.

Risk management is about possibilities and probabilities. It’s about assessing the 80/20 of exposure and then committing the strategies and tools needed to protect yourself. I hope these insights will help those of you battling on the front lines. If you have any questions regarding the trials and tribulations of managing in today’s high-risk environment, e-mail or give me a call at 800-234-3304.

riskVue | The webzine for risk management professionals
June 2001