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10 Tips To Help Avoid Employment Lawsuits

By Don Phin

1. Don’t hire the wrong employee.

Avoid hiring in haste. If your need is urgent, consider leasing or hiring a temporary employee or using a consultant. Use an employment application that is thorough, contains an “at-will” clause, an EEO (Equal Employment Opportunity) statement, and an authorization for reference checks and pre-employment testing. Be sure to conduct thorough reference checks, including background checks on driving, criminal and credit records when appropriate.

2. Be careful when treating employees as independent contractors.

Treating employees as independent contractors to save money can be risky if the employment relationship is not documented and structured properly. Have independent contractors sign an agreement acknowledging their status. Make sure they have their own business license, tax identification numbers, place of business and other clients. Allow independent contractors to control the manner in which they perform their work. If you have any doubts about their classification, ask for a letter ruling from the IRS.

3. Don’t promise too much when hiring.

Under the laws of most states, employees are hired on an at-will basis. Use an at-will employment clause in your job application, employee handbook, benefits documents and other employment related documents. Don’t make promises (future promotions, lifetime employment, a partnership interest in the business, etc.) that you may not be able to keep.

4. Hire, promote and maintain the employment of qualified women and minorities.

Encourage qualified women and minorities to apply for a job. Stress the fact that diversity enriches the quality of life, enhances workplace creativity and improves customer sensitivity. Conduct quarterly surveys to make sure no complaints of discrimination or harassment are festering.

5. Be aware of discrimination and sexual harassment issues.

Have well-defined and documented anti-discrimination and sexual harassment policies that are supported by top management. Develop and implement grievance, investigation and disciplinary procedures.

6. Explore alternative possibilities before layoffs or downsizing.

Age and other discrimination claims are particularly common due to the disproportionate effect layoffs have on older workers. Do not wait until the last minute to let employees know there is a problem. Let employees know the numbers — if they fully understand your financial status, they are more likely to help you create solutions and less likely to take personal offense in the event of a layoff. Consider reducing salaries or work hours rather than termination. Perhaps the nature of your products and services should be reconsidered, or maybe your marketing strategies need an overhaul. Ask employees for suggested solutions.

7. Don’t say the wrong thing.

Performance appraisals, disciplinary notices, termination, references to prospective employers and even off-the-cuff statements made to employees, customers and vendors can result in defamation claims. Let employees help define expectations and outcomes. Make sure your employees “own” their performance, discipline and termination. Make sure your communications about an employee are work related and objectively stated.

8. Don’t fire somebody the wrong way.

Make sure you have followed your company’s policies, procedures and guidelines for conduct and performance. Have more than one person participate in the termination decision. Be sensitive - acknowledge the emotional and financial loss employees will suffer as a result of being terminated. Unless the employee was dishonest or deceitful, make an effort to help him/her find new employment. If you have any questions about the legitimacy of the termination, contact an attorney first.

9. Accommodate a sick or disabled employee.

The Americans with Disabilities Act (ADA) and the Federal Family and Medical Leave Act (FMLA), as well as some other state laws require accommodating employees who are unable to perform their work due to limitations created by their sickness or disability, or that of a family member. When possible, request the employee show how they can continue to add value to your company despite sickness or disability and without causing harm to your continued operations. If in doubt about your rights to terminate a “disabled” employee, contact a federal or state agency or attorney for assistance.

10. Don’t lose trade secrets and other proprietary information.

Identify your company’s proprietary and trade secret information, such as your production or delivery methods, marketing approaches, or your customers and vendors. Use copyrights, patents, trademarks, services marks, and other forms of protection. Protect access to information from internal and external sources by watching your files, e-mail and even your trash. Don’t hire an employee who promises to improperly give you another company’s confidential information.

Source: “10 Legal Traps for the Unwary Employer.” Don Phin’s Special Report Series. www.donphin.com. For more information, call 800-234-3304. Reprinted and edited with permission.

riskVue | The webzine for risk management professionals
January 2003