Types of Litigants
There are certain types of employees who are more likely to sue the company. It may help corporate managers avoid lawsuits if they are aware of these types of litigants.
Seasoned employees. A common type of litigant is the employee who is terminated after years of pay increases, promotions, and positive performance reviews. Perhaps the employee encountered a new boss or new work circumstances that led to difficulties and were the actual cause of termination, but they have a work history that creates a basis for a sense of betrayal and discrimination.
In addition, these employees often sue for a breach of implied contract, claiming that they can only be terminated for just cause. A breach of an implied contract occurs where an employee has worked at an organization long enough that it becomes implicit that she will only be fired for doing something wrong or because the job is eliminated.
Under California case law, for example, there are certain factors that courts look at to determine whether such a contract exists. The court considers whether the employee received raises, good reviews, promises of continued employment, or promotions. Other factors include whether the employee was there for a lengthy period of time.
The case law in this type of claim has steadily moved over the years to favor the employer. To further protect themselves against such claims, many corporations have all their employees sign “at-will” agreements, which can be used in court as evidence that no implied or explicit contract existed.
Companies still must respect the principle of looking out for the employee who has a long history of service to the company, because this employee will generally have more legal rights than the new employee. Even where the explicit legal issues are unclear, courts and juries will often be more sympathetic toward such plaintiffs and will award more money in such cases if the employee does win. Such employees will typically have amassed a large number of coworkers as allies who will assist in the prosecution of the case by serving as supporting witnesses to the claims made.
To avoid these types of lawsuits, I advocate that companies give such long-time employees generous severance packages to compensate them for years of service. In addition, I always advocate a graduated probation structure and a second, third, and fourth chance for such employees if at all possible. The longer the period of employment, the longer you should give an employee to improve his or her performance.
Another option is to eliminate the employee’s position altogether if that is a legitimate corporate objective, as this makes for a complete defense to an employment-related lawsuit based on a termination. However, an employer needs to be prepared to accept the consequences of eliminating such a position without replacing it for several years. (Replacing the position too quickly defeats the purpose of structuring it as an elimination.)
Difficult employees. In my experience, some employees are more likely to make invalid claims of ill treatment depending on their personality. However, employees should stand up for their rights, and a sophisticated and smart employer would not refuse to hire someone because they had a lawsuit against a former employer. Some people may sue more because they are in a category that faces more discrimination—an African-American in the south, for example, or a gay man in the Bible belt. Those suits are probably valid. To deal with difficult employees who sue for no reason, documentation is the best defense. Trying to screen applicants for this trait would be inefficient at best, and might even be illegal.
Typically these employees fall into one of two categories. The first is the employee with a victim mentality. Fortunately for the company, these employees will also suffer from credibility problems. Employees who see themselves as victims will call on every resource at their disposal, including the law, to avenge themselves. These employees are like overgrown kids who have difficulty accepting criticism. I tell employers who manage these types to document that the employee seems to continually feel wronged by the company no matter how constructive the feedback. Employers should share these observations as well so in deposition it becomes clear that the employee was warned.
The second type of employee is difficult to get along with and is contentious. Again, documentation is key with these types of employees. Managers should make sure that employees review each document so that they can’t later claim pretext or surprise. If there is an investigation because this person has caused a problem for another employee, put that in the file as well. Again, make sure there are no surprises for the employee so share all of this information.
Generally the best way to avoid a successful lawsuit is to make a real effort to keep the employee. Managers should terminate employees only when they have done everything possible to make them productive members of the team. This approach has been known to transform an employee’s performance and even if it does not, the company is better protected from lawsuits.
Valid claim. Employers should not be blind to the fact that some litigants will have a legitimate case. In this case, the employee is likely reasonable, well liked, and not someone who generally complains or stirs up trouble. With this type of litigant, employers should be willing to sit down and talk with the employee about the concerns. If the employee has already been terminated, the company may need to seriously consider settling the case before it goes to court.
How a company initially handles a problem with an employee can make all the difference. Employers faced with a problem employee should move slowly, consider the role of emotions in the lawsuit, train managers well, hire an independent employment attorney, and document everything. If there is a lawsuit, the company should not proceed with house counsel if that counsel was involved in the decision to terminate. Likewise, the manager who conducted the termination should not make the final decision on strategy and settlement of a resulting employment case.
Proceed with caution. Progressive discipline and ample warnings to employees about an eventual termination prevents lawsuits. Even if the employee is terminated because of job elimination, giving notice is paramount. Employees need to adapt to the difficult process of losing a job, and they need to feel that the decision to terminate them was fair. Keeping employees in the loop, refusing to fire on a whim, and giving employees the chance to improve performance all go a long way to preventing litigation.
Consider emotions. When it comes to the workplace, people consistently underestimate the role that emotions play. Managers often make decisions based on emotions, and employees often go to court to redress their emotional grievances. If employers are constantly aware that employment situations are emotionally charged, they are more likely to tread carefully. The end result may be the same, but the company will alienate fewer employees in the process. This means fewer lawsuits.
Provide training. Since a company is liable for the behavior of its managers, it should always train them well. Sexual harassment, discrimination, hiring procedures, and diversity are just a few of the topics companies should consider. In addition, companies should keep managers updated on all legal developments that might affect the workplace.
Get legal counsel. Preventing lawsuits is far more cost effective than defending against them. Companies should hire an employment attorney or retain a counsel who is experienced in employment law to draft handbooks, letters, at-will agreements, and other key documents. Also, if corporate counsel is not versed in employment law, companies should make sure an employment attorney is used as a consultant on any new workplace policies and whenever tense situations arise. Many lawsuits occur out of ignorance. An employment attorney can also make sure that the company’s policies and practice are consistent—a key element in avoiding litigation.
Document everything. Periodically I conduct an entire seminar for managers on the single topic of performance evaluations. Evaluations are important because they are written documentation of what occurs in the workplace. They can be used to inform the employee and to support an employer’s decision to terminate an employee based on performance.
Managers should keep a file relating to each employee’s performance issues and put everything relating to the employee in it. Every time a manager needs to counsel an employee, he or she should make a written record of the encounter and put it in the file. This helps to show that decisions in the workplace were made on the basis of performance and nothing else.
Companies cannot avoid having to discipline employees and occasionally having to terminate staff. But they can go a long way toward avoiding employment lawsuits if they have clear and consistent policies against discrimination, take all complaints seriously, proceed carefully with any disciplinary procedures, document all reviews, train staff on the legal issues, and treat all employees fairly. n
Diana Maier is a partner with Bushnell, Caplan, Fielding & Maier of San Francisco, California.