Three years ago, a company began to have problems with its most successful manager, we’ll call her Mary. Though Mary had always been productive, good with clients, and well liked by her staff, her behavior suddenly seemed to change. She missed deadlines, was late to work, and lost the sharpness that made her so successful. Her supervisor placed her on probation, and then instituted a performance improvement plan.         

When nothing changed, the supervisor asked Mary what was going on. Mary said that she was suffering from a debilitating back injury and requested 12 weeks leave under the federal Family and Medical Leave Act (FMLA). The company approved the leave. Two months into Mary’s leave, however, her supervisor began to realize how much Mary’s performance had declined over the last six months.

Sales projections were way off, her direct reports were complaining about her, and the company had lost a major account due to her negligence in handling several projects. In addition, the supervisor began to realize that the division Mary managed was suffering without a manager on the job. The supervisor, feeling he had no choice, fired Mary two and a half months into her leave.

Mary sued the company and the supervisor for disability discrimination, violation of the FMLA, and retaliation. The supervisor was stunned. He had never considered Mary to be disabled and certainly had not fired her for that reason. Still, corporate counsel informed the supervisor that the case was likely to proceed.

As this real-life case illustrates, all supervisors in a company need to be well versed in the many ways that discrimination cases can arise. In this case, the employee could argue that she was discriminated against on the basis of her disability due to her termination alone and the fact that the company was aware of her disabled status. She would also have a successful cause of action for violation of California’s Family and Medical Leave Act for termination while on protected leave.

Other terminations make prima facie cases of discrimination where the burden shifts to the employer to prove it had legitimate reasons for the firing of the employee. If Mary, for example, had been replaced with a male worker, particularly one who was younger than she, and if Mary was 40 or older at the time, she would have a prima facie case of sex and age discrimination.

Mary’s attorneys will, if they are competent, list these causes of action even if there is no direct evidence of such discrimination. To do otherwise could be malpractice, because the law is in essence stating that such terminations should be suspect. In other words, a plaintiff’s attorney deems certain behaviors in the workplace appropriate if they are directed against a white, heterosexual, able-bodied, young male, but potentially litigious if they are directed against a protected group and fulfill prima facie requirements.

This article examines what types of behaviors can land a company in court, how to avoid these behaviors, and the personality traits that might lead certain employees to sue while others do not.

 Bad Acts

In considering the merits of an employment lawsuit, the plaintiff’s lawyer looks first at the steps the company has taken against the employee such as probation, demotion, and termination. These are known as adverse employment actions. Termination is generally required in a successful lawsuit against an employer. There are exceptions, however. The employee’s claim may simply entail harassment based on sex or another protected status as well as retaliation or some other action that requires that employee quit to get out of an intolerable working situation. In such a case an employee is asking that the resignation be considered “constructive termination.”

If, for example, an employee is harassed by a manager or coworker, the company is often liable even if the employee voluntarily chooses to leave the workplace. This constructive termination means that the employee felt that he or she had no option but to resign to end an intolerable situation. And if the employee has good reason to leave, liability is the same for the employer regardless of who initiated the employee’s departure.

Bad acts can take many forms but can be split into three general categories: harassment, hostile work environment, and violation of public policy.

Harassment. Cases of sexual harassment often end up in the courtroom unless the employer is proactive about investigating and preventing the slightest possibility of sexual harassment. In some states, such as California, the court will hold a company strictly liable if such harassment is perpetrated by a manager. In these cases, the court assumes that the employer knows about the situation.

If the employee claims harassment by a manager, coworker or client, all that a potential plaintiff is expected to do is notify a manager, supervisor, or the corporate authority designated as responsible for investigating employee complaints. Responsibility for addressing the complaint is then in the hands of the employer.

For example, the author was recently involved with a California case in which a female employee had a relationship with a male client. When the relationship ended, the client threatened to take his business elsewhere unless the employee was removed from his accounts. When the company honored this request, it set itself up for a lawsuit, because it was complicit in the client’s acts of harassment.

As in this example, sexual harassment can simply be negative actions against an employee who ends a sexual relationship and is then retaliated against for doing so. If the company permits such retaliation to occur, it is participating in the harassment.

Though laws may vary slightly from state to state—California law tends to be more pro-employee than others—they are generally consistent in a company’s duties to its employees.

The company should also seriously investigate any complaint of sexual harassment no matter how frivolous it appears, and it should consider anyone in the company equally capable of harassment. Management should bear in mind that once the company has been made aware of the harassment, it must investigate the complaint competently or it could face liability.

For example, in the aforementioned case involving a client, the employee told the human resource department that the client was threatening her, but human resources failed to investigate because human resources personnel held the employee in low regard. The fact that she had engaged in a consensual relationship with a client damaged her credibility. But the California Supreme Court (Carter v. California Department of Veterans Affairs, California Supreme Court, 2006) recently held that a company doing business in California has the duty to prevent and investigate sexual harassment complaints, even those directed against a corporate client with whom the employee has voluntarily been involved. The company is liable for responding to allegations of harassment even if initiating the investigation or taking action to stop the harassment disrupts the corporate-client relationship.

Part of what the company did wrong in this case was that instead of investigating the allegations made by the employee, it undertook an investigation against the employee making the claim. Even if there was good cause for the investigation, it appeared that the company was retaliating against the employee for complaining of sexual harassment. A company must refrain not only from doing what is clearly illegal but also from doing what could be interpreted as illegal.

Hostile environment. Sexual harassment and hostile work environment are both a subset of sex discrimination, a cause of action that allows a plaintiff to recover certain damages depending on the applicable federal or state laws. For example, in California, successful plaintiffs can obtain attorney fees, economic damages, emotional distress damages, and punitive damages.

Any company that allows employees to do something systematically that is making other reasonable employees uncomfortable faces a potential suit for hostile work environment. But a hostile work environment is not always easy to spot. It’s not just the neighborhood garage where the office is littered floor to ceiling with “girlie” pictures. The courts may also find that the environment was hostile if male or female plaintiffs are made to feel uncomfortable at work, even if only periodically, because coworkers comment about plaintiffs’ good looks in a personal manner or coworkers discuss openly at work their own sexual conquests.

To avoid these types of claims, companies should have active training programs to ensure that employees understand the range of behaviors that can constitute sexual discrimination or harassment and the consequences for engaging in any of these behaviors at work.

Violation of public policy. Termination in violation of public policy is a favorite among plaintiff’s attorneys. If an employee is retaliated against for blowing the whistle or refusing to do illegal acts, he may have a strong cause of action for a termination in violation of public policy. What that means is that if your company is doing something illegal—violating either a statute or a regulation—and an employee openly opposes it, don’t terminate or demote that person unless there is an excellent reason that has nothing to do with the fact that he is stirring up trouble for the company.

There are employees who vocally oppose virtually every single company policy. Some of their opposition may be legitimate, and some of it may be a shortcut to taking on the company. In my practice, I see numerous employees who at first seem to have a strong case for violation of public policy. However, when I review their file, I see that their entire work history consists of a long dissent against the company carried out in an unproductive manner. In these cases, the key factor is whether there was an existing regulation or law that the company violated, whether the employee was demoted or fired after making a complaint about this violation. If she wasn’t, and she has a long history of being a troublemaker, managers should document these problems consistently until a pattern asserts itself. If a manager has done this, there is no reason to expect a successful lawsuit

Retaliation. Retaliation is a similar cause of action that arises when an employee is retaliated against for doing something that he or she is entitled to do when it relates to a protected class under the antidiscrimination laws. For example, in the case cited at the beginning of this article, the employee we called Mary could argue that she was retaliated against for exercising her right to the FMLA, and she would have a strong case.

Generally, employers should not terminate someone who is in the middle of a leave period. That person is entitled to leave under state and federal law, and the courts will see it as too much of a coincidence that something totally unforeseen would come up in the relatively short period of time that the individual is out of the office.

In the California sex harassment case described earlier, there was a fairly egregious case of retaliation. The employee told the human resources department in an e-mail that she was afraid of complaining about the harassment because she feared retaliation by her supervisor. Since she was later terminated, the plaintiff could legitimately claim that her fear had come true. That e-mail cemented the success of a retaliation cause of action.

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.

Disciplinary Actions

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.