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Minimizing the Risk of Workplace Litigation
By Sylvia A. Ezenwa, JD  In today's litigious society, no business is immune from the threat of workplace litigation. Workplace litigation refers to any lawsuit brought by an employee against his employer, in which the employee claims that his legal rights have been violated by the employer's unlawful employment practices.
There are "many kinds of employee lawsuits, including claims of: sexual harassment, discrimination, wrongful termination, breach of employment contract, negligent evaluation, failure to employ or promote, and wrongful discipline, deprivation of career opportunity, wrongful infliction of emotional distress, mismanagement of employee benefit plans."
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Although there is no surefire way to prevent such litigation, this article discusses steps that you, as an employer and O&P company owner, can take to minimize the risk to your business.
Step 1: Develop and distribute an employee policy manual
It is not uncommon for an employee who has been terminated for violating a company's employee policy to file a lawsuit against his employer, claiming that he was wrongfully terminated because he was unaware of the policy
before
he was fired. For that reason, you should place
all
of your company's employee policies in an employee policy manual, and update the manual periodically, whenever an existing policy is changed or a new one is added. An employee policy manual should contain information on:
- Employee holidays, vacations, family and medical leave, and sick leave
- Employee compensation (including wages, overtime pay, bonuses, and pay raises)
- Employee benefits (including medical, dental, life, and accidental death and dismemberment (AD&D) insurance; 401 (k), pension, and retirement plans; flexible spending programs; and tuition reimbursement)
- Employee performance evaluations
- Employee discipline and termination
- Employee grievance resolution (including arbitration)
- Employee dress code
- Applicant screening and hiring
- Sexual harassment policy (including reporting and investigation)
To minimize the risk of workplace litigation, you should educate your employees about your company's employee policies, and make sure that each employee understands his obligation to strictly adhere to them. To that end, hold a staff meeting on the premises at least biannually, at which your human resources personnel or manager should:
- Distribute copies of the employee policy manual to all employees.
- Discuss the policies in the manual and answer employees' questions.
- Have each employee sign and return an acknowledgement form, which states that the employee has received a manual, read and understood its contents, and agrees to abide by its terms under penalty of discipline or termination.
- Have each employee sign an attendance sheet to confirm that the employee has been present for the entire meeting.
Keep the attendance sheet and signed acknowledgement forms in a secure location along with your other business records. So if an employee claims ignorance of an employee policy in a future wrongful termination lawsuit, his signatures on both the attendance sheet and an acknowledgment form may help prove that he was aware of the policy.
Step 2: Develop uniform hiring practices
If denied employment, an applicant could file a lawsuit against an employer, claiming that he was not hired because of unlawful discrimination--race, color, religion, gender, national origin, age, disability, or otherwise. For that reason, you should develop a set of hiring practices for your company, and apply them uniformly to every applicant for employment, including current staff members seeking internal positions. As an illustration, consider the following set of hiring practices:
- Compose a job description, including a list of minimum, required, and preferred skills and qualifications.
- Advertise the position for a minimum of two weeks in print or online media, soliciting cover letters, resumes, and professional references.
- Form a hiring committee made up of an odd number (at least three) of senior staff members. Have the committee members meet to screen and select a pool of the most qualified applicants.
- Have each committee member interview each selected applicant one-on-one.
- Have the committee members meet to discuss their impressions of each applicant and vote for the best candidate. The odd number of committee members will eliminate the possibility of a tie vote.
- Send an offer letter to the best candidate, and request that the candidate sign and return the letter in order to accept the job.
Again, keep a transcript of every hiring committee meeting, along with any notes taken by individual committee members during applicant interviews. Later, if a rejected applicant files a discriminatory hiring lawsuit against your company, those documents may help prove that the committee members used objective, non-discriminatory reasons (e.g., education, work experience in the O&P industry, existing client base) to make their hiring decision. The use of a hiring committee is important because it can blunt allegations that a hiring decision was made based on just one individual's biased or prejudiced views.
Step 3: Develop a sexual harassment policy
Sexual harassment is a "type of employment discrimination, [that] includes sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature prohibited by Federal law (Title VII of 1964 Civil Rights Act) and commonly by state statutes. . . ."
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Just as with discriminatory hiring claims, the best way for you to minimize the risk of litigation is to develop a sexual harassment policy for your company, and apply that policy uniformly to all employees, including managers and supervisors, regardless of seniority. A sexual harassment policy should answer the following questions:
- What kinds of conduct are considered sexual harassment?
- How should an employee report sexual harassment by a co-worker?
- How should an employee report sexual harassment by a manager or supervisor?
- How will a harassment claim be investigated?
- How will a harasser be punished?
- How will a victim be compensated?
Seek the assistance of a lawyer when developing your company's sexual harassment policy to ensure that the policy complies with federal and state civil rights laws; and if possible, arrange for the lawyer to visit the premises to discuss the policy with your employees and answer employees' questions.
Step 4: Post notices of employee policies
Federal law requires every employer to post in conspicuous places on the premises notices prepared or approved by the United States Equal Employment Opportunity Commission (EEOC), which set forth excerpts from, or summaries of, important provisions of federal civil rights laws, including filing a discrimination complaint with the EEOC.
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Failure to comply with this law may result in a fine of up to $100 for each separate offense,
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so keep copies of all postings, and record the date when each notice is posted, as proof that your company has complied with the law.
Step 5: Obtain insurance coverage
Employee practices liability insurance (EPLI) will not prevent employees from filing employee lawsuits, but may help your business financially survive such a suit by paying the legal costs associated with it. Specifically, EPLI will reimburse the cost of defending your company against an employee lawsuit in court, including attorney's fees, judgments, and settlements, regardless of whether you win or lose the case. However, EPLI typically will not pay for punitive damages, civil or criminal fines, or liabilities covered by separate insurance policies, such as workers compensation.
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EPLI can be purchased as a separate insurance policy or as an endorsement to your business owner's policy (BOP). An endorsement will add EPLI coverage to the other kinds of coverage offered by your BOP. The cost of your EPLI will depend on how great the risk of workplace litigation is to your company--the greater your risk, the higher your cost. Risk factors that your insurance company will consider in determining your cost include your type of O&P company (practitioner, supplier, or manufacturer), number of employees, and history of employee lawsuits.
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Conclusion
The bottom line is that you must develop sound employee policies for your company, and then educate your employees about those policies, making sure that they understand their employment rights and obligations. This will minimize the risk of litigation and, hopefully, foster a conflict-free and far more productive work environment.
References
-
Insurance Information Institute, What is employment practices liability insurance (EPLI)?, available at
www.iii.org/individuals/business/optional/epli/
(last accessed November 27, 2005).
- Black's Law Dictionary 1375 (6th ed. 1990).
- 42 U.S.C. § 2000e-10(a).
- 4. 42 U.S.C. § 2000e-10(b).
-
Insurance Information Institute, What is employment practices liability insurance (EPLI)?, available at
www.iii.org/individuals/business/optional/epli/
(last accessed November 27, 2005).
- See Id.
Sylvia A. Ezenwa is a lawyer, author, freelance writer, and consultant based in Superior, Colorado. She is licensed to practice law in the State of Texas. She writes legal articles for trade and consumer publications. Contact her at e-mail:sylvia@opedge.com
DISCLAIMER: The information in this article is not intended to constitute legal advice. Please consult an attorney regarding your specific situation.
Copyright 2006 Sylvia Ezenwa. Reproduction of any portion of this article in any form is prohibited without the expressed, written consent of the author. 
Table Of Contents - February 2006
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