Seven Steps to Avoid Employee Lawsuits

Guest post by: Allison Grace
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Performance Review Disagreements - By Allison Grace

Labor and employment disputes represent the top litigation threat to the majority of U.S. corporations, so it's no wonder that a major fear for business leaders is the fear of employee lawsuits. Consider these facts:

Employee lawsuits have risen 400% in the past 20 years to the current level of 6.5 claims per 1,000 employees annually.
The most common targets for discrimination claims are private employers with between 15 and 100 employees.
Plaintiffs are more likely to win 63% of employment lawsuits that go to trial.
Discrimination claims filed with the Equal Employment Opportunity Commission (EEOC) hit an all-time high in 2008.

Unfortunately, it has become far too easy for employees to sue their employers. And what's even more unfortunate is that many employers don't realize until after they're sued that a lawsuit could have been prevented, or at least their defense to the lawsuit strengthened, by taking simple preventive measures.

Seven simple steps that employers can take to both avoid employee lawsuits and make it easier to prevail if a lawsuit is filed are:

1. Hire carefully. Look for gaps in employment and ask probing questions to fully understand the reasons for frequent job movement or periods of unemployment. Verify previous employment and check references. Do your due diligence upfront to make sure you're not hiring someone who's been a problem employee for other employers.

2. Classify employees correctly. Claims related to pay are most common. Follow the guidelines of the Fair Labor Standards Act (FLSA) to correctly classify employees as exempt or non-exempt and to comply with overtime pay provisions. And follow IRS and Department of Labor guidelines to correctly classify employees and contractors.

3. Communicate company policies with an Employee Handbook, including policies against discrimination and harassment. Make sure all employees receive and sign a form acknowledging receipt when hired.

4. Address complaints and problems when they arise. Your Employee Handbook should include a procedure for handling employee complaints. And managers should be trained on what is and isn't acceptable behavior and how to address problems.

5. Provide open, honest, direct feedback through a regular performance review process. Don't sugarcoat bad performance because you don't want to hurt someone's feelings.

6. Document performance problems as they are observed throughout the year. Whether it's unacceptable behavior or repeated lateness or poor performance, keep a written record. It's harder to prove that an employee was warned or disciplined if there's no documentation.

7. Terminate carefully. If the termination is for poor performance, make sure you've given the employee an opportunity to improve and have documented all discussions related to the performance issue. An employee who is surprised by his termination is more likely to sue, so clear warnings along the way that his conduct is putting his job at risk are key.

Can communicating effectively during a termination help you avoid a lawsuit?

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Performance Review Disagreements - By Allison Grace

About the Author: Allison Grace

RSS for Allison's articles - Visit Allison's website
Allison Grace, CEBS, CCP, CMS, is President and Founder of Instant HR Solutions and a human resources professional with more than nineteen years of experience. As a consultant, Allison has worked with companies in various industries including hedge funds, technology, oil and gas development, recruiting and accounting. Combined with technical training and professional certifications, Allison’s practical experience includes working in all aspects of human resources to establish HR programs that support the strategic objectives of the business. Her extensive experience includes benefits, compensation, legal compliance, performance management, employee relations, recruiting and termination.
Click here to visit Allison's website.

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