Employer's CornerEmployment Suits – Mitigating a Threat from Within for Small Businesses

October 9, 2018by admin0

Employment related claims can be the bane of existence for many small businesses. There’s never a shortage of (justified or unjustified) disgruntled ex-employees eager to make a businesses’ life a living hell.

When disgruntled employees leave a company on less than amiable terms, vengeance often takes the form of a wage, harassment, discrimination or retaliation suit. But despite the arduous financial and almost certain risks, small businesses tend to be the least prepared to deal with employment claims.

Amidst the daily hustle and bustle of running a closely held business, planning for employment related risks often takes a back seat.  And many small businesses end up paying the price in wasted resources, steep financial losses, and reputation damage. Below are some deliberate proactive measures that could potentially blunt such risks:

Be an Employer An Employee Would Love to Have

The best defense to employment suits is to genuinely treat employees appropriately, with compassion and fairness.  The workplace is a microcosm of society at large. And basic rules of decency should hold true as well (one would think).  Management should endeavor to create a culture that embraces fairness and decency, and shuns shoddy employment practices.

Now, there is no legal right to a warm and fuzzy workplace. Employers have no responsibility treat employees like family, etc. That said, be the employer you’d love to work for. Yes, I believe in the golden rule. Having happy employees and a profitable business are not mutually exclusive concepts.

Have Good HR Compliance Policies

That said, as a business, you can’t totally control for the possibility of the disgruntled ex-employee with an axe to grind. When that happens, you’ll need an arsenal of sharp defense tools to thwart such attacks. A good defense starts with having good HR policies.

Undocumented policies are no policies at all. It’s fiction. Once employees come into the picture, a customized and ever evolving handbook and set of documented procedures provide a good base to mount a formidable defense (if need be). Good policies address how employees are classified, espouse the company’s anti-harassment/anti-discrimination policies, put employees on notice on how their performance will be evaluated, etc.

Put Your HR Policies to Action and Document Like You’ll be Sued

It would seem small businesses are starting to buy into the importance of having employee handbooks and policies.  But many still miss out on the most important step—following through.

Good HR policies without the appropriate follow through is akin to hypocrisy.

Just don’t preach the policies and procedures, live them out.  If your policy calls for a reporting process, provide employees with the means and documents to access such a process. Conduct the performance reviews your policies call for and so on.

Then develop a healthy obsession with documenting everything. Document like you’ll be sued eventually. It’s a healthy obsession. Embrace it. It could be the difference between an iron-clad shield to meritless suits in the future and losing. Document the ups and downs of employees in real time.

Some level of record keeping is usually required by law. But where legal requirements for record keeping stop, your healthy compulsion for documenting should kick in. Document the employment relationship before, during and after. An employee file should be able to tell a complete story of the employment relationship.

Consider Binding Arbitration and Alternative Dispute Measures

In addition to good HR compliance programs and good documentation processes, binding arbitration agreements could prove to be a good tool to fend off frivolous suits. Despite strong pro-arbitration stances taken by several jurisdictions (and federal law), small-to-medium sized companies do not take advantage of requiring binding arbitration and other alternative dispute resolution measures.

Employment claims processed through the state administrative agencies or courts can be a long drawn out process. Between an employee filing a claim and the layers of appeals, an employment dispute could take years to conclude.

Throw into the mix that a lot of times federal and state investigatory agencies fail to screen out meritless complaint. Consequently, employers are forced to expend valuable time and resources defending even the most frivolous claims.  Many employers end up throwing in the towel early (even when not at fault). They end up paying a “ransom” settlement instead of engaging in a long drawn out expensive traditional litigation battle. Disgruntled employees, with meritless cases, count in this. Under the right circumstances, binding arbitration and other alternative dispute resolution forums could prove to be quicker, less expensive and less public than traditional litigation routes.

Like with any other business threat, employment risks can be mitigated and controlled. It starts with deliberate proactive planning.


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