AVOIDING EMPLOYMENT--RELATED LIABILITIES:
Ten Tips from the Front Lines
Sean R. Gallagher and
Edwin P. Aro , Hogan
& Hartson LLP1
INTRODUCTION
In recent years employers in the United States have
experienced an explosion of employment--related
claims. The number of employment--related lawsuits
filed in the federal courts jumped from roughly 7,000
nationwide in 1990 to more than 22,000 in 1997.2 Few
expect that trend to abate.
Many employers view the battle lines as inexorably
drawn and have resigned themselves to the belief that
employment litigation is a cost of doing business.
Others, however, recognize that these claims are not
necessarily inevitable. Indeed, employers who adopt a
proactive approach to employee relations can and
should expect to see a substantial reduction in
employment--related claims and a positive impact on
morale, productivity and, ultimately, the bottom line.
Although the pervasive legal regulation of the
workplace often leaves employers feeling paralyzed by
a “damned if you do, damned if you don’t” attitude,
managers need not and indeed should not succumb to a
fear that they just cannot win when it comes to
managing employees. Rather, jury verdicts, court and
administrative filings, and the authors’ anecdotal
experience all tell the same story: taking the ten
relatively easy steps described in this article can
substantially reduce any employer’s potential exposure
to employment--related claims.
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THE TIPS
1. Emphasize doing it right over doing it quickly.
Whether the issue is hiring, promotion, discipline or
discharge, employers often emphasize speed and
decisiveness over substance and accuracy. There is
never a good reason to rush to judgment about any
employment--related issue. An employer generally has
only one chance to get these decisions right. Thus,
managers should emphasize making decisions well
over making them quickly. Moreover, managers
should, in all circumstances, take the time and steps
best calculated to lead to a measured, thoughtful
decision.
Ensuring that managers take their time and resolve
problems calmly is often difficult because at the heart
of many employment claims lies an interpersonal
dispute between the claimant and his or her manager.
Such disputes usually affect both the claimant’s
perception of his or her treatment at work and the
manager’s ability to deal levelheadedly with the
claimant. For this reason, employers should take great
care to ensure that all decisions are made thoughtfully
and only after due reflection, especially those
involving employees whom management find most
irritating and difficult.
At no time are these considerations more important
than when an employer is considering discharging an
employee. Employers must take care to avoid a rush to
judgment. In all but the most exceptional of
circumstances, employers should consider suspension
(with or without pay) as an alternative to summary
discharge. This is particularly true where a manager
feels that he or she “has to” fire an employee
immediately, perhaps because the employee is
suspected of theft or sabotage, for it is in those
situations that the risk of a bad decision is greatest.
Suspending an employee before discharge serves three
important purposes. First, it permits an employer to
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take the time necessary to ensure that the employee in
fact did what he or she is accused of, often by
conducting further investigation. Second, a suspension
allows the employer to conduct a proportionality
review, considering how it has handled other
employees accused of similar misconduct and whether
the offense in question really calls for corporate capital
punishment. Finally, a suspension allows the employer
to cool down and make a rational, unemotional
decision in a calm setting and with a full, fair
appreciation of the facts.
The same essential values -- objectivity, relative
fairness and cool--headedness - are critical to virtually
every employment--related decision and generally can
be effectuated only where an employer takes the time
necessary to get it right.
2. Review and comply with policies and procedures.
Written policies and procedures can help employers of
all sizes apply some measure of consistency and order
to a wide variety of human--resources issues; but they
are a double--edged sword in that an employer’s failure
to follow policies often gives rise to litigation in which
an employee claims that a policy, procedure, or even
verbal promise constitutes a legally enforceable
contract.3
Because a careless phrase may result in wholly
unintended legal consequences, all written employer
communications to employees -- handbooks, policies,
procedures, offer letters and the like - should be
collected, reviewed, and updated as necessary.
Particular care should be taken to avoid making any
written commitment that the employer is unwilling to
keep in all circumstances. There exists no general
principal allowing employers to deviate from
established, unqualified contractual rights because
they believe they “must” do so. Accordingly,
employers must draft policies they can live with all the
time and should avoid generalized or overly optimistic
statements that might apply some of the time but won’t
work in every situation.
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Likewise, written commitments to “treat all employees
fairly” or to “respect your dignity as a human being”
can be dangerous for employers. These sentiments are
of course at the heart of effective employee relations,
but courts regard some such statements as contractually
binding.4 Thus, upon discharging an employee
governed by a personnel policy or mission statement
guaranteeing “fair” treatment, an employer may be
forced to convince a jury that its handling of the
employee’s situation was objectively “fair.” For this
reason, rather than promulgating written commitments
to treat employees fairly or to respect their dignity,
employers should incorporate those unwritten
principles into their day--to--day management of
employee--relations issues.
Care in the creation of policies is just the first step.
Before taking adverse action against an employee, an
employer should consult all applicable policies to
ensure that the employer has done what it has promised.
Often, the answers to how an employer should or must
handle a discipline or discharge issue are laid out in
black and white in its own policy manual or employee
handbook.
3. Implement and follow a realistic and effective
policy concerning harassment and discrimination.
Case filing statistics and jury verdict surveys suggest
that employers are more likely to experience a claim for
gender discrimination and/or sexual harassment than
for any other form of discrimination and are more
likely to lose a harassment case tried to a jury than any
other kind of case. Given the United States Supreme
Court’s seminal rulings in Faragher5 and Kolstad,6 all
employers should have and follow a realistic and
effective anti--harassment policy.
While the details of such a policy are beyond the scope
of this article, in general an anti--harassment policy
should include:
S a specific identification of prohibited
conduct, including examples;
S
a prohibition of such conduct and explanation
that any violation may result in discipline up
to and including discharge;
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S
a prohibition of retaliation against persons
who report or support a harassment complaint
in good faith; and
S
specific information concerning how
employees can report suspected harassment
or retaliation which includes at least two
unrelated reporting avenues (i.e. employees
should report suspected violations of this
policy to a manager or a human resource
representative).
The anti--harassment policy should be included in any
employee handbook or policy manual and otherwise
distributed with other important policies and practices.
Moreover, employers must promptly investigate and
take steps to resolve all harassment and/or
discrimination claims.7 In the authors’ experience
employers have little chance of winning a harassment
or discrimination lawsuit arising from a claim that was
reported to management and then ignored or
mishandled. Employees also quickly lose faith in
employers who fail to act on good--faith complaints of
discrimination and harassment - failures that not only
compound the employer’s liability for the conduct
underlying unaddressed complaints but usually also
lead to further misconduct and often to a decline in
employee morale and productivity.
Finally, employers should consider periodic
harassment training for all employees. New employees
should be informed of and given a copy of the
employer’s harassment policy during introductory
training. Employers also should consider hiring
professional consultants to meet with employees to
describe harassment, discuss its implications, and
answer questions. Such sessions should be mandatory
for all employees and must be characterized by
management as serious.
4. Avoid documentation land mines.
The importance of adequate documentation cannot be
overemphasized.
Nearly all employee--related
disputes involve a job description, a manager’s or
investigator’s notes concerning poor performance or
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misconduct, relevant e--mail traffic, or some other
form of written documentation. Employers must
carefully consider how such records are created and
what they say as well as how they are organized and
retained.
With respect to record creation, employers should train
managers how to document employee performance
and, in particular, how to prepare performance
evaluations that fairly and accurately portray employee
performance.
Likewise, given the increased
prevalence of e--mail in almost every workplace, all
employees should understand that e--mails can and
often are “company records” and that electronic
retrieval technology can recover nearly any e--mail
message sent on an employer--provided system, even
many thought to have been permanently “deleted.”8
Thus, employees should be instructed to write e--mails
only on subjects they would address in a formal
business letter, avoid using glib or otherwise colorful
language that might come back to haunt them
(especially when taken out of context), and exercise
particular caution when sending e--mail messages
relating to sensitive personnel matters.
Creation of thorough documentation is not enough,
however.
In order for employee--related
documentation to have any utility, the employer must
be able to put its hands on these records in the future.
Accordingly, completely aside from statutory
record--retention obligations, employers should
remember that in many circumstances records of
employee interactions are the only evidence an
employer has to defend an employment--related claim.
Because some employment--related claims can be
brought as long as three years following an employee’s
discharge,9 employers should implement a systematic
way of collecting and preserving for at least that long
all records relating to discharged employees, including
in particular relevant e--mail messages and “unofficial”
supervisor notes and files.
5. Give the human resources function its due.
Many businesses proudly proclaim that their
employees are their most important asset. Too often,
however, the business function most directly
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responsible for critical personnel assets -- the Human
Resources (HR) function - is treated as a poor stepchild
in employers’ day--to--day management and
decision--making processes.
Worse yet, HR is
sometimes thought of as a dumping ground for
employees who are unable to succeed elsewhere.
Employers who manage employee relations
successfully recognize the importance of including HR
in every business decision, providing the function with
proper personnel and other resources, and encouraging
-- from the top down - the respect that HR must have to
do its job effectively.
6. Hire and retain employees thoughtfully and
legally.
Many employment--related disputes and lawsuits are
traceable to a poor hiring decision and/or a poor
decision to retain someone after he or she should have
been dismissed. Employers must take the hiring
process seriously with a long--term view, asking “Does
this applicant have the potential to be a keeper?”
To ensure compliance with federal, state, and local law,
employers should scrutinize their application forms
and advertisements, train supervisors in interviewing
skills, and check practices with respect to background
checks, information verification, and other screening
processes. Once employees are hired, employers
should take care to regularly and thoroughly review
their performance and conduct and should take
appropriate action, up to and including discharge,
when employees fail to perform or engage in
misconduct. Retaining a problem employee especially one whose conduct is illegal or dangerous poses a variety of legal and business risks that all
responsible employers should endeavor to limit or
avoid.10
7. Give honest, regular performance reviews.
The sine qua non of successful employee relations is
effective
communication.
Regular,
accurate
performance appraisals are particularly invaluable in
both improving performance and documenting
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deficiencies. Irregular or inflated reviews serve neither
objective and can be dangerous in litigation.
Many managers resist providing honest reviews out of
a fear of conflict or to be “nice” to employees. But
doing so almost always makes a performance or
conduct problem worse because the employee either
does not know what the manager expects or comes to
believe that the manager does not care what the
employee is doing. Conversely, it is the authors’
experience that the vast majority of employees who
receive constructive feedback respond (or at least try to
respond) to the feedback provided, even if it is highly
critical. In sum, thoughtful, direct, and honest reviews
work.
Lack of honesty in the performance review process can
be fatal in the event of litigation. One unpublished
survey of the attitudes of prospective jurors concluded
that more than 55 percent of its respondents either
agreed or strongly agreed with the statement, “The best
evidence of an employee’s work performance is that
employee’s performance appraisals.” That data, of
course, belies the conventional wisdom that
“everyone” knows managers habitually inflate
performance evaluations for the reasons cited above.
Put another way, jurors believe performance
appraisals, even if presented with testimony or other
evidence suggesting that an employee was not as good
as his or her appraisals made him or her look. For that
reason inaccurate reviews often add monetary injury to
the insult of being sued by an employee discharged for
poor performance because those very reviews often are
cited as key evidence supporting a jury verdict in the
employee’s favor.
8. Formalize the discharge process.
Both voluntary and involuntary employment
terminations give rise to myriad substantive and
procedural questions and issues including: (a) whether
the separation violated (or might be claimed to violate)
applicable law; (b) whether the circumstances of a
particular separation give rise to any inference of
retaliation; (c) whether its circumstances comply with
the employer’s policy or any applicable employment or
collective bargaining agreement; (d) how and when the
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final paycheck is prepared and delivered; (e) whether
and how the employee must be paid for unused sick or
vacation time; (f) how the employee is notified of his or
her rights under COBRA; (g) how the employer will
handle references; and (h) whether the separation poses
risks to the employer’s business or competitive
interests or intellectual property and, if so, how to
minimize those risks. Every employer should develop
and follow a protocol for handling these issues to both
simplify the administrative process and limit legal
exposure.
9. Train managers in “Employment Law 101.”
A line manager is in the middle of virtually every
employment dispute. Managers often speak and act
before consulting with human resources professionals
or counsel, sometimes with unhappy consequences.
Issues and problems that are obvious to human
resources or legal professionals are not always obvious
to line management or rank--and--file managers. For
these reasons all managers should be trained, at a
minimum, in good hiring practices, performance
management, discipline, dealing with health--related
issues, and avoiding retaliation or the appearance of
retaliation. Likewise, all employees, particularly all
managers, should be apprized of the risks associated
with casual or improper use of e--mail, voice mail, and
other modes of communication and cautioned
concerning adherence to the employer’s policies or
guidelines concerning such communications.
10. Avoid retaliation and the appearance of
retaliation or unfairness.
Often there is no causal connection between an
employee claim or complaint (e.g., workers’
compensation, harassment) and a subsequent adverse
decision (e.g., demotion, discharge).
However,
disappointed employees sometimes allege such a
connection, and juries sometimes agree with them.
This is especially true where little time passes between
an employee’s protected activity and an adverse action;
in such circumstances a close temporal proximity alone
may create an inference that the adverse action was
retaliatory.11 That fact is doubly problematic for
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employers because an employer can be liable for
retaliating against an employee who complains about
harassment, for example, even if the alleged
harassment never occurred or otherwise is not
actionable.12
Given these problems, managers and HR must not only
avoid retaliation but must also be mindful that things
can easily appear to be other than they really are and
take steps to avoid creating an inaccurate impression
that some protected activity caused a later adverse
action. This is not to say that employers should avoid
disciplining or discharging any employee who has filed
a discrimination charge or complained about
harassment because such activities do not ipso facto
permit an employee to run amok without fear of the
consequences.13 When an employee recently suffered
a workplace injury or made a discrimination or
harassment claim, it is especially important for an
employer to ensure that a planned disciplinary action or
discharge is amply supported by objective written
evidence of poor performance or misconduct and that
the employer is not overreacting to conduct in which
other employees have engaged without repercussion.
CONCLUSION
While the principles discussed in this article touch on
many things, the authors believe that at a minimum
employers need to ask themselves one simple question
before they decide to discipline or discharge an
employee: “Will this come as a surprise to the
employee?” When employers follow the ten tips
outlined above, their employees cannot fairly be heard
to complain that they did not know what was expected
of them, did not know how to correct their performance
or behavior, and did not understand the consequences
of refusing to change their ways.
Although workplace relationships are governed by a
plethora of legal rules, much of what successful
managers do is apply common sense that is within the
easy grasp of almost anyone who takes the time to think
through what he or she is doing and resolve
employee--related issues in a direct, honest, and
reflective way. Viewed in the light of that principle, the
top ten tips for avoiding employment--related liability
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really boil down to two key concepts -- communicate
openly and honestly with employees, and take action
only after giving careful thought to the consequences of
the proposed action.
_________________________
1Ed
Aro and Sean Gallagher are partners in the Denver office of
Hogan & Hartson LLP. Both are civil trial lawyers whose
practices emphasize labor and employment, intellectual property
and general commercial matters. Ed and Sean frequently write
and speak concerning loss prevention issues arising from
employment relationships. Sean received his B.A. in 1984 from
Baylor University, and his J.D. in 1987 from the University of
Denver College of Law. He recently represented Colorado
Governor Bill Owens in the state’s congressional redistricting
litigation. Ed received a B.A. from the University of Denver in
1986 and his law degree magna cum laude from Boston
University School of Law in 1989. Before joining Hogan &
Hartson in 1998, Ed served as a Law Clerk for the Honorable
Richard P. Matsch of the United States District Court for the
District of Colorado.
2US
Department of Justice figures as reported by BNA Daily
Labor Report of January 20, 2000.
3See, e.g., Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo.
1998) (permitting enforcement of employer’s personnel policies
under alternative breach of contract and promissory estoppel
theories).
4See,
e.g,. Decker v. Browning-- Ferris Industries of Colorado,
Inc., 931 P.2d 436 (Colo. 1997) (recognizing claim for violation
of an express covenant of good faith and fair dealing based upon,
among other things, an oral promise of “fair” treatment).
5Faragher
v. City of Boca Raton, 524 U.S. 775 (1998) (An
employer generally is vicariously liable under Title VII for a
supervisor’s harassment of a subordinate, but may raise an
affirmative defense based on, among other things, the
reasonableness of the employer’s efforts to prevent and remedy
harassment).
6Kolstad
v. American Dental Association, 527 U.S. 526, 545
(1999) (An employer who would otherwise be held vicariously
liable for punitive damages for a supervisor’s willful
discrimination can avoid liability for such punitive damages
upon a showing that the offending manager acted contrary to the
employer’s good faith efforts to comply with Title VII).
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7For
an extended discussion of investigation techniques and
considerations, see Gallagher & Miller, The Practitioner’s Guide
to Colorado Employment Law, § 20.3.2 (2001).
8See,
e.g., Pooley and Shaw, Finding What’s Out There:
Technical and Legal Aspects of Discovery, 4 Tex. Intellectual
Prop. L. J. 57 (Fall 1995) (Describing technological methods for
retrieving ”lost” and ”deleted” electronic data); Dunbar, When
Documents are Electronic: Discovery of Computer-- generated
Materials, Washington State Bar News 33 (Apr. 1997)
(discussing cases dealing with discovery of electronic evidence).
9See
C.R.S. Sec. 13-- 80-- 101(a) (establishing a three-- year
limitations period for breach of contract actions).
10See, e.g., Van Osdol v. Vogt, 892 P.2d 402, 408 (Colo. App.
1994) (Employer liable for negligent supervision and retention if
it knows or should have known that employee’s conduct would
subject third parties to unreasonable risk of harm), aff’d, 908 P.2d
1122 (Colo. 1996); but see Middlemist v. BDO Seidman LLP,
958 P.2d 486, 494 (Colo. App. 1997) (employee’s negligent
hiring and retention claims against employer are barred by
exclusivity of Colorado Workers Compensation Act). Under the
Faragher and Kolstad cases discussed above, see supra notes 5
and 6 and accompanying text, any failure to investigate and
remedy misconduct also may give rise to or exacerbate statutory
discrimination liabilities that otherwise would not befall an
employer.
11See, e.g., Love v. Re/Max of America, Inc., 738 F. 2d 383,
386-- 87 (10th Cir. 1984) (inferring retaliation where employee
was fired two hours after complaining about an allegedly
discriminatory pay disparity); Rhymes v. St. Joseph Regional
Medical Ctr., 1996 U.S. App. LEXIS 15406 (10th Cir. Jun. 25,
1996) (temporal connection between filing of EEOC charge and
dismissal two months later established prima facie retaliation
case).
12See Sauers v. Salt Lake County, 1 F.3d 1122, 1127 (10th Cir.
1993) (retaliation claim viable even where employee failed to
establish actionable harassment).
13See, e.g., Morgan v. Hilti, Inc., 108 F.3d 1319 (10th Cir. 1997)
(affirming summary judgment for the employer on a retaliation
claim arising from the discharge of an employee five months
after she filed an EEOC charge); Gonzagowski v. Widnall, 115 F.
3d 744 (10th Cir. 1997) (affirming entry of summary judgment
against employee on retaliation claim, even though discharge
followed employee’s filing of three separate EEOC
discrimination charges).
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