H.R. Alert

July 2009

Employee Lawsuits Explode as Lay Offs Rise

In the present economy layoffs are rising at an unprecedented rate. Just last week layoffs were announced by Starbucks, Pfizer, Caterpillar, ING Group, Home Depot, Texas Instruments, IBM, AOL, Eastman Kodak and many others. Financial firms, Goldman Sachs and Morgan Stanley which have already made significant reductions in their workforces announced they will make additional layoffs.

Prompted by these layoffs employee lawsuits by former employees are also on the rise. One indicator is the rise of complaints filed with government agencies such as the Equal Employment Opportunity Commission which realized a 15% increase last year and is expected to exceed that percent this year.

More and more so-called wrongful termination lawsuits are being tried by juries which tend to favor employees. Out of 120 cases surveyed by the Rand Corporation in 2007 66% were won by employees. The average award was over $650,000 per suit excluding legal fees which can often exceed the cost of the judgment. Employee lawsuits are even more expensive for California employers where a recent study found that plaintiffs were 75% to 80% of the time winning an average of more than $300,000. It’s become similar for employers to play the lottery.

So what can you do to protect yourself? Here are some tips and strategies:

• Document all your policies, procedures and benefits in an employee handbook. Include a mandatory arbitration agreement. Ensure that your employees sign the last page as an acknowledgement of receipt.
• Conduct sexual harassment training initially with your managers and secondly with your employees. Don’t forget to provide handouts and have participants sign an attendance roster.
• Get help when conducting layoffs to ensure you are doing it legally correct. The selection of those affected requires some thought to avoid an age or gender discrimination lawsuit. Consider alternatives to the traditional layoff.
• Whether you like it or not when an employee comes to you with a complaint take the time to conduct a thorough and objective investigation documenting each step of the process.
• Ensure with each new hire you check references, conduct a criminal background check and prepare a customized offer letter.
• Never terminate an employee on Workers’ Comp. unless you have checked with me in advance of the process.
• Make sure you follow your procedures for layoffs defined in your personnel file. If you avoid a step it could come back and bite you.
• Always provide departing employees with their final paycheck on their final day of employment.
• Whenever possible utilize a system of progressive discipline when confronting a nonproductive employee. Don’t forget to document each step of the process.
• Do not garnish an employee’s final paycheck unless you have written permission from the employee to do so.
• Resist disciplining an employee for refusing to do a task when he/she claims it will be dangerous to do so.
• Explore alternatives to layoffs like cutbacks in hours and pay. Spread the pain to all managers and employees.
• Involve me if you sense the departing employee may be litigious.
• Audit the hours of any departing employee to ensure you provide all their wages including overtime.

As always, if you have questions please call.

Larry Levy

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