Avoiding HR lawsuits in a shaky economy

By Susan Tribby, associate vice president of risk management, AlphaStaff

The Equal Employment Opportunity Commission (EEOC) recently reported receiving 93,277 workplace discrimination charges in the 2009 fiscal year, marking the second highest level ever. Race, retaliation and sex-based discrimination made up the majority of the charges, with complainants receiving more than $376 million.

Although the economy seems to be slowly improving in 2010, many businesses will be forced to lay off workers and delay promotions. Historically, as the number of employee layoffs increase, the potential for litigation also rises. This happens for several reasons. Often employees who are laid off during a recession would not necessarily be laid off in a better economy and believe they have grounds to sue for unfair termination. Or employees who have been let go and need funds to stay afloat think a lawsuit may generate some income. Additionally, if a group of employees who are laid off all share a common trait (for example, all are older than 50, or all are women), this can lead the employees to think they have grounds for a class-action lawsuit.

Read an article, "Small businesses, big risks: Everyone needs EPLI."

Layoffs and terminations can lead to suits ranging from age discrimination to wrongful termination, and many employers are facing new legal challenges as an onslaught of baby boomers trigger a new wave of age-bias lawsuits.

Risk managers need to provide proper guidance for dealing with legal obligation, especially as companies attempt to get business back on track. This includes adopting fair employee policies and documenting their termination procedures to help prevent HR-related lawsuits resulting from the termination process or an increase of suspicious workers' compensation injury claims.

Read an article, "No surprises! High unemployment makes the case for EPLI."

The following best practices are for small and midsized businesses to prevent HR-related suits when considering workforce reductions:

1. Document the methods used to determine who will be laid off. Base eliminations on objective, documented performance criteria, such as number of sales.
2. If performance measurements are going to be used to determine who will be released, provide documentation supporting the decisions; for example several years (if possible) of performance appraisals, disciplinary issues, sunshine letters, etc. Other factors that can be considered are merit or seniority. The key is to be as objective as possible and to have the proper documentation to support the decision.
3. Train managers on how to complete the reduction in force (RIF) evaluation. Explain to them that they should be objective in utilizing the criteria set forth to determine who will be released. Put them on notice that supporting documentation is necessary in determining who will be released.
4. Train managers on how to communicate these staffing changes before performing RIF. There should be one consistent message as to the reasons for the reduction and the criteria used. Be sympathetic and most of all, respectful. What is said during the layoff process can later be used in court proceedings.
5. Document everything, from the reason for the layoff to the selection procedure, including any problems or concerns that occurred during or after the communication meeting.
6. Have statistics available that justify why certain employees were let go as opposed to others.
7. Don't make false promises, or be dishonest to the employee during the communication meeting. Additionally, managers should not make promises that are outside of the realm of the severance package.
8. Always have two people present during communication meeting. If possible, extend good will by offering severance packages that include services like continued healthcare for a period of time. This cordial gesture in itself could serve to prevent a lawsuit.
   As a measure of concern for the employee's well being, provide information on an employee assistance program (EAP), if applicable), or the number to a temporary placement agency. Let the providers know you are doing this ahead of time so they will be prepared to assist your former employees.
9. Express the overall reasons for layoffs to your staff as opposed to reasons pertaining to the individuals who were let go.
   Always be as forthcoming as possible with your staff regarding changes in the company. This is better than staff learning of changes through rumors or the media.
10. Communicate what else the company has done to maintain costs (e.g., cutting down on expenses, a holiday brunch instead of a lavish party, maintaining costs on supplies, telecommuting or job share options, etc.). This will show that the company has tried to maintain costs in ways other then the RIF.
11. Share any good company news or improvements with current employees to keep morale as high as possible.
    Any workers' compensation injuries that are reported during a period of layoff should have a thoroughly documented accident investigation.

Companies of all sizes and industries can easily safeguard against these suits by following the guidelines outlined above. Damages from wrongful termination or discrimination suits can be extraordinary, but a little planning and procedure clarification can help pull a company through already tough times.

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Susan Tribby is associate vice president of risk management for AlphaStaff Group Inc., a human resource outsourcing company offering flexible employer solutions that control costs, address key compliance issues and provide legal liability protection. For additional information, call 888-335-9545 or visit www.alphastaff.com.