Employment practices claims, for the most part, are undertaken for one of two reasons. The first, obviously, is the potential dollar award; the second is emotional—the employee's feeling of having been unjustly used. No matter what the reason, though, employment practices claims are costly, not only in dollars, but in lost hours spent in reviewing files and interviewing witnesses. Foresight in implementation of appropriate practices and procedures will enable the prudent firm to avoid many potential pitfalls.

The majority of claims against firms are made by former employees and arise from a variety of reasons. Wrongful termination cases often result from corporate downsizing, with age discrimination as the unfortunate by-product (protection under the Age Discrimination in Employment Act begins at age forty, with no upward cap). Former employees may contend that their rights under the Family and Medical Leave Act or the Americans with Disabilities Act (ADA) were not addressed in the workplace and that the resulting intolerable situation forced their resignations.

Claims by current employees may also cite these reasons. Additionally, current employees may claim they have been passed over for promotion based on discrimination—age, race, color, religion, gender, or national origin. Claims of sexual harassment are on the rise. With the erosion of the doctrine of employment at will, many employers today are taking the approach that employment practices claims are a cost of doing business and taking steps accordingly.

This article examines steps risk managers can take to avoid potential employment practices liability issues, as well as state laws regarding several aspects of employment practices liability.

 

Claims do not always arise from the past or current employee, however. Prospective employees may bring suit. Employment ads must be monitored for provocative language. A firm could advertise for a recent college grad or salesman with a proven track record, which suggest illegal age or gender preferences. Job applications must be reviewed to make sure no question could be construed as biased or discriminatory. Any information requested must pertain to the performance of the job itself, not to extraneous matters. For example, questions concerning child care arrangements could be viewed as putting women at a disadvantage.

The job interview itself must be carefully structured in advance to be sure that no questions can be construed as discriminatory or biased. The interviewer cannot ask disability-related questions, not even those that might seem to impact job performance, such as drug addiction or sick days taken. If the applicant has an obvious disability, however, or has voluntarily disclosed a hidden disability, the employer can reasonably discuss the need for accommodation. The ADA is nothing if not complex, and case law is still in the developmental stage.

There are many risk management strategies that can be implemented. First, a human resources audit of practices and procedures already in place might be undertaken. This could be done either by an internal or external agent, such as a law firm specializing in employment practices, and should cover job advertisements, applications, and interviewing practices. Employee handbooks and compliance mechanisms must be reviewed. These audits can uncover potential problem areas and recommend corrective actions. (A word of caution—the results of such an audit are not necessarily immune from discovery in event of a suit.)

An often overlooked method of reviewing current practices is through regular employee surveys. Employees who feel their concerns are heard and are being acted upon are more likely to use internal complaint mechanisms to resolve disputes. Such surveys must guarantee anonymity. Vertical—both up and down—communication policies must be in place. There may be an open-door policy, where employees can voice concerns to any manager.

Employment handbooks should detail organizational policies on hiring, discipline, and firing, and clearly state that discrimination in the workplace will not be tolerated. The handbooks should contain other policies concerning sexual harassment (whether opposite or same-sex), the ADA, and leaves of absence. Such policies must be in compliance with all applicable local, state, and federal laws. Employee handbooks should also state that employment is at-will. A cautionary note—listing specific violations as cause for termination is a dangerous practice in that the implication is that other equally serious violations are not.

The annual job review process must also be analyzed. The evaluation process must be tailored to the specific job requirements, and must use consistent requirements for all employees with the same jobs. Unfortunately, since many persons do not wish to convey unpleasant information, a common mistake is to gloss over poor performance, thus leaving the employee with the feeling that his performance is satisfactory. If, therefore, the employee must be terminated for poor performance, the employer is left open to a lawsuit. The reviewer must be careful to note strengths and weaknesses and give the employee both a chance to improve and specific improvement strategies. Above all, the review process must be viewed as fair to all employees. Behavior that is not tolerated from one employee should not be acceptable from another.

Even with the best loss control strategies in place, complaints can arise. All complaints do not necessarily result in a suit. Other internal methods can be used to address the complaint. Included among these methods are procedures in which the aggrieved employee first brings the complaint to her immediate supervisor or to human resources. This mechanism should allow the employee to appeal upwards in the hierarchy as necessary. A legitimate defense in a sexual harassment suit is that the employer has exercised reasonable care not only to prevent, but to deal with any such incidents should they occur.

Other dispute resolution devices include instituting a peer review committee comprised of both managers and employees who have authority to hear and act upon a complaint or appointing an ombudsman, either internal or external, to help resolve the dispute.

Even with the best internal procedures in place, a dispute may still end up in court. A trial, however, is not the only outcome. The employer can still avoid litigation through alternative dispute resolution methods, such as binding arbitration or mediation. Arbitration proceedings are confidential (unlike a trial) and can avoid both adverse publicity and high-dollar jury awards. Mediation, on the other hand, although confidential, does not guarantee an outcome, since the mediator's function is to attempt to negotiate a settlement between the parties, not to render a decision.

Finally, insurance as a risk management technique needs to be thoroughly investigated. The commercial general liability will not necessarily respond to employment practices situations, so employment practices liability insurance should be in place. The coverage provided should be carefully reviewed. Some policies, for example, provide both directors and officers coverage and employment practices coverages in one package. This can prove to be a problem since a claim in either area seriously diminishes the remaining limit of liability. Similarly, is defense expense an additional amount, or included within the limit of insurance? If the latter, then the limit of insurance should take this into account.

A superior policy provides both indemnification and defense against allegations of wrongful acts, including those that have occurred prior to the policy's inception but have been presented as a claim during the policy period. Punitive damages, where allowed by law, should be covered. There should be exclusionary language that clearly distinguishes between wanton or willful disregard of any law on the part of an employee that is the focus of such claim, and the vicarious liability of the organization. In other words, the organization should be provided coverage although an individual employee is not. The deductible or retention wording must be reviewed. For example, if there is a class action suit, will the deductible apply on a per-claim or a per-claimant basis? Another situation that must be considered is if a firm merges or acquires another firm, will the policy cover the other employees?

Insurance Services Office (ISO) provides an employment-related practices liability coverage form. Many insurers have developed their own forms. The risk manager will need to review his own firm to determine which coverage form best meets the firm's needs.

Federal law restricts employment decisions based on race and national origin, religion and creed, gender, age or disability. The restrictions on race, religion and gender apply to businesses with fifteen or more employees. The restrictions on age apply to businesses with twenty or more employees and the restrictions on disability apply to businesses with fifteen or more employees.

Many states add additional categories such as sexual orientation and marital status, and set lower limits for the size of business.

Following is a listing, by state, of these additional protected categories and business sizes, with statutory references:

ALASKA: changes in marital status and pregnancy or parenthood (§18.80.220);  size—1 or more (§18.80.300).

ARIZONA: genetic test results (§41-1463); tobacco use for state employees (§36-601.02(f) );  size—1 or more for sexual harassment allegations, otherwise 15 or more (§41-1461).

ARKANSAS: ancestry (§11-13-110); size—9 or more (§16-123-102(5) )

CALIFORNIA: ancestry; medical condition; marital status; sexual orientation; pregnancy, childbirth, or related medical condition; size—5 or more (Gov't Code §12926)

COLORADO: ancestry and someone married to or who plans to marry another employee (§24-34-402); sexual orientation (Romer v. Evans, 517 U.S. 620 (1996) )

CONNECTICUT: marital status, genetic information, and ancestry (§46a-60); sexual orientation (§46a-81c); tobacco use* (§31-40s); size—3 or more

DELAWARE: marital status, genetic information (t. 19 §711); size—4 or more (t.19. §710)

DISTRICT OF COLUMBIA: marital status; personal appearance; sexual orientation, gender identity, or expression; family responsibility; matriculation; political affiliation (§2-1402.11); pregnancy or childbirth (§2-1401.05); tobacco use*(§7-1703.03); size—1 or more (§1-2502)

FLORIDA: marital status (§760.10); HIV status (§760.02); sickle-cell trait (§448.075); size—15 or more (§760.02)

HAWAII: sexual orientation, ancestry, marital status, arrest and court records (§378-2)

IDAHO: size—5 or more (§67-5902)

ILLINOIS: citizenship status, ancestry, marital status, military status, unfavorable discharge from military service, sexual orientation (775 ILCS 5/1-102); expunged, sealed or impounded arrest or criminal record (775 ILCS 5/1-103); use of lawful products off of employer's premises during non-working hours (820 ILCS 55/5); size—1 or more in cases of handicap discrimination, otherwise 15 or more (775 ILCS 5/2-101)

INDIANA: ancestry (§22-9-1-2); tobacco use* (§22-5-4-1); size—6 or more (§22-9-1-3)

IOWA: HIV status (§216.2(5) )

KANSAS: ancestry (§44-1001); HIV status (§65-6002); size—4 or more (§44-1002)

KENTUCKY: familial status (§344.020); tobacco use* (§344.040); HIV status (§207.150, .160); size—15 or more for disability claims, otherwise, 8 or more (§344.030)

LOUISIANA: pregnancy, childbirth, and related medical conditions (§23:342); sickle-cell trait (§23:352); tobacco use* (§23:966); size—25 or more for pregnancy, childbirth or related medical condition (§23:341)

MAINE: ancestry, sexual orientation (T.5 §4572); tobacco use* (T.26 §597)

MARYLAND: marital status (Art. 49B §16)

MASSACHUSETTS: ancestry, genetic information, military service, sexual orientation (excluding pedophilia) (c. 151B §4)

MICHIGAN: height, weight, marital status, arrest records (§37-2202); size—1 or more (§37.2201)

MINNESOTA: marital status, status with regard to public assistance, sexual orientation (§363A-08); tobacco use* (§181.938); size—1 or more (§363A-03)

MISSOURI: ancestry (§213.055); tobacco use* (§290.145); size—6 or more (§213.010)

MONTANA: marital status (§49-2-303(1)(a) ); tobacco use* (§39-2-313(2) ); size—1 or more (§49-2-101)

NEBRASKA: marital status (§48-1104); HIV status (§20-167)

NEVADA: sexual orientation (§613.330); legal use of consumable goods during nonworking hours and off the employer's premises (§613.333); genetic information (§613.345); tobacco use* (§613.333)

NEW HAMPSHIRE: marital status, sexual orientation (§354-A:7); tobacco use* (§275:37-a); size—6 or more (§354-A:2)

NEW JERSEY: marital status, domestic partnership status, ancestry, affectional or sexual orientation, atypical or hereditary cellular of blood trait, genetic information, service in Armed Forces (§10:5-12); familial status (§10:5-4); tobacco use* (§34:6B-1)

NEW MEXICO: ancestry, spousal affiliation (if the employer has 50 or more employees), sexual orientation or gender identity (if the employer has 15 or more employees) (§28-1-7); tobacco use* (§50-11-3); size—4 or more (§28-1-2(B)

NEW YORK: engaging in recreational activities, political activities, and legal use of consumable products during non-working hours and off of employer's premises (Labor Law §201-d); predisposing genetic characteristics, marital status, military status, sexual orientation (Executive Law §296); size—4 or more (Executive Law §292(5) )

NORTH CAROLINA: tobacco use* (§95-28.2); HIV status (§130A-148); sickle-cell trait, hemoglobin c trait (§95-28.1); genetic information (§95-28.1A)

NORTH DAKOTA: marital status, public assistance status, participation in lawful activity off of employer's premises during non-working hours (§14-02.4-02(6) )

OHIO: ancestry, pregnancy, childbirth or related medical condition (§4112.02); size—4 or more (§4112.01)

OKLAHOMA: tobacco use* (T.40, §500)

OREGON: marital status, juvenile record that has been expunged (§659A.006, .030); genetic disorders (§659A.006); employment of another family member (§659A.309); pregnancy, childbirth, or related medical condition (§659A.029); tobacco use* (§659A.315)

PENNSYLVANIA: ancestry, GED recipients (T.43 §955(k) ); refusal to perform an abortion or sterilization (T.43 §955.2) size—4 or more (T.43 §954(b) )

RHODE ISLAND: sexual orientation, gender identity, or expression; ancestry (§28-5-5); pregnancy, childbirth or related medical condition (§28-5-6(2) ); HIV status (§23-6-22); tobacco use* (§23-20.10-14); size—4 or more (§28-5-6)

SOUTH CAROLINA: tobacco use* (§41-1-85)

SOUTH DAKOTA: ancestry (§20-13-10); tobacco use* (§60-4-11); size—1 or more (§20-13-1)

TENNESSEE: size—8 or more (§4-21-102(4) )

TEXAS: genetic test results (Labor Code §21.402)

UTAH: pregnancy, childbirth, or related medical condition (§34A-5-106)

VERMONT: ancestry, sexual orientation, HIV status, place of birth (T.21 §495); size—1 or more (T.21 §494)

VIRGINIA: pregnancy, childbirth, or related medical condition, marital status (§2.2-3900)

WASHINGTON: marital status (§49.60.040, .180); HIV or Hepatitis C status (§49.60.172); size—8 or more (§49.60.040)

WEST VIRGINIA: ancestry (§5-11-9(1) ); tobacco use* (§21-3-19(a) ); size—12 or more (§5-11-3(d) )

WISCONSIN: marital status, ancestry, sexual orientation, arrest or conviction record, service in Armed Forces, genetic test results, use or nonuse of legal product off of employer's premises during non-working hours, pregnancy, childbirth, or related medical condition, honesty test results (§111.31)

WYOMING: ancestry, tobacco use* (§27-9-105); size—2 or more (§27-9-102(b) )

*in compliance with company smoking policy

A list of state time requirements for bringing an employment-related claim follows. Note that the time is from the date the discriminatory act occurred or from the date of the last act in a pattern of discriminatory acts.

ARIZONA : within 180 days (§41-1481)

ARKANSAS : within one year (§16-123-107(3) )

CALIFORNIA : within one year (Gov't Code §12960)

COLORADO : within 6 months (§24-34-405)

CONNECTICUT : within 180 days (§46a-82)

DELAWARE : within 120 days of the practice of discrimination or its discovery (T.19 §712)

DISTRICT OF COLUMBIA : within one year (§2-1403.04)

FLORIDA : within one year (§760.11)

GEORGIA : within 180 days (§45-19-36)

HAWAII : within 180 days (§368-11)

IDAHO : (in district court): within 90 days (§67-5908)

ILLINOIS : within 180 days (775 ILCS 5/7A-102)

INDIANA : within 180 days (§22-9-1-3)

IOWA : within 180 days (§216.15)

KANSAS : within 6 months (§44-1005)

KENTUCKY : within 180 days (§344.200)

LOUISIANA : within 180 days (§51:2257)

MAINE : within 6 months (T.5 §4611)

MARYLAND : within 6 months (Art 49B, §9A)

MASSACHUSETTS : within 300 days (c.151B §5)

MINNESOTA : within one year (§363A.06, .28)

MISSOURI : within 180 days (§213.075)

MONTANA : within 180 days (§49-2-501)

NEBRASKA : within 300 days (§48-1118)

NEVADA : within 300 days (§233.160)

NEW HAMPSHIRE : within 180 days (§354-A:21)

NEW JERSEY: within 180 days (§10:5-18)

NEW MEXICO : within 300 days (§28-1-10)

NEW YORK : within one year (Executive Law §297)

NORTH CAROLINA : within 180 days (§95-242)

NORTH DAKOTA : within 180 days (§14-02.4-19)

OHIO : within 6 months (§4112.05)

OKLAHOMA : within 180 days (T.25 §1502)

OREGON : within one year (§659A.820)

PENNSYLVANIA : within 180 days (T.43 §959)

RHODE ISLAND : within one year (§28-5-18)

SOUTH CAROLINA : within 180 days (§1-13-90)

SOUTH DAKOTA : within 180 days (§20-13-31)

TENNESSEE : within 180 days (§4-21-302)

TEXAS : within 180 days Labor Code (§21.201)

UTAH : within 180 days (§34A-5-107)

VIRGINIA : within 180 days of the discriminatory event or 300 days of the date of unlawful discharge (§2.2-2639)

WASHINGTON : within 6 months (§49.60.230)

WEST VIRGINIA : within one year (§5-11-10)

WISCONSIN : within 300 days (§111.39)

WYOMING : within 6 months (§27-9-106)

Following is a state-by-state list of potential awards for employment discrimination claims. Note that these awards are by Civil Rights Commissions unless otherwise indicated:

ALASKA: back pay, attorney fees, costs (§18.80.130)

ARIZONA : back pay (two years max.), attorney fees (§41-1481)

ARKANSAS : (in court): back pay with interest (two years max.), attorney fees, compensatory and punitive damages with the following limits (§16-123-107(5)(c) ):