Employing the Enemy: Sobering Statistics

Employee lawsuits are more than an expensive nuisance.  They erode productivity, distract management, and can transform your corporate culture.  The most frustrating thing about employee lawsuits are that they are  mostly avoidable.  The Jury Verdicts Research 2007 edition of “Employment Practices Liability, Jury Award Trends, and Statistics” sets forth some highly sobering statistics:

– Employee lawsuits have risen 400% in the past 20 years to the currently level of 6.5 claims per 1,000 employees annually.

– The most common targets for Federal discrimination claims are private employers with between 15 and 100 employees (41.5%); second are private companies with an excess of 500 employees (23.9%); and third are private companies with between 100 and 500 employees (18%).

– In any employment case filed in federal court, there is a 16% chance the award will exceed $1 million and a 67% chance that the award will exceed $100,000, excluding attorney’s fees.

The average compensatory award in all federal court employment cases was $493,534 and reflects a 45% increase since 2000 (compensatory awards do not include punitive damages or attorney’s fees).

– In State courts, compensatory awards are up 39% while wrongful termination claims are up 260%.

– If an employment lawsuit goes to trial, plaintiffs are more likely to win 67% of cases in State court and 63% in federal court.

– The cost to settle an employment lawsuit has grown significantly over the last 5 years, from an average of $130,476 in 2001 to $310,845 in 2006.

The best way to avoid an employee lawsuit is to incorporate these practices:

Hire the Right People: Most small business owners are poor interviewers.  Study up on interviewing techniques, and craft probing questions to uncover potentially difficult employees.

Treat Them Right: Paying someone doesn’t mean you can walk all over them.  Treat your employees with respect.  Don’t humiliate them by reprimanding them in front of their peers, or do anything else that may cause lingering resentment.

Implement Harassment Policies:  Your harassment polices need to cover not only sexual harassment, but harassment based on race, religion, age, or disability.   Be certain to train your management on how these policies work on a regular basis.

Follow your own rules: Have an attorney or HR professional draft an employee handbook with up-to-date employment policies, and make certain you follow them.  You’d be amazed how many employers and managers ignore their own rules, which is a major litigation factor.

Document Everything:  The importance of good record keeping cannot be overstated.  If you don’t have something in writing, chances are a jury or judge may not believe it happened.

Evaluate Everyone: Regular employee evaluations can be valuable proof in an employment lawsuit.  Make sure any unsatisfactory performance is properly documented.  Otherwise, the judge or jury will not believe you when you say the employee performed poorly but all their evaluations are excellent.  You should conduct the evaluations on a regular basis, usually at least once per year.

Do Not Retaliate:  Employers are often blindsided by retaliation claims.  It is important to avoid retaliation because recent cases have lowered the burden for plaintiffs to prove their retaliation claims.

Take Action and Investigate Promptly: If a complaint arises, make sure you take the complaint seriously, investigate it promptly, and document it thoroughly.  A quick and thorough investigation may help eliminate problems before you have a real mess.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.

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