Top 10 mistakes employers make that lead to employment-related litigation, and how to avoid them

Employers have a better chance of avoiding costly litigation by following these 10 steps

Guy Allen

Employers across the nation are served with lawsuits from former employees nearly every day. Examples of the wrongdoings former employees claim include that the termination was unlawful, that he or she was harassed, or that the employer failed to pay overtime. No matter the preventive steps taken by employers, they may still face lawsuits.

However, there are some mistakes employers make that increase the odds of being subjected to employment-related lawsuits. At a minimum, employers should avoid these common mistakes:

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10. Undocumented misconduct or performance problems – Employees’ performance issues should be documented. Proper documentation goes a long way toward avoiding someone’s claim that he or she was wrongfully terminated based on a protected characteristic such as age, disability, or gender.

9. Inaccurate employee evaluations – An employee’s evaluation should accurately reflect the person’s job performance. Having an inaccurate, grade-inflated employee evaluation can have unintended consequences down the road. For example, in defending a wrongful termination claim, an employer may be in the position of trying to convince a judge, jury, or plaintiff’s counsel that the employee was terminated for poor performance, when the employer’s own evaluation of the employee says that the person met or exceeded expectations. This scenario sheds doubt on the employer’s reason for termination because the employer is not perceived as truthful – either with the inflated evaluation or the reason for the termination. It is therefore imperative that, as uncomfortable as it may be to give soneone a negative evaluation, that it accurately reflect the employee’s job proficiency.

Guy Allen

8. Failing to have an anti-harassment policy and complaint procedure – One of the best defenses to a harassment claim is that an employer has a well-documented anti-harassment policy and complaint procedure, and that the employee failed to avail himself or herself of the policy. Employers without these policies put themselves in a weak position should they need to defend a harassment claim.

7. Failure to conduct an effective investigation – In the event an employee files a harassment claim, it is imperative that the employer conduct an effective investigation by preserving evidence (including emails), interviewing the appropriate witnesses, reaching a conclusion, and sharing the results of the investigation with the parties involved. It is often not the result of the investigation, but rather the method and completeness of the investigation, that comes under the most scrutiny.

6. Ill-considered and discoverable e-messages – Many people communicate things electronically that they may not say face-to-face or in an office setting. It is easier to make an off-the-cuff comment or inappropriate remark via email or text than other modes of communication. It is important to remember that emails and texts are discoverable in litigation, and that they often come back to haunt an employer. Thus, employers should be careful when communicating with employees and should have a written policy regarding the proper use of electronic communications.

5. Loose lips after termination – It is important for issues surrounding an employee’s termination to remain confidential. Employers should be wary of conversations with the employee regarding his or her work performance after termination. It is not uncommon for employees to record post-termination conversations in an attempt to get employers to make admissions for use in litigation. Likewise, the employer should not discuss the reasons for termination internally except with individuals with a legitimate need to know.

4. Uncontrolled letters of reference – Glowing letters of reference for someone terminated for performance reasons often become “Exhibit A” in an employee’s discrimination complaint. It is very important to have a policy about the type of information that can be written in reference letters, and to have a centralized base from which all reference letters are issued. It is advisable to have a policy that prohibits providing any references other than to confirm the employee’s last position/job title and his or her inclusive dates of employment.

3. Failure to define at-will relationship – Employers must make clear, whether in an offer letter, contract, or handbook, that the employment is at-will, meaning that either the employer or employee may terminate the relationship at will, at any time, with or without cause or advance notice. An at-will policy should be included in all applicable offer letters and employee handbooks, and should be clear, final, and not subject to modification (except in writing signed by the employer and employee).

2. Failure to keep track of employee hours worked – Wage and hour lawsuits, where employees claim they did not receive overtime pay or were not paid for hours worked, have become much more prevalent. Proper documentation of hours worked, including meal breaks, and the amount employees are paid goes a long way toward preventing and defending many of the most common types of wage and hour lawsuits.

1. Failure to procure employment practices liability insurance – Employment Practices Liability Insurance (EPLI) provides insurance to businesses for the majority of employee-related claims, including attorney fees. The costs of obtaining EPLI policies have gone down dramatically over the years. Employees can file claims with government agencies responsible for investigating discrimination claims, often at no cost. The employer, on the other hand, has to retain counsel to defend these claims, whether they have merit or not, and this is costly. An EPLI policy can help an employer reduce financial liability, subject to the deductible and potential exclusions from coverage, with respect to many claims filed by employees.

Employers should do everything in their power to avoid costly employment-related litigation, and they have a better chance of that if they refrain from making these 10 mistakes. While it’s impossible for an employer to completely insulate himself or herself from having to defend an employment-related lawsuit, if these pitfalls are avoided, he or she will be in a better position to defend a claim.

Guy M. Allen is a shareholder in Littler Mendelson’s Long Island office. He has a broad range of experience representing employers in all types of employment matters, including complex employment litigation, trade secret and non-competition litigation, discrimination, and more. Mr. Allen counsels clients on a variety of employment issues, including contracts, reductions-in-force, employee handbooks, leave policies, and the interplay of federal and local state statutes such as the Family and Medical Leave Act. Contact him at gallen@littler.com.

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