An unplanned tour of our judicial system can be financially devastating to a business. If presented with a lawsuit, a business may become an unwilling participant in costly legal proceedings, and the fact that the suit may be groundless is of little comfort. Long before any court looks at the relative merits of the plaintiff's claims, the business will be running up large legal fees while its attorney's answers the complaint, responds to discovery requests, attends depositions, and makes innumerable court appearances. The process alone has forced some businesses into bankruptcy.
While lawsuits in our litigious society are seemingly unavoidable, a business need not wait helplessly for the process server to arrive at its door. The best course of action for any business is to take affirmative steps now to maximize its efforts to avoid litigation. This article explores your dealings with both prospective and current employees and provides tips on how to prevent innocent mistakes from leading to devastating litigation. While no advice can protect you from your intentional acts, hopefully the tips that follow will help to prevent your innocent acts from landing you in court.
1. Check Your Hiring Procedures and Help Wanted Ads.
With no evil intent, many businesses adopt discriminatory hiring practices. For example, placing an ad that says, seeking "college students" or "housewives looking for extra income" or "gal Friday" each may be subject to a discrimination lawsuit. So what do you do? Just advertise the job description and let the candidates decide if they are interested. This will not only avoid claims of discrimination, it will expand your pool of qualified candidates.
2. Review Your Interviewing Procedure Before Hiring An Employee.
Having written the perfect, nondiscriminatory job ad, do not let all your good work go undone once you start interviewing. Do not ask questions that are not somehow job related. Even seemingly harmless small talk during the interview can get you in trouble. To be safe, make a list of the questions you intend to ask, and then review your list to make sure each all the question is job related and neutral in tone. In the free forms section of this website is a prepare list of questions you may ask during an interview. If you have any doubts, consult with a local attorney.
3. Check Your Employment Contracts.
Now that you have decided to hire someone, what does your employment offer letter, or contact, say? Does it answer each of the following questions:
- What is the position they were hired for (Title of the Job Position)?
- What Job Duties are involved?
- Is employment guaranteed for a specific period of time, or can the employment be terminated at any time ("at- will")?
- How much will the employee be paid, how often, and when?
- If an employee works for a commission, how are unpaid commissions handled if the employee leaves?
- Were any benefits promised, and if so under what conditions?
- What are the grounds for termination?
If you don't have an employee offer letter or employment contract specifying these points, you may end up litigating them. If you are not using an employee offer letter or employment contract, start. Keep the agreement simple, but make sure it covers the main conditions of employment. We also strongly suggest you have it reviewed by a local attorney to ensure you have not innocently omitted something important or included something damaging.
4. Review Your Employee Handbook.
If your company rules and policies are oral, you should consider having an employee handbook prepared. If you already have one, the policies set forth in the handbook or manual will be considered a part of your employment contract. It is therefore essential to make certain that the wording of your handbook is not negating the intent of your contracts. Employee handbooks prepared from software or books available the local stationary store are often fertile ground for employment related litigation resulting from conflicting policy statements and inadequate policies. A recent court decision held that a basketball coach, hired on a one-year contract, could not be fired at the end of that year except for good cause. The court based its decision on the school's handbook, which imposed such a condition. Your employee handbook should be regularly reviewed and updated.
5. If You Have An Employee Handbook -- Follow It.
Having reviewed your company's handbook, make sure it is followed. A common mistake is to discipline an employee without first following the review procedure contained in the employee handbook. Even if caught committing murder and mayhem, the employee is contractually entitled to whatever review process your employee handbook establishes. While a snap disciplinary decision may later be vindicated, the point here is to stay out of court altogether. That can only be accomplished by following procedure, regardless of how egregious the employee's conduct may seem.
6. Document Everything.
Document all employment matters, from hiring to termination. If the day comes that you need to justify a hiring, promoting, disciplining, or firing, you will want written documentation to support your decision. When hiring, be prepared to justify why you hired one candidate over another. That will require keeping on file the applications and/or resumes of all the candidates. You will be at a serious disadvantage in court if you cannot recall why you failed to hire a particular candidate.
Current employees should receive written evaluations at least every year, and any interim problems or kudos should also be documented. All evaluations should be signed by the employee, acknowledging receipt.
Supervisors understandably hate to give bad evaluations since it is confrontational and hurts morale. But such reluctance frequently results in a file with nothing but glowing evaluations. Supervisors should always give scrupulously honest reviews.