Ten Steps You Can Take in a Day to Minimize Employment Liability
by Stephen F. Ruffino

The author is a partner at the law firm of Gibney, Anthony & Flaherty, New York and
heads its Labor and Employment Group.

Deck:Legal disputes with employees are on the rise. To minimize your liability, here
are 10 preventive measures you can take in a day.

Text:

Age discrimination, sexual harassment and disabilities claims by employees have
increased dramatically during the past two years. Recent legislative initiatives and court
decisions have encouraged employees to sue at the slightest provocation. With the
availability of increased damages and expanded statutory rights, every hiring, discipline
and employment termination decision has the potential to generate litigation. Fortunately,
employers need not be idle victims of a litigious environment. Instead, you can review
your employment practices and make small changes that will both decrease the
occurrence of legal claims and improve your chances of having a successful defense if a
dispute cannot be avoided.

What you spend on reviewing your employment practices will be far less than
what you would spend should your company be sued for discrimination. And you never
win a lawsuit brought by an unhappy employee: A single discrimination lawsuit can
easily disrupt your business for as long as three years and cost hundreds of thousands of
dollars in attorneys' fees and damages to the injured employee.

That's why you need to examine your current practices to be certain that your
company complies with its legal obligations. Your efforts will also demonstrate to
employees that you treat all workers fairly.

And the process need not be expensive or time-consuming. Here are 10 cost-
effective steps you can take in a day to minimize your company's vulnerability to
employment-related lawsuits:

1.Adopt a sexual harassment policy. Employers are not automatically held
liable for the acts of supervisors or other employees who create a "hostile environment"-
one in which sexual jokes, references and innuendos interfere with an employee's ability
to work-provided they can show that they were not aware of such behavior, that they
promoted an environment that discouraged it and took prompt corrective action. That's
why you need a policy that defines and prohibits unlawful sexual harassment, as well as
specifies complaint procedures.

A policy can be drawn up in five minutes, but will be worthless unless you
educate all managers and employees of their attendant responsibilities-and rights. This
means distributing the policy to all staffers and training them as to what constitutes
sexual harassment and what to do if it occurs. Supervisors should be trained to recognize
and dela with complaints and to investigate them promptly.

2.Review you employee handbook. Because many state courts increasingly
regard handbooks as written employment contracts, make sure you handbook contains a
prominent disclaimer stating that it is not an employment contract, that all employment is
"at will" and that workers can be fired at any time for any reason. The disclaimer should
be printed on the first page, or perhaps on a separate page, in large, bold type. Many
companies take the added precaution of having employees sign the disclaimer and filing
it in their personnel folders.

Make sure you preserve your right to modify the terms of your handbook at any
time. Otherwise, a court could maintain that policies discussed in the handbook are
binding and must be upheld.

3.Create written job descriptions. Job descriptions should minimize
unjustified firings and the resultant discrimination lawsuits. After all, when supervisors
specify criteria with to evaluate employees, you will have a defense for firing or refusing
to hire a person who does not measure up. all you need to do is to ask employees and
their supervisors to list the daily requirements of their jobs.

This is particularly important in light of the Americans With Disabilities Act,
which prohibits discrimination against disabled individuals qualified for the positions
they seek. Since a disabled person is qualified if he or she meets a job's legitimate
requirements-in terms of skill, level of experience and education-and is able to perform
its "essential" functions, written job descriptions should be prepared before you advertise
or interview to fill a position. Be careful to focus on specific tasks-an employee is
required to proofread documents-rather than on physical attributes-an employee must
have 20/20 vision.

4.Examine interview procedures. In 1991, a major New York City employer
was sued for sexual discrimination after asking female job applicants about their birth
control methods. To avoid such legal trouble, contact your lawyer or state's fair
employment agency for guidelines on what questions you can legally ask during
interviews. In general, avoid questions that are based on stereotypes and make sure
managers ask applicants only job-related questions.

It is also a good idea to make sure that your job application forms are up to date.
That means getting rid of questions that relate to age, ethnic background, disabilities,
marital status, sexual orientation or other topics that could provoke charges of
discrimination. But make sure they ask for the authorization to verify information, and
state that any falsifications are grounds for discharge. (And with the growing number of
negligent-hiring cases on the books, the fact that you checked an applicant's background
could be a valuable defense.)

5.Conduct regular performance evaluations. Set up a schedule for
conducting performance evaluations. It is best to hold reviews on a quarterly basis, but
they should be done at least once a year. These reviews should focus on what the
employee has accomplished, what he or she needs to work on, and future goals (focusing
on objective, job-related criteria) along with a time frame for achieving them.

Ideally, periodic evaluations will help enhance an employee's performance and
also provide evidence, when necessary, that a terminated employee failed to meet the
requirements of the job. Stress to managers the importance of giving honest reviews. his
reduces the chance of subjective, inconsistent appraisals, which can lead to liability.

6.Get valid Summary Plan Descriptions (SPDs) for all benefit plans. Federal
law requires that employers distribute to every benefit plan participant a clear statement
describing the plan benefits and his or her procedural rights. These rights include making
claims for benefits, taking steps if benefits are denied and appealing a denial of coverage.
Without SPDs, you could be liable for statutory penalties under ERISA and open to
claims by employees that they did not receive benefits to which they were entitled.

It is also a good idea to review all of your group health and life insurance,
retirement, disability and pension plans to confirm that your SPDs are not promising
employees benefits you have not paid for. Otherwise, you may have an obligation that is
both unfunded and uninsured, for which you could be responsible.

7.Institute standard termination procedures. Send a memo to all supervisor
stipulating that they must obtain prior approval from either the director of human
resources or a top executive before firing anyone. This procedure should cut down on
unjustified firings and the discrimination suits that typically follow. It is also a good idea
to have a witness present at all terminations to confirm what is said.

And be sure to tell the truth when letting someone go. Otherwise, you won't have
a defense to fall back on should he or she sue, alleging a discriminatory basis for the
firing. A case in point: An employer fired an employee who threatened to kill his
supervisor, but told the employee that his position was being eliminated. The employee
sued for discrimination and won because the employer could not back up its real motive
for firing him.

You should speak with terminated employees as though they were taping your
conversation for later use in court. This will remind you to speak accurately and
cautiously at all times. In general, however, if you are uncomfortable stating the real
reason for a termination, you probably should not fire the employee.

8.Set up a system for giving references. Designate one person-typically your
human resources director, office manager, or a high-level executive-to respond to all
calls and letters asking for references for former employees. This person should limit his
or her responses to objective data, such as dates of employment and the final position
held. This should prevent co-workers and line managers from making potentially false
and defamatory statements that could expose your company to liability. You can disclose
salary with the former employee's permission.

9.Make a policy to promptly notify terminated employees of their post-
employment entitlements and to document your efforts. Such entitlements include
COBRA continuation notices, state conversion notices, and distribution of documentation
for qualified benefits plans. Failing to provide COBRA notices can result in your
company essentially becoming the insurer, obligated for employees' insurance
continuation benefits. A COBRA violation also can mean having to pay tax penalties and
statutory damages. In addition, inadequate notice procedures could bring claims of
ERISA violations, resulting in both statutory penalties and negative tax consequences.

10.Consider getting insurance against discrimination. In the event your
company is sued for discrimination, such insurance will cover your defense and any
damages you must pay.

Be aware, however, that insurers only will cover good risks-i.e., companies that
have taken the precautions outlined in this article. Basically, they want to see that you
have done everything possible to protect your company from situations that could cause
liability. You can obtain such insurance, which typically costs [HOW MUCH?] from
[Chubb Reliance, Lexington].