November 30, 2021 | By Esther Ellington
The deck is stacked against employers in employee-related lawsuits. These verdicts, often awarded because of misconceptions, drain money from companies so that any action taken to prevent these lawsuits can be seen as an HR cost-saving initiative.
There is no way to eliminate the risk of someone, including employees, suing you. But there are proactive steps you can take to minimize your risk.
Employees are more aware of their rights today than any previous generation. That means they know if HR is doing something wrong or not aligned with current law. Small businesses must take proper and quick action to keep employee lawsuits at bay.
In HR, documentation is everything. When you document an incident or a reprimand, you are creating evidence to defend yourself against an employee lawsuit.
The documentation you create and keep in your employee’s personnel file makes up due process. This shows that you allowed employees to correct any poor performance or bad behavior. Doing so will help you defend against any employee lawsuits, including those for wrongful termination. If you don’t have proper documentation, you cannot easily protect your company.
HR must stay on top of ever-changing employment laws. At the federal, state, and local levels, labor laws impact how you can hire, what you must pay employees, workers’ compensation coverage, how to calculate overtime, required benefits, and so much more.
Intentionally ignoring these laws will cause problems. But mistakenly ignoring them will also cause issues. You can make an innocent mistake, accidentally breaking employment law, and still face fines, penalties, and costly employee lawsuits.
Any employee that oversees another employee is representing your company. If they mishandle an HR incident or treat someone in a discriminatory manner, your manager’s actions could put your company at risk even without intent.
Managers must have consistent training to help them avoid doing or saying anything which could open your company up to employee lawsuits. Annual training and updates for managers are a great idea. In this training, you should also encourage managers to reach out to HR with any questions to make sure they are acting appropriately.
Managers are not the only employees who require training. The rest of your team should also have training within their first few days on the job, as well as annual training sessions.
These training sessions can help remind employees how to stay safe at work and how to treat colleagues respectfully. Through regular training, you can reduce the likelihood of discrimination or other illegal activities at work.
You should have a company handbook that clearly lays out your company policies and procedures. Employees must know that when they come to HR for an issue that HR understands how to handle the issue with confidentiality. Your employees should also review the handbook regularly to understand the processes and procedures they must follow to remain compliant at work.
But having policies is only half the battle. Your HR team and managers must also implement and follow the policies consistently. If HR treats one employee differently from another and only follows a policy some of the time, that could be discrimination and open your company up to employee lawsuits.
Just like you must make sure that your team is following due process, you need to make sure that your HR team is proactive and addresses employee issues right away. Letting things fester will only make them boil over and potentially end up in court.
HR needs to address problems so that employees feel heard and respected. When employees feel valued and listened to, they are less likely to take their internal complaint to a lawyer and make a lawsuit out of the issue.
Companies can go bankrupt over employee lawsuits. While the laws are not set up to intentionally bankrupt a business, you could quickly find yourself in a precarious situation if you don’t follow the laws set up in your jurisdiction.
One of the most common reasons for employee lawsuits is incorrect pay. If employees sue a company for not getting paid correctly for their regular pay or for overtime, a company can be on the hook for vast sums of money. This can include the back pay owed to every employee, in addition to the employee’s share of taxes. So not only would your company have to pay taxes on behalf of employees, you would still have to pay your regular company taxes, plus fines and penalties.
All that’s required to minimize the risk of employee lawsuits is for HR to have the spare time necessary to focus on preventing the issues that give rise to employee lawsuits. Companies must consider outsourcing HR administration burdens like payroll and benefits administration if HR is stretched too thin. Letting go of these mundane tasks can help to reduce the likelihood of your company facing costly and embarrassing employee lawsuits.
Esther Ellington is the Director of Client Services at Questco Companies. Leading the Client Services and Onboarding Teams to deliver an exceptional client experience from the beginning of the client relationship and beyond.