Chapter 27 - § 27.2 • GOOD MANAGEMENT PRACTICES

• Jurisdiction: Colorado

§ 27.2 • GOOD MANAGEMENT PRACTICES

§ 27.2.1—How Juries Decide Employment Cases

Managers are busy people. In any hectic environment, it is easy to ignore "small" problems — and that is exactly how many managers and executives view most employee problems. Human resources professionals and employment lawyers know, of course, that improperly managed "small" employee-related difficulties can and often do quickly become big problems that can cost an organization enormous amounts of money and staff time, distract managers and executives from the business of the company, can adversely affect employee morale, and can expose the employer to significant legal liability.

The results of employment-related lawsuits in Colorado speak volumes about the consequences of inattention to employee-relations issues. Plaintiffs' verdicts in excess of $300,000 are not uncommon, and in one widely publicized case a jury in the U.S. District Court for the District of Colorado ordered an employer to pay more than $10 million in damages to an employee who, at the time of the verdict, still worked for the employer.¹ And such verdicts do not tell the whole story, because the award amounts cited do not include the attorney fees often awarded to plaintiffs who win at trial, nor do they reflect the attorney fees paid by employers in defending lawsuits (often in the low to middle six figures per case), even when the employers win at trial.

And, of course, most employment cases raise the possibility that a discharged employee will be reinstated to his or her former position. Thus, after contesting a former employee's claims in court, sometimes for years and often in highly emotional terms, an employer faces the prospect of losing that battle and being compelled to rehire the person and welcome him or her back into the workplace to resume his or her career, bolstered by a courtroom victory and sometimes also having received a substantial economic award in addition to reinstatement.

Realities such as these highlight why understanding basic employment law is critical for every manager in every business. In most cases, a little preventative maintenance and an awareness of potential land mines can eliminate or substantially reduce an employer's exposure to a catastrophic judgment. Conversely, ignoring warning signs of trouble, or failing to seek expert help as early as possible, can be disastrous.

Survey data reflecting the attitudes of members of the American public who make up juries — especially in the wake of the job outsourcing and tax and accounting scandals over the last decade — illuminate these verdict statistics, and reveal some startling facts about the people responsible for judging employment-related claims and defenses:²

• 67 percent feel that too many workers are treated unfairly by their employers;
• 56 percent "agree" or "strongly agree" that executives will lie to increase profits;
• 57 percent "agree" or "strongly agree" that the best evidence of an employee's performance is his or her performance reviews;
• 91 percent think that a company is negligent if it does not properly document an employee's performance problems;
• 78 percent of respondents agree that "many companies destroy documents hoping to avoid taking responsibility for things that they have done"; and
• 63 percent of respondents feel that their opinion of large corporations changed for the worse during calendar 2002, the year in which Arthur Anderson was put out of business by a federal obstruction of justice conviction, the full scope of the Enron scandal became public, and MCI WorldCom became embroiled in a bankruptcy and accounting controversy.

Given these attitudes, what is the difference between winning and losing? Analysis of cases tried in Colorado shows that almost every jury trial lost by an employer involved one or more of the following problems:

• Unexplained inconsistencies in discipline for arguably similar misconduct;
• Unrealistic, "pie in the sky" personnel policies that read like guarantees (e.g., "we promise to treat all employees fairly and with dignity" or "we strive to prevent all harassment in the workplace");
• Failure to follow a written policy;
• Unrealistic or inflated performance appraisals;
• No documentation of poor performance or misconduct;
• Failure to communicate honestly with the employee about the reasons for discharge;
• A poor investigation — especially a failure to get the employee's side of the story before discharge;
• No or poor documentation of a pre-discharge investigation;
• Retaliation or an appearance of retaliation; or
• A rash or emotional discharge decision.

On the other hand, employers rarely lost cases in which they had properly investigated and documented misconduct or poor performance, proceeded carefully and unemotionally, and avoided any appearance of retaliation. In other words, when an employer behaves deliberately, professionally, and honestly, it may discharge any employee who fails to meet the employer's expectations without significant exposure to employment-related lawsuits.

§ 27.2.2—Top Ten List: Managing And Avoiding Employment-Related Liability

Jury verdicts, court and administrative filings, and the anecdotal experience of many employment law practitioners all tell the same story: taking ten relatively easy steps can substantially reduce any employer's potential exposure to employment-related claims. Those ten steps (in no particular order):

1) Emphasize doing it right over doing it quickly.

Whether the issue is hiring, promotion, discipline, or discharge, employers often emphasize speed and decisiveness over substance and accuracy. There is never a good reason to rush to judgment about any employment-related issue. An employer generally has only one chance to get these decisions right, should emphasize good decisions over fast ones, and in all circumstances should take the time and steps — suspension before discharge, for example — best calculated to lead a measured, thoughtful decision.

2) Review and comply with policies and procedures.

Written policies and procedures can help employers of all sizes apply some consistency and order to a wide variety of human resources issues. But they are a double-edged sword, in that an employer's failure to follow policies is a frequent cause of litigation. Policies should be collected, reviewed, and updated as necessary, and care should be taken to avoid making any written commitment that the employer is unwilling to keep in all circumstances. Also, before taking any adverse action against any employee, an employer should consult all applicable policies to ensure that the company does what it has promised to do.

3) Implement and follow a realistic and effective policy concerning harassment and discrimination.

EEOC charge statistics for Colorado and jury verdict reports suggest that employers are more likely to experience a claim for gender discrimination, retaliation, and/or sexual harassment than for any other form of discrimination. Especially given the Supreme Court's seminal rulings in Faragher and Ellerth, all employers should have, and follow, a realistic and effective policy and promptly investigate and resolve all harassment and/or anti-discrimination claims. Employers also should consider periodic harassment training for all employees. The importance of beginning an investigation quickly after any complaint is received and communicating with the complaining employee while the investigation is ongoing cannot be underscored enough. Indeed, discrimination claims often arise due to the employer's perceived inattention to or disregard for the employee's complaint generated because the employer failed to follow up in a timely fashion or failed to communicate with the employee during the pendency of the investigation to assure such employee that the investigation was ongoing.

4) Avoid documentation land mines.

Nearly all employee-related issues involve a job description, a manager's or investigator's notes concerning poor performance or misconduct, relevant e-mail traffic, or some other form of written documentation. Employers must carefully consider both how such records are created and what they say, and how they are organized and retained. Training management employees in how their notes, e-mails, and or other written documentation may be viewed in the context of any employment litigation is an important tool for employers to mitigate these risks.

5) Give the Human Resources (HR) function its due.

Most businesses happily proclaim that their employees are their most important asset. Too often, however, the business function most directly responsible for critical personnel assets — the human resources function — is treated as a poor stepchild in employers' day-to-day management and decision-making processes. Worse yet, HR sometimes is thought of as a dumping grounds for employees who cannot make it elsewhere in the company. Employers who manage employee relations successfully recognize the importance of including HR in every business decision, providing the function with proper personnel and other resources, and encouraging — from the top down — the respect that HR must have to do its job effectively.

6) Hire and retain employees thoughtfully and legally.

Many employment-related disputes and lawsuits are traceable to a poor hiring decision and/or a poor decision to retain someone after he or she should have been dismissed. Employers must take the hiring process seriously, with a long-term view, asking, "Does this applicant have the potential to be a keeper?" To ensure compliance with the Equal Pay for Equal Work Act, ADA, ADEA, and Title VII, employers should scrutinize application forms and advertisements; train supervisors in interviewing and documentation skills; and check company practices with respect to background checks, information verification, and other screening processes. Once employees are hired, employers should take care to regularly and...