Owners of any size company struggle with the issues of being sued by an employee or outside vendor. The changes in the employment laws in early 1990 seem to be a well kept secret. It is hard to relate to changes in the employer exposure, particularly if you have not owned a business in excess of ten years. Most of us did not realize the impact of congressional changes in the law in the early 1990's. The passing of the Civil Rights Act created variables for companies that did not exist prior to the 1990's. The most glaring changes are, trial before a jury of your peers, compensatory damages plus punitive and exemplary damages and of course pain and suffering! These civil disputes have created a new variable for owners. Compensatory and punitive damages were given cap limits by Congress, establishing some kind of maximum dollar value of protection. But, in reality there can be multiple causes of action against you the employer and your company (the entity) combined with state torts issues that make for a financially volatile case far beyond cap limits established by Congress.
Awards of back pay and attorney fees are not typically governed or limited by these caps. There is no incentive for the plaintiff's attorney to be cost-effective in working a case and most courts grant the plaintiff's attorneys cost in addition to the judgement amounts in cases where the employer does not win. It is not uncommon to see these fees exceed the standard damage amounts awarded on the case.
A host of other employment causes of action can spring from laws that are not employment laws. In terms of Discrimination Law, hidden within the intention of the law lies a small section devoted to protection of the employee. These laws exist separate from the traditional discrimination laws and create still more employers' practice liability exposure for owners of companies.
Insuring employers and claims administration is an evolving risk. The risk is constantly changing with new court rulings, and new causes of action with revision of regulations. State Legislature along with U.S. Congress are constantly considering additional "employee protection" laws that have a immediate impact to employers and owners of companies. Since the 1990's, a complex series of laws, at both the federal and state level are aimed at protecting an employee's civil rights. The number of employment cases filed in federal courts alone has nearly tripled.
The cost of defending an employer in an employment lawsuit can be a tremendous cash flow drain and can involve litigation for over two years. Cases tried in front of a jury average 57% for discrimination acts of some sort.
Understanding the risk of lawsuits from employment practices must be factored into the development of all policies and procedures as a company grows and moves through the rigors of managing the employment line. Training managers and supervisors will serve as your first line defense. Training should include:
- Agreement to surface all employee problems to management or human resources.
- Train all management and supervisors on employment practices.
- Have employees sign an agreement to inform the employer of any and all grievances.
- Investigate all complaints, regardless of merit or charge.
Remember, the employee's claim against the employer will be; the employer violated a rule or law. Your best defense is the ability to demonstrate that the company acted according to its rules, acted consistently and informed the employee of the rules and consequences for not following the rules. The lack of documentation will only lead to the employer's word against an employee's word.