Legal nightmare.

Employees take Employers to Court

For several years now, the business community has been beset by product liability suits, "deep pocket" settlements, and soaring insurance rates. Now, to add to the legal misery, a growing number of employees are suing their employers.

Many of these

For example: In 1978, American Standard Corp. dismissed Gerald F. Adler, one of its managers. A letter from the company to the state unemployment agency stated that Adler had been fired for "unsatisfactory performance." Adler, outraged, maintained that the real reason he'd been let go is that he had reported alleged misdeeds at the company. Adler sued.

In January 1986, a Baltimore federal jury awarded Adler $2.8 million in the case. The judge who heard the case, however, threw out the jury's finding that Adler had been defamed and left damages related to "abusive discharge." The verdict was appealed by both sides.

In reporting the case, the Wall Street Journal made the following comments: "Harshly criticizing a former employee to others is perhaps the easiest way a company can make itself vulnerable to a defamation suit."

The Wall Street Journal also reported a similar case. Larry W. Buck was abruptly fired from his insurance broker's job. He tried, in vain, to find work in his field. Buck then hired a detective to find out why he'd been fired from his previous job. In the course of the investigation, Buck's former boss told the detective (who recorded the conversation) that Buck had been "ruthless," that he was disliked by his fellow workers, and that he'd been a failure as a businessman. Furthermore, the boss described Buck as a "classical sociopath, a zero, a Jekyll-and-Hyde person who was lacking in...scruples."

Armed with the detective's tape recorded interviews, Buck sued the company for defamation. The jury agreed that he had been libeled and slandered and awarded him $1.9 million - an award that was later upheld by the U.S. Supreme Court.

The WSJ article also noted that in other cases fired employees are seeking libel damages because their performance was judged unsatisfactory - and that judgment was disseminated outside the company.

A Cleveland lawyer who specializes in such cases said: "Juries don't have a lot of sympathy for big companies putting someone on the street. Juries also have a high regard for a person's reputation."

The act of dismissing an employee can land an employer in court these days. If, for example, a fired worker is required in a job interview to disclose the reasons he was let go from a previous employer, he may have a basis for launching a defamation suit on ground of "compelled self-publication." In fact, just about any report from a former employer that discloses negative factors about a worker's character or performance can provide the basis for a defamation action.

Wrongful dismissal, libel and sexual harassment all constitute grounds for suing an ex, or even a present, employer.

Wrongful dismissal may involve a large number of factors. In Washington, 150 former employees of a shut-down brewery are suing their former employer for $46 million. The basis for the suit was provided by an alleged statement of the owner of the brewery some years before. At the time, he apparently said something to the effect that "I'll shut this plant down over my dead body...your children and your children's children will have jobs here..." Later, when declining profits forced him to shut the plant down, the hapless employer was faced with a multi-million dollar lawsuit. His promise, which was more of an emotional statement of intention, was apparently construed as some sort of "implied contract" statement.

If you give a former employee a bad reference that prevents the individual from getting a new job, he or she can sue you. If you make promises, either in writing or verbally, that you don't keep, you can be sued for fraud. Negligence can also provide the basis for an employee-employer suit.

Insulting an employee or correcting the individual in front of other employees can get you in trouble. Just about any attack on a person's character, competence or reputation can be costly for an employer.

Employers can be sued for race, age or ethnic discrimination. They can even be sued for "ugly discrimination" - that is, if they favor better looking employees over more homely ones. Employees have sued employers for giving raises to prettier employees and bypassing homelier ones.

The whole field of sexuality provides a rich arena for legal exploitation of employers. For example, you could be sued for sexual harassment for any number of reasons. Jim Bowles, an attorney who specializes in defending companies in employee-related lawsuits, tells of a situation wherein the basis for a suit was that the supervisor had told a female employee a dirty joke and invited her to a birthday party at which there was a cake shaped like two women's breasts with candles on top.

Another area an employer must consider is that of "sexual preference discrimination." If an employee is fired on the basis of his sexual preference or cohabitation practices, the employee can sue. Furthermore, if an employer jokes about someone who has a handicap or debilitating disease, such as AIDS, this can be grounds for a costly lawsuit.

Dr. Adele Scheele, writing in the Los Angeles Herald Examiner said, "If a boss telephones an employee at midnight, or sends disparaging letters, or fires employees in alphabetical order until someone confesses to stealing things from the company kitchen, that is considered as being malicious..."

Where does it end? In Florida, women who work in prisons are suing because they can't get the prison guard jobs assigned only to males. Yet prisoners have complained in the past about being naked in the presence of female guards. The law must recognize that there are going to be cases where certain job assignments are more appropriately given to certain individuals. Can a male insist on being hired to work in a female sauna? Or can an individual insist on employment with the airlines as an attendant if he or she is very aged, or very obese?

There are many grounds for suits which are appropriate. For instance, you can't fire a person to save paying commissions or pensions. Nor can you fire an older employee to start a younger employee at a lower salary.

In most, if not all states, employers may not terminate an employee who has filed for workers' compensation. Nor can you fire an employee because he is a member of the Klan, the Nazi party or the Communist party or for involvement in unionization.

In almost all instances, you cannot withhold the paycheck of a terminated employee who has not returned company property. You must use due process to recover your property.

Dr. Scheele also observes that an employee can't be fired if the firing is against public policy. For example, you can't terminate an employee who refuses to commit perjury for you, or to lie to city, state or federal investigators who visit your business premises. She notes, "You can't make employees choose between perjuring themselves and keeping their jobs."

What all this amounts to is that you can no longer "fire at will." If you do not have a legally valid reason for letting an employee go, and if you are not highly circumspect in how you express that reason, and to whom you express it, you could be opening yourself for a devastating lawsuit.

Just how costly can it get?

Defending yourself in any lawsuit these days is usually an incredibly costly undertaking. And, whether you win the case or lose it, the lawyer still gets paid.

TRW Inc., a Cleveland-based corporation, estimates that it costs between $140,000 and $250,000 per case to defend itself in an employee-launched defamation suit.

Of course this leads many employers to seek out-of-court settlements, even when the suing employee really doesn't have a case. Not giving in to what is sometimes just plain blackmail can be devastating if the award is in six or seven figures.

According to Jim Bowles, who was quoted earlier, the average jury award is around $400,000 to each employee who wins a case against ex-employers. Employees win such cases 60% of the time. In cases where the employees win, the employer must also pay legal costs for the former employee. The legal considerations are myriad and costly, which could affect the bottom line.

In today's suit-happy society, the employer has to insulate himself as much as possible against devastating legal action. It might be possible to win in court and yet the employer might incur legal fees of such magnitude as to affect the existence of an enterprise.

The solution for employers is to follow the leads of the medical profession - practice preventive medicine. If done successfully, this can help you avoid costly legal actions in the first place. Remember, win or lose, the lawyers still have to get paid and their fees are out of sight.

According to Mike Wilbourn, vice president of Cal Gas Inc. in Sacramento, CA, there are several things an employer can do to prevent legal trouble involving employee-generated lawsuits. When hiring a new employee, disciplinary policies should be spelled out from the beginning. Such policies involve two major areas: "cardinal sins" and "performance-related" problems.

"A cardinal sin might be something like drinking on the job, dishonesty or bringing firearms or drugs onto the company's property. Striking a supervisor would probably fall into this category." However, if this is company policy, it should be spelled out in no uncertain terms, perhaps even in the employee manual. What if you are a small business and don't have a manual? Then you are in for trouble - even a set of rules typed and photocopied is better than no written rules.

Performance problems should be dealt with progressively. Again, the procedure for dealing with problems should be spelled out clearly to the new employee before being hired.

When a performance problem first crops up, Wilbourn recommends dealing with it right away. If such behavior is allowed to continue unchecked, other employees might get the impression that it is acceptable and begin to imitate it.

Initially, dealing with a problem may merely mean bringing it to the employee's attention. Everything should be known about a problem before confrontation with the employee. "Document everything. This will save you grief later should the matter come up in court," advises Wilbourn.

Wilbourn also cautions both employees and employers against losing emotional control when dealing with performance problems. "All employees should be treated equally when it comes to addressing performance problems," warns Wilbourn. "Employers should treat employees as they themselves would wish to be dealt with in a similar situation."

Wilbourn notes these points: 1) Use identifiable and known work standards; 2) tell the employee what is expected; 3) notify the employee of substandard performance; and 4) keep documentation of the conference.

There are no sure ways to avoid hiring potential litigants, but you can follow a policy of not hiring in haste. Take the time to check the references, study the employment application and do a thorough job when interviewing. During the interview, however, your hands may be tied somewhat by federal and state laws that do not allow you to ask certain questions - the kind of questions that were allowed years ago. If you ask the wrong questions at an interview or on an application blank, you may be in trouble later on.

Personnel consultants frequently advise and advocate trying to placate a worker being discharged by trying to find that person employment. There is an adage: People who find jobs don't sue, while those who remain unemployed blame it on last employer.

"Even if a company refrains from releasing negative information about a fired employee, the company may still be vulnerable to a libel suit if the dismissal came with little warning and the reasons for the firing were unclear," says John Donavan, a Buffalo, NY lawyer. He continues, "If the discharged worker is forced to tell a new (or prospective) employer the reason he was let go, such compelled self-publication can constitute defamation if the reason for the firing can't be fully documented."

Does this mean that once hired, never fired? No, you can still discharge workers, especially for economic reasons. But you must make yourself clear and follow the guidelines set forth in this article.