CEO Best Practice: Labor Law

Executive Tools

• Executive Summary
• Self Assessment Checklist

Expert Practices Articles

• Surviving the Workplace Revolution
• Hiring Right: Your Best Defense
• The Terminator: How to Fire Employees Safely
• Protecting Against the Big Hits: Compliance Tools and Techniques
• Building Strong Employee Relationships
• Going the Extra Mile

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Surviving the Workplace Revolution

Why do employees sue their employers? For several reasons, say our experts:

• Emotion and blame. When employees feel mistreated, they look for someone to blame. It couldn't possibly be their fault, so it must be yours.
• Changing values. Two generations ago people didn't sue their employers because it didn't fit their value system. Today, many people believe the world owes them a living. Hence, they sue at the drop of a hat.
• Ego. Many business owners still adopt a "my way or the highway" attitude. Such an approach only serves to antagonize today's highly educated and mobile worker.
• Inconsistency. Lotito, Phin and Lott agree on one thing -- treating one person or a group of people differently than others will get you sued quicker than just about anything. Not only does consistency help you avoid the courtroom, it also goes a long way toward boosting morale.

Four areas tend to generate the most claims and the steepest financial damages: wrongful discharge, sexual harassment, age or racial discrimination and wage and hour claims. Focusing on these four areas, say our experts, will dramatically reduce your risk of winding up in court. In particular, beware of wage and hour claims, where employees incorrectly classified as exempt sue for overtime and back wages. The number of these claims has skyrocketed in the last few years.

To minimize your exposure in these high-risk areas, Phin recommends a three-pronged approach:

1. Make sure you have the "ABCs" of compliance in place.
2. Treat people fairly and create a culture that makes them feel good about working for you.
3. Purchase employment practices liability (EPL) insurance.

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Hiring Right: Your Best Defense

Phin recommends pre-employment testing for both skills and character. This can include general behavioral assessments such as the Predictive Index and DISC as well as skill tests for specific jobs (i.e., typing tests for word processors, math tests for accounting positions). Lott agrees, with one caveat: Don't default to the same test over and over without a regular performance assessment. Every six months or so, ask yourself:

• Is the test helping us get a better-quality person and a better match to the jobs we're hiring for?
• Is this test helping us build a diverse workforce?

To protect yourself from a legal standpoint during the hiring process, Lotito recommends the following:

• Create a customized application form that meets all the legal requirements and the unique hiring needs of your organization.
• Provide proper training for your supervisors.
• Use arbitration agreements.
• Use an executive employment agreement with your senior managers.
• Include severance clauses in your employment contracts.
• Conduct rigorous background checks.

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The Terminator: How to Fire Employees Safely

In order to minimize the chances of a wrongful discharge lawsuit, our experts recommend a carefully implemented progressive disciplinary system. For a rules violation:

• Give a verbal warning and document it.
• Give a written warning and have the employee sign it. If they refuse, write at the bottom of the form "the employee read but refused to sign" and have a neutral third party initial it.
• Give the "last rights." If the violations continue, place a letter in the employee's file that says one more violation will result in immediate termination.
• Suspend the employee pending investigation.
• Terminate the employee. If everything checks out and you have implemented the process correctly and fairly, fire the employee.

Progressive discipline for performance problems follows the same basic pattern:

• Identify the performance/behavior problem. Be specific.
• Set expectations. Tell the employee exactly what he or she must do to improve.
• Set a deadline. If the employee doesn't meet the standards you have set by a certain deadline (usually 30 to 90 days), they will lose their job.
• Document at every step of the way.

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Protecting Against the Big Hits: Compliance Tools and Techniques

The key to reducing your exposure to costly lawsuits, say our experts, lies in using the following tools and techniques to protect yourself from the highest-risk areas:

• Training. According to Lotito, a good compliance program starts with proper training of all supervisors and managers. Topics covered should include hiring skills, progressive discipline, conducting performance evaluations, handling employee complaints, conducting investigations and more.
• Employee Handbook. Phin believes the best handbooks are written by HR specialists and then reviewed by attorneys for the legal aspects. This allows you to adopt a positive tone that emphasizes your good management practices while providing the legal protection you need.
• Formal Complaint Procedures. Two of the highest-risk areas involve sexual harassment and discrimination. To avoid lawsuits in these areas, post the appropriate federal and state law posters on your walls and have a written policy in place clearly stating that you do not tolerate discrimination or harassment in any form. Have a formal process that tells employees where to go and what to do when they have a grievance. Take all complaints very seriously, advises Lotito, and engage in a prompt and thorough investigation. Establish alternate lines of reporting, especially with sexual harassment claims. When an employee has a valid claim, take immediate action.

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Building Strong Employee Relationships: A Long-Term Approach to Avoiding the Courtroom

In addition to complying with labor laws, staying out of the courtroom also requires an organizational culture that supports strong relationships with your employees. According to Phin, good relationships depend on four essential elements:

• Trust. People who trust each other don't sue each other, they find other ways to resolve their differences. To create trust in your organization, hire trustworthy people. Get rid of policies that encourage dishonest behavior. Set expectations and hold people accountable. Walk your talk.
• Shared Direction. To get everyone going in the same direction, suggests Phin, constantly communicate the vision. Focus on what your employees are gifted to do (as opposed to what you want them to do). Above all, tell a compelling story.
• Communication. Trust and shared direction depend on the third element of powerful relationships -- communication. To enhance your communication efforts:

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Going the Extra Mile

Ultimately, all your employment-related practices should work together to support three critical goals:

1. Keep complaints internal.
2. Get complaints dismissed before they get to court.
3. Have proof of your defense if you do end up in court.

To ensure the right level of support, ask yourself two questions:

• What mechanisms do I currently have in place for employees to resolve grievances within the organization?
• What steps have I taken to ensure that my managers and supervisors follow those procedures every time?

If you can't answer these questions in a satisfactory manner, say our experts, don't be surprised to find yourself standing in front of a judge and jury.

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