The Sound Practice of 'Happy Law'

Legal experts share 4 tips for heading off nuisance lawsuits by ex-employees.

If you’ve ever dreaded the possibility of dealing with a disgruntled and litigious former employee, one that repeatedly hauls you before the Madison Equal Opportunities Commission, the Wisconsin Equal Rights Division, or the federal Equal Employment Opportunities Commission on suspect employment discrimination claims, you’re not alone.

It’s a very realistic scenario, especially if you haven’t taken care of business on the front end. Fortunately, there are ways to avoid that frustrating position, and they involve a little preventive medicine. The key to fighting off nuisance complaints is to establish and execute sound employment practices, starting with the process of making good hires and consistently documenting the steps you’ve taken to bring out the employee’s best.

We spoke to two local attorneys, Dan Kaplan, a partner with Foley & Lardner, and Thomas Godar, a shareholder with Whyte Hirschboeck Dudek, who offered four tips on how to avoid hot water when an employment relationship ends.

“This isn’t an individual, one-off issue,” Godar said. “Yes, you can somehow contain it, potentially, at the end of the process, but getting the right people on board, orienting them properly, making early decisions if they are not going to work out, all of that is part of a much longer process to avoid the kind of lawsuits where they take good laws that were meant to be a shield of protection and they make them into a sword in order to take on the employer.” 

1. Hire well

This counsel is admittedly obvious, sort of like buy low and sell high, but also a challenge to execute. From the false claims on résumés to the “name, rank, and serial number” approach of many former employers, it can be difficult to carry out a thorough background check. 

Sound hiring practices begin with identifying job candidates who have the proper experience and background, and conducting a background check that also takes into account how long they have worked for other employers. “Let’s ask them to provide a copy of the employment file, or at least a copy of their last evaluation because people can make up all sorts of self-serving information in their interviews,” Godar said. 

Employers make bad hires for a number of reasons, from the simple lack of due diligence to the pressure of filling a position to take pressure off an overworked, under-duress staff. “Sometimes, the human resources department is getting a lot of pressure from the folks on the line, the supervisors, because they need somebody now,” Godar said. “So they might move more quickly than they should.” 

Sometimes employers are unwilling to take those extra steps, whether it’s initial drug and alcohol screening, or whether it’s following up on references. They are fearful that even if they try to conduct reference checks, former employers will stonewall by simply confirming dates of employment and title.

There are strategies to get around that. According to Godar, prospective employers can ask about whether job candidates had regular evaluations from their employers. They also can ask whether an ex-employer provided written discipline indicating whether the employee met expectations. “Ex-employees can always request their former employer to provide that,” Godar noted. “That might give you an insight into the answer a person might provide.”

Godar also advised employers to talk to former supervisors if they can, which offers greater potential to go in depth and gain more insights than contacting human resource people, who are trained to only give name, rank, or serial number.


2. No Surprises

Once new employees are onboard, conduct careful reviews in the first 30, 60, or 90 days to evaluate whether the new hire understands the job and fits your culture. Oftentimes, employment discrimination lawsuits come out of a poor cultural fit in which an employee poisons the well, Godar noted.

Kaplan indicated that employers would be wise from the onset to prepare for the possibility that employees won’t work out. That argues for a consistent process of setting clear expectations, sharing information with employees about any failures, and training to correct any deficiencies. If this is done on a consistent basis, the termination of a struggling employee will come as less of a shock, and the employee, however disappointed, is more likely to view the firing as a fair judgment.

“If a termination is a surprise to an employee, he or she will be much more upset about it,” Kaplan explained. “If they are aware of what the employer believes are the failings as it relates to their job performance, then they at least have an understanding. They may not agree with it, but they at least know you are being consistent in the application.”

Kaplan said it’s also important to hold all employees to the same standard in order to further ensure a sense of fairness. “The number one reason why employees file lawsuits is not just because they think there was some nefarious, discriminatory basis for the termination, it’s because they think that what happened wasn’t fair,” he noted. “While the EEOC and the non-discrimination laws don’t enforce ‘fairness,’ you do get stuck in that legal quagmire of having to prove that what you did was legal, even if it wasn’t fair.

“So the best thing to do is take what I call the fairness approach. Give people notice, give them warnings, and be consistent in your application of those things.” 

Another scenario that could unfold is when an employee’s job changes over time and the employer fails to provide the proper training for new requirements. One aspect of fairness is to avoid simply throwing employees to the wolves. To remove that excuse, employers should head that off at the pass with additional training, and employees should raise that concern during periodic job reviews. 

“You would hope the employee would raise that concern at the first instance, when you are discussing the poor performance with the employee,” Kaplan said. “First a warning, and then some kind of disciplinary track is the best approach to performance improvement, or moving somebody out of the workforce for not performing well. You normally don’t have someone that is not performing to your liking and you turn around and say, ‘That’s it, you’re done.’ You must say, ‘Here’s your downfall, here’s why you’re not succeeding, here’s how you need to improve, and I expect improvement by a certain time.’”

Godar said the failure to convey a sense of fairness will leave terminated employees with questions. “They will fill in the blanks with their own suggestions,” he warned. “If you leave the suggestion that it was unfair, they might think it was unfair because they are a minority, or over 40, or what have you.”

If the employer is unsure whether the firing will come as a surprise, Kaplan suggests taking one more step. Have a meaningful counseling session with discipline and say, ‘Next time, you will be terminated,’” he advised.

3. Follow a Strategic Process

If termination is required, the way it’s handled can help avoid nuisance claims. At this point, if an employer can document that all the proper steps have been taken to fashion a successful employee-management relationship, then a reasonable basis for termination has been established.

In an actual termination process, it’s always best to do it in a manner that shows decency. Again, the number one concern is fairness because an employee doesn’t want to be treated poorly when he or she is let go. “The more that you can treat an employee with decency, the less likely they are to want to extract their pound of flesh,” Kaplan noted. 

There should be a termination process that involves at least two people, and there should be a respectful exit process that does not involve cleaning out your desk in front of co-workers. Try to avoid scenes where the employee is stood over by a guard as he or she boxes up possessions in front of everybody. 

“Sometimes on a Friday, after the workday, it can be best because then the employee can be let go and they don’t have to face their co-workers during the week, or as they are leaving,” Kaplan advised. 

Both attorneys recommend that, wherever possible, employers provide some severance compensation. Obviously, if somebody is being terminated for poor performance, you don’t want to provide a glowing reference, but you can note that you have discussed performance issues all along and let the employee know he or she will be eligible for unemployment insurance and that it’s the employer’s intention not to challenge unemployment compensation.

“If the employee asks for a reference, offer to provide dates of employment, position, and if the employee agrees, compensation level. If you do it in a manner that suggests you’re being fair and open about it, that you are not lying or hedging about the reason, that’s useful,” Kaplan stated.

For a termination that does not involve performance, such as downsizing due to economic conditions, the employer should consider providing outplacement assistance. 

In addition to softening the blow, employers might consider a separation agreement. In return for modicum of severance or some other benefit, including outplacement benefits, an executed release agreement can offer severance in return for a promise not to pursue certain claims. “Once they sign that agreement, then all of those kinds of discrimination claims can be released and they would not then be able to be asserted against the employer later,” Kaplan said. “If they were, you would have that piece of paper that has been signed, and that is a quick, inexpensive defense to present.”

Under no circumstances should severance be offered without some sort of release agreement. “Nothing feels worse than having paid someone three months of pay and then after three months and one day, find out that they have filed a discrimination complaint,” Godar said. “It’s an agreement that states that because we are going to provide something to you that you otherwise would not have earned at work, you also promise not to sue us. It’s a contract that’s enforceable. They have to be carefully done, but they are enforceable.”


4. Anticipate litigation

According to Godar, once litigation begins or if an employer can anticipate it, there are two options. If you anticipate it, you might seek to immediately negotiate a release with a small amount of compensation, whether it’s two weeks of pay or four weeks of pay, and get a full release from any action someone might bring.

Once a lawsuit is launched, “It’s our advice to work very hard at the front end to have no probable cause found,” Godar counseled, “or if you know that there is going to be a challenge under discrimination, to fight the unemployment compensation because you can get some discovery, some information under oath immediately. 

“Often, the employee is not as well prepared as he or she might be in six months when they are lawyered up. And finally, sometimes there are flat-out frivolous lawsuits. At that point, you might go after the lawyers for bringing it.”

“All of these steps are like bricks in the wall to minimize a [corporate] culture where somebody wants to go out and use good employment laws as swords rather than shields,” Kaplan said. “Employees are smart. They know that if they bring a complaint, they have additional protection because anti-retaliation laws are so strong.” 

Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click hereIf you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.