To Defend or Not to Defend Against a Suit

Business as usual breaks down when an employee sues a company, and executives know how devastating a major suit can be. Deciding when to settle a case and when to defend against the claim in court becomes complicated.

“If you’re going to spend $10,000 to save $1,000, you lost,” said Shawn Daniels, a lawyer who represents both employers and employees for the Kincaid, Horne, Trumbo & Daniels law firm in Fayetteville.

There is a line at which economics should outweigh the public relations value of settling a case out of court, Daniels said. However, employers shouldn’t automatically settle all the time, or they risk building a revolving door for employee suits.

A “blood in the water” scenario occurs when several former employees sue a company in cases similar to one that an employer has just settled, Daniels said. To avoid chumming the staff pool with a too-simple settlement, employers should consider the message they are sending to the other employees.

Some employers traditionally have more employee complaints to handle, Daniels said, such as fast-food restaurants that have high turnover and low loyalty levels.

A few types of cases narrow options because they carry such a threat.

Area lawyers agreed that a sexual harassment case ranks as the most dangerous type of suit for employers in Northwest Arkansas to face, because it is difficult to disprove and hard to defend.

An employer’s worst nightmare would be to have a single mother of two children crying on the stand, explaining that she put up with a bad situation for so long because she needed the paycheck, Daniels said.

John Elrod, managing shareholder of the Conner & Winters law firm’s Fayetteville office, agreed.

“Any modern company with a good human resource department would have a zero-tolerance policy for sexual harassment or sexual discrimination,” Elrod said. “It’s very dangerous to ignore these cases.”

If any merit is found in the employee’s case, the best thing to do is fire the violator, Daniels said. Employers should also remember to document all actions leading up to the termination to try to avoid a wrongful-termination suit.

An absolute act such as firing the violator shows the victim, most often a woman, that the company wants to correct the situation.

If the complaint doesn’t merit firing the accused, administrators can separate the two, either on opposite work shifts or in different locations. Appeasing the employee who presents the complaint can avoid a suit altogether, Daniels said, because employees aren’t likely to sue their current employer.

“If she goes to you first, she’s giving you a chance to fix it,” Daniels said.

Sexual harassment charges are one of those pursued by the U.S. Equal Employment Opportunity Commission. Companies with 15 or more employees must abide by the federal statutes protected by the EEOC, including Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, religion, sex or national origin; the Equal Pay Act of 1963; the Age Discrimination in Employment Act of 1967; the Americans with Disabilities Act of 1990; Section 501 of the Rehabilitation Act of 1973; and the Civil Rights Act of 1991.

Employees charging unlawful employment discrimination can sue a company for reinstatement or hiring, court orders to eliminate discriminatory practices, restoration of lost wages, damages and attorney’s fees.

Damages vary according to the sued company’s employee base. The damage award for companies with 15-100 employees is capped at $50,000, but the range reaches $300,000 for employers of more than 500 employees.

To give a company an opportunity to correct the situation, employees must explain their complaint to management before filing any charges, Daniels said, or employers will use that lost chance to build their defense.

Each claim of sexual harassment should be immediately and thoroughly investigated. After interviewing the accuser, the accused and any witnesses, administrators should determine any validity.

“It is the responsibility of any employer to investigate objectively,” Elrod said. “If they fail to investigate, they do so at their own peril,” he said, adding that if the employer finds merit in the complaint, the case should be settled out of court.

“If you have concerns about it, get rid of it before it gets filed [in federal court],” Daniels said, because after an employee files a federal case against an employer, the filing appears on the company records for every further court claim.

Prevention

A well-written, lawyer-approved, employee-signed handbook can mean the difference in winning, losing or avoiding employee litigation cases.

“That’s your best defense,” Daniels said.

Paying for a lawyer’s revision of the handbook can cost $1,000-$5,000, Elrod said, but the long-term protection is invaluable.

Among other things, a solid company handbook should define harassment, discrimination and policies concerning alternative dispute resolution. An official alternative dispute resolution policy may deter employee litigation by handling the concern in-house or with third-party mediation.

Daniels said 75-80 percent of all employee complaints are settled through alternative dispute resolution.

Mercy Health System of Northwest Arkansas tends to employee concerns through two methods of alternative dispute resolution. Steve Voyak, public relations director for St. Mary’s Hospital, explained the “Dear Susan” process.

Boxes with comment cards sit in high-traffic areas of the hospital for employees, patients and families to fill out with suggestions, concerns and questions. Each card is read by Susan Barrett, president and CEO of St. Mary’s Hospital and Mercy Health System. With comment cards, the notes can be anonymous.

The personnel director for the hospital, Sandra Elliott, said a more direct problem-solving procedure also works. In sexual harassment concerns, the staff member reports the conduct to her department director or the human resources director. Immediately, the situation is confidentially investigated.

Mediation through a neutral third party or an ombudsman accepted by both the employer and the employee can also help settle employee complaints. No alternative dispute resolution can guarantee that an employee won’t sue the company, but it can require certain steps to be taken to resolve the concern before a suit is filed, Daniels said.

Once a handbook has been signed and filed, employers should stick to the policies in the book. Straying from the policies within the handbook can be as bad as not having one at all, Daniels said. Consistency becomes vital to building a defense.

Documentation from the human resource director becomes priceless when employee charges are filed. Any complaint records and company reactions, employee performance evaluations, and investigation documentation can show the administration’s efforts to respond to employee concerns.