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Watch out for employment lawsuits

If coping with the “normal” problems of a sluggish economy weren’t enough, small business owners have anotherlawsuit concern to be weary of—litigation. Employees who have been laid off are turning to the courts to find recompense by filing discrimination and wage and hour claims in record numbers, said attorneys Nancy A. Johnson and Scott S. Cairns of McGuireWoods LLP (www.mcguirewoods.com) in a recent workshop sponsored by the law firm.

In 2008, the Equal Employment Opportunity Commission (EEOC) received the largest number of claims ever—95,402, which was 13% higher than the previous high in 2002, and every category of discrimination experienced a double-digit percentage increase from 2007 to 2008.

Scott Cairns

Scott Cairns

Age discrimination claims went up 29% from 2007 to 2008, said Johnson. Retaliation claims increased 23% from 2007 to 2008. “Retaliation is the most dangerous type of claim,” said Cairns, explaining that people are human, and it can be hard not to let employee allegations taint judgments, or at least to convince a jury to believe that judgment was untainted.

In addition to discrimination claims, wage and hour claims—that is, claims concerning unpaid or underpaid overtime or working off the clock—are also on the rise, with a 77% increase since 2004. Alleged job misclassification—erroneously classifying an employee an exempt from overtime

Nancy Johnson

Nancy Johnson

 provisions and therefore not paying that employee overtime —is one of the most common types of wage and hour claims, but claims concerning falsified time cards are also common and are increasing.

The reasons for increased activity in employment claims are believed to be directly related to the recession. More terminations, demotions, denials of promotion—in other words, adverse employment decisions—create a greater risk for disgruntled employees to lodge complaints. Also, when workers are unemployed for long periods of time with little prospect of gaining employment, they look for other means to acquire money and take a harder look at available remedies which might otherwise not be worth pursuing.

Cairns explained that often terminated employees rush to an attorney with allegations of discrimination not necessarily knowing if it was discrimination or not. “Even if people don’t have a discrimination claim,” said Cairns, “an attorney they consult may convince them that they have a [wage and hour] claim.”

How to avoid litigation

Florida is an at-will state, explained Cairns, but that status does not give employers the freedom to do whatever they want. All employment decisions should be made with care to avoid inviting litigation down the line.

Johnson and Cairns outlined a number steps small business owners can take to ward off claims:

• Review each layoff or termination decision. Always use objective and measurable criteria before terminating someone, and document the decision process. You don’t have to tolerate poor performers, said Cairns, but document feedback and decisions.

“One of my clients does not permit any termination on the spot,” he said. “The supervisor can put an individual on leave with a recommendation to terminate. This gets the employee off site and gives the company time to examine the termination decision.”

Best bet: Consult an attorney before making any decisions. This is especially important if you are terminating employees who are in a minority in terms of a protected class such as race, gender, religion, age (at least age 40) or disabiltiy.

• Examine exempt job classifications. The Fair Labor Standards Act defines exempt and nonexempt positions. Make sure you have employees classified properly.

“It’s the exempt classification that gets you into trouble,” said Cairns. “I recommend every employer take a look at exempt classifications. This isn’t that hard, because if you have 100 jobs, you probably only have five or six jobs that need to be reviewed. Remember, though, that it’s not the job title; it’s the duties that affect exemption.”

“If you find you’ve made a mistake in classification, you want to correct it as soon as possible,” said Cairns. “The Department of Labor can be cooperative if you are trying to fix things.”

• Review your timekeeping procedures. Make sure you keep records of hours worked for each nonexempt employee—even if you pay them a salary.  

• Train supervisors in appropriate timekeeping. Do not tolerate working “off the clock” or any other falsification of time cards.

Scott S. Cairns is a partner with McGuire Woods in Jacksonville. He can be reached at scairns@mcguirewoods.com or 904-798-3223. Nancy A. Johnson is an associate. She can be reached at njohnson@mcguirewoods.com or 904-798-3234.

 SIDEBAR

Beware of theft

Employees are human, and when fear of layoffs or other economic stressors weigh on them, they may resort to “getting back” at their employer by whatever means they can, such as by taking things that don’t belong to them.

“People almost always take something with them when they leave an employer,” said Cairns. Generally, they steal by taking:

• Property and/or products. They may take things that don’t belong to them, from stationery supplies to laptop computers.

• Money. They may embezzle, take cash, accept illegal kickbacks, or even falsify sales transactions.

• Company data. Company data is particularly difficult to control today, since people can download databases and customer files onto an inexpensive thumb drive or a Blackberry.

• Time. They stop working but don’t clock out.

To anticipate theft:

• Do thorough background checks prior to hiring;

• Put into place controls on merchandise, cash, and assets that can be converted into cash;

• Perform audits;

• Talk to employees about the situation and let them know what steps are being taken.


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