7 Significant Steps to Prevent Employee Litigation

Prevent Employee Litigation

By Terri Lubaroff

Problems, Problems Everywhere…

Anyone who has ever worked as corporate counsel knows it ain’t easy.

Corporate counsel has to deal with lawsuits, human resources, risk management, internal politics, and an ever-changing landscape of compliance landmines.  To make matters worse, the higher-ups do what they want, when they want… and then they come to tell you about it just in time for you to deal with the fallout you could have prevented — if they had just consulted you first!

Employees don’t always get along.  They lie and they sue.  They are victims of corporate downsizing and of circumstances.  But they also have amazing talent and potential that can push your company ahead of the competition.  The trick is knowing how to capitalize on talent while eliminating, or at least minimizing, the risk of conflict.

One lawyer recently told me she wished she had a magic wand.  She would make her company’s problems disappear.  She felt ineffective, overworked and frustrated.  Conflict was her life, and the way she managed conflict wasn’t effective.

While I would have loved to have been able to provide that magic wand, alas, I am not Harry Potter.  However, as a mediator, I have developed some helpful insights over the years.

Below are 7 early intervention techniques I gave to that lawyer in place of her “magic wand.”  Perhaps they can help your company avoid conflict too:

1) Risk management must be a top priority. 

“By failing to prepare, you are preparing to fail.”   — Benjamin Franklin

Risk management is defined as “the identification, analysis, assessment and control of, avoidance, minimization, or elimination of unacceptable risks.”

The goal of risk management is to identify potential conflicts before they develop.

The challenge is to fully identify as many risks as possible and convince your company to invest in their prevention.  Hiring a dedicated risk manager is one option.  This person should be educated in risk management and ideally have some real-world experience in your industry.  Successful risk management requires company investment in proper training and empowerment of its risk manager.  “Empowerment” means allowing risk managers to delve deeply into the company’s management techniques, business practices and culture.  A risk manager must fully explore potential risks, engage in effective analysis, mitigation and planning, and develop a risk response plan.

Corporate attorneys often act as risk managers.  Many corporate attorneys don’t realize that risk management is actually 100% of their job.  Let’s identify some of the proactive ways in-house counsel can manage risk.

First, risks must be identified.  This involves information gathering about the company’s biggest areas of concern and includes examining past actions that exposed the company to risk.

What went wrong? 

A corporate attorney must look at all aspects of the business in risk assessment.  This includes everything from corporate culture and hiring practices, to accounts receivable policies and marketing.  Information gathering involves interaction with every level of company management and staff — from the board of directors down to the night janitors.  Examine every possible scenario for risk.  Look particularly hard at high-risk employees (minimum wage part-timers, for example) and in unique areas of concern (like trademark or patent protection/litigation).

Once you have gathered all of this information, develop and initiate methods of risk prevention.  If risk prevention is ineffective, the company must invest in the management of risk impact.  This often requires a delicate balancing between legal limitations, the company’s needs, and the rights of employees.  Effective risk prevention and risk impact management can be achieved with an open corporate culture; but more competitive, closed cultures can also succeed if top management understands the dangers of failing to prepare.

Remember the benefits of brainstorming.  Ask questions like, “what are the top one-hundred most likely lawsuits?” or “what might happen if…” or “when an employee feels harassed, he or she can…”   If you’re not able to answer a question developed during brainstorming, you have identified an area that needs work.  Use this information to develop an action plan for each contingency.  Know the company’s risk tolerance for each potential risk.  Be prepared to act.

As you take these steps, you will come to realize how vulnerable your company is to risk.  Your risk–assessment efforts will lead to faster resolution, increased company productivity, and decreased legal spend.

2) Get to know your staff by checking in with them early and often. 

“Knowing is half the battle.” – G.I. Joe

If knowing is half the battle, what is the other half?  Simply put, the other half is people.  After all, conflict does not develop in a vacuum.

One of the biggest mistakes companies make is failing to connect with their staff at all levels. Employees want to feel valued, important and necessary.  A company that ignores the human element is setting itself up for conflict.

Require regular check-ins from a high-level manager during the first few days, weeks and months of employment.  Clear and early communication about culture and values, as well as frequent check-ins from multiple sources, are vital to long-term employee satisfaction.  In fact, studies show that events in the first hours of an employee’s new job can strongly predict turnover six to twelve months later.

3) Listen to what you hear.

“When people talk, listen completely.  Most people never listen.” – Ernest Hemingway

Have you seen Undercover Boss on CBS?  C-level executives go “undercover” inside their own companies, often posing as new employees who need training.  During their time incognito, CEOs gain valuable insight into their employees, their customers and their company.

While it’s not practical for every officer or corporate lawyer to go “undercover,” the lesson is valuable.  Dropping in unannounced and taking time to visit informally with staff goes a long way in building company morale.  Moreover, you will be amazed at what you hear.  Employees are more open with their managers if they interact on the employees’ “turf.”  Often, someone will disclose a rumor about someone else.  It might be that Larry touches people inappropriately, that Sam is interviewing at a competing firm, or that Dawn drinks on the job.

“It is much smarter to fire someone in advance before they create a problem than firing them after the problem has occurred,” says Steve Smith, former managing partner of Greenberg, Glusker, Fields, Claman and Machtinger, LLP.  Smith recommends investigating rumors on an informal level so the company can take a proactive approach to risk management and prevention.  Rumors are an early warning system, and will clue the company into potential problems that can be stopped before they become actionable.

4) Ask whether employees are embedded in their jobs.

“Keep away from people who belittle your ambitions.  Small people always do that, but the really great can make you feel that you, too, can become great.”  — Mark Twain

Being ‘embedded’ in a job is a fairly new concept. It examines whether an employee fits a position well, has links and rich relationships with others who depend on them within the company, and whether they would have to give up valued perks like money, benefits, leadership opportunities, skill development, or personal contacts if they left their job.

Providing mentors who can identify growth opportunities is one way to increase “embedded” employees.  Other methods include encouraging employee creativity, shared decision making, staff feedback and employee satisfaction.  Provide needed support in a way that furthers the corporate mission and promotes the corporate culture.  Provide a quality work environment, be people-proud and committed, and most of all, allow employees to have fun.  People who enjoy their jobs are less likely to leave and less likely to sue.

Don’t underestimate the concept of embedding.  People who feel valued, proud and committed usually don’t sue unless they have a really good reason.  Which brings us to…

5) Recognize your own mistakes.

“Eventually, we all have to accept full and total responsibility for our actions, everything we have done, and have not done.”  — Hubert Selby, Jr., Requiem for a Dream

Sometimes bad things happen to good people.  And sometimes good intentions result in bad things.

No company (and no individual) is perfect.  If a mistake was made, recognize it.  Don’t fight for the sake of fighting.  Sometimes admitting fault generates enough goodwill to resolve the conflict early and at less cost.  On the other hand, know when to fight an unfair and unfounded accusation.  After all, sometimes a company must “draw a line in the sand.”

6) Establish a “bad news first” culture.

“Bad news isn’t wine.  It doesn’t improve with age” – Colin Powell

A prominent bank chairman recently told me that the best management decision he ever made was to tell the president of the bank that he wanted to hear bad news right away.  This did three things: 1.) it established that clear and open communication was expected and important; 2.) it established a culture that dealt with problems rather than blame; and 3.) it allowed the company ample time to mitigate or prepare for conflict.

People are always happy to deliver good news immediately, but bad news tends to sit, until someone eventually has to deal with it.  People are afraid that the company is going to “kill the messenger,” so bad news tends to come as a total surprise, resulting in crisis.

Once bad news hits, problem-solving, not blame, should be the company’s highest priority.  Blame won’t fix the problem.  Bad news should be disclosed immediately up the chain of command to the highest authority.  If bad news is disclosed early, the company can mitigate damage, saving time and money.

7) Provide for conflict resolution.

“You don’t drown by falling in the water; you drown by staying there.” – Edwin Louis Cole

Conflict is an everyday fact of life.  Company politics, employee issues, and customer dissatisfaction are all potential sources for high-risk conflict.  Companies that have risk management plans in place often use early conflict prevention and resolution methods, as well as conflict resolution for cases that have escalated into litigation.

The benefits of mediating during litigation cannot be understated and are well known.  However, many companies fail to use mediation as early intervention in conflict.  A skilled, professional mediator can help parties in conflict come to resolution and preserve their relationship.  Given the opportunity for resolution, employees, business partners and customers may avail themselves of it rather than initiating a lawsuit.

A mediator can confidentially listen to a person’s complaints with an empathetic ear and without judgment.  Often, a person just wants to be heard.  Importantly, a mediator can help communicate complaints to the parties in a way that makes sense, whether the opposing party is a high-school educated night manager or the CEO.  Once this occurs, a good mediator can bridge the gap between a person’s “wants” to their “needs” and “interests,” narrowing down the true issues, which may be legal, personal or financial.

A company should look into any aggrieved party’s complaints – even if the company truly believes they are unfounded.  Letting the aggrieved party know that the company is taking the complaints seriously will generate goodwill that is useful in reaching resolution.

In the end, find a way to address an aggrieved party’s complaints. It is especially important in early intervention mediation to not be dismissive.  A company can give a little in such situations, yet get a lot in return.  This is the power of a positive “no.” Mediators are skilled at such tasks, and can be used for any type of problem a risk manager can conceive.

Problems, problems everywhere?  Just wave your new magic wand… early intervention and risk management.

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