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Six Simple, Low-Cost Steps to Avoid Costly Employment Claims
By Ann Marie Towle-Mason, SPHR, and Celene Adams  

Often, companies call their human resources consultant after an employee files a claim against them.  

But by then it can be too late.  

Nationally, employees filed nearly 83,000 employment claims in 2007, according to the U.S. Equal Employment Opportunity Commission (EEOC).  

The average verdict in employment practices liability cases, which comprise 30 percent of all civil litigation in U.S. courts, had approached more than $450,000 per judgment by 1999, a figure that does not include other costs such as lower productivity and morale, damage to reputation and higher turnover.  

The good news, however, is that happy employees generally donít file claims against their employers. Since employee grievances usually pertain to issues they have with their managers, not to the company in general, if you train your managers to take preventive measures, you can significantly reduce or eliminate employee claims.  

ďBut!Ē you may be saying, ďIt costs money to reduce exposure to employment claims

Not necessarily.  Here are six effective, low-cost ways you can minimize employment claims.

Select the right people for the job

Market data shows that most employee turnover happens in the first year of employment, which is attributed to poor hiring decisions. Spending time up-front to set up a system for selection will increase the likelihood that the person is a good fit for the job and for the culture of the company.  

                Write down a realistic job description.

                Develop key questions to ask each candidate based on the job description.

                Target your advertising, consider interns, and try placement agencies.

                Always conduct a brief and specific telephone screening.

                Keep the personal interview on track.

                Donít forget to call former supervisors before making an offer.

                Train your managers in effective interviewing skills.

 Pay employees correctly

Paying employees incorrectly is a common reason companies suffer claims. Wage and hour claims are among the most prevalent complaints. The Employment Standards Administrationís Wage and Hour Division recovered more than $220 million in back wages for more than 340,000 employees in fiscal year 2007, exceeding the record levels collected in fiscal year 2003 by 3.8 percent. The agency concluded approximately 30,000 compliance actions and assessed more than $10.3 million in civil money penalties.  

Not understanding the complicated rules is often to blame.  

                Donít assume that a salaried employee is exempt from overtime.

                Be wary of deducting wages from exempt employeesí salaries.

                Include bonuses and commissions into overtime pay calculations.

                Hourly employees must have an uninterrupted 30-minute meal period.  

Show employees how to do the job and monitor their performance

Showing your employees how to do their jobs takes time.  But it saves time in the long run. Once youíve shown your new hires the ropes, make sure they carry through. Managers sometimes tend to be hands off.  But, after youíve demonstrated the essential tasks, watch how theyíre implemented, give feedback, and use discipline if necessary.


                Take the time to develop a realistic training plan.

                Assign responsibility for the successful training of new employees.

                Include your best employees in the training plan, but donít place the entire burden on them, and recognize and reward your employee-trainers for the extra effort.

                Provide constant, meaningful feedback along the way.

                Donít wait to correct deficient performance.  

Give complaints the red-carpet treatment

Just listening to complaints relieves a lot of the stress an employee feels.  Employees will usually try to resolve their complaints internally; however, if you fail to take the time to hear them out, your employees can go to an agency such as the California Department of Fair Employment and Housing (DFEH) or the EEOC, or they can go directly to an attorney.  

But although listening is a good first step, you have to do more. 


                Allow employees to go above their supervisor with complaints.

                Train supervisors and managers on how to accept and handle complaints.

                Listen carefully and without judgment.

                Donít try to solve the problem before looking into it.

                Treat complaints as confidentially as possible, but donít promise complete confidentiality since you are required by law to investigate certain types of complaints.  

Insist on respect and show it

Many employment claims concern harassment or discrimination. California leads the nation in exposure to employment law claims. The average cost to defend and pay an employment claim in California exceeds $300,000. The average jury verdict in a sexual harassment case in the state exceeds $1 million. Managers need to create a culture of respect to reduce or eliminate such claims.  

                Communicate your company values.

                Walk the talk every day in every situation.

                Donít tolerate hurtful behavior.

                Create opportunities for employees to learn about each other.

                Conduct harassment and diversity training.  

Know when and how to invite people to leave

If youíve given an employee all the tools he or she needs to succeed and youíre still not getting results, face reality and decide how to end the employment. You donít want to surprise employees in terminating them, however, as this will increase their impulse to seek retribution. Many times, an anticipated termination can become a win-win, because an employee who knows he or she is not doing well will often look for another job. And if you end the relationship with dignity instead of anger, you will decrease the chance of a claim against you.


                Decide whether the employee can do the job or just doesnít want to.

                Discuss and document performance and require immediate improvement.

                Make it clear what an employee needs to do in order to keep the job.

                Ask the employee for a commitment to doing what is required.

                Give an employee the choice to resign or be terminated whenever possible.

                Offer severance pay in return for a signed separation agreement and release of claims.

                Treat employees in the same manner when they are leaving employment as you did when they arrived.  

Training your supervisors in these techniques will help your company avoid costly employment claims.  Your supervisors, more than anyone or anything else, create a human resources culture by the manner in which they enforce your policies. Such training will serve to prevent employer liability and minimize the recovery of damages, including punitive damages, should they be awarded.

Ann Marie Towle-Mason, SPHR, is President of HR Source Consulting, Inc. and a Managing Consultant with Aspen Risk Management Group.  Contact Ann Marie at: 619-294-9863, or via the Web at www.aspenrmg.com

Celene Adams is a San Diego-based freelance writer.  Contact Celene at www.celeneadams.com, or 619-825-6062