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Here is how HR can help prevent the missteps that could cost your company big in court.
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Careful handling of bias complaints can keep your organization out of court.
When former police officer Anthony Hogan accused his supervisor in the Kansas City police department of age discrimination, the department looked into the matter and decided to fight the claim. Hindsight suggests the investigation could have been more thorough, though it was good enough to satisfy the Missouri Human Rights Commission. The commission failed to find "reasonable cause," and Hogan, who had been a policeman for more than 24 years, pushed on to state court.
There, with the jury listening, he countered his supervisor’s denials with the proverbial smoking gun—tape recordings from three meetings where the supervisor could be heard telling him he was "burned out," "dragging his feet" and "no longer a fireball." Further testimony fingered another police official who had referred to him as "Officer Dirt—because he is older than dirt."
Somehow, the age bias Hogan experienced went undiscovered during internal investigation when remedial action might have salvaged his career. Now, it was the jury’s call. In a 10-2 verdict, it awarded him $700,000 in actual damages and $2 million in punitive damages. Hogan settled for $1.95 million during an appeal.
This botched investigation suggests what can happen without in-depth and careful handling of discrimination cases. Dennis Egan, partner at Popham Law Firm in Kansas City, Mo., says that job losses and layoffs foster a spike in discrimination claims. U.S. Equal Employment Opportunity Commission (EEOC) officials report that filings always go up during a recession; they expect an increase in filings because of legislative changes including the Lilly Ledbetter Fair Pay Act. And, with discrimination suits against employers expected to rise as Baby Boomers reach retirement age, it might be a good time to evaluate how your organization addresses charges of discrimination.
Here’s how to help your organization avoid the fate of the Kansas City police department and proactively prevent bias claims of all kinds.
Respond promptly and civilly to "de- mand letters." Frequently, human resource professionals learn of a looming legal claim when the complainant’s lawyer sends a demand letter. The lawyer offers to discuss reinstatement, back-pay or severance in return for not filing with the EEOC. "I always send a polite e-mail to HR saying here’s the situation, here’s what I’m suggesting we do," says Donna Ballman, an employment lawyer in Fort Lauderdale, Fla., who represents claimants.
"The demand letter puts you on notice that something went wrong. It’s common courtesy to acknowledge it," says Rae Vann, general counsel for the Equal Em- ployment Advisory Council in Washington, D.C. Too often, HR professionals treat these letters as junk mail. "Twenty-five to 30 percent of the HR people who get my letters just ignore me," Ballman complains. "This is very foolish. From the get-go my client feels he’s been done wrong and the nonresponse just gets him angrier. When you get a letter from me, if you do nothing, it’s not going to go away."
Sometimes, even when HR professionals respond, the tone of their letters creates problems. They may convey the outrage employers harbor at the attorneys’ audacity and perceived inaccurate assessment. "When you respond in an inflammatory manner telling the lawyer how ridiculous his letter is, it’s a big mistake," says Janet Hill of Hill & Associates in Atlanta, former president of the National Employment Lawyers Association. "It’s an invitation to him to escalate."
Contest unemployment claims with discretion. Usually, when employees are terminated, they apply for unemployment insurance. Weigh carefully the consequences of contesting a claim. "If he stole money or embezzled, of course, don’t let him get unemployment," Hill says."Otherwise, it may be advisable to let the claim go forward. It doesn’t increase your rate, and if you fight, the person will get a lawyer who will start digging around. And the lawyer will get a free shot at HR at the unemployment hearing."
Guard against retaliation claims. Almost 28,600 workers filed retaliation charges with the EEOC in 2008. "It happens all the time," says Dianna Johnston, an EEOC assistant legal counsel in Washington, D.C. "The employer wins on the underlying claim then loses on retaliation."
Sometimes, the retaliation is flagrant, like when the supervisor flies off the handle by firing or demoting the person. "This happens infrequently, but it still occurs even with seasoned employers," says Joseph Schmitt, partner and chair of the labor and employment group at Hallenland Lewis Nilan & Johnson P.A. in Minneapolis. More often, "it’s a manager who’s not sophisticated who lashes out."
People get "emotional when they’re accused of discrimination," says Jan Waterhouse, J.D., SPHR, assistant dean for operations and finance at University of Iowa College of Nursing in Iowa City, Iowa. "They may say things behind the complainant’s back, or tell people about the claim—which they’re not supposed to do."
Manage the person by the book, advises Condon McGlothlen, partner at Seyfarth Shaw in Chicago. "Complainants should not become immune from being treated like everyone else. Don’t manage them with such kid gloves that you send a message that filing charges is a ticket to job security. Document performance problems, but don’t go overboard. Keep a diary on an employee with a pending charge, but don’t put the person under a microscope that would be different from how you treat other employees."
Don’t get snared in a legal trap. Be aware that claims can be engineered, says Robert B. Gordon, a partner in Ropes & Gray in Boston and author of Dealing with Employee Lawsuits (Aspatore Books, 2005). "John Doe is experiencing problems—receiving bad performance reviews. He senses he’s facing the broom, so he lobs in a discrimination accusation or accuses the manager of picking on him because he filed a claim. What he’s doing is painting himself with a coat of Teflon. If the employer stands up to him, a retaliation claim is likely to come."
Occasionally, the documents reveal an obvious set up, Schmitt says. "The employee communicates to the manager, tells him he has a personal concern that’s bias-related, but asks him not to do anything. Then he comes back a month later and accuses the manager of having knowledge of the problem, but not doing anything."
Protect your information. Consider the advantages of doing your investigation under the direction of an attorney. When you go it alone—as happens in smaller organizations where resources are limited—anything you learn is fair game for the complainant’s lawyer. "Say a manager admits to telling the complainant that he was an ‘old codger,’ " Gordon says. "The comment would be privileged between the manager and HR only if the investigation was under the guidance and direction of an attorney."
Gather facts quickly. As time drifts on, people leave the company, documents get lost. Companies err in not making a full investigation of the facts as soon as possible. Collect everything—personnel files, pay records, general HR files, disciplinary records—any documents about that individual should be protected. "You need to scrub the case on the front end," says McGlothlen. "Begin by reviewing your process generally. Ask: ‘do we have a system in place? If so did we apply our procedures equitably to the complainant?’ "
If the person is in a protected class, HR reviews the situation before a termination is authorized at Johnson Controls, an automotive products company in Waukesha, Wis., with 140,000 employees. "We do our best to train supervisors so they know when they’re dealing with a potential landmine," says HR Director Lisa Whitmore, SPHR. "We have control systems in place so a supervisor can’t process a negative event unilaterally."
Don’t cut corners. Resist the temptation to talk to only one person, review one or two documents and reach a conclusion about the justification of the action. "Get the story straight, so that once done, it will be the story for the rest of the case," says Eric Dreiband, a partner at Jones Day in Washington, D.C.
"There may be times when you think you’ve done a thorough investigation, but you missed something," Waterhouse says. "Later, if the case goes to litigation, it can come back to haunt you."
A thorough investigation will uncover the weaknesses in your case, says Christine Walters, J.D., SPHR, a principal at HR consulting firm FiveL Co. in Westminster, Md. Walters helps employers investigate and respond to complaints. "If the case involves failure to promote or firing, I want to make sure the performance appraisals are there and that they go back a few years," she says. "It’s helpful to have the goods on them in writing."
Walters says problem cases often begin with appraisals. "When they indicate above-average performance or that the worker exceeded expectations, it can lead to an inference that the employer’s action was discriminatory."
Document interviews. Keep a re-cord of your interviews and retain them in the investigative file. Invite employees to write their account of what they saw or heard and give it to you, Walters advises. "If they decline, ask if you can write it up. Either way, ask them to initial it, but don’t push too hard. If they refuse, make a note of it. You want that signature or initial so you can validate the document six months later."
Maintain credibility. Consider the possibility that a lawyer like Egan may have you under oath. From the outset, Egan, a veteran of more than 100 jury trials, will challenge your impartiality and conclusions: "HR advises the company on how to accomplish the termination," he says. "How can they then go back and objectively investigate a decision that they participated in?"
Lawyers who investigate cases also run the risk of losing their objectivity. "The attorney has presumably given the company advice that there’s no claim or not a good claim," Hill says. "There’s a pride aspect that can inhibit willingness to compromise or rethink a recommendation."
Don’t demonize the claimant. "You may be deeply resentful that the person brought the charge and it can cloud your judgment about what a fair resolution may be," Gordon advises. "There’s a tendency to demonize this person just because he or she brought the claim. Remember, this is the same person who was a good human being who came to work every day and tried to do a good job."
Consider: When you terminate people, they try to figure out why they were selected. "It’s human nature to question whether it was a personal characteristic rather than a business decision," Vann says. And high-profile cases aside, the odds are stacked against the ousted employee. Most cases will fade away at the EEOC—with withdrawals, abandonments or findings of "no reasonable cause." But even for losers, the process serves a purpose. "It gives them something to do at a tough time in their lives; it gives them some feeling of having a day in court—of knowing they’ve told somebody their side of the story," Schmitt says.
Check out mediation. The EEOC encourages mediation in cases other than ones it designates as high priority. It invites the employer to participate either when it sends the charge letter or soon after. "Mediation is an incentive to my clients; if they can settle, it will save them money," says McGlothlen. He says employers should mediate only if they are open to settling. "I won’t go through sham mediations just to gain the discovery. A company that mediates should be prepared to settle the case."
In contrast, Dreiband sees advantages to mediation even if you don’t settle. "It gives the employer an opportunity to size up the person who brought the charge and learn whether there’s a lawyer involved."
Still, about 70 percent of employers take a pass on mediation, preferring to let the EEOC investigation run its course. Many conclude that they have done nothing wrong and to settle would set a poor precedent. Some say the opportunity comes too early. "The company hasn’t had the time to investigate or evaluate the case," Vann says. "You don’t want to be asked just to settle on a cost-of-defense basis. You don’t know if you did anything wrong, so why settle?"
A study in 2000 of 629 employers found that the main reason they opted out was because they didn’t think the claim was meritorious and they were unprepared to offer compensation when they expected that the EEOC would not find "reasonable cause."
Lawyers, on both sides, however, suspect these employers are not being practical. "In 25 years experience as a lawyer and HR executive, I’ve never seen that settlements encourage lawsuits," says Michael Buda, SPHR, senior vice president of HR and employment counsel at Superior Hospital Corp. in Boca Raton, Fla. "All that agreeing to a settlement shows is that you have to solve problems and get on with your business."
"It is really stupid not to mediate," Ballman insists. "What is the downside? It’s free; you get to rehash the issues; you get a chance to resolve the matter. If you don’t mediate and wind up in litigation, the judge will make you mediate."
Learn from experts. Kevin Murphy, a professor of psychology and information sciences and technology at Penn State University in University Park, Pa., is a consultant and expert witness, hired by both employers and plaintiffs to assess the legitimacy of their positions and then testify in court. In disparate treatment cases, Murphy, former president of the Society of Industrial and Organizational Psychology (SIOP), looks into the claimant’s work history—evaluations and promotions—and offers his opinion on whether the record aligns with the employer’s decision. "Worst cases are when there’s no real process of evaluation in place or when the documentation doesn’t measure up," he says. "An organization that does not have the documentation is in real trouble. I love that to happen if I’m working for the plaintiff."
Murphy has testified in more than 20 cases, for employers about half the time, usually when they’ve gone through a reduction in force (RIF). Employers have most trouble supporting their actions when they create procedures designed to cut staff, he says. "They have a well-developed performance management system which they disregard. Instead, they gin up something out of the blue to support their decisions. When you ignore all the things you already have in place, it can come back to bite you."
Respond fully to EEOC charges. EEOC regulations require you to answer a charge letter within 60 days. In some companies, HR assumes the responsibility; others assign it to in-house or outside counsel. The agency officially requests only a position statement, but the consensus is that more is better. "They really expect you to provide supporting documentation," McGlothlen says. "If they just get a letter from you, they’ll just follow up asking for more. It’s better to give them what they’ll want up front so they know you’re cooperating. Stonewalling can be perilous, encouraging on-site visits, and court orders demanding the production of documents."
Don’t treat the EEOC as the enemy. It’s not productive to argue with EEOC officials during the investigatory phase when they request information or even when they make a rare on-site investigation. "The investigators may do things that you think are ridiculous or they may be overly zealous," Dreiband says. "Your job is to respond in a measured way."
Remember, investigators have crushing caseloads and are not interested in debating the finer points of case law. "They’re not impressed so much with citations of the last 20 age-discrimination court decisions as they are with the EEOC’s own guidelines," Dreiband says. "Cite those provisions to the investigators; they care about their own standards."
Put the company’s interests first. In a discrimination case, there are several issues an employer must weigh.
The answers may yield a business decision that opts for fighting to the finish. Or they may point to the practicality of cutting your losses. "You don’t need to take up too much attorney time before you start racking up fees," says Whitmore, a member of SHRM’s Workplace Diversity Special Expertise Panel. "Sure, sometimes the demand letter is ridiculous, but we’ll offer a smaller amount just to get rid of the claim. If we provide a settlement, we ask the claimant to sign a release in exchange. We also go on record that we don’t believe we’ve done anything wrong."
At Johnson Controls, Whitmore says when a settlement is reached, the payout is charged against the budget of the claimant’s former manager. It’s often a bitter pill to swallow because he believes he did nothing wrong. "The manager is sick about giving money to someone he thinks has no right to it," Whitmore says. She preps managers during training for the eventuality that they might have to settle a case for business reasons. They go along, but reluctantly. "They usually want to fight it out to the end."
Most important in deciding what to do, Whitmore says, is not to lose sight of the ripple effect. Your workers are watching and waiting to see how you handle each claim. "We think about the people who worked with the claimant. We want everyone to think we’re an upstanding employer. We want others to believe we did the right thing."
The author, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.
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