On September 15, 2021, a divided panel of the Ninth Circuit Court of Appeals decided…
Lawsuit Prevention for Employers
Whenever it becomes necessary to approach employees about performance or misconduct issues, I encourage employers to consider, carefully: “Do you picture this employee as part of your team in five years?” If the answer is “no,” any delay in firing the employee spells “P-R-O-C-R-A-S-T-I-N-A-T-I-O-N.” Procrastination roughly translated means, “begging for legal problems later.”
After more than three decades of advising employers, I have observed that employees who are candidates for termination seem to have a sixth sense of what is looming. Delaying the decision provides an opportunity for such employees, who are often “street smart,” to complicate the employer’s task by staging events in order to create legal hurdles for the employer to circumvent. They do this to discourage the employer from taking imminent disciplinary action. It often works.
A vivid example was presented early in my career, when a client summoned an employee to a termination interview. When the employee arrived at the supervisor’s office five minutes later, she entered with the words, “I just slipped on a grape in the hallway and hurt my back.” With these words, the employee vastly complicated the situation by creating a situation where, if the supervisor went ahead as planned and said, “You’re fired,” the employee could later contend that, immediately after she had reported a work-related injury (and possible physical disability) the employer terminated her.
This allegation would amount to what lawyers call a “prima facie” case of unlawful retaliation, and set the stage for a major legal battle. If such a case was tried before a jury, typically comprised of employees, the employer could expect to take its place among the ranks of those on the receiving end of a six or seven figure punitive damages award.
To avoid such nightmares, it is essential that employers understand that in California, they are functioning in a state with the most demanding employment laws in the nation. Not coincidentally, California is widely considered to be the lawsuit capital of the world. Employers are particularly vulnerable, because juries bring their natural pro-employee bias to the task of determining violations of the thousands of laws that regulate the state’s workplaces.
Once employers grasp the inherently dangerous terrain of where they are doing business, fundamental prudence dictates that they optimize whatever compensating precautionary measures are available to them. In practice, this means that employers must, before a dispute arises, take several preemptive measures. These include, at minimum, distribution of a state-of-the-art employee handbook, mandatory arbitration policy and complimentary personnel forms. Together, these can serve to neutralize many of California’s legal traps.
For example, the arbitration policy solves the jury bias problem referenced above. Just as important, the arbitration process can reduce an employer’s defense costs by as much as 90 percent, as compared to costs approaching a million dollars or more presently required to navigate the gauntlet of a jury trial. This precaution alone would enable far more employers to defend a case through trial than is presently the case.
That’s right, very few small employers can presently afford the enormous expense of defending a lawsuit that often typically arrives without warning, and is usually not budgeted for. To prove the point, ask yourself this question: If you were sued today, could you afford to pay defense counsel the better part of a million dollars in the next year to 18 months to defend your business? Many small employers will answer “no.”
Once the above “foundational documents” are properly in place and their receipt is acknowledged in writing by all employees, it is imperative that employers be certain that all personnel forms distributed to employees are entirely consistent, in every respect, with the employee handbook and arbitration policy. For example, if the application provides for “at-will” employment, the handbook must be free of references to a progressive discipline policy. Such policies state that a first infraction will result in a verbal warning, with additional infractions generating increasingly harsh sanctions. Such a policy is inconsistent with at-will employment, which provides that either party can terminate employment without any warning, and without any preliminary disciplinary steps.
Since employee handbooks and related documents are treated as formal written contracts by the courts, they are governed by rigid rules of contract interpretation. One of these provides that inconsistent contract provisions will be construed against the drafter, which is always the employer in the employment context. Using my example, this means that the at-will policy would be disregarded as though it did not exist.
Once rules of conduct are carefully set out in the handbook, employers must vigilantly enforce infractions. Starting with the introductory period, violations must be noted and the violator confronted. Before any employee is allowed to successfully complete the introductory period, it is imperative that his/her direct supervisor be forced to assess if the employee is a “keeper,” after carefully considering the question. Marginal employees during the “honeymoon” will become a deferred termination, and every termination involves the threat of a legal dispute. This problem should be solved within the first 90 days.
Performance evaluations must be approached carefully, to be sure that they do not “sugar coat” performance as a means of “keeping the peace.” Many wrongful termination cases have been lost by employers after performance evaluations showing adequate performance were introduced into evidence. One such document can be fatal.
Before an employee is approached about a performance or misconduct issue, it is important that the provision of the handbook that has been violated be identified so that the warning, whether verbal or written, is carefully worded to be consistent with the written rule. Every third grader knows that you can’t punish someone unless they were clearly informed of the rule violated. Poorly worded warnings or other disciplinary actions can invite an allegation that, “you punished me for violating a rule that wasn’t in the handbook.” This should be avoided.
When considering a termination, it is important to determine if the subject employee recently complained of safety or legal issues in the workplace, which could give rise to a claim of unlawful retaliation. As with the trumped-up allegation referenced above, this does not mean that the termination must be sidetracked, but it might mean that additional care is brought to the process once the potential problem is identified.
Lastly, I always recommend that employees be suspended before they are terminated, no matter what. This precaution ensures that there is enough time to carefully consider any problems that might be presented, and to implement any additional precautions that may be called for. Once a termination is implemented, the employer is stuck with it, even if it is later determined that a mistake was made. While the employer can offer to reinstate the employee, the employee is not required to accept reinstatement.
Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over three decades. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives.
While no one can guarantee a future free of lawsuits, Putnam has compiled a remarkable record of success: Not one employer-client has been sued in 36 years with his system of precautions in place.
For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well.
You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them. www.jaygputnam.com/articles-by-jay-g-putnam/