The Enemy Within

Companies fear employee lawsuits more than any other legal threat. To prevent them, experts advise looking in the mirror.

Look in the Mirror

There is no typical employee lawsuit. Complaints can range from discrimination (age, sex, race, religion, national origin, pregnancy) to safety and health violations to a hostile workplace, wage and hour violations, harassment, wrongful termination, and retaliation, as well as breach of fiduciary duty.

While it is easy to blame the litigious nature of our society for the proliferation of such lawsuits, experts contend that employers should first look in the mirror. Most employment-related charges come down to an interaction between an employee and a manager that has gone horribly wrong. “We promote people to managerial roles because of their operational successes or financial skills,” says Robert Gilmore, an employment and labor attorney with Kohrman Jackson & Krantz PLL in Cleveland, “but those skills don’t translate into good management of people.”

Sometimes, says Gilmore, managers sugarcoat issues with problem employees because they fear conflict, don’t want to be the bearer of bad news, or want employees to like them. When problems escalate to the point where an employee must be terminated, lack of documentation or disciplinary history can leave the company vulnerable to litigation.

Other times, managers fail to properly listen to employee complaints, act on them, or pass them along to superiors. This often happens because a manager is so overwhelmed with operational demands that he or she overlooks the seriousness of an accusation. “When a company or manager is under stress,” says Gilmore, “they’re trying to hit numbers and they close down communication. They don’t want to hear a complaining employee. In some companies, if an employee comes forward with a problem, they cut off his head. It’s really a culture issue.”

But it’s crucial to encourage employees to come forward with complaints — not punish them when they do — because “just being open and listening to employee complaints can give managers information about potential problems,” says Ralph Dawson, a partner at Fulbright & Jaworski. Agrees Michael N. Sheetz, a partner with Nixon Peabody LLP: “The best time to resolve a case is right when it begins,” and that’s often at the complaint stage.

At Pelco Inc., one of the largest video-security-camera manufacturers in the world, the 2,400 employees and their complaints are taken very seriously. The Clovis, California-based company has an active suggestion/complaint system in which employees send notes directly to a designated representative in their division.

Every comment is reviewed once a month by CEO David McDonald and the company’s executive board, logged by the human-resources manager, and assigned for resolution the same day. Two days later, the resolutions are explained at group meetings. “It keeps everyone honest,” says McDonald. Systems like this, often taking the form of telephone hotlines, have become standard in the wake of recent financial scandals, but usually focus on reports of fraud or malfeasance rather than the managerial or interpersonal issues that can escalate into employee lawsuits.

Pelco’s “say anything” system, however, is just one reason why the company, in its 20-year existence, has had only one employee lawsuit filed against it — which it settled for $1,000. McDonald attributes the company’s litigation-averse employment culture to creating an environment in which “the line between management and employees is so blurred that no one even uses those terms any more.” In his opinion, however, “this culture isn’t an antilitigation plan or a profit plan, it’s a do-the-right-thing plan.” In addition to a companywide open-door policy, McDonald says that Pelco’s active volunteer program (since 1993, Pelco and its employees have donated more than 1 million toys to Toys for Tots) levels the managerial hierarchy and creates a common bond between employees and managers.

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