The Enemy Within

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

Above all, act with fairness. “In the final analysis, the main reason people decide to sue is because they don’t think they were treated fairly,” says Gilmore. “If you treat an employee unfairly, and that employee is a member of a protected group, you run the risk of being sued for discrimination.”

Kris Frieswick is a freelance writer based in Boston.

Retaliation: Lawsuit du Jour

The fastest-growing area of employment litigation is retaliation. In 2004, Equal Employment Opportunity Commission settlements alone totaled $90 million. And that’s not likely to abate anytime soon, considering the U.S. Supreme Court’s broadening of the definition of retaliation last summer.

That case involved a female employee of Burlington Northern Santa Fe Railway Co. who claimed the company retaliated against her after she filed a harassment claim against her manager. After the complaint, she was reassigned from her forklift-operator job to one involving more hard physical labor. The company denied the charge. It hadn’t fired her or cut her pay, argued company attorneys, so its actions could not be deemed retaliatory.

The Supreme Court, however, sided with the worker. And its June 2006 ruling created a precedent that dramatically broadened the concept of retaliation to include management’s alteration of an employee’s status in ways other than outright termination or pay reduction. Now retaliation can include a transfer or a change in working hours, for example.

The EEOC is also broadening its definition of retaliation, says Constance M. McGrane, a litigation attorney with Conn Kavanaugh Rosenthal Peisch & Ford in Boston. Typically, as part of any employee-lawsuit settlement, a clause is added stipulating that the employee will not reapply for a job at the company. These so-called don’t-darken-my-door clauses, however, may be “viewed by the EEOC in and of themselves as retaliation,” says McGrane. — K.F.

So Many Ways to Sue

Determining the scope of employee lawsuits is problematic. For starters, there are no aggregate numbers for how many such suits are filed annually. After all, they can be filed in either federal or state court and can allege violations of a multitude of federal or state employment statutes.

For example, in 2005, the number of cases filed alleging only labor-law violations (relating to workplace conditions, union issues, and fair labor standards) and civil-rights violations (related to the Americans with Disabilities Act and the Civil Rights Act of 1991) in all U.S. district courts was 35,252. But this doesn’t include the cases filed in state court alleging violations of state labor and employment laws.

Adding up the vast economic toll isn’t easy either. Statistics from the Equal Employment Opportunity Commission, the federal agency that oversees compliance with federal antidiscrimination laws, offer only a small glimpse, but it is staggering. In 2005, companies paid out more than $378 million in discrimination-claim nonlitigated settlements with that agency alone. That’s up from $362 million the year before, but doesn’t include the billions that companies pay out in legal costs or court-ordered judgments and settlements or the hundreds of mammoth class-action suits filed on allegations of such things as breach of fiduciary duty (filed by employees of Enron and AIG) and the massive sex-based discrimination suits filed in 2004 against large retailers like Wal-Mart and Costco.

The other cost, of course, is the disruption such suits cause. “In addition to the damages that companies pay, these lawsuits divert time, talent, and resources,” says Ralph Dawson, a partner with Fulbright & Jaworski. And between the time spent preparing the lawyers, serving as witnesses, gathering evidence, and so on, says Michael Sheetz, a partner with Nixon Peabody, the “overall cost of executive downtime far outweighs the out-of-pocket costs.” — K.F.

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