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The Rising Number of Lawsuits: Crucial Facts and Ways to Protect Your Company

Stop the insanity!

An employee contacted a lawyer about workplace discrimination, alleging he was not given a promotion because of his age.  The employee admitted that he had shown up late on numerous occasions, and that employee who received the promotion was the same age. After listening carefully to his story, the lawyer told the employee, “You don’t have a discrimination claim--but let me see your paystub.” In that moment, the case went from having no value to a multi-million-dollar class action lawsuit. 

Make no mistake, employee lawsuits are on the rise. In addition to traditional wage and hour and sexual harassment claims, companies are seeing a flood of background check, paystub and texting class actions. Staffing firms face huge risk. Even if your practices are on the right side of the law, you may be forced to settle a claim to avoid a catastrophic downside.

Why is this happening? In the past, the plaintiff bar chased ambulances, shaking down insurance companies for a settlement. But personal injury cases are tough to prove and ultimately the award is relatively small.  With the explosion of laws with statutory penalties, eager attorneys have found new sources of revenue that require far less work to get a big return.

Case in point: The Telephone Consumer Protection Act) which governs autodialing and text communications.  Sending a job offer without proper consent can cost you up to $1,500 per text. It doesn’t take much work for the plaintiff’s attorney to prove her case: She simply subpoenas your records and the number of unauthorized texts.  No, He said/She said factual issues; no need for costly experts; and no need to prove that even a single class member was, in fact, harmed.    

Protect Yourself. Implementing a robust compliance program is your best defense.  Here are five measures you’ll want to take:

1.      Have arbitration agreements and class action waivers. As part of this agreement, employees waive their right to bring a class action against you, and, instead, agree to private mediation. This is a magic eraser for stopping class actions before they make a mess of your business.

2.      Track changes in the law. With the localization of employment and activist courts, you could easily miss a new requirement that can cost you. Proactively implement federal, state and local tracking mechanisms to get in front of new regulations.

3.      Identify risk owners responsible for managing specific employment risks. When everyone is responsible for catching the ball, there’s the risk it will hit the grass. Specifically identify employment risks and document who in your company is responsible for managing them.

4.      Audit to ensure policies are implemented. Change is the enemy of compliance. Everyday occurrences such as turnover and competing priorities leave compliance execution to chance. Establish and follow documented compliance procedures to support your policies, including ongoing communication, training, auditing, and monitoring.

5.      Ensure the adequate insurance. Get with your broker and have an honest discussion about your risk. Understand what is covered and what is out of scope. Consider additional coverage as appropriate.

Every day, new regulations are placed on your business. To ensure you protect your company, have a documented compliance program with a Charter, Code of Conduct, and proactive programs around your top risks. This is one true instance where an ounce of prevention is worth a pound of cure.