Hindsight is 20/20. When a lawsuit is done, I do an after-action report to look for lessons learned. I've always found at least one thing I'll do differently next time.
External counsel, like me, has an unfair advantage to also look back on what our clients did before we jumped in. We can see how an in-house counsel's early moves with an HR matter impact a company's position in litigation. Some HR issues can slip past in-house counsel new to handling them. These are blind-side risks. Let's take a moment — without laying any blame — to highlight five of those risks.
1. Putting Compliance Ahead of Business. HR policy audits are fundamental. Just get a management team buy-in before starting one. Management should be willing to seriously discuss how to resolve a weak spot discovered by the audit. The worst case scenario is for an audit to turn up a practice that's easily challengeable, and then do nothing about it. Many laws, like the federal overtime law, impose additional damages on an employer who handles a known compliance problem like an ostrich. That's not a legal mistake. Not all mistakes are.
2. Neglecting a Dispute Resolution Plan. Lawsuits happen. Tamping down defense costs can put the company at an advantage in settling or dismissing an employment suit. Higher costs yield larger nuisance-value settlements.
Arbitrator, judge or jury — who resolves an employment dispute matters to defense costs. Yet thinking out the most sensible dispute resolution system is easily overlooked. The right one depends on a company's industry and geographic footprint.
An arbitration policy might deter employees from filing claims, limit their discovery or waive their right to file a class or collective action. On the other hand, a jury waiver gives a judge the chance to dump a claim on an early motion to dismiss or later at summary judgment.
3. Bad Mouthing an Opponent.Talking trash doesn't help. Yes, it's tempting to act the tough guy behind closed doors with a management team, but think down the line. A lawsuit is really just a dispute, and bad mouthing the other side fuels the fight. Managers will struggle to make an objective business call in settlement talks. And disdain for an ex-employee is apparent from the witness stand. Juries don't like it.
4. Trampling on the Crime Scene. When a key employee defects to a competitor, the management team often asks if he five-fingered any digital trade secrets. Smart question. A well-meaning GC may let managers or internal IT poke around on the ex-employee's computer or smart phone for proof he emailed sensitive files to a personal account. That's the IT forensics equivalent of trampling on a crime scene.
Chances are the GC will need IT forensics to prove data theft. Most folks are smart enough not to leave the telltale signs. But courts can be nit-picky about IT forensic evidence. The starting point for forensic analysis is a clean forensic image of the drive. The more a drive is used, the dirtier the forensic trail becomes. Enough use can lead a court to kick out the forensic expert's testimony.
Take a forensic image of the drive first, and then feel free to rummage through the computer for a smoking gun. The GC now has the image she needs and only spent a couple hundred bucks to get it.
5. Changing Tune. Employment at-will can give a false sense of security. If an employer doesn't need a reason to let someone go, why waste time over-thinking it? Because moving too fast can blow summary judgment.
Here's how it works. Busy with other pressing matters, a GC gives short shrift to the reasons for a termination. Managers identify a half-baked reason for the decision or one (but not all) of the reasons. At termination, the managers tell the employee about the reason. They also use the reason to fight unemployment benefits. An EEOC charge finds its way to the GC's desk who decides to improve on the original reason. Responding to the charge, he tacks on more reasons or changes the story entirely.
The company might have just bought a jury trial. Judges can deny summary judgment when a company's reasons for the termination change over time — even if the new, improved reasons would have won the day. The bottom line is get the story straight up front.
Alan Bush of The Woodlands represents companies in labor and employment matters. He breaks legal developments down into business points on his blog at hrriskybusiness.com.