To: Our Clients and Friends

From: Todd M. Sahner, Esq.

Dated: August 15, 2007

 Re:  HOW TO AVOID THE EMPLOYEE CLAIM MINEFIELD

Current state and federal laws create a minefield of potential problems for employers in dealing with their employees.  Fortunately, there are steps that you can take to minimize your exposure and the risk of litigation.  This article discusses how you can take protective measures.

            I.            Wage and Hour Problems

Under current law, certain employees are “non-exempt,” meaning that they must be paid for overtime.  In New Jersey, and in most states, overtime is defined as any work week in which the employee devotes more than 40 hours to work for the employer.  There are two areas where employers tend to get into trouble.  First, they do not keep accurate records of hours worked.  Second, many employers fail to understand what counts as time worked.  For example, there is what is commonly known as the “donning and doffing” rule, which provides that time spent by an employee suiting up and getting ready for work, and gearing down at the end of the work day, frequently counts as time spent at work. A second problem is that technology has made it convenient (sometimes required) for employees to work from home or remote locations.  This also counts as time worked, even though it is rarely tracked.

In addition, many employers fail to understand the distinction between a non-exempt employee (someone entitled to overtime) and an exempt employee (who is not entitled to overtime).  The distinction can be quite fuzzy, but in many cases, careful specifications of an employee’s title and responsibilities can clarify that they are an exempt employee and are not entitled to overtime pay.  Current law provides that if an employer is found to have violated wage and hour laws, the liability can begin with an amount equal to twice the amount due to the underpaid employees, and there is the possibility of criminal prosecution and civil penalties of up to $1,000 per violation.  The dollars can add up very quickly.

            II.            Claims by Disgruntled and Terminated Employees

Federal and state law provides a host of potential claims to disgruntled and terminated employees.  Employees in a protected minority status (people over 40, racial and ethnic minorities, women and certain other classes) and employees with a disability have a viable claim if they can prove that an adverse employment action was taken against them based on their minority status or disability.  An adverse employment action can be anything from termination to a salary cut, a change or demotion in title, or even the failure to promote when compared with other employees.

A separate state statute, the Conscientious Employee Protection Act, commonly referred to as the whistle blower statute, similarly allows an employee to bring suit if that person believes that an adverse employment action was taken by the employer because the employee complained about what they believed to be a legitimate violation of state or federal law, or a breach of contract rights on the part of the employer.  Our recent experience is that employees who believe they are about to be terminated, disciplined or demoted frequently concoct a complaint in order to try to gain leverage.

Finally, employees also have the right to bring suit if they claim that they have been subjected to harassment or a hostile work environment.  Case law teaches that a hostile work environment can include having to endure ethnic or gender slurs, demeaning comments on a regular basis or even one outlandish incident.  There is one “infamous” lawsuit where a female employee complained that she overheard two male employees talking in the coffee room about a Seinfeld episode they had seen the night before where Jerry Seinfeld couldn't remember the name of his girlfriend.  She told him that her name rhymed with a body part. Jerry guessed “Mulvah.”  It turned out her name was Delores.  The plaintiff claimed this offended her and a federal district court judge said that this case got past summary judgment and needed to be tried to a jury.

Protecting an employer from these types of claims requires a certain amount of planning and attention to detail.  First, all employers should have in place a written policy prohibiting discrimination, harassment or a hostile work environment in the work place.  The policy must include a realistic and practical means for employees who believe that they are experiencing these problems to lodge a formal complaint with an appropriate person or people in the company, and similarly must contain a workable and realistic methodology for the company to promptly and accurately investigate these claims and take remedial action if in fact discrimination, harassment or hostile work environment has occurred.  Finally, in order for the policy to provide appropriate protection from liability, the company must have annual training so that employees understand the terms of the policy, their rights under the policy, and what they can expect in the event that a complaint is lodged.  Assuming that the employer puts all of the above in place, the employer then obtains the maximum protection available under the law in the event that litigation is commenced.

With regard to claims by disgruntled or terminated employees that they have sustained an adverse employment action because of some minority status, the most important policy that a company can pursue involves conducting periodic reviews of all employees (we suggest every six months), the results of which are documented in writing, signed by the reviewing supervisor and the employee.  In addition, if incidents occur in between evaluations that affect an employee’s performance and status in the company, those incidents should similarly be documented in writing.  The reason is that employers frequently want to terminate employees because they are simply poor performers.  If the poor performer happens to have a disability or be in a protected minority class, in this litigious environment, they frequently consult with counsel and attempt to pressure the employer into settlement claiming that they have been targeted because of their disability or minority status.  Fortunately, the law does not protect sub-par performers simply because they are minorities or have a disability.  In the event these claims are made, if the employer can prove that the adverse employment action was taken solely because of performance related issues, having nothing to do with the minority status or disability, the employer should prevail.

Litigation by disgruntled and terminated employees is all the more common under the current environment because many statutes provide for counsel fees to the prevailing party.  This greatly increases the risks to employers because if they lose, and even if the damages sustained by the employee are relatively minimal, the counsel fees could easily amount to many tens of thousands of dollars, sometimes reaching the six figure level.  This obviously raises the stakes for the employer and gives plaintiffs tremendous settlement leverage.  The good news is that experienced plaintiffs’ counsel, who almost always take these matter on a contingency, are generally sophisticated enough to know when they have a difficult case where the odds of winning are very slim, and will often back down if the employer has a good paper trail documenting a nondiscriminatory reason for an adverse employment action.

The bottom line is that the right planning up front, at a relatively minimal cost, can be a tremendous money saver down the road.  Failure to take these relatively simple precautionary measures could leave an employer exposed to frivolous claims and perhaps, even worse, could adversely affect the decision making process – it is simply bad business to keep an underperforming employee simply because of the fear of litigation.