Employee claims are among the most common forms of litigation that companies face, threatening major financial and reputational repercussions that could resonate throughout the business.
Proactively safeguarding your business against the prospect of legal action by your employees is seen as the most effective way of minimising the damage that such cases bring. Being proactive in this case means being able to recognise potential warning signs, introduce preventative measures, and ensure that all of your employees are on the same page.
The biggest issue for business owners facing litigation is the major financial hit they represent. Legal costs and damages have been known to grow exponentially in a short amount of time, putting most small businesses (and even some larger ones) at risk of folding.
Another problem that companies need to be wary of is the reputational damage that legal action could bring to an organisation. In November 2016, after a protracted battle, former wrestler Hulk Hogan was awarded more than $31 million in a settlement against Gawker Media, a move which essentially bankrupted the company and led to a shift in public opinion against the Gawker brand.
Although the case wasn’t related to employee claims, it demonstrates the destructive effect that legal action can have on your company’s reputation. If it can happen to a major international entity, then it can happen to you. How then can you protect yourself against the danger of being sued? By understanding where you’re most at risk, and how to pre-emptively address these issues to prevent future problems.
Companies are often blindsided by legal claims brought against them by employees. This is mostly due to the fact that instead of keeping their ears to the ground, they go one step further and stick their head in the sand. When it comes to workplace lawsuits, there are often a few common culprits that are more than noticeable if you pay attention.
In most cases, employees sue their employers for one of the following reasons: discrimination in the workplace, harassment of any kind, failure to reimburse them for overtime, workplace injuries incurred while on the job, or cases of wrongful termination.
If you follow any high-profile cases of workplace lawsuits, chances are that it will be any one of these five culprits. If companies are continuing to make the same mistakes, then can they really argue that they did everything they could to prevent them?
In most cases it’s cut and dry and the company has to accept responsibility and pay out massive legal fees and damages to the plaintiff. This is the worst outcome, especially for small businesses, as the initial financial hit itself will likely be enough to kill the business and, even if it isn’t, the reputational damages will ensure that the end isn’t too far off anyway.
If these are such common occurrences, then there must surely be a means of preventing these situations from taking place and saving face before it becomes necessary, right? Right.
As the Chinese proverb suggests, “The best time to plant a tree was 20 years ago. The second best time is now.” This same concept applies to preventing legal action – your company should already have measures in place to deal with the issues that eventually grow into lawsuits, but if it doesn’t then the next best time to do so is immediately.
Documenting everything is important. When it comes to employees, you should be documenting everything from their first interview through to their performance reviews, attendance, disciplinary hearings, or anything else that might prove your compliance. If an employee lodges a complaint with HR for any of the reasons previously discussed, ensure that this is recorded and appropriate action is taken.
Training can also be beneficial in educating your employees on workplace rules and standards that have to be met. This can help you keep your nose clean and give you the grounds to remove any employee that contravenes what they learned during any relevant training.
Consistency is key when it comes to dealing with employees. Favouritism will put you on a fast track to an unhappy workforce. Instead, ensure that policies advocate the equal treatment of employees regardless of their position or any other factors that could be misconstrued as discrimination.
Finally, legal compliance is essential to protecting yourself against potential lawsuits. Failure to adhere to the legal standards that govern your business will give you no leg to stand on in the case of litigation and give all the power to the plaintiff. Ultimately, you need to make sure that everything you do is above board and that your company follows standard procedures and protocols.