Why Employees Sue Employers

Understanding what motivates employees to file a lawsuit against their employer may help employers avoid being sued. Remembering the Golden Rule goes a long way.

• Feeling Helpless. Arises from a feeling that one's work life is no longer in one's control - the more this loss of control appears to come from wrongful action, the more likely the employee will sue.
• Not understanding why they were fired/disciplined. Don't confuse telling an employee they're fired with telling them why they're fired. When a person feels like they've been blindsided, they tend to feel that they've been treated unfairly and will be more likely to seek justice.
• Financial Security is Upended. Seems obvious that getting fired is not helping your financial situation - employers make this worse when they vigorously oppose unemployment comp applications from a terminated employee. Rubbing salt in the wound improves your chances of being sued.
• Treating the Employee Poorly when Firing. Bad treatment creates bad feelings and bad feelings lead to lawsuits. Public displays that humiliate/embarass the employee, strong-arm tactics like walking them to the door with security, and changing locks immediately after the employee is gone are a few examples.
• Not treating the employee as a team member. Employees like to think of themselves as team members, part of the family, someone not expendable. Being dropped at a moment's notice doesn't help.
• Being treated differently from others or by a new supervisor. Inconsistent treatment is often viewed as unfair and unfairness begs for justice. In the same vein, new supervisors often take over their responsibilites with an assumption that all relationships are a blank slate. There is never a blank slate - employees expect newbies to know their past contributions and they expect to be treated the way they were told they would be. Promises made in the past aren't forgotten by the employee.
• Selective listening. When an employee feel like the employer doesn't want to hear their side of the story, they are more likely to seek a forum which forces the employer to listen = a courtroom. Exit interviews, performance reviews and responses to EEOC charges are all after-the-fact communciations.
• Inadquate investigations. No one likes to report a problem and receive little to no feedback on it. Worse still is not having the facts straight before investigating accusations of employee wrongdoing and then, not apologizing when the accusations turn out to be wrong.
• Any type of harassment followed by firing. No matter how an employer tries to spin it, employees who are fired after complaining of harassment will believe they have been retaliated against.

Prevention Tips:

1. Give feedback about performance early and often. An open-door communication policy that makes employees feel like they are listened to is optimal. Open communciation will make your workplace better and help avoid an employment-related lawsuit. If your communication is limited to annual reviews and exit interviews, you've missed the boat.
2. Frequent performance evaluations that set performance goals and address problems directly help employees understand why they were fired if that becomes necessary. A system of progressive discipline also has its merits. Unless absolutely necessary, don't fire an employee without warning.
3. Don't fight an unemployment comp application without a really good reason; know your facts well before opposing the employee; use severance packages is possible to assist an employee with transition.
4. Prepare for termination - if you've been using strong communication systems, termination shouldn't come as a surprise and thus doesn't need to be done at a moment's notice; conduct terminations privately. Show the employee dignity and respect in the process-let the employee leave outside the presence of others.
5. Don't sit non-peformers on the bench - give extra coaching/practice until the employee must be cut.
6. Don't allow inconsistent treatment without justification and don't forget about past promises, practices and history.
7. Listen to and take seriously all complaints.
8. Take investigations seriously and provide feeback.
9. Lookout for harassment.

"Caveat Emptor" or as the boss used to say, "Don't Poorboy it."

Can't afford to hire a lawyer to help you? Or, just don't want to spend the money - afterall, you did a decent job installing the ceiling fan all by yourself. Well this recent post directs the small business owner to various sources for "free" or low-cost legal forms that you can use.

A word of caution however, that the writer does not address: being your own lawyer is not the same as installing your own ceiling fan. The money you save upfront may pale in comparision to what you may spend fixing the damage that your "do-it-yourself" lawyering created. If being a trained legal professional involved nothing more than filling in the blanks on a form then lawyers wouldn't spend 3 years in law school and then sit for a god-awful bar examination to measure competence. Think about it. Even if you can find a step-by-step guide on how to remove your own appendix, I bet you still wouldn't do it yourself.

So You Want To Sue?

Our society is litigious, no question about that. I think there is plenty of blame to go around for this state of affairs and the lawyers aren't the only ones at fault. It is incumbent upon all attorneys to make sure potential clients understand the drawbacks to litigation rather than simply signing them up and depositing the retainer check. Here's my short list of things every client needs to consider before filing a lawsuit:
1. What is my goal? What do you want to accomplish from the suit? Is there another method for attaining that goal besides litigation?
2. Can I afford it? Litigation is expensive. Many types of cases can be handled on a contingency basis for fees so that you do not pay attorney's fees unless you are awarded a verdict in your favor - these are usually a percentage of the total recovery (33% if settlement is obtained prior to trial is standard - and the percentage usually goes up once you enter the trial phase). However, not every case is a contingency case - the lawyer is willing to accept greater risk for a potentially greater return on fees in a contingency case - this philosophy doesn't work if you are a defendant (being sued) or the lawyer evaluates the risk to be greater than the potential reward. Don't expect contingent fees because they may not be suitable or offered. Hourly rates vary by location and the lawyer's experience. It is not uncommon to see $400 + hourly fees in Denver, while $200 per hour is near the ceiling in a smaller community like Fort Collins. One week's worth of work at $200 per hour is $8,000 in fees - and it is unlikely that a district court lawsuit with be completed in 40 hours time. Clients are also responsible for all associated litigation costs - depositions, filing fees, etc.
3. Don't assume the loser will pay fees and costs. The "American Rule" of attorney's fees dictates that each side pays their own lawyer. If the basis of the suit is a contract or statute that provides for the award of fees to the successful party, then you may be in luck. Same goes for costs. Don't assume the other side will have to pay - it may be your bill in the end.
4. Are you prepared for the sacrifices litigation requires? Litigation is contentious and by design, adversarial. It does not have to be nasty, but unfortunately, it often is. This extracts an emotional toll on the parties that often times they are not prepared for. Litigation also requires you to work closely with your lawyer - you will need to answer interrogatories, attend and be subjected to depositions by the other side, attend hearings and the trial. This means time away from work and family. A lawsuit can drag on for a year or longer, so you need to be ready to endure the inconveniences of litigation for a significant period of time.
5. Does the bad-guy have the ability to pay a judgment? It is possible to win the battle, but lose the war. You've just been awarded a judgment in your favor, now what? The hardest part to many cases is collecting a judgment. If the defendant does not have insurance coverage to indemnify the judgment, you're looking at executing on personal assets. If the defendant has few assets, or jointly owned assets, this may leave you with a "paper judgment" worth little more than the paper it is printed on.
6. What is the cost-benefit analysis? When you consider some of the factors outlined above, are the potential benefits you stand to receive by suing greater than the costs? Do your damages justify the effort and cost of litigation? Small value cases often do not pass the cost-benefit test - once you subtract out fees, costs, emotional toll, etc., there is very little left to make you whole. It makes little sense economically to sue someone for $500 in damages if you're paying $200 per hour for the lawyer. This type of analysis must be undertaken to ensure that filing suit is a sound and rational decision rather than an erratic and emotional one. Six months after suit is filed, you may no longer be "mad" at the defendant like you were when suit was filed, but you may be mad at the bill you receive from your lawyer each month as a result of your decision to sue.

What the Hell?

Blazing the legal trail as usual, the Ninth Circuit has apparently now made being an *&^%hole in the workplace a colorable cause of action for gender-based discrimination.

Annie bar the door.

Basic Estate Planning: Wills versus Trusts

There’s a considerable amount of confusion floating around about estate planning, perpetuated by some silly misinformation and/or misunderstanding. People generally aren’t overly excited to dwell on their mortality, which estate planning naturally involves; add to that reluctance what I view as an overly-aggressive financial planning industry and you’ve got plenty of fodder for snopes.com-like urban myths.

Here’s some simple basics to understand:

A will tells the world how you want your property distributed when you die. Wills come in different varieties, some very simple and some fairly complex, but they all accomplish the same aim. If you die without a will, the earth will not stop spinning and in most cases, the State will not inherit your stuff. Most states, Colorado and Wyoming, for instance, have a “statutory will” in place for those without wills – it’s called intestate distribution. That is a lawyerly word that means “without a will.” Intestate laws simply provide a prioritized list of relatives who will inherit your property, starting usually with a spouse and children. As long as you are okay with the statute’s estate plan for you, you might need a will. Generally, persons with no children and few assets won’t have need for a will with provisions that differ from the intestate statute.

If you have children who are minors and own more than just the shirt on your back and perhaps a car, you should have a will. The primary reason is to set up testamentary trust(s) (another fancy lawyer term) for the children, who will not get control of your property as minors. Your probate property and non-probate property will fund these trusts, and generate (hopefully) income to provide for the well-being and maintenance of the children in your absence. Without this arrangement, a family member will have to establish a conservatorship to receive (and hold) the property during the children’s minority. This is a judicial process – it will likely require the help of a lawyer, associated fees and expenses and time. Why bother putting your relatives through that hassle? This is also the method for letting all the relatives whom you want to raise your kids in your absence by appointing a guardian. Some minor estate planning will take care of these concerns.

Trusts act like wills, but they are created and put “into play” while you’re still alive (except testamentary trusts mentioned above – they become “active” only after you die). They can be revocable – so you can undo it later, or irrevocable, meaning that you can’t change it. A trustee is appointed to be the steward of the property placed into the trust and you name beneficiaries who will receive the property. Revocable trusts generally don’t provide any tax benefits since the grantor (person who establishes the trust) retains control over the property. Such trusts are used as a method of avoiding probate (which is a judicial process a will goes through) and maintaining more privacy about your estate and distribution wishes (wills are public documents once they hit probate court). Irrevocable trusts are normally used to avoid, to the maximum extent possible, paying estate taxes at death. The grantor loses “ownership” and most control of the property put into these trusts, therefore the property (values) aren’t attributed to the grantor, thus reducing the size/value of his or her taxable estate – which reduces the tax liability. Such trusts are usually most beneficial to persons whose estate are very large – usually exceeding the unified credit amount spouses are allowed to pass tax free (currently $1.5 million per spouse, or a total of $3 million combined). Trusts usually comprise one component of a relatively complex estate plan. They have come into fashion in recent years, but people should be careful about rushing into a trust-based estate plan without consulting with legal and financial professionals. Not everyone needs a trust.

A word of caution here too. You will find plenty of computer-based programs or “will kits” on the market. They are much cheaper than what you will pay to have a lawyer draft a will. But, you get what you pay for – there are usually no guarantees that these programs will draft your documents in compliance with state law (see the disclaimers on these products). You wouldn’t buy a program to perform surgery on yourself just to save some coin on medical expenses – or would you?

Cost range? Expect to pay on a flat fee scale ranging from $300 (simple will) to several thousand (trust based plans).

A New High (or perhaps Low) in Legal Fees?

Justice is expensive. The more mulah you have, the better your chances. Look at Michael Jackson and O.J. I've handled what I thought were pretty expensive divorces when I was practicing law full-time in Wyoming, but this case has to set a new record for legal fees in a divorce, especially in Wyoming. Don't know the gory details, just the amount charged by the firm - over $200K!! Hope she got some justice for that!

New FTC Rule on Storage and Disposal of Consumer Information

The Federal Trade Commission recently created a Rule which implements the requirements of the Fair and Accurate Credit Transactions Act of 2003 [FACTA], pertaining to the proper storage and disposal of “consumer information.” This Rule went into effect on June 1, 2005, and applies to any business, regardless of size or number of employees, that “maintains or otherwise possesses consumer information, or any compilation of consumer information, derived from consumer reports for a business purpose.” The purpose of the Rule is to reduce the growing problem of identity theft.

Who Does the Disposal Rule Apply To?

The FTC Disposal Rule, which implements FACTA applies to “any person that, for a business purpose, maintains or otherwise possesses consumer information, or any compilation of consumer information.” This includes consumer reporting agencies, resellers of consumer reports, lenders, insurers, employers, landlords, mortgage brokers, and any other business that possesses or maintains consumer information. Thus, any business that obtains a consumer report or compilation in connection with its business is subject to the rules.

What Information is Covered by “Consumer Information?”

Under the Fair Credit Reporting Act, “consumer information” is any record about an individual that is a consumer report or is taken from a consumer or similar type report that is created by an outside agency or company. The information may exist in paper, electronic or other formats. The Rule would also cover any of a business’s own internal records that are derived from a consumer credit report or background check. The “derivative” portion of the Rule may prove problematic for businesses because it may not always be clear whether information received was taken from a consumer report. Consumer information does not include information that does not identify individuals, such as aggregate information or blind data. According to the FTC, knowledge of the source of information is not a prerequisite to the duty to comply with the rules.

If information falls within the definition of “consumer information,” then businesses are responsible for proper storage and disposal of that information. The safest approach for any business is to treat all records containing consumer information as though they fall within the FACTA definition and handling them appropriately under the entity’s storage and disposal policy.

Disposal Compliance under FACTA.

The Rule does not require businesses to use any specific disposal measures when destroying FACTA-protected information. Whatever disposal measures are used must be reasonable “to protect against unauthorized access to or use of the information in connection with its disposal.” This may depend upon the size and the resources of the business possessing the information. At a minimum, reasonable measures includes establishment of policies and procedures for proper record disposal and an appropriate employee training program to implement the same.

Some of the FTC approved methods for disposal include shredding or burning paper records, or “smashing” or “erasing” records stored on electronic media such as computer discs or hard drives. Ultimately, the methods chosen to dispose of records will depend upon the circumstances. Whether a particular disposal method is “reasonable” will depend upon such factors as the nature and size of the entity involved, the costs and benefits of available disposal methods and the sensitivity of the information at issue

If a business opts to outsource its disposal responsibilities to a company specializing in document destruction, it retains ultimate responsibility for proper disposal. Thus, when outsourcing, the business must ensure that the company hired to dispose of records acknowledges, in a written contract, that the records to be destroyed may contain consumer information, and further, that the company agrees to comply with the FACTA disposal rules.

Liability for Non-Compliance with FACTA.

The new rules provide a range of civil liabilities and other penalties for non-compliance. These include civil liability for actual damages sustained by any person whose identity is stolen as a result of non-compliance with FACTA, as well as exposure to class action lawsuits.