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EMPLOYEE DISCRIMINATION CLAIMS: A HANDBOOK FOR CREATING A SAFE HARBOR FOR EMPLOYERS

Newsflash: We live in a litigious society. This isn’t news; we are all aware of the explosion in litigation and litigation costs. There are more lawyers than ever, and it seems that folks are just more willing to sue each other. Congress and state legislative bodies have had a hand in the proliferation of litigation too, by providing powerful tools to potential plaintiffs in areas where legislators have perceived a historical imbalance. Unfortunately, while the goals of such legislation are generally laudable, the practical effect is often quite different than anticipated.

The area of employment discrimination is a good example. Few people would argue that the goals of the sweeping Civil Rights legislation that was passed by Congress in 1964 were unjust or unwarranted. With the good, however, comes the bad. As every employer today knows, the burden of this legislation and the legislation that has followed in its footsteps (e.g. Americans With Disabilities Act, Family Medical Leave Act, Pregnancy Discrimination Act, Age Discrimination in Employment Act, etc.) can be overwhelming. In essence, employment discrimination legislation has created a system where employers are constantly faced with the sometimes daunting task of proving their employment decisions were not motivated by discrimination. Defending employment decisions against claims of discrimination is always costly, not only in terms of bottom line expense but diminished employee morale and loss of goodwill.

Has the pendulum swung too far? People will argue vehemently on both sides of the issue, and both sides make excellent points in support of their position. One thing, however, is certain – employment discrimination laws are with us to stay. Fortunately, there are steps that a prudent employer can take to reduce its exposure. Perhaps the easiest and most important is to create, distribute and follow an appropriately drafted employee manual or handbook (“Handbook”).

Create a “Safe Harbor”

Employees have more weapons available to them than ever to challenge the employment decisions of their employers. By adopting and implementing anti-discrimination and anti-harassment policies companies can dramatically increase their chances for success in any related litigation. Properly implemented policies also serve to discourage claims in the first instance. To be effective, these standards and procedures must be communicated to all employees and followed by management. The tool of choice to accomplish all of the above is the employee manual or handbook (“Handbook”). Unfortunately, many businesses either do not have Handbooks or have grossly inadequate Handbooks. Worse, an improperly drafted Handbook can actually create liability where none previously existed; for example, as discussed below, many Handbooks have the unintended effect of waiving an employers’ right to terminate employees “at-will”, i.e. for any reason or no reason at all. However, properly drafted Handbooks can serve as an effective way to comply with requirements regarding communication of your company’s anti-discrimination and anti-harassment policies, or, in the words of the Supreme Court, create a “safe harbor” from discrimination and harassment claims.

In the realm of harassment claims by employees, a properly drafted and implemented Handbook is absolutely essential. This is because the United States Supreme Court has actually recognized Handbooks as creating a potential “safe harbor” against these claims. Specifically, the Court has ruled that if the employer has in place a reasonable procedure whereby an employee can complain about such conduct, and the employee fails to take advantage of that procedure, the failure of the employee to register such complaint can shield the employer from liability. In other words, if the Handbook forbids harassment and establishes a procedure by which an employee can report allegedly harassing conduct, the burden shifts to the employee to follow the procedure.

For example, one federal court concluded that an employer was not liable for harassment committed by an employee’s supervisor, because the employee testified in deposition that she had read the employer’s employee handbook and knew of her employer’s anti- harassment policy, but still failed to report the harassment. In another case, a court explicitly stated that “promulgating an extensive anti-harassment policy is evidence that the employer exercised reasonable care to prevent sexual harassment.” Such cases demonstrate the truth in what Benjamin Franklin is attributed to have said with regard to fire safety: “an ounce of prevention is worth a pound of cure”. In other words, be proactive. If the first time your business opens its Employee Handbook to see if it contains the necessary protections is the day a million dollar lawsuit is filed against it, you may very well be too late.

Publicize Your Anti-Discrimination Policies

Step one is to proclaim your anti-discrimination policy in the Handbook. Let your employees and prospective employees know that you are an equal opportunity employer. Describe the potential for advancement – let your employees know that promotions will be merit based and specify objective standards which management considers in making its decisions.

Step two, of course is to practice what you preach. Make sure that management is aware of and abides by your company’s policies and procedures. It is one thing to say “we do not discriminate,” it is another to practice non-discrimination. As stated by one federal court in a sex discrimination lawsuit, “[T]he mere fact that Defendants had anti-discrimination policies in their employee handbook . . . does not protect Defendant unless it makes at least a good faith effort to abide by them.” In other words, talk is cheap. Your business must implement and abide by its procedures, or the benefit of the protection you gain by distributing a Handbook will be lost.

Step three is to communicate your policies and procedures. You may have the most comprehensive, exquisitely drafted Handbook in the history of the universe. However, “if you don’t use it, you lose it”. If, after creating your Handbook you throw it in a drawer next to last year’s list of New Year’s resolutions, the practical effect of both will be the same - zero. To be effective, the Handbook has to be delivered to all employees, and the employees have to know its contents. The simplest and most effective way to accomplish this is to have all employees at the time of their hire (or at the time of the implementation of the Handbook) acknowledge in writing that they have received, read and understand the contents of the Handbook.

Other Significant Benefits

Handbooks are flexible documents. In addition to reducing the Company’s exposure to employee claims, Handbooks can also serve a number of other important legal functions. They can cover as many or as few areas as the employer may chose. Moreover, Handbooks may be amended by the employer at its discretion – provided, of course, the amendments are communicated to and acknowledged by employees. A few of the other significant uses of Handbooks include putting employees on notice about your company’s privacy policies, protecting your company’s ability to terminate an employee at-will, and protecting your company’s valuable confidential information.

Privacy Considerations

For numerous reasons, many employers find it useful or helpful to monitor employee communications. However, in order to do so, the employer must comply with local privacy laws which have been enacted in many states. Generally, these laws require notice and consent to such monitoring. Handbooks are an excellent means to effectively put employees on notice that communications, including e-mail, voice mail, and telephone calls, may be monitored for business reasons, and obtaining their consent to such action. Although some states do not require an employer to have received such express consent, doing so provides an added level of protection for the company.

Maintaining the Employment at Will Doctrine

A Handbook can also be used as an effective tool to establish terms of employment without the need for employment agreements. Care must be taken, however, to create terms that are favorable to the employer. For example, virtually all states follow the “employment-at-will” doctrine. This doctrine provides that, absent a specific employment contract for a fixed period of time, an employer has the unfettered right to discharge an employee for any reason or no reason. Many courts, however, have whittled away at this doctrine by finding evidence of an agreement or understanding that the employee would only be terminated for cause. Employee manuals have been the downfall of many employers in this regard. In one such case the Handbook provided that employees would only be terminated for “just cause”. In another case the Handbook stated that employees would only be discharged following a series of progressive disciplinary procedures. In both cases the court held that even though the employee had no written employment agreement for a fixed term, the Handbook was evidence that the e

The number and mployee could not be terminated without cause. Does this mean that you should forgo a Handbook altogether? Absolutely not! What it means is that you should carefully review and revise or create your Handbook to make sure it goes no further in establishing an employment relationship than you wish to be created. A properly prepared Handbook will explicitly disclaim the creation of an employment contract, and affirm the “at-will” status of the relationship.

Maintain the Privacy of Confidential Information

type of issues that can be covered in a Handbook is as varied and diverse as the businesses that create them. However, one additional point warrants mention. A properly drafted Handbook can actually help protect the privacy of your company’s confidential information. Every company has confidential information which it would not like disclosed to its competitors. Generally speaking, to protect such confidential information, a company is required to implement reasonable security procedures. In other words, a court will not treat your information as confidential if you don’t. Handbooks can be used to establish policies that demonstrate that your company protects its confidential information. By doing so, your company will have a much greater chance of prohibiting the disclosure of its confidential information thereby precluding your competitors from reaping the benefits of the time and effort you spent developing such information.

A properly drafted and implemented Handbook is an efficient and cost effective tool to protect your business from the potentially devastating effects of employee discrimination and harassment litigation. Moreover, many other important legal issues can be addressed in a Handbook, providing the company with various protections and flexibility. On the other hand, an improperly drafted Handbook may expose the company to liability, particularly if care is not used to avoid creating an expectation that employees will only be terminated for cause. In the final analysis, in terms of employee – employer relations, it comes down to the three L’s; as long as there is Legislation and Lawyers there will be Litigation. Prudent business owners will not wait to be served with a multi-million dollar complaint to prepare a defense. Prudent business owners will use the tools available to them to avoid the lawsuit in the first place. A properly drafted and implemented Handbook is one of the most cost-effective tools available today.