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HR Handled Right

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In the 1930’s, British author Allan Massie said: ‘We are responsible for actions performed under circumstances for which we are not responsible.’ He could be speaking for corporate UK today. The employment relationship is becoming increasingly complex. With the convergence of European Union regulations, the obligations of employers in relation to employment law in the UK is becoming increasingly onerous.

As companies open subsidiaries and operations beyond their borders, they are encountering regulations and exposures with which they may be unfamiliar. Globalization of business, such as the development of the European Union, is dramatically affecting the exposure many international companies face in their routine operations.

Unfair dismissal, sexual and racial discrimination claims are becoming more common. This has been happening in the US for some time and now claims are also happening here in the UK. Human resource professionals and CEOs now find themselves in the unenviable position of scrambling to anticipate, prevent, and defend a myriad of perceived employment wrongdoings, both real and imagined. Perhaps a look at what savvy U.S. employers are doing to reduce employment practices liability can save UK managers some of the headaches their American counterparts have suffered.

The Long Arm of the Law

We’re all familiar with laws that protect employees from unfair treatment on the basis of sex, race, religion and disability. Employment practices claims can arise from the alleged violation of these laws by just about anyone in a company – from the director to low level employees. Among the issues included are unfair dismissal, discrimination, harassment, libel and slander, emotional distress, and employment-related misrepresentations as well as retaliation against anyone for complaining about any of the above.

Practically speaking, most Employment Practices Liability (EPL) litigation falls into three basic categories:

  • Unfair dismissal: In a wrongful discharge suit, the person complaining alleges that the company unfairly dismissed him or her, either by breaking an implied or written contract or by firing him or her for performing a legal duty or exercising a legal right. Many employers are lulled into a false sense of security by the at-will doctrine, which holds that employment can be terminated at any time, for any reason, or for no reason at all. However, in the U.S., many exceptions to the at-will employment rule have been created and the courts are continually limiting the parameters in which an employee can be legally terminated without cause.
    • Common triggers of unfair dismissal claims: Misleading statements of job security or inaccurate comments about the financial strength or permanence of the organization during the hiring process, misleading (i.e., inconsistent or overly nice) performance reviews followed by termination, inconsistent application of discipline across employees, mishandled termination meetings.
  • Sexual harassment: Essentially, in a sexual harassment complaint, the person complaining alleges that unwelcome sexual conduct interfered with his or her job in some way. The ‘unwelcome sexual conduct’ can take many forms, ranging from inappropriate sexual comments to a manager requiring sex as a condition of employment. Over the past three years, U.S. courts have shifted the corporate liability standard from one of negligence (did the company know? Or should they have known? And what did they do if they had known?) to vicarious liability (what steps did the company take to prevent this from happening?). The good news is, with company-wide prevention training, effective policies and procedures, and top management support, companies can shift some of their corporate liability to the offending individual should a complaint occur.
    • Common triggers of sexual harassment claims: Inadequate or mishandled inappropriate behavior investigations, a narrow or restrictive complaint reporting policy, ignorance regarding sexual harassment law, multicultural communication breakdowns, stress as a result of rapid growth, poorly handled layoffs.
  • Discrimination: Employment-related claims of discrimination have historically arisen out of allegations of failure to hire, promote, or treat a person equitably due to race, color, religion, sex, national origin, age, or disability. As obvious cases of intentional discrimination decline, companies are seeing more and more discrimination cases arise as a result of ineffective supervisory practices, which either offer evidence of adverse impact (through exclusion or ignorance) on a particular group or create the perception of discrimination (for example, through lax or flippant attitudes toward offensive racial or ethnic comments).
    • Common triggers of discrimination claims: Discriminatory comments, asking illegal questions in the hiring interview, a manager’s misguided attempt to be ‘affirmative’, poorly communicated or delineated promotion criteria, excluding older employees from training or career development programs, inconsistent discipline across employees, the perception of inequity (for example, a labor pool demographically segregated by job title, limited recruitment avenues).

Reducing Claims Through Interpersonal Risk Management

In my experience, 80% of all employment-related complaints are due to relationship failures. Not surprisingly, relationship failures also account for virtually all voluntary turnover, job dissatisfaction, and low organizational commitment. Companies who proactively manage interpersonal risks not only reduce unnecessary legal liability, they can measurably increase their company’s revenues through reduced turnover and increased productivity. Companies who follow certain risk-reducing policies, procedures and practices avoid hiring and, if hired, identifying and terminating problem employees. Here are just a few ways companies are reducing their corporate employment related risks.

Interpersonal Risk Management Practice 1: Smart Hiring Procedures. Sometimes your best hiring decision is the decision NOT to offer someone a job. Given the fact that 95% of employment-related litigation is initiated by as little as five percent of the workforce, the majority of wrongful termination claims are in essence wrongful hiring practices. The chance of hiring a problem employee can be reduced or eliminated by training your managers and recruiters in the following smart hiring practices:

  • Draw From Alternative Applicant Pools: Relying on multiple recruiting sources not only provides the best odds of finding ideal candidates, it also makes it easier for companies to develop a diverse employee base. Savvy employers rely on a number of referral sources, ranging from trade and vocational schools to existing stellar employees to the Internet.
  • Use Detailed Employment Applications: Carefully review answers applicants give about their prior employment history and background. Using an application that asks detailed questions (and has at-will language as well as, potentially, an arbitration statement) is important, but interviewers must also understand how to spot “red flags” that signify a potential problem employee and know how to gather more information about them.
  • Collect Multiple Sources of Revealing Interview Data: Asking probing questions enables the employer to gather crucial information; however, no matter how perfect the candidate seems to be for the position, objective data must be gathered. Background and reference checks are critical ways of checking the veracity of the applicant – and potentially avoiding a negligent hiring charge.

Interpersonal Risk Management Practice 2: Effective Policies and Procedures. Creating and documenting the implementation of clear and comprehensive human resources policies are key components in preventing employment practices claims. The existence of an employee handbook, especially if accompanied by a signed receipt of acknowledgement by the employee, can provide crucial evidence in defending many kinds of employment lawsuits. For example, a handbook can disprove an employee’s allegation that he or she was unaware of the organization’s rules, policies and procedures. Some of the must-haves in the employee handbook should:

  • contain a list of work rules and identify the ones that, if violated, can result in discipline, including termination;
  • avoid stating specific progressive-discipline procedures;
  • clearly communicate a policy of zero-tolerance regarding sexual harassment and drug use;
  • communicate state and laws governing working conditions, employee leaves of absence and return-to-work policies. In addition, management should be continuously updated on policies and procedures. Untrained or improperly trained managers can create needless legal exposure by not taking the appropriate action when disputes arise.

Interpersonal Risk Management Practice 3: Accurate Job Analyses and Descriptions. Accurate job analyses are the building blocks upon which human resource management is built. The information obtained forms the basis for recruitment processes, hiring procedures, the identification of training needs and the development of training programs, the creation of job descriptions, and the improvement for such activities as performance appraisal and career development. They can also buffer you from legal claims, such as disability claims. Therefore, it is critical for employers to have detailed job descriptions for all jobs that

  • clearly define the skills and performance requirements for each position;
  • list the essential physical functions and psychological qualifications required;
  • clearly define the results that the company expects employees to achieve;
  • be specific and, where possible, quantified in terms of dollars, numbers, percentages, time, etc.

Interpersonal Risk Management Practice 4: Manage and Monitor Performance. Clarity as to what is expected when a worker is hired, as well as throughout the employment relationship, is critically important for both the employee and employer. When descriptions contain both job quantity and quality measurements, it is possible to carry out effective performance management. When these measurements are clearly linked to rewards, the employee is more motivated to self-manage as well. In fact, employers who allow employees the opportunity to share in the success of the company and who provide incentives for continuous learning have lower turnover rates and higher producing workers.

Once the performance criteria are set, employees must be given regular and consistent feedback. Risk-reducing guidelines for performance reviews include:

  • performance reviews should be carried out twice a year;
  • performance ratings should be accompanied by specific behavioral examples;
  • managers should be required to keep performance notes in between
  • performance reviews to avoid letting recent events dictate the performance rating;
  • cited areas of improvement should be accompanied by an improvement plan and target date;
  • all performance evaluators should receive training on the performance management system.

Interpersonal Risk Management Practice 5: Protecting Your Downside With EPL. While good human management can significantly limit exposure, it can never remove the risk completely. We rely on people to carry out our policies and procedures, and people make mistakes. Just as fire protection doesn’t alleviate the need for safety procedures or smoke detectors, it should never be used as a substitute for policies and procedures, nor for building a corporate culture that grows powerful relationships. What it can do is significantly reduce your financial exposure, a valuable contribution given the legal cost of defending an employment claim, even an unfounded one can be substantial.

So, what’s the lesson learned? Perhaps the best lesson is that many of the risk management strategies that protect companies against employment related claims are good business. Also, that relationship failure is the common theme underlying many of the problems that get shuffled off to HR. Finally, that companies who proactively take steps to reduce their employment related risks can give more time treating their employees as assets rather than worrying about them becoming liabilities.

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