General Practice, Solo & Small Firm Division
American Bar Association
General Practice, Solo, and Small Firm Division The Compleat Lawyer
Fall 1997 copyright American Bar Association. All rights reserved.
Hiring, Disciplining, and Firing Employees Covering Your Assets
BY MILLICENT N. SANCHEZ
Millicent N. Sanchez is a shareholder-director of Swerdlow, Florence & Sanchez, Beverly Hills, California, which represents medium and small businesses, as well as multi-billion dollar corporations, in all aspects of labor and employment law.
The success of any business is directly tied to its most important asset: Its employees. This is especially true for law firms. A competent, professional, courteous, and service-driven staff is critical to a law firm's ability to attract and keep solid clients, and produce high quality work.
In order to be successful, law practices must be competitive and business-savvy. Incompetence and negative attitudes among a law firm's staff can destroy employee morale and hinder team building. Every hour spent by law firm management on supervising, counseling, and terminating marginal employees gobbles up precious time that instead could have been spent on adding value to the practice.
The Potential for Employment Litigation
The wrongful hiring, discipline, or discharge of an employee can create enormous liability for employers. The costs to a law firm to defend a single wrongful discharge or employment discrimination lawsuit are personal as well as economic. Cases are expensive, time-consuming, exhausting, and demoralizing for the firm and its staff.
Firm managers, supervising lawyers, and employee-witnesses can be tied up for months or years in various aspects of the litigation. Law firm managers are also sued personally, in addition to the law firm. Because other claims - including defamation, invasion of privacy, fraud, misrepresentation, and negligent and/or intentional infliction of emotional distress - can also be alleged in these cases, the scope of these lawsuits can be broadened substantially.
Attorney fees to defend wrongful discharge or employment discrimination lawsuits and prepare for trial can reach the low- to mid-six figures. Damages in employment cases range from substantial contract remedies such as back pay, future wages, and lost benefits, to emotional distress and tort damages for fundamental public policy claims, to punitive damages. A law firm's comprehensive general liability insurance policy will rarely cover such claims, although separate employer practices liability insurance coverage can be purchased.
Lawyers who are too complacent about the need to understand human resources issues in the law firm, or who are not adept at the subtleties of interpersonal dynamics, can make horrible and expensive mistakes that can bind the firm. Innocent, ambiguous comments by a supervisor in the firm can result in liability. The failure of the law firm's supervisors to understand or even know about the existence of a firm policy or procedure can also create liability. Because of their advanced legal training, lawyers may be vulnerable to a higher level of knowledge as to how to legally conduct themselves in the workplace. Neither the size of the law firm, nor its geographic location, nor its practice area provides any reliable shield from litigation or the threat of litigation.
A Proactive Approach
An approach that focuses on hiring and retaining only the highest caliber employees is critical to preventing and limiting a firm's exposure to wrongful discharge lawsuits. Unfortunately, law firms may not always be as prudent during the hiring process as they should be, especially when there is an immediate time pressure to staff a case or deal. Law firm management must also treat the discipline and discharge of its employees as significant potential liability events that should be undertaken only after proper planning and evaluation.
Wrongful discharge and employment discrimination laws vary among the states and under federal statutes and regulations, so firms should consult a local lawyer to be up-to-date in these areas of the law.
A law firm must always balance its desire to manage its workforce effectively with its need to provide notice and fair treatment to its employees. The goal is to incorporate a preventive approach, which will provide facts that are intended to reflect favorably on the law firm in wrongful discharge and employment discrimination litigation.
In most law firms, the firm's management is responsible for a firm's successful hiring strategies. Therefore, firm managers must be aware of and be willing to utilize all available prehire screening techniques. A significant percentage of job applicants commit resume fraud, are convicted criminals, are unlawful drug users, or have engaged in misconduct in previous jobs that could disqualify them from consideration for a job.
Applications: A Key Ingredient
Law firms must adopt and utilize a full employment application and require an applicant to fill in all of the blanks completely. The application needs to be signed under penalty of perjury. Do not accept a resume in place of a completed application form. Gaps in employment dates are significant but may not be obvious from a resume. The applicant should be specifically questioned about any gaps in employment and asked to explain any questions that were not answered completely on the application form. Beware of stationery store application forms - they may be outdated, may fail to include important questions, or may contain unlawful questions. (See "A Thorough Application Form. )
Interviews must be conducted with care and an understanding of employment discrimination laws. Face-to-face interviews allow a law firm to get a personal feel for a serious candidate, and offer an opportunity for the candidate to meet the people who work at the firm.
The law firm's interviewers must also have a basic understanding of what attributes are being sought for the particular position and what information needs to be obtained from the candidate in order to evaluate the candidate for the position. An interviewer should review the candidate's completed application form, resume (if available), and a current job description before the interview.
If possible, everyone who will work with the candidate, if hired, should be given an opportunity to interview him or her. Interviews must be taken very seriously and the interviewers should be given time to prepare questions or topics to discuss. The questions should be phrased in order to elicit information that will enable the firm to determine the candidate's job-related skills and experience, current ability to do the work required, availability to work the hours required, qualifications, goals, aptitude, intelligence, and personality.
Interviewers must be trained to avoid questions or discussions that are potentially illegal. Questions relating to a person's age; race; national origin; gender; religion; political associations; arrest record; children and spouse (and child care arrangements); and medical, physical, or injury histories should be avoided. Beware of casual "warm-up" conversations that tend to dwell on these matters.
Throughout the screening process, always avoid making statements that could be viewed as a promise of permanent employment or a misrepresentation of the position, compensation benefits, or other terms or conditions of employment.
Reference and Background Checks
Employers have a duty to exercise reasonable care in hiring their employees. Checking a candidate's references and conducting background investigations on serious candidates is part of meeting that duty. These investigations can show that a candidate is honest and dependable or that the candidate has lied about his or her qualifications or background.
Numerous professional companies provide preemployment background and reference screening services to employers. Things that can be checked include past employer references; criminal conviction history on a local, statewide, or national basis; validation of social security numbers; motor vehicle records; drunk driving convictions; civil litigation records; workers' compensation history (but only after the employment offer is made); financial histories (if relevant to the job); education history; prior addresses; and professional licenses (including state bar membership status and disciplinary actions).
Although employers in most states have a qualified privilege to communicate truthful information about employees when asked by another employer, many employers refuse to provide references about an individual, other than merely to confirm the dates of previous employment and position. In California, the state supreme court has ruled that former employers can be liable for giving a misleading and incomplete positive reference if the employee in question causes physical injury to employees of the prospective employer or to third persons. A law firm should consider adopting a policy to refuse to hire any candidate about whom the law firm cannot obtain a reference from former employers.
Preemployment honesty and personality tests may also be administered for serious candidates, although use of such tests must be sufficiently related to an essential function of the job in question, and must be validated as a predictor of a person's ability to successfully perform the job. A law firm may also be required to show a compelling interest in requiring the testing. Once an employee has been hired, rights that protect an employee against wrongful discipline and discharge begin to accrue. Disciplining and discharging employees is not a pleasant task. But if handled with fairness and due process, a law firm can reduce the chances that a disciplined or discharged employee will dispute the action taken against the employee. After all, the manner of discipline or discharge, rather than the reason for the discipline or discharge, is often the motivation for a claim or lawsuit filed by a disgruntled employee or former employee.
Written Policies Are Essential
Employers can create the ability to terminate employees at will, i.e., for any reason or for no reason, with or without cause or notice, if proper language is placed in employment policies, employee handbooks, and employment application forms. In deciding what should be included in the law firm's documents and policies, it is necessary to balance the firm's desire for good personnel relations (and in the case of certain employers, the desire to maintain a union-free atmosphere) against the flexibility and legal protection that at will language provides to the law firm. While each employer should strike its own balance, most law firms would be best served by adopting at will employment and including appropriate language in their written policies, application forms, and agreements.
The manner in which the law firm handles discipline and discharge should also be in writing and communicated to all employees. Procedures should provide the law firm with the ability to be flexible and impose discipline that is appropriate to the situation, rather than require a predetermined multi-step disciplinary procedure to be rigidly applied in all situations. Rules of conduct that are clearly written and fairly and uniformly applied should be included in the law firm's policies. Employees need to be aware of all applicable policies, procedures, and expected standards of behavior and performance in the workplace. The handbook is also invaluable as documentary evidence before juries, judges, and administrative agencies.
Performance Reviews Should Be Honest
If an employee is disciplined or discharged for poor performance, the employee's reviews should reflect poor performance. However, supervisors may feel it is easier to rate an employee as "acceptable" than to rate the employee as "below requirements" or "unacceptable."
It is better for an employer to have no performance review system than to have dishonest reviews. In litigation, the discharged employee will always point to a record of satisfactory or above average performance reviews. Employees should be asked to acknowledge receipt of a copy of the review in writing.
A Thorough Application Form
A thorough application form includes questions about all prior jobs for a significant period (e.g., the exact dates of employment, including months, specific reasons the applicant is no longer working at each prior job, contact number and name at each job, and whether the termination was voluntary or involuntary), a complete unemployment history, a complete education history, a complete history of all criminal convictions (including misdemeanors, not just felonies, as permitted under state law), and any need for reasonable accommodation in order to perform the essential functions of the job being sought.
In addition, the application should require that the applicant specifically agree in writing to the following:1. An investigation of statements made in the application and a release of liability for informants giving truthful information.
2. The obtainment of a consumer and/or investigative report.
3. Preemployment drug testing and post-offer medical examination, as permitted by law.
4. Disclosure of subsequent criminal convictions.
5. If hired, the applicant will comply with company policies, can be terminated at any time or for any or no reason, with or without notice, and will not engage in conduct which is in conflict with the interests of the law firm.
M.N.S. Discipline and Discharge
Discipline should take place promptly after an infraction. An employer who permits an employee to continue to work after committing an infraction could be viewed as having condoned the misconduct or waived the infraction by the employee. The discipline should always be given privately and not in anger.
Basic due process dictates that employers conduct a complete and fair investigation of the facts before discipline or discharge occurs. Those conducting the investigation should not be biased against the employee. Discharge is a traumatic life event. Before any disciplinary or discharge action is taken by a law firm, the employee should be told why he or she is being considered for discipline or discharge and be given an opportunity to present facts that the employee deems appropriate.
In addition, the law firm should ascertain how other employees who have engaged in similar conduct have been treated. Consistency of treatment for similar offenses is a basic element in the fair administration of discipline. The law firm should always review the employee's personnel file, and be totally familiar with and consider the employee's length of service, the history of successes, and the history of discipline before imposing discipline or discharge.
Never utilize the "freeze-out" approach. In some cases, particularly with lawyers or high-level staff members, rather than directly dealing with a problem employee, a firm may resort instead to the "freeze-out," e.g., failing to invite the employee to key meetings or reassignment of work to others. The freeze-out approach is a sure way to create liability for a law firm. Any special characteristics or peculiar sensitivities of the employee involved should also be considered. Discipline should be imposed with a great deal of sensitivity toward the employee's feelings of dignity and self-respect. If the employee is in the midst of a divorce, a serious illness, family problems, or any other unique circumstance, the law firm should consider that circumstance in deciding upon the penalty to impose or how the employee will be informed.
An employee with several years of service may, under certain circumstances, be subject to discharge only for good cause. Particular care should be given to long-term employees. Alternatives to discharge, such as training or demotion, should be considered. These long-term employees generate enormous jury sympathy.
Be especially careful when a discharge involves a charge of moral turpitude or dishonesty. These charges are very serious and may require an employer to prove the case beyond a reasonable doubt. The risk of lawsuit in these types of cases is very high, and the law firm should take even greater care to obtain and evaluate reliable evidence before taking any disciplinary action.
Occasionally, there is a single dramatic incident that in and of itself justifies discharge. Generally, though, this is not the case. Often, the events that result in discharge occur over a significant period of time and are cumulative. Where there is no single, dramatic incident, there should be a documented history of counseling and honest criticism.
Unless the firm policies dictate, there is no specific legal requirement for written warnings, suspensions without pay, and other similar types of discipline before an employee can be discharged. However, a history of counseling and criticism, documented either by written documents that are given to the affected employee or by memorandum to the personnel file, will be very helpful in establishing that the employee was treated fairly. It is also very desirable that goals and timetables for the accomplishment of specific improvements be established, together with clearly expressed standards of performance.
Don't Terminate During Illness or Injury
Terminating employees who are injured or ill can generate substantial jury sympathy, even if there is legitimate reason for the termination. If feasible, these employees should be allowed to remain in a "leave status."
Depending on the circumstances of an employee's absence from work due to illness or injury (e.g., if the illness or injury is work-related or constitutes a serious health condition under the federal or applicable state law relating to family and medical care leaves and disability discrimination), an employer may or may not have the right to permanently replace injured or ill employees. If there is some doubt as to whether the employee is malingering, the termination decision can be made when the employee is ready to return, but only after a full investigation is undertaken, following the procedures for discipline described in this article. In these situations, legal advice from counsel experienced in federal and state employment laws should be obtained before any decision to discipline or discharge is made.
An Employment Agreement Can Be Helpful
An employment agreement that specifically provides for at-will employment or for employment for a specified limited term is a useful method to reduce liability for any employer. In addition, the agreement can provide for the arbitration of all disputes, including employment or the termination of employment. A properly written arbitration clause can avoid a jury trial and result in the dispute being resolved instead by an arbitrator experienced in employment law and workplace issues.
A separation of employment agreement containing a general release should be considered as a way to avoid liability. A written separation agreement containing a general release will limit an employer's liability for wrongful discharge and most other employment allegations, with the exception of workers' compensation and unemployment claims.
The inducement to sign the separation agreement can be severance pay that is otherwise not required by law firm policy. Severance pay should be conditioned upon the execution of such a separation agreement. A law firm must avoid coercion or undue pressure to obtain the employee's signature on the agreement. Its execution must be knowing and voluntary.
A Stitch in Time
Written documents impress juries and are extremely important in proving what occurred. It may take several years to get to trial after the filing of a lawsuit. Without documentation, it may be impossible for the employer to present a believable case. Law firm management needs to be educated on the potential liabilities that can result if discipline and discharge is not done properly. A procedure for the utilization of legal counsel during the discipline or discharge process should be established. With proper planning, it is highly probable that litigation can be avoided.