News & Information

 

FEATURED PRODUCT

OSHA Standards for the Construction Industry as of August 2009
This book contains the occupational safety and health standards for the construction industry promulgated by the Occupational Safety and Health Administration (OSHA), effective July 1, 2009.

Learn More »

CCH® HR MANAGEMENT - 12/03/08

Workplace litigation risk heats up as economy cools

A cooling economy and the workforce reductions that follow can raise employee anxiety and increase the prevalence of employment litigation. It's critical for employers to anticipate trouble on the legal front when the economy slows.

Corporate counsel can best manage the growing liability risk by anticipating the potential fallout of a declining economic environment within the organization. Watch for:

• More individual claims. If the job market dries up, workers are less able to leave an employer for another job if a rocky relationship develops. Instead, employees may choose to stay and sue.
• Higher damages. In a good economy, employees are less inclined to file suit because they are quickly hired elsewhere—and their damages are mitigated. But rising unemployment can bring a commensurate rise in damages in successful employment actions. Back pay awards are offset by interim pay, but where interim work is hard to find, damages will be higher.
• Class action or RIF-related suits. Publicity surrounding large-scale layoffs not only increases workplace jitters, it can more frequently result in multi-plaintiff and class action suits.
• Structural workforce changes. One tricky area involves implementing a staff reduction in one area of an organization while still trying to hire in other departments. Without the proper planning, companies may become easy targets for lawsuits in these scenarios. Communication is key. Here, it is especially important to explain to employees why the organization is hiring in some areas but reducing staff elsewhere.

The general counsel's office must also prepare the human resources team for its role in mitigating the litigation risk at this critical juncture.

Human resources professionals can minimize potential liability in the face of a slowing economic forecast. Below are some pointers for HR in carrying out this crucial role:

• Don't slash benefits. The employment practices and benefits that are key to retaining and recruiting employees are just as relevant in an economic downturn. In a challenging environment, programs that offer assistance to employees, such as work-life benefits, can help employers effectively maintain employee goodwill and minimize the hard feelings that lead to litigation.
• Document criteria for RIFs. Should workforce reductions become necessary, it is critical for employers to use clear and nondiscriminatory criteria concerning who will be retained, what factors will be considered, and what processes will be followed in reaching the ultimate decision.
• Review benefits and waivers. Carefully review benefit plans and determine what additional benefits can be made available in severance situations. Use a written waiver and release agreement in exchange for separation benefits.
• Stay on the ball. Tough times are no excuse for losing sight of the best employment practices. There is a need for care and consistency in the way HR practices are administered, from hiring to reductions in force—perhaps now more than ever. The challenge is not to completely let go of the "softer" side of HR, which is so essential to employee enthusiasm, trust and loyalty.

From a risk management perspective, the more employers can maintain morale and foster employee confidence, the more it helps to minimize risk on the legal front.

Visit our News Library to read more news stories.