[This article by Aaron Morris originally appeared in the Orange County Business Journal.]


Aaron Morris, Esq.

An unplanned tour of our judicial system can be financially devastating to a business. Upon being sued, the business becomes an unwilling participant in costly and often inescapable legal proceedings.  The fact that the suit may be groundless is of little comfort. Long before any court looks at the relative merits of the plaintiff's claims, the business will be running up legal fees answering the complaint, responding to discovery requests, attending depositions, and having its attorney attend innumerable court appearances. Some businesses end up in bankruptcy from the process alone.

While law suits are seemingly unavoidable in our litigious society, a business need not wait helplessly for the process server to arrive.  The best course of action for any business is to take affirmative steps now that will maximize the chances of avoiding a sustainable court action.

This week we look at your dealings with both prospective and current employees. And while no advice can protect you from your intentional acts, the following tips may keep your innocent acts from landing you in court.

Check your hiring procedure.

With no evil intent, many businesses adopt discriminatory hiring practices. Here is a common scenario:

You have decided that your business really needs a part-time "gofer" to run miscellaneous errands. Since the job does not pay very much and you are located near campus, you decide to run a classified ad asking for college students to apply.

Your innocent ad could lead to a suit for age discrimination. Since you have limited the possible applicants to college students, you may be creating the impression that you are discriminating against retirees, for example. You may be guilty of race discrimination as well, since the percentage of minority college students is probably not reflective of the population as a whole.

Ads that seek a "gal Friday" or "housewives looking for extra income" are equally unacceptable since they carry gender-bias overtones and thus may appear to discriminate on the basis of gender.

Just advertise the job description and let the candidates decide if they are interested. This will not only avoid claims of discrimination, it will expand your pool of qualified candidates.

Check your interviewing procedure.

Having written the perfect, nondiscriminatory job ad, don't undue your good work once you start interviewing.

Don't ask any question that isn't somehow job related. Even seemingly harmless small talk during the interview can get you in trouble. For example, asking a woman about her plans for marriage and children smacks of gender discrimination. These questions are frequently asked by interviewers who are afraid the candidate will take a maternity leave right after she is trained. Just as it is usually illegal to fire a woman because she is pregnant, hiring decisions cannot be based on a woman's intent to have children.

Even questions concerning education may be improper if the job does not require any special schooling.

To be safe, make a list of the questions you intend to ask, and then review your list to make certain all the questions are justifiable as being job related and neutral in tone.

Check your employment contracts.

Now that you've decided to hire someone, what are the conditions of their employment? Are they guaranteed employment for a specific period of time, or can you terminate them "at-will?" How much will they be paid? If an employee works for a commission, how are unpaid commissions handled if the employee leaves? Were any benefits promised?

If you don't have a contract specifying these points, you may end up litigating them. As the old saw goes, "oral contracts aren't worth the paper they're written on." If you're not using employment contracts, start. Keep the agreement simple, but make sure it covers the main points.

A very important issue is the grounds for termination. Unless industry standards or corporate philosophies mandate otherwise, your employees should be terminable at-will. Absent a bad economy, no rational employer is going to fire an employee that is doing a good job. But too many employers unnecessarily limit their options by promising to keep an employee "as long as they do a good job." That should go without saying, but having said it, at-will status may be defeated. If it later becomes necessary to fire the employee, he or she can bring an action for wrongful termination, claiming the termination was without good cause and therefore a breach of the promise not to fire.

For the same reason, don't use a probationary period for new employees. To do so implies that the employee will obtain "permanent" status once the probationary period is over.  Keep your employees "at-will," and make sure that status is reflected in the employment contract.

Check your employee handbook.

If your company rules and policies are set forth in a handbook, they will be considered a part of your employment contracts. It is therefore essential to make certain that the wording of your handbook isn't negating the intent of your contracts.

Employee handbooks are fertile ground for finding that an employee cannot be terminated at-will. A recent court decision held that a basketball coach, hired on a one-year contract, could not be fired at the end of that year except for good cause. The court's decision was based on the school's handbook, which imposed such a condition.

If you have a handbook -- follow it.

Having reviewed your company's handbook, make sure it is followed. A common mistake is to discipline an employee without first following the review procedure contained in the employee handbook. Even if caught committing murder and mayhem, the employee is contractually entitled to whatever review process that has been established. While a snap disciplinary decision may later be vindicated, the point here is to stay out of court altogether. That can only be accomplished by following procedure, regardless of how egregious the employee's conduct may seem.

Document, document, document.

Document all employment matters, from hiring to termination. If the day comes that you need to justify a hiring, promotion or firing, you will want written documentation to support your decision.

When hiring, be prepared to justify why you hired one candidate over another. That will require keeping on file the applications and/or resumes of all the candidates. You will be at a serious disadvantage in court if you can't remember why you failed to hire a particular candidate.

Current employees should receive written evaluations at least every year, and any interim problems or kudos should also be documented. All evaluations should be signed by the employee, acknowledging receipt.

Supervisors understandably hate to give bad evaluations since it is confrontational and hurts morale.  But such reluctance frequently results in a file with nothing but glowing evaluations. Supervisors should always give scrupulously honest reviews.


Aaron Morris is a Partner with the law firm of Morris & Stone, LLP, located in Santa Ana, Orange County, California. He can be reached at (714) 954-0700, or by email.  The practice areas of Morris & Stone include employment law (wrongful termination, sexual harassment, wage/overtime claims), business litigation (breach of contract, trade secret, partnership dissolution, unfair business practices, etc.), real estate and construction disputes, first amendment law, Internet law, discrimination claims, defamation suits, and legal malpractice.



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