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The Top 10 Management Mistakes That Lead to Lawsuits

It's not illegality that fuels employee lawsuits, but rather employee anger arising from perceived unfair treatment. Placing a legal label, such as discrimination or retaliation, on the seeming unfairness occurs afterward, according to Workforce Management.

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Supervisors, managers, executives, and even HR staff often engage in behaviors that, unwittingly, lead employees to feel misled, lied to, or otherwise unfairly treated. In doing so, they increase the likelihood of litigation. Ten common mistakes increase the likelihood of employee lawsuits and financial exposure.

1. Forgetting about Training

Workplaces today are busier than ever. Devoting time to management training takes precious hours away from productive, moneymaking endeavors. Your credit union, however, is its managers. What the managers say and do, your credit union says and does. Correct behavior prevents lawsuits. Missteps lead to liability. Managers who aren't conversant in your credit union's policies, and who don't know the basics of setting goals, preparing performance appraisals, and proper documentation become the catalyst for lawsuits.

Supervisors need training about how to handle difficult situations—what to say, whom to turn to for assistance, and what not to do. Failing to provide management training is shortsighted, and with the rise of potential individual liability, unfair to a credit union's supervisors.

2. Disregarding Policies

Policies establish your credit union's "rules for the road" for both employees and managers. They set standards and inform employees of management's expectations. Well-drafted policies tied to your business needs provide guidance to managers and employees. If followed, policies help ensure consistent treatment of employees.

Disregarding policies heightens the potential for inconsistent treatment. It thus increases the risk that employees subjected to harsher action than their co-workers will interpret the discipline they received as unfair or discriminatory. Ignoring policies also sends the message that the employer believes they're unimportant, and gives license to employees to disregard them as well. An employer that fails to follow its policies not only loses the benefit of having them, but it also sets itself up to be portrayed as mismanaged, uncaring, and willfully noncompliant with the law.

3. Shooting from the Hip

Firing without notice may occasionally be appropriate, but rarely. Acting without fair warning, or rashly or arbitrarily, invites resentment. Employees who feel ambushed may be led to seek their revenge through litigation.

You can reduce this risk by making employees aware of the probable consequences of misconduct through well-publicized and consistently enforced policies and progressive discipline. Before disciplining an employee, you should be able to state:

  • The legitimate business reason for the action.
  • Whether the action is consistent with other disciplinary actions you've taken in similar situations, and if not, why not.

In addition, employers are usually well-advised to give an employee the opportunity to give his or her side of the story before administering discipline. A meeting with the employee often provides a valuable safety valve for both employee and employer.

Often, employees admit the misconduct (or some portion of it). Though unhappy with the discipline levied, employees often will be satisfied with the opportunity to have been heard. Managers need not agree with the employee, and should not argue or apologize. Meeting and listening alone can make employees feel they've been treated fairly—because, in fact, they have been.

4. Motivating Poor Performers with Raises and Bonuses

The season for annual raises and bonuses brings with it the temptation to give under-performing employees some amount of increase or bonus. Withholding raises and bonuses is a tough decision. We all like to be liked. Withholding raises and bonuses seems contrary to a supervisor's goal of maintaining morale and staff loyalty.

Giving undeserved increases, however, does not spur poor performers to improve. Rather, it reinforces poor performance by telling employees their performance merited an increase or bonus.

Terminating someone on the grounds of poor performance, after years of raises and bonuses (even small ones), creates concrete evidence of inconsistency between what you say now versus what you said then. It raises suspicion of ulterior motives for the adverse employment action and provides strong motivation for the employee to consult counsel.

5. Criticizing the Person

Few jobs lend themselves to purely objective evaluation. Subjective criteria nearly always come into play. The challenge lies in relating performance criticism (and praise) to the job and not the person. Reviews that characterize the employee, rather than evaluating his or her performance, may become evidence of bias and discriminatory stereotyping.

6. Ignoring Problems

Employers ask for trouble when they ignore problems and complaints. Failing to address performance issues has the practical effect of lowering performance standards. It leads employees to believe they're performing at satisfactory levels because management hasn't told them otherwise.

You might be dissatisfied with an employee's level of performance, and you might truly believe that the employee ought to know he or she is missing the mark. Unless you confront employees about performance deficiencies, however, and expressly state what employees need to do to meet expectations, change is unlikely. When after years of accepting poor performance a manger finally acts, perhaps by discharging the poor performer or perhaps by passing the employee over for promotion, the employee may react with surprise, hostility and claims of discrimination.

7. Putting Nothing in Writing

Without a written record documenting employee performance issues and management's response, employers increase the risks of "he said, she said" situations when taking adverse employment actions. Employees who haven't been given (and required to sign) counseling memos or performance evaluations frequently claim that the counseling, the warning, or the evaluation was never received. Verbal warnings carry less weight than written warnings with employees, their lawyers, and juries.

8. Understanding That Boys Will Be Boys

A hostile work environment, whether because of sexual harassment or harassment based on age, disability, or race, may arise from either severe or pervasive conduct. Jokes, e-mails, and passing comments, when considered individually, may be of little consequence. Accumulated and viewed as a whole, however, they can be used to show pervasive misbehavior that has converted a professional workplace into a frat house. That a harassing employee might not intend to harass his co-worker does not constitute a defense nor does it create a shield from being sued.

Employers who know of employee misconduct, such as use of the company's e-mail system to send sexually explicit jokes or photographs, and who fail to take action to stop the conduct, substantially increase their risk of litigation and liability for damages.

9. Lying

When management fails to tell the truth, employee disgruntlement inevitably follows, and with it a fast track to the courthouse and potential liability.

Employers do not protect themselves by telling older employees they're being discharged because of job elimination when the true reason is poor performance. As soon as someone (younger) is hired to replace the discharged employee, the company's lie, even if intended to protect the employee from hurt feelings, will be seen as a pretext to hide discrimination.

10. Covering Up

Repeatedly, experience shows that a cover-up carries worse consequences than the initial misdeed. Shredding documents, deleting files, or throwing away drafts upon learning of an impending lawsuit can all add up to trouble. When confronted with a bad situation, it remains true that honesty is the best policy.

This story was compiled by the staff of The Point for Credit Union Research and Advice and was published on its website at http://thepoint.cuna.org. Reprinted with permission.

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