Bad News Can Be Good For a Wrongful Termination Lawsuit

An employer may build a stronger defense against a problem employee by digging up more evidence of misconduct.
Ask employers to list their least favorite tasks and firing an employee is bound to be at the top. It’s difficult, awkward and stressful for everyone concerned. Replacing an employee is expensive, time-consuming and hurts productivity, and the possibility of a lawsuit for wrongful dismissal makes it even more worrisome. So it’s no wonder that employers are reluctant to terminate staff even in cases of blatant employee misconduct.

But hanging onto a problem employee is a bad idea, no matter how unpleasant it may be to let him or her go. In most cases, it’s better to remove a problem employee as quickly as possible. Keeping on bad employees is bad for morale, but equally important is the fact that the discovery of one termination-worthy incident may be only the tip of the iceberg. In fact, some employment attorneys feel that the discovery of one fireable offense could indicate that there are others.

“Most difficult employees cause problems across the board,” wrote Toronto employment lawyer Howard Levitt in a recent article in the Ottawa Citizen. “When a client comes to me with one reason to terminate someone, I am always alert to the possibility of more,” he wrote.

Secondary Misconduct as a Defense

The good news is that this can sometimes work in the employer’s favor in the case of a wrongful termination lawsuit. If an employer discovers, while preparing a wrongful termination defense, that the employee engaged in misconduct other than that for which he or she was fired, the newly uncovered misconduct can be used in the defense of the lawsuit, and this applies in both the US and Canada.

“Ultimately, employers can rely on the results of later investigations if the evidence establishes that the problems existed at the time of dismissal,” wrote Levitt.

“In the US, federal and state law usually permit the use of ‘after-acquired evidence’ in defending employment discharge and discrimination cases,” says Charles Krugel, a Chicago labor and employment lawyer.

In fact, the employer could end up successfully defending a wrongful termination case that he or she might have lost, had the secondary misconduct not been uncovered.

“More specifically, this means that although there is an alleged illegal action by the employer, if newly obtained evidence of employee misconduct justifies firing or disciplining that employee anyway, then the employee can’t be compensated (awarded damages) even if the employer’s actions, prior to obtaining the new evidence, are illegal,” says Krugel.

Dig for Dirt to Reduce Damage

“The newly obtained evidence should warrant termination or discipline so long as such action is consistent with company policy or practice, is illegal or is otherwise so extreme that the employer can’t justify retaining that employee (eg, violence, theft, vandalism),” says Krugel. This evidence may not be a complete insulator from liability, Krugel says, but it may help to reduce damages.

It makes sense then, for employers faced with a wrongful termination lawsuit to spend considerable time and effort digging through the dismissed person’s employment history to find any other evidence of serious misconduct.

Published November 22, 2011; Author: Dawn Lomer

Very recently, one of my clients had 2 civil rights complaints filed against them with an enforcement agency by the same employee.  Each complaint was a few months apart and were sort of “kitchen sink” complaints.  That is, the employee primarily complained of disability discrimination though their complaint included discrimination on the basis of many other protected classes too.

One of the problems that arose, on our end, was that we never responded to the complaints in a timely manner in the first place; I won’t explain why this happened but it did.  Although our delays had no bearing on whether the actual alleged discrimination occurred, in my opinion, it’s never a good idea to just blow-off a regulatory & enforcement agency (for more on how to deal with & respond to regulatory agency complaints, see this post). Nevertheless, after we officially responded, by denying all charges, & once we got the settlement process going, it took about 2 weeks from issuing our response to reaching a $1,250 settlement for both complaints.

This is the 3rd employment civil rights complaint I’ve settled in the $600 range over the past few months.  Here’s information on the earlier (September) complaint.

The rationale for settling all 3 of the complaints instead of going through hearings or trials is that it’s cheaper to settle in the $600 range than it is to pay my fees & lose a lot of time off from work preparing for & attending hearings.

The complaint was baseless. The employer is a great social services organization. The settlement is similar to a recent NLRB settlement I negotiated for 40% backpay.  This case also concerned a social services agency & allegations of firing in retaliation for concerted activity. In both cases, the complaints were groundless, but the settlements were cheaper than prolonged litigation or dispute resolution.

Another common element in these cases, as with most labor & employment complaints I deal with, is that the complainants almost always think that they’re going to receive a financial windfall & shock the world with revelations of abuse, mismanagement, etc. That’s just not reality. More often than not, the ex-employees have to realize that if they want to get a quick resolution & money, or some sort of resolution, from their complaints, then they should reach a cost-effective settlement.

The agencies that process these complaints are usually cognizant of these realities already, which is probably why they don’t block these settlements, and sometimes even persuade the complainants to accept these terms. These agencies have huge caseloads & need to spend greater resources on substantiable complaints.

Also this month, on behalf of another social services client in Chicago, I negotiated very favorable terms for a pre-trial settlement at the National Labor Relations Board.   In this case, which is similar to the NLRB’s recent spate of social networking cases involving non-union companies, the NLRB brought a complaint against my client for firing a non-union employee for complaining to a third-party that had no managerial authority or control over the employee’s issues.  Here, even though the client is non-union, and the complaining employee had no authority to insert themselves into these types of issues, the NLRB alleged that the employee was representing the rights of other employees (none of whom lost their job or were disciplined).  The settlement reached requires no posting of notices, no reinstatement, and my client only had to pay a fraction of full backpay to the employee.

Reprinted with permission from the January 2011 edition of the “Employment Law Strategist” © 2011 ALM media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, reprints@alm.com or visit www.almreprints.com.

A PRACTITIONER’S PERSPECTIVE: RESPONDING TO REGULATORY AGENCY COMPLAINTS

For business owners, one of the most troubling aspects of management is receiving an employment related complaint from a governmental regulatory agency. Such agencies include the Equal Employment Opportunity Commission, the National Labor Relations Board, the U.S. Department of Labor, the Federal Trade Commission or any of the similar state, local and municipal equivalents to these agencies.

Preparing a response is an onerous task. The process leaves a business wondering who is really in charge; what exactly are our tax dollars paying for, and why would we ever want to employ someone again?

Since America’s inception, business owners and government entities have engaged in a balancing act of regulation and free enterprise. Lately, due to increasing government intervention in private sector business operations, and due to our economy’s shortcomings, this balancing act seems swayed in government’s and big business’ favor. Big business has an advantage because small to medium-sized businesses usually do not have the same resources (money, manpower, time, energy) to devote to responding to these complaints and charges. Consequently, some of the most important questions for smaller business owners and managers include:

• Are we judged guilty before being proven innocent;
• How do we respond to an regulatory agency complaint; and
• What information is necessary to give them without jeopardizing our operations or finances?

Once it determines that the complaint is official, the business owner must ascertain the nature of the allegation. That is, what law or regulation is cited in the complaint? Also, what is the potential punishment or the amount of damages that can be awarded if the company loses the investigation? Once this has been determined, it will be easier for the company to figure out how to respond and what evidence should be included with the response.

A third factor to consider is the deadline for response. Obviously, a company does not want to miss a deadline, but if pressed for time, some agencies (not all) permit additional time for a response. Note that a request for additional time has to be made by the company — it is never implied or otherwise understood that the company needs additional time to respond.

Generally, the company’s response is an informal statement of the company’s position on the allegation (often called a “position statement” or a “statement of position”). The statement is informal because it is usually not written in a legalistic or official format similar to court filings. However, this does not mean that the business should be casual about its response. In a very detailed and organized fashion, the company should explain the what, why, when, who, where and how of what transpired.

Regarding the position statement: in addition to providing a written narrative of what occurred, the company should include any documents, recordings and files (i.e., exhibits) that support its contentions. All exhibits should be referred to in the statement. If there are more than a few exhibits, or if exhibits have numerous pages or subparts, it is helpful to include some sort of index or table of contents. Essentially, anything that helps an average reader understand the position statement, and anything that clearly and completely explains the company’s position, should be included or referred to in the statement. It is acceptable to remove any privileged or confidential information such as attorney-client communications, social security numbers and birth dates. However, it is essential not to appear as if you are hiding something. Consequently, the reasons for redacting information  should be explained if they are not obvious (e.g., why the redacted information is protected or proprietary business information, personal employee information, patented or trademarked information).

In addition, sending a very detailed response is better than sending a general and bureaucratic sounding response. With recent advances in communications and technology, transparency (i.e., openness, honesty, forthrightness) is a hot topic and an important consideration when responding to an agency. The less it looks as if you are trying to hide something, and the more you appear to be taking a respectful, problem solving approach to the matter, without admitting guilt or being overly aggressive, the better the chance that the agency will rule in your favor. Otherwise, the agency or decision-maker, at this first level of dispute resolution, will summarily kick the complaint to the next level or rule against your business.

Disclosure

How much to disclose and what to disclose are key considerations. This brief article cannot summarize all of the factors to consider in determining what to reveal in the position statement. Sound business judgment and common sense might help to resolve these concerns. Competent legal or business counsel can also help. As a general rule, stick with the facts,  i.e., what can be proven with sufficient and reasonable evidence, and what can be disclosed without compromising any business secrets and other confidential information.

The position statement is used by the agency to decide whether or not to investigate the charges further or whether to pursue some other form of dispute resolution such as mediation, settlement discussions — or even whether to file a more formal complaint or lawsuit against the company.

The agency representative making the decision is usually an appointed official, who may be an attorney. In many instances, the agency official is an experienced and competent official who is able to comprehend nuanced information. However, there are exceptions; not all decision-makers are experienced or competent. Moreover, the decision-maker may not be making a decision based on all the facts. The decision is usually based either on whatever information is available, or on the decision-maker’s perception of the response and evidence.

Often, at the investigatory stage of dispute resolution, the agency may request additional information, beyond that which is indicated in the position statement. Or sometimes, after the submission of the position statement, new information surfaces. In either instance, the company should not hesitate to send additional information to the agency. Think of it as engaging in an ongoing dialogue with the agency about the circumstances surrounding your case. Just make sure that whatever additional information is sent does not contradict anything stated in the position statement and is easily integrated into the statement.

Once the position statement has been ruled upon, the complaint will either be dismissed or will proceed ahead to some sort of trial or other dispute resolution procedure (e.g., mediation or arbitration).

As a general rule, it is not always necessary for a responding company to utilize legal or business counsel for the response. However, if the responding company is not attuned to the specific regulatory agency’s style or the alleged violations, and it does not have the benefit of counsel to assist in their response, it could adversely affect its chance of receiving a favorable response. It is not wise to use the position statement as a means to test how whether you are adept at dealing with agency complaints. This is not the time for experimentation. It could cost your business plenty.