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.

At the core of Stephanie’s presentation is the below Slideshare/Youtube presentation (click on the link below):

Statistical Analysis as Evidence in Employment Discrimination Litigation

Additionally, there was some good back and forth discussion on my LI Group concerning the importance of statistical analysis.  Instead of summarizing the discussion, I’ve posted it in its entirety below:

Charles Krugel www.charlesakrugel.com • This is great Stephanie! Thanks for posting it.  After watching your presentation, my impression is that statistical analysis may be more important for combatting class action certification than actual disparate impact discrimination.  Am I wrong?

Stephanie R Thomas, Ph.D. • Statistical analysis has a role in class certification, disparate impact and disparate treatment cases. For class certification, statistics can be used to examine commonality and typicality – I have a separate presentation on this (http://www.slideshare.net/TheProactiveEmployer/examining-class-certification-issues-with-statistical-analysis).

For disparate impact claims, I see statistics as having two roles. First, you can statistically examine your employment practices (hiring, promotion, termination, requirements for a given position, etc.) with respect to various protected group definitions proactively to identify any potential problem areas before you get to the litigation stage. Second, in the litigation context, statistics can be used to examine the challenged policy or practice to determine if there is statistical support for the claim of disparate impact.

With respect to disparate treatment claims, statistics can be used to assess whether there is statistical support for the claim. The analysis for disparate treatment is typically more complex than for a claim of disparate impact, because of the need to carefully define comparator groups and similarly situated employee groupings. But statistics can be very useful in assessing the merits of disparate treatment claims.

Charles Krugel www.charlesakrugel.com • Thanks again Stephanie!  The use of statistical analysis in disparate treatment claims is an interesting idea.

The reason that I wonder if statistical analysis is more beneficial at the class action certification stage of litigation, in disparate impact claims, is because that ruling lies with the judge not a jury. Whereas in a disparate treatment claim, the final determination of guilt or innocence is usually made by a jury.

In my opinion, it requires incredible communication skills to get statistical analysis across to a jury in a disparate treatment case. Obviously, on a case-by-case basis, it has to be determined whether and how to get this analysis across to a jury in a such a case.

On November 6, 2009, Ill be presenting my 2nd “Assessing Business Liabilities – A Legal & Accounting Perspective” seminar.  Like my 1st seminar, I’ll be presenting with 3 other attorneys & a CPA. This is at the Silver Stallion Restaurant, 1274 Lee Street, Des Plaines, IL (breakfast will be served).  The seminar is free.

The focus of this seminar is assessing a business’ liabilities from the legal & accounting perspectives. Attendees will be able to ask questions about your their own business’ situation.

Topics will include:

• Reducing Income Tax Liabilities
• Real Estate Assessment & Taxes
• Employee Problems & Human Resources
• Intellectual Property – Value & Potential Problems
• Partner Agreements – Dispute Resolution

Speakers are:

• Frederick R. Dempsey – Real Estate Tax Appeals Attorney
• Leon Edelson – Intellectual Property Attorney
• Scott Greenberg – CPA
• Me
• Barry Mortge – Attorney for Closely Held Businesses

ADVANCE REGISTRATION IS REQUIRED AS SPACE IS LIMITED; RSVP By AUGUST 14th

For more information and to register, please call Ivey at 847-299-9901 or e-mail her at i.compall@hgaltd1.com; you can also contact me.

Presented by Hirsch Greenberg Accounting Ltd
950 Lee St
Des Plaines IL

We’re doing 2-3 more of these seminars before year’s end.  I’ll post that information as it becomes available.

It’s not something that organizations, particularly their HR departments, are too enthusiastic about, but exit interviews are a rich source of information that companies can use positively as they grow in age and experience. Exit interviews, if not framed and structured properly, end up either being a useless exercise or one that leaves a bitter taste in the mouth with unnecessary recriminations and blame. Here are a few guidelines for HR managers to follow when conducting exit interviews:

• The best exit interviews are those conducted face to face, preferably by someone who is not known to the employee, either an outsider or someone from another department. Direct supervisors or managers are the worst choices to hold these interviews. If an employee is not too keen on a direct meeting, a questionnaire could be used to procure the necessary information.

• A useful exit interview must capture employees’ honest opinion of the company, their reasons for leaving, their suggestions for improvement within the company, any problems they may have had within the company, and their views on compensation and job satisfaction. It must also focus on retrieving knowledge specific and relevant to the employee who is leaving, such as contacts and methods that could be used to find and train suitable replacements.

• Exit interviews are more suited to employees who are resigning or leaving the company on their own volition rather than for those who have been laid off or terminated on other grounds. The latter kind would not be too cooperative and the answers they provide may not be a true reflection of the work conditions that prevail in the organization.

• No employee should be forced to attend exit interviews – they must be completely voluntary. Employees must be informed about the purpose of the interview and asked if they would return to the company, if asked, at some future date.

• Exit interviews must not be undertaken as exercises either to defend the company’s policies and practices or to conduct a post mortem on the employee’s performance within the company. The interviewer must adopt a polite and courteous attitude towards the leaving employee, even if the parting of ways is not too amicable.

• The information one infers from an exit interview is most important to the company – allegations and allusions to personal attributes and characteristics do not help. What does make a difference are details that can help improve the company’s management practices and policies in a way to improve customer and employee retention.

Organizations would do well to assess the importance of conducting regular employee feedback sessions during the course of their employment rather than conduct exit interviews after they announce their resignation. While employees who are leaving tend to be more honest since they have nothing to lose by sucking up to their higher ups, anonymous questionnaires also help achieve the same result. At the end of the day though, a constant appraisal of the working atmosphere within the company will help in bringing down attrition rates considerably.

Chuck Krugel’s Comments:  Although exit interviews can provide useful information, and can ease the exit transition, I’m not familiar with research or studies that indicate any sort of cost versus benefit analysis of exit interviews.

Therefore, prior to implementation, I caution employers to determine the costs of conducting exit interviews, and to either research or analyze what types of questions and format of the exit interview will work best for them.  Additionally, if an employer decides to conduct these interviews, implement them across the board, and not on specific employee groups.  This may help to avoid disparate treatment or disparate impact claims.

In other words, in theory, exit interviews can be useful, in practice, pay attention to the what, why, how, when, etc.  Why spend time and money if you can’t clarify the costs and benefits?

6 steps to keep Employee Complaints from Escalating

If an employee is unhappy then the best thing you can do is let him or her vent about the issue that’s bugging them. The worst thing that can happen is that the employee lets the situation fester. This is when a simple problem can escalate to one on a much larger scale. Something that could have been kept in-house could lead to the employee seeking counsel if the issue is that important. There’s no way to prejudge how important something is to an individual until it’s too late. Follow these six steps to keep the employee happy and, in turn, your business running smoothly:

1. Let the employee come forward on his or her own. The employee m ay be embarrassed or extremely agitated about the situation.Accordingly, they may realize that they need time to assess their feelings. When they’re ready to discuss the problem meet with them behind closed doors for their privacy.

2. Consider the facts. Let the employee explain the situation. Take notes during the meeting. Your experience will allow you to separate the facts from the emotions that are sure to come into play.
3. Have the employee put it in writing. By having the employee write down his complaint the possibility for misunderstandings down the road will be drastically limited. Encourage the employee to do this and let him or her know that this standard procedure and in his or her best interest as the situation unfolds.
4. Investigate thoroughly. After the initial complaint has been lodged, talk to the employees being named in the complaint. Get their sides of the story in writing. During this process, take notes and consider just the facts as you weed out the emotions that will be present.
5. Ask for witnesses.If there are any witnesses available that can corroborate the complaint or dismiss the allegations talk with them as soon as possible. Again, ask for a written statement and take your own notes during the interview process.
6. Make the judgment on the facts. Once you’ve collected all the statements and can properly weigh the facts it’s time to levy a judgment. Try to avoid involving attorneys, but if it comes to that point act swiftly. Consider the ramifications for your company. If possible, seek a non-biased mediator to assist in the matter. This can alleviate the complainant’s fears that he is going to get snowballed in the matter and will make everyone feel better about the process.

Chuck Krugel’s comments: Relative to employee venting, an employer has to pay attention to when, where , to whomand why and employee vents. For example, if the employee just doesn’t like the employer, then it’s probably best to do that away from customers and other employees.

If the employer learns of a situation, not directly from the involved employees, but from a witness or other party, the employer might still be legally obligated to investigate and take corrective action. By not doing so, the employer may be exposing themselves to legal liability and the loss of money.

Additionally, it’s not possible to always get a complaint in writing from the employee or a written statement from a witness. Sometimes, the employer has to document a witness’ statement or a verbal complaint from an employee. This is especially true where the employee is unable to write or the employee doesn’t speak or write in English well.

Finally, with respect to fact gathering and checking, an employer isn’t required to prove something as a matter of fact in order to take action. An employer just has to be reasonably sure that something occurred; the employer isn’t legally required to prove as a matter of fact or even “beyond a reasonable doubt” that something occurred.