An Employment Lawyer's Four New Year's Wishes For Employers

Saturday, January 1, 2005 - 01:00
Jonathan D. Wetchler

The new year is a time for reflection and resolution. In thinking of employment disputes that could have been avoided, should have been less expensive to resolve, or would have involved substantially less risk if only a fact or two had been different. I wish that employers aspiring to a peaceful and productive new year would:

1. Train All New And Existing Employees About Their EEO And Anti-Harassment Policy

Managers and employees should be trained about the behavior their employer prohibits under its EEO and Anti-Harassment Policy, as well as how to raise a claim through the employer's internal complaint procedures. While many employers already have trained managers and supervisors, which is essential, many have stopped there. Training rank and file employees about what conduct is prohibited and how to respond to prohibited conduct can significantly reduce legal claims in two ways: First, hostile environment claims can result from the conduct of co-employees as well as management. Providing employee training reduces the likelihood that inappropriate co-employee conduct will be engaged in or tolerated at a level that can create a hostile environment. Second, in the event that inappropriate conduct takes place, employees who are offended will be substantially more likely to use the employer's complaint procedure, thereby permitting the employer to remedy the situation and avoid a claim being filed with a government agency or in court.

To be sure,, there will always be some employees who are trained and still do not avail themselves of their employer's claims procedure before raising sexual or other harassment claims. But having conducted training will greatly increase the likelihood that such an employee's claim will be dismissed on summary judgment under the affirmative defense recognized by the Supreme Court in Farragher v. City of Boca Raton and Burlington Industries v. Ellerth. Where the alleged harassment does not culminate in an adverse employment decision, the employer may avoid liability by showing that: (1) the employer exercised reasonable care to prevent and promptly correct any harassing behavior; and (2) the plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer to avoid harm.

The importance of this defense was significantly increased by the Supreme Court's decision this past year in Pennsylvania State Police v. Suders, holding that the defense is available in constructive discharge cases unless the plaintiff quits in a reasonable response to an employer-sanctioned adverse action of an official nature, such as a demotion or a cut in pay. This means, for example that if an employee quits in response to a sexually hostile environment (a typical case) the Farragher/Ellerth defense is available, so long as there has been no demotion or other official employer-sanctioned adverse action. In other words, under these circumstances, the constructive discharge can not be used as an adverse employment decision to render the Farragher/Ellerth defense inapplicable and to avoid summary judgment.

The training should be documented and if it is to be conducted on a regular basis, can include a certification by the employee that he or she has not been subject to any policy violations since the last training.

2. Provide For Mandatory Arbitration Of Claims

With well publicized reports that approximately 97% of civil cases do not go to trial, an increasing number of employers are recognizing that court litigation is not the most efficient method for resolving employment disputes. While mandatory arbitration is not necessarily the right approach for every employer, for many employers eager to reduce their expenses and time spent on litigation, arbitration may be a welcome alternative. This is particularly true for employers who (1) settle cases they would otherwise fight because the cost of litigation is too high, and/or (2) know they are likely to settle many cases and wish to keep their legal fees to a minimum before settlement is reached.

When structuring an arbitration program, the following points should be kept in mind:

  • In many jurisdictions, including Pennsylvania, the obligation to arbitrate may be imposed by adopting a policy that is circulated to employees. By continuing employment, employees are deemed to have agreed to arbitrate.

  • Either acceptance of employment or the employer's mutual obligation to arbitrate can constitute adequate consideration for the employee's obligation to arbitrate. In other words, in jurisdictions such as Pennsylvania, providing an economic payment or benefit to employees is not required.

  • Consider providing that other than a minimum payment from the plaintiff for filing fees (e.g., $125.00) the employer will bear the expense of the filing and arbitrator's fees. This will eliminate litigating the issue of whether the employee may be relieved of the obligation to arbitrate because of financial hardship. Other approaches also exist for dealing with this issue, such as providing the arbitrator with discretion to award some or all of the costs of the arbitration to the prevailing party.

  • Ensure that the scope of the obligation to arbitrate encompasses all claims relating to employment and the termination thereof. Although an enumeration of all claims subject to arbitration typically need not be included, there should be an acknowledgment that the employee is waiving the right to have a court determine the employee's rights, including under federal, state and local statutes prohibiting employment discrimination, including but not limited to sexual harassment. Moreover, employees may not be precluded from filing discrimination charges with the EEOC and other agencies.

  • If the employer may need to file claims in court for injunctive relief to prevent the disclosure of confidential information or the violation of non-competition or non-solicitation obligations, include this exception to the employer's obligation to arbitrate (and analyze whether consideration in addition to the employer's mutual obligation to arbitrate should be provided).

  • Include reasonable limitations on discovery (e.g., the number of depositions to be available) but provide the arbitrator with the authority to provide for additional or other discovery upon a showing of substantial need.

  • Avoid the temptation to include provisions limiting damages, such as precluding damages for emotional distress or punitive damages, which creates a substantial risk of invalidating the agreement.

  • Consider including a clause granting the arbitrator the authority to award to the prevailing party some or all of its attorney's fees, in addition to any such awards required by law. This may cause plaintiffs some concern about filing frivolous claims, but also may result in awards of fees against employers for non-statutory claims in which fees would not otherwise be available.

As highlighted by the points above, it is important to ensure that the document(s) requiring arbitration are carefully crafted to ensure that the obligation will be enforceable and consistent with the employer's legitimate business needs.

3. Enter Into Agreements With Employees To Protect Their Business

Many employers do not consider the important protections they may obtain through agreements with their employees. For example, if you employ managers, sales or technical employees who have the ability to take your customers and key employees to a competitor or who could start a new business to compete themselves, your company needs protection. Agreements should also address issues including use of confidential information and ownership of intellectual property created by your employees.

Covenants against competition, agreements not to solicit customers and agreements not to solicit employees all may be effective tools for protecting your business. If employees possess confidential information or business relationships they obtained while in your employ that would benefit a competitor, these agreements may be needed. Typically, consideration for such agreements can consist of the acceptance of new employment and in some states, such as New Jersey, the continuation of employment. Where additional consideration is necessary either for enforceability or to induce employees to sign, consider offering severance pay in the event of termination by the employer without cause. Other possible forms of consideration include bonus eligibility, additional benefits and stock options.

The following are examples of additional protections to consider:

  • Confidentiality agreements can be used to ensure that employees do not use or disclose confidential information improperly during their employment or for the benefit of competitors or themselves after employment has ended. Any employee with access to confidential information should sign an agreement of this nature. These agreements should also require employees to return all documents and information relating to the company's business upon their cessation of employment or earlier upon request, retaining no copies, excerpts or summaries.

  • Intellectual property ownership agreements may provide that all intellectual property developed by employees while they are employed is the property of their employer. Agreements of this nature typically address in detail the assignment of inventions, maintenance of records and the obligation of the employee to assist the employer in securing copyright and patent protections. Since intellectual property may constitute an employer's most valued asset, agreements of this nature should not be overlooked.

  • To the extent that employees are required to sign agreements, particularly in states such as New Jersey, the agreement should make clear that employment is at-will and both the employee and the company may terminate the employee's employment at any time and for any reason, with or without cause or notice.

  • Agreements should provide that they may be assigned by the employer without the employee's consent. In Pennsylvania, for example, covenants against competition may not be assigned without employee consent in the absence of a provision of this nature.

  • All agreements providing for substantial severance pay should require that employees sign a release as a precondition to receiving payment.

  • Agreements with employees, particularly those hired from competitors, should provide that the employee is not subject to any contract or restriction that could preclude or limit the performance of duties for the new employer. The employee should also represent that he or she does not possess any documents containing the confidential information of any former employer and will not make use of any such information.

4. Coach Supervisors To Avoid Retaliation Claims By Actively Managing Performance Issues

Perhaps the most serious consequence of not addressing employee performance deficiencies in a timely manner is the retaliation claims that may result. Here is one scenario: An employee's performance fails to meet expectations but is evaluated as satisfactory. The employee later raises a discrimination claim as a result of being given undesirable assignments from the supervisor. When the employee finally receives an unsatisfactory evaluation (or is demoted or fired) for performing in the same manner that had been evaluated as satisfactory before the charge was filed, the employee, who was not a victim of discrimination, now has a cognizable retaliation claim.

The Supreme Court has held in Clark County School District v. Breeden that employers are not required to suspend previously planned or contemplated employment actions upon receiving a discrimination complaint. Accordingly, supervisors should be coached to both (a) promptly address and document performance deficiencies; and (b) clearly communicate and document the disciplinary action that will follow (e.g., termination) if performance does not rise to an acceptable level by a stated time and remain at that level. By establishing that the deficiency is perceived before the claim is raised, the retaliation claim may be avoided. And if a discrimination claim does follow, the employer may have a reasonable chance of prevailing on summary judgment by showing that the allegedly retaliatory conduct was "in contemplation" before the claim was raised.

Jonathan D. Wetchler is an employment lawyer with over 20 years of experience exclusively in the area of employment counseling and litigation, Mr. Wetchler counsels clients concerning all aspects of employment law and has successfully handled virtually every type of employment litigation.

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