Reducing Legal Risk to Your Company
As an owner or executive of your company, there are five improvements you should consider making within your organization to help prevent legal issues. Handling these things proactively will make your business run smoother and can mitigate the burden on your business if an employee files a lawsuit against your company or you are otherwise faced with a difficult employee issue.
(1) Review your employees’ pay and positions.
There are a lot of ways a company can run afoul of the Fair Labor Standards Act when a business grows and changes over time. All organizations should carefully evaluate how their employees are paid to ensure the organization is in compliance with applicable laws. Even if you follow what others in your industry do, it may not be enough to prevent a claim from being brought against your company.
Do you have employees doing the same job but who have different titles? Are they also paid differently? Do you have contractors working alongside employees for a long period of time? Do you have managers that don’t actually manage people and also don’t manage an entire project or line of business? If any of these apply to your organization, it is a good time for an employment audit to ensure your business is complying with applicable laws.
(2) Train your managers.
Continuously training management often gets overlooked. There is rarely a good time to have your management employees turn their attention from the goals of the business to focus on legal risk and compliance. But there are numerous benefits of periodic training, including educating management on how to properly handle complaints of harassment and discrimination.
Additionally, ensuring employees know how to report any issues, concerns, or suspected discrimination or harassment is critically important. Employers must have a strong reporting procedure that provides for multiple avenues of reporting and guarantees employees that they will not face retaliation for making good faith complaints of discrimination or harassment. Management training can also be used to coach managers and strengthen the skills they need to navigate other difficult management issues they may face. If you have not done management training recently, getting a training session scheduled would provide valuable protection to your company, as it is essential that your managers know their legal obligations as a part of your leadership team.
(3) Establish a performance review process.
Many of the claims we see against companies are pursued when an employee feels mistreated or wronged. This is often due to receiving little to no feedback on their performance from management during the course of their employment. This lack of communication can lead to misunderstandings in the workplace, which can then result in litigation.
It is natural for managers to shy away from difficult conversations and confrontations when an employee is not meeting expectations, but this leaves the company exposed to risk when the time comes to make a decision on termination. As a business leader, you should prioritize giving managers the tools they need to address performance deficiencies while communicating respectfully and fairly with employees. Empowering your managers to raise and document performance concerns early in the process will go a long way in protecting your company and minimizing the chances you are sued. And, with regular training and good documentation practices, you’ll be ready to strongly defend yourself in the event of litigation.
(4) Protect your confidential information and trade secrets.
What is your business’s most valuable information? What kind of information gives your business a competitive advantage? Is that information properly protected? Who has access to your confidential information?
Confidentiality agreements are an important tool for protecting your business’s most important information. These agreements are used to set forth employees’ obligations to not to share your sensitive information. Such agreements also make clear that the company, not the employee, owns the information, even if the employee worked on or compiled the information during the course of their employment. Depending on your business, confidentiality agreements can also be used alongside noncompete agreements, nonsolicitation agreements, and/or nonrecruitment agreements, all of which should be tailored to your specific business needs and must be carefully drafted to comply with constantly-changing state laws.
(5) Set an example.
Finally, it is worth considering other steps you can take to cultivate a positive workplace environment that lets employees know they are valued. If you spend the time necessary to actively develop your culture and ensure that your managers are acting to best represent the organization, it is less likely you will be the target of a disgruntled employee’s lawsuit. No employer can completely prevent all personnel issues, but when complaints are taken seriously with proper investigations and managers exemplify the company’s professional and respectful culture, it greatly mitigates any problems that may arise.
Conclusion
Not only do these steps help put your organization in a position to efficiently and effectively defend against claims that may be asserted against it, they will also help you avoid having to deal with expensive litigation. The time you spend focusing on these key improvements will pay off. If you would like to learn more about any of the topics discussed in this article, please reach out to a member of our firm.
Kristina K. Griffin, May 2024