Common Reasons Employers Get Sued

tom wolfe
Tom Wolfe, Managing Partner of Moore Brewer Wolfe Jones Tyler & North.

This article will examine some of the more common reasons employers may find themselves defending a lawsuit or claim, and will offer some simple suggestions for minimizing risk.

#1.  Misclassification
Many employment-related claims stem from misclassifying non-exempt employees as exempt. Non-exempt employees must be paid for every hour worked, including overtime. The law presumes that employees are non-exempt unless they qualify for one of the permissible exemptions under law. Determining whether a particular employee qualifies as exempt goes beyond job title and requires a careful analysis of how the employee spends his or her time, as well as whether the applicable salary test is met. Whenever duties or salary are modified, it is a good idea to also ensure that any existing exempt classification still applies. Misclassifying an employee as an independent contractor is another common mistake. Both the courts and the Internal Revenue Service will look beyond a written agreement to the intent of the parties, the nature of the work, and the circumstances as a whole to determine whether an individual is truly an independent contractor under law.  Noncompliance can result in liability for back pay and penalties.

#2.  Discrimination/Harassment
Discrimination or harassment based on any of the following protected characteristics are all prohibited by law: age (more than 40 years), race or color, religion, national origin or ancestry (including language use restrictions or holding a Vehicle Code §12081.9 driver’s license), physical or mental disability, medical condition (including cancer or AIDS/HIV status), genetic information/characteristics, pregnancy and perceived pregnancy, marital status, sex/gender (including pregnancy, childbirth, related medical conditions, breastfeeding, gender identity or gender expression sexual orientation, or sexual stereotypes), or military/veteran status. Employers are also prohibited from retaliating against an employee claiming certain legal protections. Common areas where violations are found include inappropriate pre-employment inquiries, intrusive medical inquiries of an employee on leave, or when emotions are allowed to influence employment decisions.

#3.  Wage and Hour Laws
Failure to provide the rest and meal periods or overtime pay required by law for non-exempt employees, including failure to accurately document work hours, can result in liability for back pay and penalties.  Although lack of oversight is a common problem, violations can also result from simply trying to be too accommodating, e.g., allowing an employee to skip lunch to leave early, work off the clock, or make up missed time by working late.  The law strictly limits an employee’s ability to voluntarily waive wage and hour protections. Keep in mind that local wage and hour laws can create inconsistent requirements, and employers will be expected to comply with the requirements that provide the most protection to employees. 

#4.  Leave Laws
A variety of job-protected leaves of absence are available to employees under state and federal law. Violations can arise from either the absence of clear written policies or an inconsistent application of policies. Employers need to understand which leave laws apply to their organization and which employees are covered.  Failure to properly classify and document a particular leave in a timely manner can result in inadvertent violations and waive valuable legal protections.  Failure to understand whether a particular leave is mandatory or permissive, the type of documentation that can or should be requested, and the terms and conditions for reinstatement are common pitfalls. California’s Paid Sick Leave law added significant protections for all California employees, both full-time and part-time, that must be incorporated into employer policies and practices. As with wage and hour laws, local leave laws may grant additional protections to employees that must also be incorporated.

#5.  Performance/Discipline
Performance evaluations that fail to accurately assess an employee’s strengths and weaknesses or merely affirm satisfactory performance to ensure a bonus undermine subsequent disciplinary actions.  The lack of a written record or excessive reliance on verbal warnings makes it difficult to demonstrate that an employee was actually aware of the issues and given a fair opportunity to address them.  A perceived lack of fairness by the employee can easily trigger claims of discrimination or wrongful termination.[1]

Minimizing Risk
Although there is no way to guarantee an employment claim will never be filed, there are several practical ways for employers to minimize their risk of liability.

  • Policies: To be effective, policies and procedures should be clear and reviewed regularly for compliance with changing laws. They should be communicated throughout the organization and applied consistently.
  • Training: Anyone with supervisory authority, especially frontline supervisors, should be well-trained on personnel policies. Among other things, they should be equipped to recognize and respond to claims of harassment, enforce rest and meal period requirements for non-exempt staff, and properly document performance issues. California law specifically requires employers of 50 or more to provide sexual harassment training to all supervisors within six months of hiring or promotion and every two years.
  • Document: Ensure that working hours, including meal and rest breaks, for non-exempt employees are accurately and consistently recorded. Performance evaluations should be accurate and write-ups should set clear expectations. Leaves of absence should be supported by appropriate documentation and confirmed in writing for the employee, including the nature of the leave of absence, the duration, and how it might impact benefits.
  • Counsel: A telephone call to your attorney for some early legal guidance is far less expensive than defending a lawsuit.

Article by Tom Wolfe, Managing Partner of Moore Brewer Wolfe Jones Tyler & North.

[1]  Both California and Nevada are at-will employment states, meaning either the employee or employer can terminate the employment relationship at any time and without reason, provided there is no violation of law (e.g., discrimination, retaliation, etc.).

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