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The threat of employee-related litigation | PEO Blog

Wednesday October 19, 2011

by Matt Thomas

Employee-related litigation is a constant worry for any employer.

U.S. Equal Employment Opportunity Commission (EEOC) charges reached an all-time high in 2010; wage and hour complaints constantly threaten a company’s bottom line.

Responding to an EEOC charge – many of which are frivolous – can cost a small company thousands of dollars – and that’s before it even reaches the formal stage. Legal fees can skyrocket when defending against a wage and hour complaint in court.

Staying up to date on labor laws is critical to the success of small- and medium-sized businesses, many of which lack the resources to do so on their own. That’s where a Professional Employer Organization (PEO) comes in: Part of a PEO’s responsibility is to stay educated on workplace laws and regulations and develop and maintain legally-approved workplace policies, both of which provide an employer peace of mind when it comes to employee-related litigation.

In 2010, a record 99,992 charges were made to the EEOC, a seven percent increase over 2009. A stale economy could be to blame, as those terminated from jobs might be lacking the financial resources to fall back on than in the past, spurring attempts to recoup lost paychecks.

Case in point: The dynamic of charges has changed. Retaliation is on the rise. In 2010, 36.3 percent were retaliation charges, marking the second year in a row it led all categories.

Simply responding to an EEOC charge can cost an employer a minimum of $3,000 and can quickly climb to as much as $8,000. If the EEOC awards the employee the right to sue and the worker follows through, defending against a charge can be catastrophically costly.

The nature of retaliation charges also has evolved over time. For the first time, the National Labor Relations Board (NLRB) is targeting non-union employers because of some provisions of the NLRB Labor Code, namely the guidelines surrounding concerted protected activity.

Social media has played a key role in retaliation charges rooted in concerted protected activity. Consider this scenario: A few employees are disciplined for something and then tweet or post a facebook entry about the discipline. If the employers are then fired, they could have a legitimate retaliation charge because their conversation is protected under concerted protected activity.

A renewed investigatory focus by federal agencies also could be fueling an up tick in retaliation charges. Agencies such as the U.S. Department of Labor and the EEOC have increased personnel as more funding is available for enforcement. For example, the budget for OSHA’s whistleblower protection program will increase $6 million in 2012, giving renewed focus to the activity.

It’s no wonder that employers can feel overwhelmed in safeguarding against litigation.

A PEO’s role is to train and educate about issues that could lead to such court cases. A small- or medium-sized company lacks the resources of a PEO, such as being internally knowledgeable of labor laws or to research such issues. Doing so could lead to paying a retainer to a defense attorney or paying $400 an hour to have an outside firm conduct critical training.

Additionally, A PEO offers training on a regular basis and can respond quickly to employer-related questions. A PEO offers defense services and employment practices liability insurance. All are proactive solutions, rather than reactively forking over thousands for representation, and allow an employer to focus on his core product and the health of his company.

An employer can stay ahead of employee-related litigation with a few easy steps:

• Policy development: Have good policies in place, including one addressing social media participation (every social media policy should mention the terms of the policy are not intended to interfere with concerted protected activity), and regularly update employee handbooks.
• Ongoing informal education: Guide your employees to changes in federal labor laws.
• Formal training: Ensure that your employees are well versed in company policies and federal guidelines, such as sexual harassment.

Costs associated with employee-related litigation can destroy an otherwise healthy business. By staying in front of workplace issues, an employer can enjoy a productive environment and gain the trust of his most valuable resource – his employees.

Matt Thomas is president of WorkSmart Systems, Inc., a leading PEO serving more than 300 clients with employees in 37 states. For more information, please visit

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