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SEVEN-FIGURE employee verdicts and six-figure legal bills are becoming all too commonplace in today's workplace. Companies, including insurers and agencies, find themselves exposed to an ever-increasing number of employment law claims, despite their efforts at compliance. As Walter Olson, author of "The Excuse Factory" puts it, "There's no such thing as the golden shores of legal compliance."

Even when employers try to do things "right," they still find themselves on the wrong end of a verdict. Even when they "win" a lawsuit, they lose. As I tell my clients, a defense victory never is.

This article will discuss a proactive approach toward reducing exposure to today's employee lawsuits.

Culture of silence

One of the biggest complaints of employers nationwide is their liability for employee claims they arguably "knew nothing about." In fact, the majority of companies sued already have in place the nuts and bolts of legal compliance, including an Equal Employment Opportunity Commission statement and grievance mechanism. In my 15 years of handling employment law claims, I can count on one hand the number of cases where the employer was completely deficient in these areas. The fact is, the greatest exposure faced by employers today is what I call the "culture of silence." This is directly related to the victimology viewpoint of many employees, who think they are never responsible or at fault for their circumstances.

In the recent Supreme Court case of Beth Ann Faragher vs. The City of Boca Raton, a female lifeguard sued the city of Boca Raton, Fla., for acts of her supervisors that created what she alleges was a "hostile work environment." The supervisors allegedly touched Ms. Faragher without her consent, made crudely demeaning references about women and propositioned her for sex. Ms. Faragher did not complain to higher management about these activities. Both she and fellow female lifeguards made informal complaints to a lower-ranking supervisor, complaints that did not go anywhere. Not surprisingly, while the city of Boca Raton had a sexual harassment policy, it was never distributed to the lifeguards. The employers argued they should not be subject to sexual harassment claims where the employee fails to speak up about the alleged unfair conduct. The plaintiffs in those cases, as in many others, argued they didn't speak up for a garden variety of reasons, including fear of retaliation, being forced to complain to the very person discriminating against them, their emotional instability, etc. The plaintiff was eventually awarded one dollar for her troubles.

The Supreme Court also struggled with the notion of when a company should be strictly liable for a supervisor's conduct. It essentially ruled that any time the harassment comes from a supervisor, there is the presumption he or she was using a position of authority to foster the unlawful conduct. In resolving this case, the court set forth this guideline: "The basic alternative to automatic liability (of a supervisor) would. . .allow an employer to show as an affirmative defense to liability that the employer had exercised reasonable care to avoid harassment and to eliminate it when it might occur, and that the complaining employee had failed to act with like reasonable care to take advantage of the employers' safeguards and otherwise to prevent harm that could have been avoided. This composite defense would, we think, implement the statute sensibly, for reasons that are not hard to fathom."

Recent cases have begun extending this test to racial and other forms of discrimination outside the area of sexual harassment. Also note that this holding applies only where there was no "tangible employment action taken," such as termination, demotion, etc. In those cases, the liability is automatic. The issue of when an employee's silence is reasonable under the circumstances is surely to be litigated for years to come.

The failure to speak up does not occur just in sexual harassment cases. The fact is, it's pretty much across the board. Most employees think twice before bringing forth complaints of unfair conduct or inappropriate activities. For example, in a recent article in The Wall Street Journal, it was reported that fully 40% of a workplace's employees would not disclose an ethical violation.

As I tell my clients, if it's out in the street, chances are it's in your workplace. All of us by now are familiar with the stories of citizens who see criminal conduct and look the other way, not bothering to lend a hand or even to telephone 911. Chances are, they don't want to get involved. They view the issue as one for the police to deal with. We have found that simply abdicating responsibility for crime to the police doesn't work. The communities most successful at fighting crime are those that have engaged in active programs. Citizen groups not only patrol the streets but will actually picket unlawful activity such as drug dealing and prostitution, and their efforts work. It's a matter of defining and defending what you stand for. If the community steps up and says it won't tolerate crime, chances are they'll get a lot less of it. The same goes for inappropriate activities in the workplace.

For many years, I struggled with creating some form of system that would help break past the culture of silence. The answer came to me one day when I was at a workshop on Dr. Deming's Total Quality Management principles. His methods emphasize the importance of front-end thinking. He often stated that a dollar spent on the front end is at least six times more effective than a dollar spent on the back end. While at that conference, another attendee and I were discussing our relationship with our sons. Unfortunately, his son was in crisis. He found out that the boy was not only using drugs but also dealing them. During our conversation it became clear he had done very little to educate his son about the issue and had never asked him "if there were any problems." In contrast, I constantly educated my sons about the problems not only of drug use but also of teen sex and drinking while driving. I would periodically check in on them to make sure there were no problems in these areas. The last thing I wanted was to be blindsided with a problem and to first find out about it from the police, the school or another parent.

After returning to my seat, the solution to the culture of silence for which I was searching struck me all at once. If all problems have a beginning and an end, I asked, how can I go to the very beginning of the problem and take a proactive approach to resolving it? The answer became clear: Ask if there's a problem! I also realized that, before I asked someone if there was a problem, I had to make sure he or she understood the issue. Then, I thought, why not go one step further and ask if anyone thinks there's anything unfair in the work environment.

Dividing the concept of unfairness into distinct categories certainly helps define the problem, but it ignores the impact of any perceived unfairness on productivity, communications, etc. When I returned to my office after the Deming seminar, I generated a form entitled "Compliance Survey." It asks three simple questions:

1. Do you understand the company policies prohibiting harassment, discrimination and safety and ethical violations? Yes or no.

2. Are you aware of, have you witnessed, or have you been a victim of the violation of any company policy, including those prohibiting harassment, discrimination, safety or ethical violations? Yes or no.

3. Would you like to speak to someone about a harassment, discrimination, safety, ethical or other issue you feel needs to be addressed? Yes or no.

A few weeks later, I got to try out the form on one of my clients, a printing company with 80 employees. The first thing I was asked by the company president was, "Won't the employees view this as ratting on each other?" My response was, "Ratting about what? Legal violations, ethical violations, safety problems and unfair conduct? Why wouldn't you want people standing up against such conduct? Do your employees fully understand how damaging such conduct can be, not only to the company's well-being but to their own? Do your employees realize that to pay $100,000 in legal fees to defend against one of these claims is the equivalent of $1 million in revenue? Do they understand how much it will affect their bonuses? Do they realize that it's no fun being dragged into a lawsuit? I think that once they fully understand the intent behind this form, they will actually embrace it. Not only that, but by distributing it on a quarterly or semi-annual basis, it will have the effect of forcing potential wrong-doers to second-guess their actions. A sexual harasser may be less willing to engage in wrongful conduct knowing that a disclosure survey would bring his wrongdoing out into the open."

After talking about this a little further, the president agreed to give it a try. The next week, we distributed the survey to all 80 employees. Much to our surprise, we received 10 responses from employees indicating they did not fully understand the company's policies and procedures. We clearly knew we had an education project on our hands. What was more surprising, however, was that three employees indicated that they had been victims of wrongful conduct. Interviews with these employees indicated a sexual harassment claim, racial discrimination claim and an OSHA concern that was being ignored.

The power of the compliance survey as a tool for eliminating employee lawsuits was immediately clear to all.

What to do about the problem

If half of the employee lawsuits I have handled involved issues that were never brought to the attention of management, the other half involved issues that were but then were poorly managed. None of us likes receiving or sharing bad news. The natural human tendency is to ignore, deny or bury bad information. Wrongful conduct that goes unchecked becomes quickly cancerous. The perpetrator who thinks he or she can get away with something is willing to go one step further. The manager who's willing to look the other way will find himself or herself at the mercy of the mutinous employee.

A number of months ago, I had dinner with my wife and four of her female friends. The next day, I was going to address a group of chief executive officers about managing their employees. I asked the women, "What would you want to tell these CEOs about the issue of sexual harassment?"

To make a long story short, they basically said two things:

First, it is important to acknowledge that sexual harassment exists. Every one of them felt they had been sexually harassed at one point or another in their careers, and two out of four felt they were currently being sexually harassed. Second, when a complaint is made, do something about it! None of them was inclined to file a lawsuit; they just wanted the conduct addressed so that it would stop interfering with their ability to do their jobs.

When the reality of wrongful conduct is not acknowledged and complaints are not addressed, employees are left with two choices. One is to see a lawyer, and the other is to shut down and leave. Many a valuable employee has silently left a job rather than fight against unfair conduct.

The most powerful tool, when it comes to resolving conflict, is that of dialogue. As stated by the late great physicist and expert on the subject of dialogue, David Bohm, "Truth does not emerge from opinions." When faced with an employee complaint, many employers, as well as their attorneys, will immediately jump to the conclusion that the complaint is unwarranted and the employee is simply a whiner or a gold digger. In light of this perception, the company representative will focus on "protecting" the company at the expense of active listening. What most people investigating complaints are after is confirmation of their own opinion, not the raw truth. If the truth hurts--and sometimes it does--then deal with it. Don't ignore, bury or deny it.

Ask the employee what he or she would like to see done. In my experience, their demands usually are reasonable. Unfortunately, the legal system has put us into a corner where we are afraid to issue an apology and to seek forgiveness for fear such actions would be considered an admission of guilt, thereby exposing us to punishment from the "victim" of wrongdoing. It is this thinking that results in seven-figure jury verdicts.


Let me summarize the points stated above. First of all, you have to know what your company stands for. Send a message from the top. If you won't tolerate harassment, discrimination, ethics violations and other forms of wrongful or unfair conduct, then let your employees know this.

Second, educate your employees about these issues. Not just once in an employee handbook, but on a regular basis.

Third, don't wait for the problem to come to you; ask if there's a problem.

And lastly, engage in dialogue when investigating complaints. Acknowledge the claimants' feelings and try to do something about the situation, if warranted.

One final note: The best way to avoid employee lawsuits is to hire people you can trust and then keep them trustworthy. People who trust each other don't sue each other! Commit to building trust within your organization, use the techniques outlined above, and you will all but eliminate your exposure to today's insane legal environment.

Donald A. Phin is a labor attorney and certified management consultant and is president of ManagementThink, a management consulting firm in San Diego.