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AVOIDING LAWSUITS HOW BUSINESSES CAN PREVENT September 1, 2002 Avoiding Lawsuits is a service of the employment law training and consulting firm of Counsel Consulting Group LLC and the law firm of Powell, Trachtman, Logan, Carrle & Lombardo, P.C. AVOIDING LAWSUITS IS A GAME OF INCHES It is often said that "baseball is a game of inches." Literally, the maxim refers to the fact that wins and losses can be decided because a grounder is an inch outside of a shortstop's reach, or a pitch is an inch off the plate. The saying has morphed into wider usage, so that when something is referred to as a "game of inches" in everyday parlance, it reflects the truism that, more often than not, things that might seem very small or inconsequential can make all of the difference - the difference between winning and losing. Tragically, many believe that the truth of the observation became plain beyond comprehension in the weeks before September 11 - a small follow-up to an FBI memo here, and a bit of extra effort on translating intercepted communications there, and thousands of lives might have been spared. Avoiding lawsuits is also a game of inches. As attorneys, we regularly see a disconcerting array of lawsuits that could have been easily avoided, had a seemingly minute, additional step, consideration or precaution been taken. It is the difference, often, between merely subscribing to standard policies in a rote, robotic fashion, as opposed to taking a step back, perceiving what the standard policies were intended to accomplish, and understanding those sorts of situations where a bit more - just an inch or two -- is the difference between success and failure. Here are some examples. The "he said - she said" sexual harassment case. Many sexual harassment cases involve a situation where a female employee accuses a male employee of engaging in sexual harassment, the male denies it, both parties seem credible, and there are no witnesses or other evidence to corroborate either side's story. Standard policies will (hopefully) mandate that the employer conduct an investigation in legally-compliant form. If, as so frequently happens, the investigation reveals no basis on which to choose one story over the other, the employer's standard procedures will typically require that it take no action against the male other than to provide him with another copy of the company's anti-harassment policies, and that it advise the female that it investigated thoroughly, could reach no conclusion, but if there are any other problems, she should notify a designated employer representative. Sometimes, that works, and life goes on. In fact, these steps technically cover what the law requires. But all too frequently, it goes awry. For instance, if the male was, in fact, guilty of prior harassment, he sometimes becomes emboldened by having beaten the rap, and the harassment becomes worse, and provable. The female, absolutely outraged that her employer did nothing to protect her other than, as she perceives it, going through the motions, brings a suit, and is vituperative in her insistence that it be prosecuted to the fullest extent possible. But what if, having a suspicion, or just a gut feel, that even though the proof was not there, something wrong may have occurred or was likely to occur in the future, the manager departed from "the book," and pro-actively (with counsel's guidance) checked back with the female every week or two - a simple show of real concern, designed to disarm a potential time bomb, and turn a potential enemy into someone who feels that the employer, however stymied by the lack of proof, really does have her best interests at heart. Or suppose the manager enlists the observational assistance of some selected, fellow employees to keep an eye on the situation, thereby proving that the employer did more than must the technical minimum in the effort to keep an employee out of harm's way? Having not just stopped at the initial investigation, the employer looks very, very good. Small steps, potentially huge results. The "termination for cause" lawsuit. Let's suppose you hire a key employee pursuant to an employment agreement that says the employee can only be terminated for cause. You work with the employee over the next year and he does not perform to your satisfaction. You see the writing on the wall, you continue to give him additional chances, but it does not work out. You perceive him as having the same view, you convene a meeting, you tell him you have concluded that he should move on - and he blames you for those projects which have been less than stellar and accuses you of making up the rest. This kind of litigation - was there "cause" or not? - is grist for the litigation mill. What many executives do not understand (at least until they've been through the mill once or twice) is that knowing you are right, and being able to prove you are right, are two wholly different things. As constituted, this scenario has a "my word against your word" outcome written all over it: you will likely be able to bring some witnesses to the table to talk about the employee's lack of performance, and he will likely be able to bring some witnesses to the table to say that you did not provide the support that was promised, or the required funding was not appropriated, or whatever. Most likely, the outcome will involve tens of thousands of dollars in counsel fees and settlement payments, or a jury who will decide your fate through a coin flip in the jury room. But what if you went that extra inch as the situation was unfolding? As we continually stress in Avoiding Lawsuits, you cannot prevent a lawsuit unless you take off your rose-colored glasses and appreciate the realistic possibility that it might happen. When you are in a "termination for cause only" relationship, you need to document (as in creating tangible evidence) that you advised the employee what was wrong, offered to assist him in making things right, and repeated the process until no reasonable fact finder could dispute that this was more than a "my word against your word" battle. The side benefit of such a procedure, aside from lawsuit prevention, is that it provides a series of mid-course corrections to the employee so that, once in awhile, the termination for cause decision never hits the table in the first instance. But the point is this: the difference between a very time- consuming and expensive lawsuit, and a routine termination (or no need to terminate at all) can often be as simple as a few five-minute memos or e-mails which fairly document events as they happen, coupled with good faith offers of assistance. The "you stole my trade secrets and confidential information" lawsuit. Key employees frequently balk at signing an employment agreement with a covenant not to compete (a provision that prohibits them from working for a competitor should they leave your employ). An intelligent middle ground is an employment agreement with a trade secrets provision - you can work in the business if I fire you or you decide to leave, but what you can't do is take or use or disclose my trade secrets and confidential information. When the employee leaves, inevitably there is a fight about whether the information the employee took - sometimes just the information the employee carried around in his head, sometimes a file cabinet full of documents or a disk of computer files - falls into the "trade secrets and confidential information" prohibition set forth in the employment agreement. Was the information really a secret? What steps did the company take to keep it confidential? Is the information really all that important? Is a customer list legally-protectible? How about a business or marketing plan? Are your manufacturing processes really all that unique? Welcome to a battle of experts and years of litigation. This is a problem that can almost always be nipped in the bud with a little forethought - to the extent lawsuit avoidance is a game of inches, this might take an inch or two of text, coupled with some routine, institutionalized procedures. For instance, list the types of information you are most worried about, prohibit the employee from taking or using or disclosing that, whether or not it can fairly be defined as a "trade secret." And set up some office procedures requiring that certain information remain confidential, defeating the standard employee argument - you didn't take steps to keep it secret, so how can you now contend that it's so valuable and confidential? The effort is, no doubt, a departure from the standard form trade secrets contract, it might consume an hour or two, but the potential benefits are unmeasurable. The moral to today's story: sometimes you can't simply rely on "the way it's always done," and sometimes you really do need to sweat the small stuff. We've been there. Let us know if we can help.
___________________________________________________________________________________ Counsel Consulting Group LLC helps companies throughout the Powell, Trachtman, Logan, Carrle & Lombardo, P.C. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com. ©Copyright 2003-2005 CCG Properties LLC. All rights reserved, except that recipients hereof are permitted, for noncommercial purposes, to provide copies or excerpts, with full attribution to us, to other interested persons for their personal use. Avoiding Lawsuits is distributed for general informational purposes only. It is not a substitute for personalized legal advice from a competent attorney. |
