Here are your options. Train your managers and revamp your employment practices, or risk punitive damages and personal liability.

Here are some of the problems CCG was created to solve:

• The Supreme Court has effectively required that companies train their managers to avoid employment law mistakes. Companies that fail to do so will risk huge damage awards, including punitive damages.
  
  
• Seven figure employment law verdicts are becoming commonplace, and the direct and indirect costs of defending against employment claims are monumental. There is no denying the link between effective HR practices and return on investment.
  
  
• As if the prospect for corporate liabilities were not sufficiently worrisome, there is a real risk of personal liability for officers and directors who fail to stem the tide of employment liabilities.

The Supreme Court Requires Employment Law Training.

During 1998 and 1999, the United States Supreme Court decided three cases that, effectively, make employment law training mandatory for any company seeking to avoid the rising tide of employment liabilities. This was a monumental change in the law. Previously, whether or not you trained your managers to avoid employment law violations was a minor sidelight. Now, whether you trained, and how effectively and often you trained, will be a focal point in the most common (and serious) strains of employee versus employer litigation.

Here is the dollars and cents upshot. If you effectively train your managers, you can minimize the amount of damages for which you may be liable in the event that, despite the training, your manager commits an employment law violation. In effect, you get credit -- lots of credit -- for trying to avoid employment problems.

But if you don’t bother to make the training effort, you will be shown no mercy. You may even be subject to punitive damages, which can extend into the hundreds of thousands or even millions of dollars, to punish you for your cavalier approach to the laws that protect your employees.

Cases in which courts punish employers for failing to train and make other good faith efforts to avoid violating employment laws are routinely issuing from courts throughout the country, and many of these cases are alarming, to say the least. We have included synopses of some of them in the The Mistakes of Others section of this website.

There Is a Direct Link Between HR and ROI.

There can be no rational debate about it: there is a direct and definitive link between employment law compliance and return on investment.

The direct costs of non-compliance with employment laws are easy to understand. Six figure damage awards are routine, and seven figure damage awards are no longer unusual. Several damage awards and settlements in the tens of millions of dollars have been reported over the last year or two. It can easily take $200-300,000 in legal fees and costs to defend against even a garden variety employment claim, whether or not the defense is successful, and much more for complex lawsuits.

The indirect costs of non-compliance are more difficult to quantify, but just as real. Claims alleging sexual harassment or discrimination, for instance, have a devastating effect on the morale of employees. Claims alleging an employer’s failure to respect ADA or FMLA rights make employees wonder how they will be treated if they ever need an accommodation or medical leave, leading to difficulties in employee retention. Claims alleging the failure to pay overtime often create a domino effect in which a multitude of employees begin to question their exempt status.

Add in the stress of litigation, and the management time spent in lawyer meetings, answering interrogatories, attending depositions, reviewing reams of documents, assembling and analyzing archived e-mails, reporting to the board of directors, and attending trial. Factor in the effects of adverse publicity when the media reports that your company was sued for racial discrimination or sexual harassment.

Avoiding even one or two employment claims a year can make a real impact on profitability, especially when compared to the cost of implementing a liability avoidance program.

And if you think it can’t happen to you, we invite you to review The Mistakes of Others section on our website.

Officers and Directors Can Be Personally Liable.

As an officer or director of your company, you owe the company a fiduciary duty - that is, the duty to use your best efforts to protect the company. If you breach your fiduciary duty, you can be personally liable to the company for the damages that result.

Among many other things, your fiduciary duty requires that you take reasonable steps to protect the company from foreseeable losses. If, for instance, you know your company is engaging in unlawful practices – the accountants are cooking the books, or the operations people are improperly disposing of toxic wastes -- you are obligated to take reasonable steps to see to it that the company abides by the law. If you don’t, and your company gets sued for your failure to stay on the ball, you could be liable to the shareholders for your company’s losses. Makes sense, right?

Now consider this scenario. You know that employment claims pose a major financial risk -- verdicts in the six and seven figure range are now commonplace, even for inadvertent managerial errors. You also know that, several years ago, the Supreme Court ruled that unless you regularly trained your managers in employment law, your company would lose whatever chance it had to minimize the damages for which it might be liable in the event of a management misstep. Nevertheless, you don’t authorize your company to spend the relatively minimal sums it takes to comply with the Supreme Court’s edicts. Next thing you know, one of your managers sexually harasses an employee, who sues the company and wins a verdict of $400,000 in compensatory damages, and $2 million in punitive damages.

The shareholders in the company are not pleased. They obtain counsel, who takes the position that you breached your fiduciary duty by not making sure the managers were properly trained. You have 100 employees, each of whom is a potential plaintiff in a multimillion dollar case. You could have substantially lowered the risk of liability for about 1% of the cost of a single employment law violation. The shareholders want the $2.4 million, plus counsel fees, from you.

What’s your defense?

Now, factor in Sarbanes-Oxley, and good luck.

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