Volume 38, Issue 11, November 2003

Unemployment Now, Lawsuit Later
Will High Unemployment Affect Your Business?

by David Barron

According to the most recent report from the Bureau of Labor Statistics, the national unemployment rate was 6.4 percent and 6.2 percent for the months of June and July, respectively. This is the highest rate of national unemployment in nine years. To a certain extent, these skyrocketing unemployment rates have placed employers at a great risk of facing employment-related litigation.

With unemployment so high and job prospects so low, ex-employees are turning to government agencies and the courts to seek much needed compensation. Over the past few years, an increasing number of individuals has filed suit against their employers alleging various employment practice violations. 

Stay and Fight
Arguably, the rise in employee charges and lawsuits can be attributed to the slumping economy. Due to the meager job market, employees are more inclined to endure a bad situation, because they know their prospects of finding another job are uncertain. Therefore, when faced with conduct they perceive to be discriminatory or harassing, they may choose to stay and fight, rather than leave and take their chances in the job market. This leads to more employees filing complaints with government agencies and more suits against employers. Also, due to the scarcity of jobs, a terminated or laid-off worker is more likely to file a lawsuit against a former employer in bad times than in good. 

The slumping economy, however, is not the only factor fueling the boom in employment-related claims. Another factor is the changing face of the labor market. Over the years, more minorities have entered the job market and older workers are staying longer, which increases the potential for discrimination claims. In fact, the largest increases in discrimination complaints in 2002 were for age discrimination, with approximately 20,000 age-related claims filed, up 14.5 percent from the previous year, followed by national origin discrimination, with slightly more than 9,000 complaints, up 13 percent from the previous year.

Increasing Claims and Money
Not only has there been a rise in claims, but employees actually are recovering more money damages as well. According to the EEOC’s litigation statistics, in 2002 nearly $53 million were paid out on discrimination claims handled by the agency. This number is up from $49 million just two years prior. Claims filed under the Americans with Disabilities Act saw the largest increase in monetary judgments, with $12 million paid out in 2002, which is a 400-percent increase from the $3 million paid out in 2000. 

What does this mean for employers today? This increase in employment-related lawsuits should prompt employers to adopt safer employment practices. By doing so, employers will minimize their risks of litigation. At a minimum, consider the following steps: 

• Familiarize your company’s managers and supervisors with relevant employment laws, including all federal anti-discrimination laws such as Title VII of the Civil Rights Act of 1964, the American with Disabilities Act of 1990 and the Age Discrimination in employment Act. (To learn more about these and other employment-related laws, visit the EEOC’s website at www.eeoc.gov.);
• Review all employment policies and make any changes necessary to minimize the risk of litigation. At a minimum, every employer should establish anti-discrimination and anti-harassment policies;
• Establish and maintain an internal reporting procedure inviting employees to report any perceived harassment or discrimination. Naturally, any employer should prefer handling a complaint internally rather than involving employment agencies or the judicial system;
• Respond to all complaints of harassment and discrimination immediately. The response should be applied in a consistent manner for each and every complaint;
• Provide anti-discrimination and anti-harassment training;
• Conduct a wage and hour audit to ensure compliance with the existing law governing compensable time, hours worked, meal periods and rest breaks, minimum wage and overtime; and
• Thoroughly document all events leading to the termination of any employee.
Taking these and other precautions today may save employers from the high costs of tomorrow’s lawsuits. 


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