WARNING: LAWSUIT AHEAD

1. WARNING: LAWSUIT AHEAD How to Fire Your Employees Presented by Brian Rubenstein of Cole, Scott & Kissane, P.A. August 21, 2012

2. Statistics Start the Trend… • Between December 2007and December 2010, more than 8 million Americans have lost their jobs • The Bureau of Labor Statistics is reporting the restaurant and hotel industry have experienced consistent job losses since 2008

3. 3 Types of Termination Scenarios • Performance-based discharge • Reduction in workforce • Job abandonment

4. Reasons Employees Sue • Most CEOs, VPs and managers believe there is a money motive or revenge incentive • In actuality, FEELINGS drive an employee to the lawyer’s office and into the court system • The vast majority of employees file charges becausethey don’t feel valued, respected or listened to

5. The 7 Deadly Sins:Common Reasons Why Employees Sue

6. Common Reason #1: “But I got good evaluations…” • Confronting a poor performer is one of the most dreaded management tasks, which is why so many managers either avoid it altogether or overrate a marginal employee • However, being “nice” creates a false sense of security and expectations, and when the manager finally gets fed up, the employee feels betrayed and mistreated • The most common complaint is that the employee didn’t see it coming • Honest communication works wonders in eliminating lawsuits

7. The Fix… • Publish expectations for employee conduct • Train managers to set clear performance standards and give informal feedback • Establish a process for progressive discipline • Adopt a means for documentation and noticeto the employee

8. Common Reason #2:“I don’t know why I was laid off …” • Reductions in force put employers at risk for lawsuits, particularly when they seem to come out of the blue or are arbitrarily applied • If HR does not give employees a rational answer for layoff decisions, employees draw their own conclusions

9. Definition of a Reduction in Force (RIF) • A RIF occurs when business considerations cause an employer to eliminate one or more positions • An employee is not eliminated as part of a work force reduction when he /she is replaced after his/her discharge • However, a person is not replaced when another employee is assigned to perform the terminated employee’s duties in addition to other duties, or when the work is redistributed among existing employees already performing related work • A person is replaced only when another employee is hired or reassigned to perform the terminated employee’s duties • The definition was expanded to include the situation in which a terminated employee is replaced by another employee promoted from part-time to full-time work

10. The Fix… • Have an attorney review layoff plans before they are initiated • Diversity among protected classes subject to layoff • Incorporating poor performers in the layoff • Keep employees informed about the company’s financial progress • a well-informed employee is more likely to understand the business necessity and not take it personally

11. Practice Tip – Safe Layoff: A Systematic Approach to Downsizing • To avoid litigation losses, businesses need to be able to justify their decisions: • Document (i) the business reason for the RIF and (ii) the criteria for selecting which specific employees are to be terminated • After employees are tentatively determined for the RIF, conduct a statistical audit to identify whether a disparate impact claim will be easily sustained (ensure attorney client and work product protections by retaining counsel to perform the test)

12. Practice Tip – Safe Layoff: A Systematic Approach to Downsizing, cont’d. • Determine and document workforce recall provisions • If substantial recalls are reasonably likely, the recalls should also be tested for possible disparate impacts • Institute a hiring freeze — limited exceptions should pertain only to newly created positions for which it can be documented that no employees otherwise subject to recall have the requisite skills • Provide support services such as out-placement and counseling assistance

13. Common Reason #3:“My boss didn’t take my complaints seriously…” • When an employee comes to a boss with a problem, there is often a sense of urgency and a serious need to vent. Putting off an employee, telling the employee to “handle it,” making excuses for the offensive behavior, or implying the employee was somehow at fault can turn a brushfire into a forest fire

14. The Fix… • Don’t just focus on the managers’ legal responsibilities for handling complaints, but help them deal with the psychology as well • When employees feel cared about, the chances of being sued are less • Make sure your harassment/discrimination policy has multiple channels of reporting and employees know how to use them

15. Common Reason #4:“Other people got away with the thing I was fired for…” • The problem with inconsistency • Most discrimination lawsuits are based on an employee's beliefthat he was treated differently because of their protected status • An employer that does not consistently apply its policies will increase the risk of discrimination claims • Common problem with managers who let non-conformance go on until they run out of patience and then ambush the next offender with disciplinary action

16. Florida Law • In Florida, it is unlawful to discriminate based on race, color, national origin, religion, sex (including pregnancy, childbirth, or related medical conditions), disability, age, citizenship status, genetic information, marital status, sexual orientation, AIDS/HIV status or sickle cell trait

17. The Fix… • As a general rule, response to particular problem should be consistent with policies and responses to prior, comparable situations • Beware of the Rash Termination • It is seldom a good idea to fire an employee on the spot. Precipitous terminations are influenced by emotion, not reason - incomplete or inaccurate information makes an employer more prone to overlooking legal requirements • Instead, suspend employee and investigate before deciding to terminate • Before terminating, have a neutral officer, HR professional or legal counsel review the facts and give recommendation • Conduct an exit interview

18. Common Reason #5:“My boss is a big jerk…” • The equal opportunity harasser may not be liable under civil rights law, but he/she is often the reason for a claim

19. The Fix… • Make interpersonal skills training a mandatory part of the development track and evaluate before promoting • Give managers help • Emotional/psychiatric claims are the leading reasons why people sue • Managers who are trained to identify and handle mental health issues, and who have access to an EAP, are less likely to handle these situations poorly

20. Common Reason #6:“My boss just doesn’t like me…" • At will employment may be the law, but I don’t buy it • In spite of the prevalence ofat will employment, the average employee isn’t necessarily familiar with ‘at will’ legalese • In a recent survey conducted by a law professor at Washington University, 337 job seekers were asked if they believed it would be illegal to fire someone out of personal dislike and a whopping 89% said yes

21. The Fix… • Conduct behavioral feedback sessions, evaluate and document conduct problems • Include interpersonal core competencies in job descriptions • Many managers fail to address energy-sucking behaviors such as the chronically negative employee or the backstabbing co-worker because they don’t perceive these as a part of the job requirements

22. Common Reason #7:“They gave me a bad reference…” • Libel suits filed by discharged employees against former bosses now account for approximately 1/3 of all defamation actions with an average winning verdict of $112,000 • Many employees who were willing to move on without suing have turned on former employers when they learned someone at the previous place of employment has jeopardized their chances of gaining new employment

23. The Fix… • Enforce a policy that allows only name, dates of employment and last position and/or salary to be distributed to prospective employers; avoid giving negative references • Maintain tight control over personnel files and avoid distributing personal information without the employee’s consent – instruct managers and supervisors to avoid distributing copies of damaging records (memos or poor performance evaluations) • Avoid criticizing an individual in front of others, particularly at the exit or firing interview

24. When All Else Fails…Severance Payment and Release • Desperate employees sue,and fired employees are often desperate - a severance agreement that includes a full release is the only way to avoid a lawsuit

25. When Should An Employer Offer A Severance Package? Evaluate risk factors: • is the employee in a protected category (more significant, is he/she likely to be replaced by someone not in the same protected category)? • Has the employee recently engaged in protected activity such as taking FMLA leave, filing a worker’s compensation claim, organizing employees for a union, or blowing the whistle on his/her employer? • Is there an employment contract in the picture? • What is the nature of the employee’s misdeeds?

26. Other Severance Considerations… • Employers can’t force employeesto sign an agreement and sometimes, an employee who never had a thought about suing starts to think about things differently once he/she sees the agreement • For the severance agreement to be enforceable,the employee must be given consideration and a reasonable amount of time to consider it

27. Missing in Action: Job Abandonment • In the restaurant and hospitality industry, job abandonment is probably more common these days because the employees are largely made up of young people in entry-level, unskilled or service positions • When an employee disappears without a trace, the company has no choice but to terminate employment. This abandonment is almost always classified as a voluntary resignation, and, as a result, the employee will not qualify for unemployment benefits. When this happens, employees are driven to litigation.

28. The Three Day Rule for Job Abandonment • Employers differ wildly on how long they will cool their heels before enacting the separation • Employment policy experts are coming to a consensus on a three day stipulation • Absence due to medical reasons: • can create a sticky situation with regard to the Family and Medical Leave Act (FMLA) or the Americans with Disabilities Act (ADA) • If the employee's absence is suspected to be medically related in any way, the employer must investigate

29. Practice Tip –How to Handle the AWOL Employee • Prevention as Cure • the ultimate goal is to discourage litigation by creating simple, clear policies that motivate employees to give required notice • Once satisfied that the job has been abandoned, employers should create documentation for the employee's file showing that a change in status has occurred and on what date • Registered letters should be sent to the employee identifying the action the company has taken and why • Include notes from the supervisor in the employee’s file or others detailing attempts to contact the missing person

30. Best Practices • GIVE WARNING: All performance-based firings should begin with a warning or probationary period • DOCUMENT, DOCUMENT, DOCUMENT: Once you've told an employee he's/she’s on probation, document every task and interaction — the better records, the easier it will be to justify your actions • DON'T GO IT ALONE: Having a representative from HR in the room adds a sense of gravity and finality to the termination conversation and it also provides a witness on your side should you end up in court

31. Best Practices, continued • BE BRIEF: Say what you have to say clearly and don't say any more • TIME IT RIGHT: Fire early in the day and early in the week — the worst time toterminate is the day before a weekend or holiday • PREPARE THE PAPERWORK: Termination paperwork and final pay should be delivered on the spot — don't wait until after you fire an employee to deliver paperwork and final pay, which should include any benefits and unused vacation

32. Questions & Answers Cole, Scott & Kissane, P.A. (offices throughout the state of Florida) Rachel K. Beige, Esq., (561) 383-9228 / rachel.beige@csklegal.com Brian D. Rubenstein, Esq., (813) 864-9324 / brian.rubenstein@csklegal.com