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Issue #44 - 4.29.08
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Using Employee Applications for Protection from Future Claims
I’ve consulted with a number of doctors recently who, when asked, told me they have satisfactory employment relations policies in place. However, when I ask if the policy has an integrated corrective action procedure, I learn that it does not. Without such a procedure in place, an employment relations policy is one in name only. It really is just a collection of rules and information.
The need for an integrated policy is more important today than any time in the past. Such policies require the practice to create records that can later be used to defend against meritless claims by former employees.
Statutes of Limitations
In many states, a former employee has years to bring suit. Even in those few states where the time limits—called statutes of limitation—are only a year, if you haven’t documented poor performance or behavior, it will be nearly impossible to reconstruct that evidence by the time you must defend.
Ohio, for example, allows a plaintiff up to six years to bring a case for wrongful termination, discrimination or unlawful harassment. This represents the outside limit, but a number of jurisdictions allow for up to two years to file suit. This means you could be blindsided by a lawsuit from an individual you might not recognize if you passed her/him on the street.
The goal, however, of an effective policy is not to defend claims, but make claims unlikely to happen. Defense costs of a suit now average over $50,000. While you are working to develop that effective policy, here are some steps you can take right now to reduce exposure.
Start with Employee Applications
Recently, a number of large employers have included in their applications the language that the applicant understands and agrees that any claim will be brought against the employer within 180 days of termination—notwithstanding any state or federal law to the contrary. These have been tested in court and they have been upheld. Historically, parties to an agreement are free to contract for provisions that limit the time, the forum and the mechanism of resolution of disputes. The courts have had no difficulty applying those principles to agreements between employers and employees—and such agreements do not destroy the “employment-at-will” character of the relationship.The plaintiff’s lawyer in me (as you may know, for twenty-five years I’ve represented employees in a whole range of litigation against their former companies) abhors the time limitation of 180 days. Often, employees will have no recollection of the agreement and, even if they seek legal advice before the time is up, the lawyer is unlikely to assume that the clock is ticking. In short, many claims will be foreclosed before the plaintiff and the lawyer even recognize the deadline.
The six-month limit is probably the shortest that courts will approve. Some employers may include a 90-day provision, but the risk of that is that if the court throws it out, the state law statute will be applied. Six months is a good fit for allowing sufficient time for a claim to be made, but short enough so that the doctor can defend.
Implementing Change Now
You might ask, “What do I do about the employees already on staff?” The answer is pretty simple. You can announce in writing a change in the company policy which imposes the 180-day time period for claims, and distribute that to the staff. State that the policy will take effect in 30 days, and any employee who remains employed after that deadline will be considered to have agreed to the change. The courts have held that continued employment after the change is sufficient consideration to bind the staff to the new policy.There is a strong trend in employment relations to require that all disputes be submitted to binding arbitration rather than court action. It was recently reported that about 25% of all employers now have an arbitration policy in place.
Like the shortened limitations period, arbitration policies are anathema to plaintiff lawyers. There are a whole host of reasons for this—too many to get into here—but suffice it to say that if my colleagues who represent employees do not like something, employers should have it.
Agreeing to Arbitration
Arbitration policies have been much litigated in the last ten years, so the parameters of a policy that will pass muster with the courts are pretty well set out. The major companies that administer such policies, such as the American Arbitration Association and JAMS, have formulated policies specifically for employee-employer disputes based on court decisions.
Binding employees to arbitrate disputes can be accomplished, as well, with the inclusion of appropriate language in the employment application. You will want to follow up on that, when you actually hire, with a document that lays out what the process is. And, like any change, you can bind current staff with the announced policy change and fair description of the process.
Include in applications the applicant’s (1) authorization for former employers to release information to you and (2) release of the former employer’s liability for any information conveyed to you in good faith. The authorization will ease former employers’ concerns about disclosing negative information, and the release of liability may open the doors to information that will be critical in the hiring decision.
A Final Caveat
These changes are not something you should do yourself. There may be specific considerations in your practice, or the state in which you practice, that might impact how you do what you want to do. Please contact me through McKenzie Management for a consultation.
Mike Moore is ranked among the best in employment law and named one of the top 10 lawyers in Ohio. As Director of McKenzie’s HRSolutions, Mike is the creator of the Employment Policy and Handbook, geared to provide dentists who are unsophisticated in the legal arena with a step-by-step policy manual.
Click here to hear Mike present “7 Elements of an Effective Employment Policy.” Email Mike at mike@thedentistsnetwork.net.
Interested in having Mike speak to your dental society or study club? Click here.