Michael Moore, Esq. Director McKenzie HR Solutions Printer Friendly Version

Human Resources Policy In A Down Economy

With this year’s autumnal equinox came the crash of the stock market and the credit squeeze that signaled tough economic times ahead. The experts forecast another year of recession. Doctors may already have seen the impact of the economy on their patient visits.

The most natural response to this situation is for doctors to tighten belts and not invest in any non-essential purchases. If you had been thinking about revamping your employment policies, but now believe it is not a good time to invest, think again. We have been preaching the need for every doctor to have an office manual that satisfies the insecurities of staff and protects the practice against legal claims. Your risk of having a claim against you is perhaps greater now than at any time in the last decade. Consider for a moment that filing of legal claims—particularly employment claims—goes up in a recession. Often the increase in filings is dramatic. Why is that? It has everything to do with how lawyers advise clients.

Plaintiff lawyers are first of all businesspeople, just like doctors. Most clients—employees—do not have the money to pay case expenses even when the lawyers take the cases on contingency. That means the lawyer must fund the case and collect the expenses he or she paid at the end.

The expense of funding an employment case today to, but not through, trial averages about ten thousand dollars ($10,000.00) in costs of depositions, filing fees, subpoena costs and other related fees. This means the lawyer must pay out a great deal of money in the expectation that the case will eventually turn a dollar. Because the lawyer’s money is on the line, he or she must make a reasoned judgment at the beginning as to the likelihood of success.

Lawyers who make bad guesses about success are not long in business. But it is not only the possibility of success that plays a part—one of the biggest considerations is the amount that will likely be awarded, and the key factor in that analysis is what the client has and will lose in income and benefits. The first thing the good lawyer looks at is how long the client has been out of work, how long she might be out of work and, if she finds a job, whether it will pay the same as her last job.

Once the lawyer has a handle on what “out-of-pocket” damages might be, he or she then looks at the intangible damages—emotional distress, loss of self-respect, humiliation, etc.—to get a feel for what the case might bring in if filed and prosecuted. In a good economy, we plaintiff lawyers turn away many potential clients who have good legal claims because the “hard damages” (lost income and benefits) do not support the expense. In a good economy, it is more likely that a terminated employee will be able to find a job rather quickly; the demand is high. If the loss of income and benefits is very modest, the lawyer is much more likely to turn the case down.

Many employment lawyers (like me) follow the “six-month rule.” We take the client on, but do not begin proceedings until she has been unemployed [or underemployed] for six months. If, before six months pass, she has found comparable work, we generally decline to prosecute the case. Whether or not she received unemployment compensation has no effect on our evaluation because under federal law such benefits are not considered when damages are calculated.

What happens, then, in a bad economy? Two factors come together to increase filings. First, when the unemployment rate climbs, clients are unemployed longer, and more cases have more economic loss to recover. Second, lawyers themselves are under economic pressure. The incentive to take cases they might not otherwise take is great. The lawyer might take the case, but prosecute it “on the cheap,” taking fewer depositions than usual and making other economies.

Doctor, you are more exposed to employment claims now than at any time in the recent past. The national average of the cost of these claims is over $100,000.00. Having solid, effective human resources policies that document your fair and equitable treatment of employees is the only defense you have to these claims.

The office manual that we create is customized to your situation and your state. We support the policy with forms keyed to specific provisions. When issues arise with employees or when an employee must be terminated, following our documentation track can virtually eliminate the risk of a claim. And with the alternative dispute resolution package that we offer with the office manual, you can avoid the courtroom completely.

Up-to-date human resources policies are not non-essential luxuries in today’s economy. They are necessities. A noted defense lawyer recently said that for even the large corporations he represents, “I try to get them to deal effectively with employment issues before a claim is made. They can pay me now, or pay me later. Paying me later, however, is what puts my kids through college.”

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 providing 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.

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