W hen a lawsuit is filed against a company, the company’s leaders are often so consumed with proving the legal allegations to be false that they ignore the ripple effect of disruption that the mere filing can have on a workforce.
The problem will spread unless the employer deals with the suit head-on, striking a balance between running business as usual and keeping tabs on potential ticking bombs.
It will take the shape of retaliation by managers and even workers, poor employee morale, a hostile work environment and branding the employer a discriminator. And all this, labor experts say, can lead to a loss of productivity and ultimately hurt the bottom line.
"Your company discriminates"
Large companies typically have some sort of litigation or action pending at any given time, but there is nothing more damaging to the company’s internal fiber than a discrimination suit, especially wide-reaching class-action suits or those backed by the credibility of the Equal Employment Opportunity Commission.
In February, Cincinnati-basedCintas Corp. found out that the EEOC was supporting a suit brought by workers alleging gender and race discrimination at the nation’s largest maker of work uniforms. In the summer, a district court judge gave the go-ahead for a gender discrimination lawsuit against retail giant Wal-Mart Stores Inc. in Bentonville, Arkansas, to obtain class-action status.
Liz Ryan--a Boulder, Colorado-based workplace consultant and CEO and founder of WorldWIT, a networking group for women in business and technology--says that once the suit is filed, the firm has to realize it will be fighting a PR battle not only outside but inside its walls. Each night, Ryan says, employees are going home and hearing their families and neighbors saying, "Your company discriminates against women, blacks, whatever."
And, labor and legal experts warn, workers not part of the action may start thinking they could be victims ofdiscrimination. Others take sides in the case, and morale can plummet.
Patricia Eyres, a management trainer and author of The Legal Handbook for Trainers, Speakers and Consultants, says that keeping the workplace running smoothly during a legal action is one of the hardest challenges employers can face. It gets even more challenging, she says, when the workers who are plaintiffs in the suit remain employed at the company.
The silent treatment
While most employers are smart enough to know they shouldn’t retaliate against employees who bring such claims, they tend to get tripped up by not looking at specific acts as retaliatory, says D. Michael Reilly, an employment attorney for companies and author of Handling Employment Liability Claims in Washington.
Reilly gives the example of an employee who files a lawsuit and has a performance review coming up. The reviewer makes a comment about the plaintiff’s communication skills and how he or she has to improve relationships with others. Making such a criticism when there is no lawsuit could be just fine, but when there’s a suit the wording of aperformance review will be looked at closely. "Someone can make an argument that that was retaliatory," Reilly points out.
Michael Lieder of Sprenger & Lang in Washington, D.C., who represents workers in class-action discrimination cases, says he rarely sees blatant forms of retaliation such as firing a plaintiff. It’s typically subtler, he notes, like giving an employee the silent treatment or not considering him or her for a promotion.
Sometimes a suit can put a deep freeze on day-to-day operations. "Managers begin to feel paralyzed, afraid to give feedback to people who are or might be perceived to be part of the litigation," Eyres says. "Then you end up with a business problem. Managers have to continue to lead, but lead within legal limits."
Reilly offered an example of a legal department for a major financial institution that ended up grinding to a halt following claims of a disparity in pay between men and women.
A female attorney in the department was the whistle-blower in the case, and her fellow attorneys began avoiding contact with one another and canceling meetings. They didn’t want to become witnesses in the case and were worried if they said something it could be taken out of context. The result: The 15 lawyers in the department were suddenly not talking to one another, no deals were being completed, and the bulk of e-mail exchanges were "more about covering your rear as opposed to getting work done," Reilly says.
The institution had to hire an outside legal firm. Everyone at the company ended up suffering in the form of layoffs and added expenditures, Reilly says.
Such suits can also create a hostile work environment as workers, line managers and executives all jockey to take sides in the dispute. In one racial discrimination suit, Eyres says, some managers and workers at a company she would not name took pieces of rope in the shape of a noose and hung them on their rear view mirrors. When the black worker who brought the suit walked by they would swing the nooses back and fourth. While the worker did not prevail in the discrimination suit, he did win a retaliation claim, costing the firm more than $1 million.
Since a lawsuit is often the first inkling the higher-ups have that there is a discrimination problem, legal and labor experts suggest doing an internal investigation immediately. "You want to talk to employees, supervisors, any witnesses whose names come up," says Ted Meyer, a labor and employment attorney for Jones Day in Houston. "It’s important to try and get to the bottom of what really happened." Executives in workforce management positions have to make sure the managers working with employees involved in the suit are trained in how to handle the situation.
Meyer’s most successful clients have involved human resources staff in the general decision-making as it relates to the suit and in the performance evaluation process of all employees. Meyer says a good HR person will verify performance evaluations and any actions that may be taken. Bringing in a third party to mediate the suit early on might also be helpful. "It allows employees to come in and vent with the employer and tell his or her story. On the flip side, it allows the employer to explain why they did what they did."
It’s also a good time, he adds, "to do some employee relations work, do some teamwork training. Keep everyone very, very busy. People with too much time tend to focus on things they shouldn’t be focusing on."
Ryan, the consultant from Boulder, suggests "small-group meetings to talk about the issue, process employee reactions and decide how to handle it inside the group."
Many legal observers point toTexaco, which settled a large class-action discrimination lawsuit in 1996, as a good example of how to deal with a discrimination suit, saying the oil company’s then-CEO, Peter Bijur, was key in mitigating the fallout.
During the litigation, a tape recording surfaced with senior executives making disparaging racial remarks. A 2000 article in BusinessWeek states that Bijur quickly acknowledged in public that the company had a serious problem and launched an internal investigation. "For 60 straight days after the scandal broke," the article says, "Bijur put aside the oil business to focus on fixing what he realized was a poisonous workplace culture. Bijur insisted that each one of Texaco’s human resource committees have at least one racial minority and one woman as a member. And he moved swiftly to hire prominent African Americans in Texaco’s senior ranks. Bijur also tied bonuses to achieving diversity."
In a more recent high-profile discrimination case,Wal-Mart CEO Lee Scott may be taking a page from Bijur’s book. While Wal-Mart is maintaining its stand that it does not discriminate against women, the retailer established an office of diversity in an effort to boost diversity in employment practices and recruitment. It also tied executive bonuses to diversity targets.
Having a deliberate strategy and communicating a firm’s objectives in one voice, Eyres says, will help mitigate the negative impact of a discrimination suit. Absolute silence or pat denials with no steps toward improvement "breeds discontent within and out of a company."