Managing Employee Lawsuit Risk at Your Practice

July 19, 2011

Employees, including those at medical practices, are suing more often, winning more often, and winning proportionately larger and larger judgments. Here’s what you can do about it.

Employees are businesses’ most valuable assets in many cases but can also be their biggest liabilities. In fact, American businesses, including medical practices, are five times more likely to be sued by an employee than for any other reason. What’s more, employees are suing more often, winning more often, and winning proportionately larger and larger judgments. 

The average sexual harassment verdict, as one specific example, produces a payout just north of half a million dollars in addition to the stress and emotional and financial costs of the litigation itself.

One of the most common sources of exposure we see is that lack of a professionally drafted handbook that outlines the policies and procedures governing the business interactions between employer and employee. When I address these issues on my planning checklist (see our previous article here, A Doctor’s Self-Exam of Legal and Financial Essentials) with my physician clients I often get the same two excuses that nothing has been done to improve, or worse, implement, the practice’s employment manual:

1. I don’t have the time to do anything about it.
2. It’s too expensive to do it right, I’ll just get one from a friend or off the Internet.

Both of these statements are false and allow for dangerous apathy.

The good news is that there are easy, inexpensive alternatives. Simply sending what you currently have to an expert for review is fast, simple, and in some cases can be done for a little as $300. If the manual you have in place is okay, they’ll let you know and if it needs to be replaced it can be done so for as little as a few thousand dollars in most cases.

For help in reducing this risk and advice on how to spot it, I turned to expert Paul Edwards, CEO of the Center for Employment Dispute Resolution. Edwards provided a list of common exposures and errors he and his team look for as one small part of a handbook review. That list is below to help identify if your practice has created risk and dangerous ambiguity inside its employment manual.

EMPLOYMENT MANUAL “RED FLAGS”:

1. Having a single-paragraph arbitration policy masquerading as an effective and enforceable arbitration agreement;
2. Failing to control and ensure continuing confidentiality when a top-level manager, hygienist, other direct-treatment provider starts contacting former patients after he or she quits or is fired;
3. Policies that forbid employees from discussing their salaries;
4. Policies that take away earned or accrued vacation time if an employee does not use it (A common wage and hour violation in several states);
5. Policies that tell employees you don’t pay for seminar time that falls on the weekend because it’s outside of the normal work week (violates federal wage rules);
6. Setting deadlines by which employees must report problems with their paychecks and disqualifying them from claiming the amount owed if they don’t meet them;
7. Over-obligating yourself to provide employees with break periods, e.g., “You are entitled to one meal break and two rest periods per day…” (Very few states require this and there is no federal rule requiring meals and breaks.);
8. Structuring policies around “if then” scenarios, e.g., “If you are late, then we will give you a verbal warning. If it happens again, then we will write you up. If it happens again within one month/year/other stated period of time, then we will terminate you”;
9. Foregoing a progressive corrective coaching policy for addressing problems in the workplace;
10. Broad statements such as, “This handbook constitutes our agreement”;
11. Threatening to withhold an employee’s paycheck FOR ANY REASON AT ALL.

This list is a good start, but can never replace a professional review and a handbook that is crafted to meet the specific compliance demands of the laws in your state and the way your specific business and its operations are structured. My prescription? Add some surety and security to your business and reduce your liability by exploring this issue today.

Learn more about Ike Devji, J.D., and our other contributing bloggers here.