Category Archives: Management

Stop Employee Theft

In 25 years of practicing employment law, I have unfortunately had to advise many clients who have been robbed by their own employees. They have lost thousands of dollars to theft of cash and inventory. In most instances, when my client has called me with questions about employee theft, the business has already been ripped off by its employee and is now just trying to figure out whether to prosecute and if there is any way to put in an insurance claim. I would rather see my clients take some preventative measures to stop employee theft before it happens.

Prevention starts by screening applicants with thorough reference and criminal background checks. Any employee with access to the financial records, bank accounts, credit cards, cash or inventory should have a clean record both with past employers and with law enforcement.

You should also assign overlapping job duties. Many of my employers who suffered losses to employee theft trusted just one person to handle the finances, the checkbook, cash receipts, reimbursement of business expenses or the bank deposits and didn’t require a second set of eyes on these records. Even if you don’t constantly have two people double-checking these records, learn a lesson from banks. Most banks require employees in sensitive financial jobs to take their vacation time in at least one week segments so that another employee can get a good long look at the vacationing employee’s records.

Every employer should also identify those areas of the business that are at high risk for theft and conduct audits every quarter or every six months on expense reporting, cash reconciliation, firm credit cards, etc. If you stock inventory, then performing a regular count of your inventory is also important. You should protect your inventory by watching for cars parked close to loading zones, unlocked exits that should remain locked, and bulging bags.

Finally, you should know your employees. The U. S. Chamber of Commerce recommends that you watch your employee’s behavior for unusual working hours, poor work performance, defensiveness when reporting on work, an unexplained close relationship or favoritism with a supplier or customer and/or a personal lifestyle that doesn’t match the employee’s salary.

One word of caution. If you suspect an employee of theft, don’t make the mistake of falsely imprisoning that employee or defaming that employee. If you detain an employee in the workplace by restricting his movement in some way, you could be guilty of false imprisonment. Let him leave if he wants to, and then let the police track him down and arrest him later if you have proof of theft. Defamation involves publicizing to others (such as your other employees) that an employee stole from you before that fact has been clearly established. In most instances, there is no reason for anyone else to be notified that you are accusing your employee of a crime. Only when the employee has been convicted of theft can you safely report to others, such as prospective employers who call for a reference, that your former employee stole from you.

Relativity in the Workplace

There is an old Hollywood story that warns of family-run businesses:

Despite their joint ownership (with Albert and Sam) of Warner Brothers studios, little love was lost between Jack and Harry Warner (who once chased Jack around the Warner Brothers lot brandishing a lead pipe, threatening to bludgeon him).

Albert Einstein was given a tour of the Warner studios. “This is the great Professor Albert Einstein,” an executive declared by way of introduction to Jack Warner. “He invented the theory of relativity.”

Warner suddenly perked up. “Well, Professor, I have proved a theory of relatives, too,” he remarked.

“Really?” Einstein replied.

“Yes,” Warner declared. “Don’t hire them!”

In my law practice, I often advise businesses in which several of the owner’s family members are employed. While many families are able to successfully avoid stepping on the landmines that are planted just below the surface of family businesses, others seem to blow up either the family or the company by forgetting to follow a few simple principles to avoid the explosives:

  • Make sure your family members are qualified to work in the role they are fulfilling in the company. I know of a successful entrepreneurial husband who wasn’t interested in worrying about the day-to-day tax, employment, accounting and management details of his business. He was a salesman and a very good one. So he left all those other details to his wife. She had no MBA, no training and no experience with the technical and financial aspects of running a business. Their business eventually suffered several large setbacks because neither spouse was qualified to manage the niggling but necessary details with which every business has to deal. The moral: either hire qualified non-family members to do the jobs which you and yours cannot perform, or require immediate and extensive training for any family member whom you expect to perform unfamiliar job duties.
  • Don’t discriminate between family and non-family members. If you have a policy manual that prevents all employee from smoking in the building, prohibits the use of alcohol while on duty or pornography on the company computers or requires all employees to show up on time, do not allow family members to break these rules. In fact, in my experience, the family members should meet even higher standards to set a good example and because they are always under more scrutiny by employees to determine whether there is a double standard applied.
  • Be careful about practicing your family’s faith in the workplace. I never advise an employer to cut out all references to faith in a business, particularly since following the tenets of your faith can create a much more ethical and wholesome workplace. However, the more family members or others of the same faith you have working in your business, the greater the possibility that applicants or current employees will feel like they have to pass a faith test to work in your business. This would of course be discriminatory, so you will have to be even more diligent about enforcing your equal employment opportunity policies, hiring employees of varying faiths, and making disciplinary decisions without regard to an employee’s beliefs.
  • Watch out for apparent authority problems. In Texas, those with apparent authority to speak for the company can bind the company to contacts and get the company in legal hot water for employment decisions. If it is well-known to your vendors and employees that your daughter is working at the company and is being groomed to one day take over the business, don’t be surprised if she is treated legally as having authority to make all decisions for the company, even if, as the owner, you don’t believe she is experienced or mature enough yet to actually make those decisions.
  • Family dysfunction can really cripple your business. If your son and daughter-in-law both work at the business, what will happen if their marriage starts to fall apart and they eventually divorce? Will you automatically fire your soon to be ex-daughter-in-law? Could this create a sexual discrimination issue? Could she make a claim in the divorce for part of the ownership of the business as community property? Those business owners who plan for the worst and hope for the best address these kinds of issues long before problems arise by requiring buy/sell contracts, pre-nuptial agreements and employment contracts with family members.

Popular Culture in the Workplace May Be Inappropriate

Michael’s co-worker liked rap music. He liked it so much that he constantly played it and rapped along. Even though the songs contained the “N-word”. Even though Michael is African American. Even though Michael complained several times over a year’s time to his supervisors that the lyrics he was forced to listen to were offensive.

Because his supervisors didn’t correct the problem, Michael contacted the Equal Employment Opportunity Commission (“EEOC”). The EEOC sued on Michael’s behalf for racial harassment and settled the suit against Michael’s employer last year for $168,000.

In announcing the settlement, the EEOC claimed that it is not in the business of judging anyone’s musical taste, but then made it clear that racially offensive language does not belong in the workplace even when disguised as popular culture. The employer had numerous chances to stop the wanna be rapper from offending his co-worker, but never effectively did so.

This kind of culture clash creates difficulties for employers. While television, movies and music have adopted an “anything goes” attitude, the harassment laws require that almost nothing offensive is ever said in the workplace. Every movie that Judd Apatow (“Knocked Up”, “40-Year-Old Virgin”, etc.) releases lowers the bar a little more on what passes for polite discourse in our society, yet every sexual harassment decision raises the standard for what is acceptable conversation on the job. In the middle of this struggle is the employer, trying to build widgets and make a profit, all while having to monitor every employee’s words and conduct.

Miller Brewing Company tried in 1993 to enforce professionalism by firing a manager named Jerold who repeated the punchline of a “Seinfeld” episode to a female coworker. In the episode, Jerry Seinfeld forgot the name of a girl, but remembered that her name rhymed with a female body part. The joke was that her name was “Dolores”. Jerold’s female co-worker didn’t get the joke, so Jerold found a dictionary and pointed out the definition of the rhyming body part. She complained and Jerold was fired a week later. Even though the company overreacted slightly to this one incident, Miller Brewing probably thought that its professionalism policy had done its job and that was the end of it.

The twist in this story is that Jerold sued Miller Brewing Company and the female coworker saying he was wrongfully terminated. The jury found that the woman was not really offended by the Seinfeld joke because she was known to participate in some graphic references herself. The jurors also found that Miller lied about the reasons it really fired Jerold. Jerold was awarded more than $20 million, although he never saw a dime of that money since an appeals court overturned the damages award.

In another music case, the Vail Corporation did not restrict employees listening to music with profanity or lyrics promoting violence against women, which Lisa said offended her. Stupidly, the company did tell Lisa, a Christian employee, that she could not listen to Christian music while on duty because it might offend other employees. The EEOC claimed that the employer also failed to accommodate Lisa’s religious beliefs in some scheduling requests and sexually harassed her by letting managers tell sexual jokes and make graphic comments in the workplace. The Vail Corporation paid $80,000 to settle that religious and sexual discrimination suit.

So do you as an employer have to police your workplace to rid it of all references to popular culture? Good luck with that. Realistically, there are some steps you can take to assure that professionalism reigns in your company:

  • Have clear, written policies expressing the company’s prohibition of racial, sexual, religious and other slurs and harassment, as well as a detailed procedure that your employees can employ to complain if they are offended. Enforce the policy with progressive discipline before any situation gets out of control.
  • Train your employees. So many young people (and some older ones) entering the job market are completely clueless about what “appropriate” or “professional” behavior and conversation actually look like. Yes, their parents and their schools failed them. But now they are your problem and you are going to have to be the one to educate them.
  • Take complaints seriously. Michael’s concern about hearing the “N-word” frequently in his co-worker’s musical selections should not have taken a year to be resolved. Even if you think your employee is being overly sensitive, investigate the complaints objectively and promptly.
  • Set a good example yourself. If dirty jokes, racial epithets or religious slurs ever sneak into your conversations, you can be sure that your employees are watching and taking note. Why should they strive to be professional and appropriate if you don’t bother to do so yourself?

Beware New ARRA Whistleblower Law

More than just Big Brother is watching you. Your employees are watching too, and can use the protections of a new whistleblower law to protect their jobs if they report any kind of wrongdoing by your business.

The new whistleblower law is included as a tiny piece of the massive American Recovery and Reinvestment Act (“ARRA”). Employees of any company that is a recipient of any stimulus money provided by ARRA are protected from job terminations if the employee discloses a problem involving stimulus funds to a supervisor or an enforcement agency. The protection applies when the employee reasonably believes he/she is disclosing a problem related to stimulus funds, such as:

  • Mismanagement or waste; or
  • Danger to public health or safety; or
  • Abuse of authority; or
  • Violation of a law or regulation governing a grant or contract relating to stimulus funds.

Companies that may receive stimulus funds include healthcare companies, especially technology providers in the healthcare field, airports, alternative energy companies, contractors rebuilding infrastructure, companies retrofitting closed industrial facilities, medical researchers, scientists, libraries, schools, shelters, and many other businesses. Therefore the employees of these companies may have a new and unprecedented level of employment protection from the ARRA whistleblower regulations.

What should a company expecting to or already receiving stimulus funds do in response to this whistleblower liability?

  • Hire and train a quality control expert or contract administrator to oversee the efficient and safe use of the stimulus funds.
  • Prepare ethics guidelines for the handling of funds and the work to be accomplished and have every employee sign off on them.
  • Train your managers and supervisors to immediately report any complaints about efficiency, public health, contractual violations, etc. from their employees to the quality control officer.
  • Be very careful about terminating employees. Document all reasons for terminations. If an employee has made complaints inside or outside of the company, talk to an employment lawyer about your company’s exposure to whistleblower liability before you terminate the employee.

Is There a Union in Your Future?

Across the country, approximately 8% of the workforce is unionized. Speculation is that if the Employee Free Choice Act (“EFCA”), the union-backed legislation making its way through the Democratic-controlled Congress, passes, that number could double.

This is causing concern for many employers, who fear that a unionized workforce makes the company less flexible, innovative and responsive to a rapidly-changing global economy, in which customers only care if your product is feature-packed and low-priced. Union contracts and the rigid rules they impose can possibly turn a company into a slow-moving and out-of-date giant like GM or Chrysler.

How would the EFCA increase your chances that your workers would be unionized? The bill would allow workers to sign cards with a check-off box saying that they want to be represented by a union. If 51% check off the “yes” box, then you will have a union in your workplace. This method is currently allowed, but employers don’t have to recognize the check-cards and can demand a secret ballot election, which provides the employer time to counter the unionization attempt. Requiring an employer to recognize the check-card election alone as controlling does increase the chance that a union will start representing your workers in negotiating all terms and conditions of employment.

The EFCA would also require the company and the union to submit to binding arbitration if a union contract could not be negotiated in 90 days. This provision could increase the chance that a National Labor Relations Board arbitrator will be determining your wages, vacation policies, attendance policies, etc., instead of you as the owner or manager of the business.

The chance of passage of the EFCA in the Senate decreased in late March when moderate Republican Sen. Arlan Spector announced that he would not support the legislation with his swing vote in these difficult economic times. However, there will probably be some sort of compromise bill that passes, so you can’t totally ignore the possibility that a union may soon be coming to a workforce near you.

If you want to decrease your chances of ever facing a union election in your business, here are some proactive steps that you can and should take right now:

Continue reading Is There a Union in Your Future?

Time for Servant Leadership

In this time of economic shrinkage, it is tempting for employers to believe that any remaining employees should consider themselves “damn lucky to have a job” (as one of my former law partners used to say). This attitude can lead to subtle exploitation of employees who will do almost anything to keep their paychecks coming each month.

My 22 years of experience in employment law lead me to believe there is a better way to treat employees, even in poor economic times, or maybe particularly in poor economic times. That management style is frequently called “servant leadership.”

The few servant leaders that I know in Texas Panhandle businesses rarely have to worry about lawsuits filed by former employees, because even job terminations are performed with grace by servant leaders.  Meanwhile, many other local companies are seeing an increase in employment litigation.

Servant leadership has been preached in the secular business world for almost 40 years, beginning with an essay by Robert K. Greenleaf which advocated teamwork, ethics, and care of one’s employees. Greenleaf and his disciples identified certain characteristics of a servant leaders, including listening, empathy, stewardship, a belief in the inherent value of employees, and a commitment to building community. Many companies, such as Southwest Airlines, have discovered that this kind of servant leadership creates fulfilled employees who will go the extra mile for the company and for its customers.

For those of us who are Christians, we know that this concept of servant leadership is much older than 40 years. It was modeled for us 2000 years ago by the greatest leader of all, Jesus Christ. Jesus demonstrated true servant leadership after the Last Supper, when he washed the feet of his disciples.

When he had finished washing their feet, he put on his clothes and returned to his place. “Do you understand what I have done for you?” he asked them. “You call me ‘Teacher’ and ‘Lord,’ and rightly so, for that is what I am. Now that I, your Lord and Teacher, have washed your feet, you also should wash one another’s feet. I have set you an example that you should do as I have done for you. I tell you the truth, no servant is greater than his master, nor is a messenger greater than the one who sent him. Now that you know these things, you will be blessed if you do them.

John 13:12-17.

As an employer, you can do so much more than hire, discipline and fire your employees. You can encourage them, inspire them, hear them, heal them and lead them by the example you set. Look up the phrase “one another” in the New Testament and you will find the best management instructions ever published:

  • Be devoted to one another.
  • Honor one another.
  • Live in harmony with one another.
  • Accept one another.
  • Serve one another in love.
  • Be completely humble and gentle; be patient, bearing with one another in love.
  • Be kind and compassionate toward one another, forgiving each other just as in Christ God forgave you.
  • Submit to one another.
  • Encourage one another and build each other up.
  • Spur one another on toward love and good deeds.
  • Offer hospitality to one another.
  • Have fellowship with one another.

What does that look like in practical terms? Ask your new employee and his family to your home for dinner. Find out about his life, his needs, his dreams and then look for ways to help him fulfill them.

Arrange for your company to build a house for Habitat or to sort canned goods at the High Plains Food Bank together, and make sure you are the first one there and the last to leave. Organize the company softball team, provide the t-shirts, and if you don’t play with them, at least be there for the games and be the loudest cheerleader in the stands. Build a healthy community and your employees will work to improve it. Employees who are led by a servant will never want to disappoint you or leave the company that has become a family to them.

Cupid at Work? Bah humbug!

Reuters published a story today about a survey on workplace romances. Just in time for Valentine’s Day, 40% of American workers admit that they have dated a coworker. Another 10% say there is a coworker they would like to date. Interestingly only 5% of women want to date a coworker while 14% of men do. Can someone say “hostile environment”?

It gets worse: of those who dated a co-worker in the last year, a third of those relationships involved a coworker who was held a more senior position, including 42% that dated their boss. Can you say “quid pro quo sexual harassment”?

I know I should be all starry-eyed about all the wonderful sparks of romance lighting up American workplaces. But my 22 years of law practice always make me fast-forward to the part where the flames of love die and and out of the embers come the EEOC claims.

Workplace romances are fraught with sexual harassment and retaliation risks. If coworkers date and then break up, the gossip, name-calling, sexual jokes and scorn can easily be twisted into a claim that the workplace has become a hostile environment based on gender.

If a boss dates a subordinate, it gets even messier. The claim can become quid pro quo (loosely translated “this for that”), meaning that the subordinate may say that she was passed over for a raise or promotion or even fired because she wouldn’t give the boss what he used to get and still wants. Quid pro quo cases involving a tangible job detriment, such as a demotion, are the worst kinds of sexual harassment cases for an employer to try to defend.

Many employers are hesitant to get involved in their workers “private” lives. If it is developing in your workplace, it is hardly private. You may need a written policy to establish clear boundaries between business and personal interactions. It can include:

  • Instruction to keep interactions at work professional (no PDA, no long personal exchanges);
  • Requirement of prompt disclosure of a developing relationship, particularly if it involves a supervisor;
  • Removal of management authority from anyone over an employee involved in a personal relationship;
  • Requirement that the dating couple work with management to find an acceptable solution to any problems that arise, such as complaints of favoritism;
  • Requirement to accept transfers, changes in duties, or even voluntary termination of the more senior party if other measures don’t prevent or resolve problems.
  • Requirement that the end of any such relationship be reported to human resources so that future actions can be scrutinized for retaliation or harassment.

Sort of takes all the fun out of the romance, doesn’t it? I feel like Scrooge at Christmas, but I’ve seen too many of these relationships go bad and then the company has to pay the price. Better to nip it in the bud, red rosebud, that is, since ’tis the season for overpriced, underdeveloped blooms!

Training Slashed Even As Employees File Lawsuits

One of the ironies of recession is that businesses tend to cut back their training of their employees at the same time that layoffs are spawning the filing of higher numbers of employee lawsuits. This is happening again during the present deepening economic crisis. Unfortunately, this is one of those situations of businesses “cutting off their noses to spite their faces.” (Do people still say that or am I showing my age?).

During 2008, studies show that average training expenditures in U.S. businesses decreased 11%. The studies don’t pinpoint which types of training, i.e. safety, skills or sexual harassment prevention, are being cut, but I can guess. Few companies understand the incredible effectiveness of providing employment law training to defeating expensive and time-consuming litigation. Therefore, if they ever offered training to their supervisors on avoiding discrimination or to their staffs on recognizing and preventing harassment or violence, they probably will slash that expense this year.

At the same time that the finance department is telling their bosses that the training budget has to go, employees are being terminated in record numbers. The national unemployment rate for January, which will be released tomorrow, will probably be around 7.5%, a 17-year high.*

And what do employees do after they are fired? They look for someone to blame, which in many cases will be the company that fired them. So they file unemployment claims, discrimination complaints, and lawsuits. During the fiscal year 2008, the Equal Employment Opportunity Commission already experienced a 15.2% annual increase in charges of discrimination and retaliation filed. Just wait until FY 2009.

I can already tell from my own law practice that even in the Texas Panhandle, which has been unusually sheltered from the current economic storm, employee complaints and lawsuits are increasing. Many of my clients are starting to face the investigative powers of the EEOC or the Texas Workforce Commission’s Civil Rights Division. Many of those charges will turn into lawsuits alleging discrimination and retaliation.

If you are regular reader of this blog, you know I always advocate written policies and employee training as your first line of defense against an employee lawsuit. If you start cutting your budget for those things, you may see short-term financial relief, but in the long run you are leaving your company very vulnerable to very costly employment lawsuits.

*Note from February 6, 2009: As it turned out today, the national unemployment figure was even higher: 7.6% for January 2009. That means that almost 600,000 jobs were lost in January. That is the worst showing for number of job losses since 1974. In all, 3.6 million Americans have lost their jobs since this recession started 13 months ago.

Lessons from NASCAR’s Discrimination Suit

Six years ago, I had never watched a NASCAR race and would have laughed if you had suggested I ever would. Aaahhh, what love will do to an otherwise rational person! Enter Rohn Butterfield into my life, and I can now tell you that there are 36 races in a season, the Daytona 500 (the start of the season) will be run in February, Jimmy Johnson has won the last three Chases for the Sprint Cup (boo!) and back-flipping Carl Edwards is “my boy”. Okay, I’m apparently an over-educated redneck.

While watching 43 cars go round and round a two-mile track for three hours can get boring at times (even if they are going 200 miles per hour), one of the things that keeps me interested is the fascinating business side of NASCAR. The NASCAR sanctioning body that puts on and officiates the races is privately owned by the France family, yet there are more corporate sponsorship dollars flowing into NASCAR than any other sport (hence the cars and drivers covered in decals). If you ever go to a race, you will marvel that the track is completely ringed by semis filled with NASCAR and driver merchandise.  NASCAR has 75 million fans who purchase over $3 billion in licensed products annually.

So NASCAR is big business. And like any business, it is subject to employee lawsuits. NASCAR just settled the latest claim for a confidential amount with no admission of any liability. The suit alleged that Mauricia Grant, who worked as a technical inspector certifying cars in the Nationwide Series, was subject to racial discrimination and sexual harassment.

NASCAR claimed in its response to the suit that it had a zero tolerance policy against discrimination and harassment in the workplace, that Grant had received and acknowledged that policy, that NASCAR had provided mandatory training annually on these subjects, a training that Grant had attended, and that NASCAR’s policy required Grant to immediately report any violations of its policies but she had failed to do so. In addition, NASCAR claimed that it conducted its own investigation when Grant’s allegations became known and had fired two officials accused of exposing themselves to Grant.

Grant said she was fired for reporting her complaint, which, if true, would be illegal retaliation. NASCAR, however, said Grant was fired for an altercation with a track security guard who asked to see her credentials. Ultimately, because the case was settled confidentially, we won’t know what really happened. But there are still lessons here that any business owner should learn from NASCAR’s experience. Ask yourself these questions to determine if you are protected should similar allegations be made against your company: Continue reading Lessons from NASCAR’s Discrimination Suit

Employer’s Ten Commandments

If you are a Texas employer, you may be wondering whatever happened to the concept of employment at will, where you could hire, discipline and fire an employee for a good reason, a bad reason, or no reason at all. You are worried that the pat on the back that you once gave for encouragement is now considered sexual harassment. You may feel like you are fighting a workplace war and you seem to be losing.

You have good reason to be worried. Jury Verdict Research reports that the median discrimination verdict in the United States was $252,000 in 2007. In 2008, we saw the largest single plaintiff employment law verdict ever–$46.6 million awarded to a supervisor who refused to fire three employees in their 60s and was then fired himself. With the economy in the toilet, more employees will lose their jobs, which always results in an increase of employment litigation for wrongful termination of some sort.

But the business owners and managers that I talk to everyday as an employment lawyer can’t keep up with the new laws and regulations that they have to follow. They understand that the laws are designed to bring fairness and equality to the jobsite, but unless the laws are merged into some kind of simplified and usable form, they find compliance almost impossible.

How can you run your business without spending all your time on employment issues? These are the ten basic principles that you and your managers need to follow to comply with most employment laws and avoid a costly lawsuit: Continue reading Employer’s Ten Commandments