In last month’s column, I shared five of my top 10 strategies for employers to stay out of court. Here are the final five ways to avoid litigation.

6. Conduct Effective Performance Reviews: Regular performance reviews, done honestly and constructively, are critical to managing your workforce and staying out of court. Employees deserve to know what they are doing well and in what areas they need to improve. Employers should use specific examples to support areas for improvement in performance reviews. Clear expectations should be set regarding any areas for improvement, and consequences should be identified for failure to make the necessary improvements.  

If an employer does performance reviews, they must be done honestly and accurately.  Many people have the tendency to rate the bad employees as marginal; the marginal employees as good; and the good employees as great. Such evaluations are not only unhelpful, they actually and actively limit the employer’s ability to terminate an employee and compromise the employer’s defenses if an employee files a lawsuit. Whenever a client asks for my advice about a potential employee termination, the first question I ask is to see the employee’s last several performance reviews. If those reviews do not identify that the employee’s performance or behavior is unsatisfactory, and if the employee has not otherwise engaged in serious misconduct since her most recent review, I cannot support termination. An employee should never be surprised by termination, and if their most recent reviews fail to inform them that disciplinary action is likely if they do not address the concerns, termination will rarely be appropriate.  

7. Document, Document, Document: Documenting conversations with employees is one of the most crucial and important aspects of a supervisor’s job. Documentation confirms the seriousness of the situation and prevents employees from later arguing that the conversation did not take place or they did not understand its seriousness. For very serious matters involving discipline, more formal documentation is necessary, likely with the assistance of human resources.  For more casual conversations, a follow-up email from the supervisor is fine. For example: “Hey Mike, just confirming our talk today about the importance of getting to your workstation on time.  I told you that I really need you at your machine at 8:00 a.m. You said that you understand. Thanks for making this a priority.” Hopefully Mike starts showing up to work on time. If he doesn’t, the employer will have this email as confirmation of a conversation regarding the importance of being on schedule.  

8. Train Your Supervisors How to Supervise: Having solid front-line supervisors is a very important part of an employer’s overall strategy to maintain positive employee relations, minimize turnover, and manage employee performance and behavioral concerns before they turn into bigger problems (like a lawsuit).  Unfortunately, few employers provide training to supervisors about how to be a leader. Such training should include many of the suggestions in this article: being fair and consistent in how supervisors treat their employees; knowing, following, and enforcing company policy; documenting conversations with employees about expectations; and conducting effective and meaningful, performance reviews. An employer cannot reasonably expect supervisors to do their job well if it hasn’t given them the training and resources necessary to be an effective supervisor. 

9. Consider Mandatory Arbitration: When an employee files a lawsuit in court, the court process is all open to the public, and a final decision about who wins and loses is usually made by a jury. We’ve all heard horror stories about “runaway juries” that give millions of dollars to plaintiffs. In response, some employers have adopted mandatory arbitration agreements that require employees to bring claims in private arbitration before an arbitrator instead of suing in court before a judge and jury. Recently, Congress and some states have passed laws limiting the kinds of claims that can go to arbitration. Mandatory arbitration certainly isn’t right for all companies, but it should be on the list for consideration. 

10. Consider Employment Practices Liability Insurance: Employment litigation is expensive. And if employers lose, they can get hit with verdicts of hundreds of thousands of dollars, or even more. As a result, many companies are now purchasing Employment Practices Liability Insurance (EPLI). Just like most other insurance policies, EPLI provides coverage for litigation claims by employees, subject to a deductible. Once the deductible is satisfied, the carrier is responsible for all attorney fees and any payments to the employee. EPLI coverage can be expensive, and employers lose a lot of control over their cases when the insurance company becomes involved, but employers should confer with their insurance agents to determine if EPLI is right for them.