Best Practices to Minimize and Win Lawsuits by Former Employees

Lawsuits brought by former employees have become an all too common fact of doing business these days. However, by having human resource employees and supervising managers implement and follow a few best practices, you can ensure that these inevitable claims do not constantly become major issues for your dealership.

Tip #1 – Employee Handbooks – Every dealership should have an employee handbook that lays out the policies and procedures for employees and the business. This should include anti-discrimination policies, anti-harassment policies, general workplace expectations, leave policies, employee benefits, disciplinary policies, termination procedures, and much more. Handbooks should be provided to each employee upon hiring and they should acknowledge their familiarity with the same in writing.  These handbooks should also be updated as needed for changes in the law or additional policies covering items not previously considered. Too often dealerships have an employee handbook and then disregard its provisions when making daily business decisions, whether in disciplining an employee, terminating an employee, or resolving interoffice disputes amongst employees. However, an employee’s attorneys will likely try to use this to their advantage when a former employee is terminated and the disciplinary action was not done in accordance with the applicable policies in the handbook. Also, the policies and any exceptions thereto should be administered fairly and consistently for all employees.

Tip #2 – Documentation, Documentation, Documentation – Dealerships should develop practices and habits, within the Human Resources department as well as by Supervisory Employees, to document everything relating to employee discipline, performance, and any other matter that may result in adverse employment action by the dealership or a lawsuit. Most dealerships do a good job of documenting a termination, but oftentimes the issues that led to the termination are not documented well. Each time a supervisor disciplines an employee or counsels them regarding a violation of policy or deficient job performance a written record should be made and placed in that employee’s file. Too often dealerships end up in litigation with a former employee and your business is left to rely on what your supervisor says versus the former employee. Documentation to support a supervisor’s statement is very compelling evidence in convincing a court or governmental agency of the correctness of your dealership’s actions. Moreover, documenting actions by supervisors at the time they are taken also helps avoid issues with employee turnover at the supervisory level (e.g., former sales manager disciplined him or her, but that manager has been fired himself and would no longer support the dealership’s position).

Tip #3 – Invest in Insurance and Training – Insurance for employment-related lawsuits can be expensive, but in a business with as much turnover as the average car dealership experiences, these costs pale in comparison to the numerous risks for potential litigation. Employment lawsuits can result in very expensive judgments and litigation can be protracted (requiring substantial attorney fees), especially when the dealership does a poor job with documentation. Polices vary in the scope of the claims they cover, freedom given to the policyholder to settle matters or choose counsel, deductibles and more. Each dealership should consider the cost and benefits of having an insurance policy in place and discuss what might work for them with their insurance professional. Also, paying for training for both human resource employees and supervisors is an excellent investment. Training these employees upfront can help ensure that they follow best practices when dealing with potentially volatile employment situations and save you money down the line by minimizing litigation, settlements with former employees and attorney’s fees.