Labor Law Explained

Benefits Law

Price of Protection?

Professional Employers

New Labor Law

Corrections or additions?

Business Law ’98: Fending Off Lawsuits

These articles by Barbara Fox and Phyllis Maguire were published

in U.S. 1 Newspaper on Wednesday, May 20, 1998. All rights

reserved.

The best way to stave off an employee lawsuit is to

keep your employees happy. So say the trio of consultants who will

give a seminar Friday, May 29, to the Employers Association of New

Jersey. "Take off the blinders and put in some side view

mirrors,"

advises lawyer Hanan M. Isaacs. "Be firm, fair, and

consistent,"

advises consultant Joseph Nebus.

"We are striving to create a change in the workplace culture so

decisions are made in a more democratic way, employees have a stake

in the workplace, and projects are managed in a team fashion with

group energy," says psychotherapist Kenneth Lipman-Stern.

The Employers Association of New Jersey features Lipman-Stern, Isaacs,

and Nebus in an interactive seminar on problem solving, conflict

resolution,

and mediation strategies in the workplace staged by the Freehold-based

Brinkerhoff Group, a consortium of 70 consultants and trainers

(732-462-7444).

Set for Friday, May 29, at 8 a.m., at the Somerset Marriott, the

seminar

costs $55 for members, $75 for nonmembers, and includes a copy of

"The New Employment Contract" by John Sarno, the executive

director (see following story). Call 609-393-7100 or 973-239-8600

to register.

At this meeting EANJ is unveiling the Management Training Institute

to be managed by the Brinkerhoff Group and directed by Raylie

Dunkel

(732-462-7444). For EANJ’s 1,000 member companies the group is adding

topics in skill development, management development, communications

skills, ISO 9000, and Total Quality Management.

In advocating a democratic system Isaacs calls the hierarchical system

the "thunderbolt" approach: do this, or you get fired. "Do

the thunderbolts work? You bet. But sometimes they burn and explode

and you send messages that it’s the right way to handle conflict

resolution."

"Our system teaches people empowerment within the organization,

and we are not talking lip service empowerment, we are talking

feedback

units and quality counsels, slices of the workforce from every venue

into a representative core that can measure things, give out charters

to every part of the organization, and provide feedback to the board.

It has impact, but it is hard to do."

The trio’s "nuanced approach to conflict management" occurs

from the top down and the bottom up. "It is a reprise of work

that was done in organizational psychology 25 years ago and has fallen

into serious disfavor," Isaacs says. "It’s communications

theory coupled with negotiation coupled with conflict management

coupled

with psychological and organizational principles. We need people with

the human tools to help us figure out where we are at every

moment."

Isaacs, based at 601 Ewing Street, has a JD from the University of

North Carolina. He practices commercial and family law, personal

injury

arbitration, and is a mediator for the American Arbitration

Association’s

New Jersey office. He works on New Jersey Supreme Court’s pilot

program

on civil mediation and on its dispute resolution committee. He is

an adjunct professor at Seton Hall Law School, where he is developing

a model to train CPAs in dispute resolution.

A huge piece of this is how to use facilitation,"

says Isaacs, noting that consultants from American Arbitration

Association

can design a system to mitigate dispute and promote specific process

remedies. So can various consultants and nonprofit groups.

But alternative dispute resolution is different from the arbitration

process, says Nebus: "You get away from a public judge or a

private

judge, and a neutral facilitator listens to the case to find what

needs to be done."

Nebus went to Siena College, Class of 1965, worked with Hercules Inc.,

was one of the founding franchisees of the Lawn Doctor Company, and

has been doing organizational redesign and ISO 9000 consulting since

1982. His Marlboro-based firm is Improvement through Involvement.

Nebus suggests that organizational redesign is probably needed on

one of three levels:

"If the horse is out of the barn, you try to do damage

control," says Nebus. "You set up a system so that

organization

doesn’t fall into that trap again, and you train them and bring their

skills up to where they should be."

If arbitration cases occur frequently, such as when people

are bringing up nonsense cases or managers are not respecting

employees,

"then we change the system or look at the system to see how it

can be more effective. Most of the time the trouble is due to issues

of empathy and self esteem," says Nebus.

"When a company does not have an immediate problem we

will do some organizational changes," says Nebus, perhaps by

installing

an employee’s council to forestall the "butting heads"

situation.

A system of dealing with future crises could focus on appointing

an ombudsman, setting up a peer system, creating a partnering model

on top of collective bargaining agreement, or simply creating a

mission

statement of goals and desires that will motivate employees.

Nebus cites the success of an employee council at a Trenton firm which

is in bankruptcy but, because it is running on the council system,

can still operate. "Under the old system 40 families would have

been without a paycheck." He also has installed an employee

council

in a high tech company in Princeton that works with Princeton

University

and has tripled in size.

He tells a war story about the United Way of Essex and West Hudson

that fell apart when the autocratic executive director was asked to

leave and the fund drive dropped by one-fourth in a couple of years.

"We put in an employees’ council that ran the day-to-day

efforts."

It had seven people from a vertical cross section of everyone from

the vice president to the elevator operator. The employee council

helped select the new executive director, set up a less costly but

better benefits program, came up with a new employee manual, and

redesigned

the configuration of the office.

As the psychotherapist of this trio, Lipman-Stern does

the psychological intervention. A philosophy major at Temple

University,

Class of 1970, Stern spent his 20s as a jazz musician in a Latin band

and then earned his master’s in counseling psychology from Temple.

He worked as a mental health therapist from 1984 to 1994 before

opening

up his own practice.

One of his first big collaborative workplace interventions: In 1994

the Gloucester County Board of Social Services had increased clientele

but, thanks to downsizing, fewer staff members. "The union was

going crazy and management was divisive, and I was brought in to

design

an intervention and improve morale and productivity."

He held a series of town meetings, in groups of 10 for 450 people,

preceded by a 1 1/2 day workshop in communication, conflict

resolution,

team building. After brainstorming on conflicts and solutions he and

the agency’s HR director built a heterogeneous task force with a cross

section of the agency and began implementing some of the changes.

"It improved morale because the people at the bottom were part

of the decision making process. Those who were really working with

the clientele had a lot of great insights. Until that time it was

the director and bureaucrats in Trenton who were making the

decisions."

Another intervention involved Hunterdon Medical Center, which had

a $1 million grant to help the nursing staff change to participatory

management, called shared governance. "Nurses aren’t good at

implementing

change because they are so used to being nurturers and second

hands,"

he claims. He gave workshops on recognizing and having power, and

on feeling confident in the decision making role. Six months later

he returned as a therapist to take the pulse of how it was going.

"Think about the ancient village," says Lipman-Stern.

"People

need to feel respected. People need to feel a part of things. If you

could teach people conflict resolution skills, I know that the rate

of lawsuits would go down."

"In any lawsuits, it’s almost never about the money," agrees

Isaacs. "People from the outside always say it is, but it’s always

that somebody got disrespected, somebody lacked appreciation."

— Barbara Fox

Top Of Page
Labor Law Explained

Employees are suing their employers at a rapidly

increasing

rate. Between 1971 and 1991, says John J. Sarno, author of

"The

Employer-Employee Relationship in the Contemporary Workplace: the

New Employment Contract" and executive director of the Employers

Association of New Jersey. He cites research showing that employment

litigation increased 430 percent in that 20 year period, and that

an additional 10,000 wrongful discharge suits are filed annually.

Sarno effectively summarizes the history of labor law, clarifying

the origin of such frequently used but infrequently understood

expressions

as "at will" employment. Except for union or government jobs,

almost everyone is working in an "at will" position, so you

can leave when you want to — but your company can fire you when

it wants to. This employment contract consists of a job offer and

acceptance and is good when compared to slavery but not good for job

security.

"It has become commonplace for employees to think that acceptable

job performance transforms the at-will employment relationship into

an enforceable contract," writes Sarno. "Moreover, in the

absence of a discernible contract, courts have found public policies

favoring continued employment, the violation of which carries

significant

penalties. It is this legal trend of judicial decisions more than

any legislation that has radically transformed today’s workplace."

"But the overwhelming majority of those employees who feel

aggrieved

are not suing their employers," says Sarno. For non-members, the

book costs $19.95; call 609-373-7100.

Top Of Page
Benefits Law

The Web Network of Benefits Professionals, a national

nonprofit group, provides a chance for executives and practitioners

in all aspects of the employee benefits field — from insurance

to law to human resources — to network with colleagues, learn

from industry experts and government officials, and participate in

practical seminars.

The chapter offers handouts derived from past programs on topics

ranging

from employee manuals and fiduciary duties to COBRA plans. Iris

Bashi of Iris Bashi Associates LLC will give the next program,

a Form 5500 workshop on the state labor department’s enforcement of

ERISA. It is scheduled for Tuesday, June 16, at 8 a.m. at Arbor Cafe,

16 College Road East. For registration call Stephanie Monique

Bosworth,

an attorney in employee benefits at Smith Stratton et al and the

president of the Central New Jersey chapter (609-987-6642 or

http://www.webenefits.org).

Top Of Page
Price of Protection?

Employment Practices Liability Insurance is the hot

item on the business insurance menu. As a type of coverage, EPLI

sprang

into existence around 1991. "It is an attempt by carriers to fill

a gap in coverage left by CGL (Commercial General Liability)

policies,"

says Jonathan S. Reed, a partner with the law firm of Traub,

Eglin, Lieberman & Straus in Hackensack. Reed will be one of several

speakers at the "Employment Practices Liability Insurance"

seminar being held at the Hanover Marriott in Whippany on Saturday,

June 6, from 9 a.m. to 1 p.m. Cost: $109. For information call the

New Jersey chapter of the Institute for Continuing Legal Education,

732-214-8500.

EPLI coverage indemnifies employers against the generation of lawsuits

that have come of age in the 1990s: wrongful termination, employment

discrimination, and sexual harassment claims, as well as claims

arising

from the Americans With Disabilities Act. These are suits that can

make or break a business: one Bergen County firm with five employees

won an age discrimination suit brought by a fired salesman, but paid

$52,000 in legal fees for the win.

While more carriers now offer EPLI policies and more rate reductions

may be forthcoming, demand is being driven by business owners. For

carriers, these are uncharted waters. "It is a tough area to

underwrite,"

says Peter O. Hughes, a partner with the law firm Stanton,

Hughes,

Diana, Salsberg, Cerra & Mariani in Florham Park and another

conference

speaker. "It isn’t like auto accidents or property casualty claims

for which there are established parameters. Some of the verdicts being

handed down by courts for these claims are completely

unpredictable."

Both insurers and owners are looking to court decisions. There has

never been a published case interpreting EPLI, says Reed, but two

cases now before the New Jersey Supreme Court will help determine

how effectively claims can be excluded under routine CGL and Workers’

Comp policies. "If the Court says there is claims coverage under

existing policies, there will be less need for EPLI," says Reed.

"If the Court enforces employee claim exclusion and denies

coverage,

that will be another selling point for EPLI."

But Hughes cautions against finding hard and fast guidelines in

specific

judgments. "One of the major problems with these claims is that

each is unique," he says. "Most determinations turn on

specific

allegations made, and if those allegations don’t apply to another

complaint, the results may be different." And Hughes offers this

warning to New Jersey business owners: "New Jersey law is much

broader and tougher on employers than federal law is."

Hughes and Reed offer these tips to business owners — those with

EPLI, and those without:

Make sure an Equal Employment Opportunity statement is

prominently displayed in all of your employment literature.

Have specific procedures for handling harassment and

discrimination

complaints, and make sure employees are aware of them. Not having

such a policy, under New Jersey case law, is in itself evidence of

employer negligence.

Tighten up your personnel handbook; if you don’t have

one, get one written and published. Since, under New Jersey case law,

an employee manual can become a contract between the employer and

employee, termination could become a breach of contract claim.

Prominently

display in your manual a disclaimer that says it does not constitute

a contract and that, as an employer, you retain the right to terminate

with or without cause.

A similar statement, concerning employment "at will,"

should be included in employment applications, along with a warning

that false information on the application is grounds for termination.

Check state and federal law for questions that can be included. As

an employer, you may not ask prospective employees about handicaps

or employment claims history. You may ask about prior convictions,

but not about arrest records.

Make sure all business decisions regarding employees are

well documented. Since claims come to court years after they are

filed, when managers or witnesses may no longer be employed,

documentation

is crucial to an employer’s case. Hughes points out a jury bias he

encounters: "Juries perceive businesses as being very organized,

so when they hear companies making assertions that haven’t been

documented,

they tend to believe it didn’t happen."

While the obvious advantage of EPLI is employer indemnification, a

major benefit of the new policies is the educational and procedural

process a business must undergo to qualify. Manuals get overhauled;

office policies may be modified and codified; and training programs

for employees sometimes are established. Instituting preventative

measures for insurance policy compliance creates, says Reed, a better

business environment for both employers and employees.

"The end result of EPLI policies will hopefully be fewer

claims,"

he says. "Employees will be treated fairly, with fewer cases of

harassment and discrimination, while policy holders will be in the

strongest possible position."

Top Of Page
Professional Employers

With average defense costs running to $85,000 and jury

verdicts on discrimination and wrongful firing running to $500,000,

you may want to adopt "Prevention is the Best Medicine" as

your firm’s motto. You have some choices:

Buy employment liability insurance and let the insurance

company do the worrying.

Outsource your human resources responsibilities to a

professional

employer organization (PEO) and let it do the worrying.

Clean up your own act.

"In a litigious world, employers can protect themselves

in several ways, and one of the best is by partnering with a well-run

professional employers organization to outsource all matters that

relate to human resources (HR), says David Flook, a spokesperson

for Employee Management Inc.

Yes, he agrees, you can buy employee liability insurance, but he

thinks

the cost is sometimes prohibitive. But if you choose outsourcing,

your money goes to pay for a number of otherwise aggravating tasks,

from keeping track of payrolls to firing a problem employee: "As

a PEO we deal with all the your exposures and headaches — and

because we do it for 13,000 employees, we do it very well."

Because EMI writes so many paychecks, you might say that it is one

of the top 30 employers in New Jersey. It has such well-known local

clients as Harmony Schools, Chubb Computer Services, AlphaGraphics

and 750 other companies

Founded in 1990 by CEO Steven Rosenthal, EMI has offices in

New York and Florida as well as in New Jersey and soon will be in

Philadelphia as well. With over $250 million in revenues and more

than 13,000 employees in its charge, it has more than 750 small and

medium business clients. They range from 2 to 1,000 employees with

the average size of 22 employees.

PEOs started in the south, where some clever accountants first cooked

up the idea to avoid having to pay in on employee pension plans. (That

loophole has since been plugged.) "The very clear trend around

the country is for a significant percentage of the small business

market to partner with a PEO," says Flook. "In three to five

years, 15 to 20 percent of the small businesses in the northeast will

be working with some PEO. That is the reality in the south."

If a client gets into a lawsuit, EMI’s attorneys will represent them

in court. "Unfortunately it is very easy to sue these days,

because

a lawyer working on contingency will take any and all cases. It is

often the most pragmatic thing to settle. But if the client has done

as we tell them to," says Flook, "they are not going to end

up in court. There has not been a sexual harassment or wrongful

discharge

in the history of EMI."

That doesn’t mean there haven’t been problems. "In the nine years

we have been operating we have probably seen it all," says Flook.

Take the client who wanted to fire someone because they had a beard

or didn’t like the way they dressed. "You’d think with an ounce

of common sense they would know not to do this."

The basic common sense things that any business should do:

Use an employee handbook. "Every single company should

have one. That is an effective way to address the nuisance type

suits,"

says Flook. Wouldn’t having a handbook lead to the idea that the

handbook

is an implied contract? "Software programs can get you into

trouble,

but a handbook done properly would not lead to that problem.

Hire and fire with care. "It is easy to hire and

rather

dangerous to terminate," says Flook. "If there is a problem

with an employee you need to give them a warning, give them a chance

to correct it, and create a file that shows you made an effort to

communicate with the employee."

Create a good atmosphere. "If everyone feels they

are part of a team it is not an us versus them kind of attitude,"

says Flook. "For no additional charge, EMI can send its human

resources advisors to do team building for a client. We have experts

who act as onsite human resources representatives and visit as often

as once a week, not only to help employers or managers but also for

an employee who is having a problem."

Flook, an alumnus of Brown, Class of 1973, points to this

example

of EMI going the last mile: If you have perfectly good employee who

has a personality conflict with a supervisor, someone who would really

be better off working someplace else, EMI could get that employee

hired by another of its clients. "We have a lot of clients with

a lot of performance needs, and we would do it only with the informed

consent of both clients," says Flook, hastening to add, "we

would not move a Problem Person from one client to another."

And what about the Problem Person? "We make sure the steps are

taken to protect against litigation, but we will also do the firing

for our client." So when the going gets tough, just call your

PEO.

Top Of Page
New Labor Law

New Jersey’s courts have a reputation for being

particularly

friendly to workers suing their employers for causes ranging from

wrongful firing to age and sex discrimination or sexual harassment.

"Part of the problem with employment law right now is that there

so many unwarranted and frivolous lawsuits brought. It reflects

negatively

on all the cases," says Perry Warren of Maselli, Warren,

& Lanciano PC, based at 600 Alexander Road. "There are people

who are discriminated against, there are women who are sexually

harassed,

and the fact that there may be a number of people crying wolf hurts

the perception of plaintiff cases in general. But there are good cases

out there."

"Some hostility to Paula Jones has created some skepticism to

sex discrimination cases, but I think that courts are looking more

favorably on race discrimination today and being less tolerant of

overt racism," says Warren.

An alumnus of Colgate, Class of 1984, Warren is an honors graduate

of the University of North Carolina Law School in Chapel Hill and

was an associate at Stark & Stark before leaving that firm, along

with Paul Maselli and Guy Lanciano, to open an Alexander Road practice

focusing on small and medium-sized business interests such as

bankruptcy,

commercial litigation, and securities arbitration (609-452-8411).

One recent headliner was a New Jersey Supreme Court decision that

single racist remark can create a hostile work environment under the

New Jersey Law Against Discrimination. An African American sheriff’s

officer, Carrie Taylor, filed suit against Henry W. Metzger,

Burlington

County sheriff.

"That case suggested that one isolated comment, if severe enough,

is sufficient to constitute race discrimination," says Warren.

The court’s verdict said that "a patently racist slur, ugly stark

and raw in its opprobrious connotation, in this day and age, society,

and culture, and in this state, an ugly vicious racial slur uttered

by a high ranking official who should know better and is required

to do better, cannot in light of this state’s strong and steadfast

policy against invidious discrimination be viewed as a picayune

insult."

The New Jersey Supreme Court sent this case to trial on February 18.

(http://www.njlegallink/library/litigation/Web24.htm

The alternative to lawsuits, arbitration, does not necessarily save

costs, says Warren. "The filing fee for arbitration is often

substantial.

Depending on the amount of damages you are seeking, an arbitration

fee can run to $1,000 to $2,000 or more. That creates a real barrier

to employees who have lost their jobs and discourages attorneys

against

taking cases on contingency."

"Even with a panel of three arbitrators, you are dealing with

highly educated employed persons," says Warren, who might be more

sympathetic to an employer. In cases decided by juries, ther

statistics

show, employers lose 64 percent of the cases.


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