Corrections or additions?
This article by Kathleen McGinn Spring was prepared for the June 12, 2002 edition of U.S. 1 Newspaper. All rights reserved.
Employment Law: Protecting Assets
There is a way for attorneys to go through a back door
in deciding whether an employment discrimination case is worth taking
on. Often attorneys take these cases on a contingency fee basis —
if they win they get a percentage of the award, if they lose they
get nothing. Sometimes, says John Thurman, a client will come
into with a complaint that could go either way. Thurman is a partner
in Montgomery Knoll-based Farrell & Thurman, which specializes in
employment and labor law (609-924-1115).
The attorney, uncertain of a good outcome, may not want to invest
his time in the case right off the bat. “They tell the people,”
Thurman says, “file a charge. I want to see the employer’s reaction.”
Stressing that this is a tactic his firm never uses, he explains why
it poses a substantial danger for employers. It costs nothing for
an unhappy employee — or former employee — to file a charge
with the EEOC, and the employer must answer that charge. The employer,
believing the charge baseless, may quickly send over documents that
look innocent enough to him, but could be damning, and could provide
all the reason an employment discrimination attorney would need to
take on the case, confident in extracting a settlement or winning
a jury award.
This is just one reason that Thurman believes the prudent employer
should consider obtaining employment practice liability insurance.
Princeton Harvest, the HR consulting arm of Thurman’s practice, sponsors
an interactive seminar, “Protecting Tangible Assets with Intangible
Assets: How Employment Practices Can Make or Break Your Bottom Line,”
on Tuesday, June 25, at 8 a.m. at the Nassau Club. Other speakers
are Paula Gould, principal in business insurance consulting
firm, Paula Gould Consulting (www.gouldconsulting.com), and Andrea
Schutz, founding principal at Management Due Diligence, a human
resources consulting firm. Call Princeton Harvest at 609-924-9370.
New Jersey, Thurman points out, has 16 different protected groups
of employees. Classifications include age, gender, sexual orientation,
handicap, race, and veteran status. And, he says, it is very easy
for any of these individuals to bring a discrimination case. “They
can pursue a claim against the employer, or they can file an administrative
charge with a state or federal agency.”
Claims are on the rise. “It’s happening a lot,” he says. “With
the growth through the ’90s, followed by a big turndown, companies
need to reduce their workforces. There are very common mistakes. They
often use subjective factors, things that are hard to defend. We see
quite a few people seeking counsel.”
One industry where claims are rife right now, he says, is biotech.
It is not uncommon for a biotech company to have one project derailed
just as it gears up for another. “They’re putting one group out
the door, and hiring through the other door,” says Thurman. Disgruntled
laid-off workers are not the only source of law suits, though. Disputes
over promotions also are a trigger, as are job seekers’ claims that
they would have been hired if an employer had not used discriminatory
hiring criteria, perhaps requiring a college degree for a job with
duties, in the candidate’s opinion, that did not require that credential.
Gould was a senior vice president at Marsh McClennan in New York City,
before starting her own firm, which is based in Princeton Junction,
in January, 2000. She talks about why small and mid-sized employers
might want to consider insuring themselves against claims by their
employees, and what they should look for in the policies.
The policies whip you into shape. Insurance companiesmake prospective clients jump through hoops before issuing employmentpractice liability insurance — and that is a good thing. A majorreason an employee can wring a big settlement out of his employeris that the employer has booby-trapped himself, perhaps by failingto conduct employee reviews or to train managers in recognizing anddealing with sexual harassment. Before an insurance company will issuea policy, it makes sure that the employer is doing all it can to protectitself against suits.The best policies let you choose your own attorney. Employmentpractice liability policies typically pay a fixed amount per hourof legal representation. Say a policy pays $150 an hour, but the attorneywho has been advising your company for 20 years charges $200. Youmay want his help on an employment discrimination case, and you canget it if you get a clause in your policy saying that you can takethe $150 an hour and give it to an attorney of your choice, ratherthan using the insurance company’s.The policies can save your firm a lot of money. A basicdefense of a straightforward case that settles out of court will mostlikely cost between $100,000 and $150,000. A complex case, or onethat ends up in court, will cost much more just in legal defense.Only five percent of all cases, on average, end up in court, but whenthey do, the employee bringing the action has a better than 50 percentchance to winning.What does coverage cost? A $1 million policy costs between$5,000 and $30,000 a year. Deductibles, commonly about $5,000 justa short while ago, have climbed substantially as the insurance industryis reeling from losses and from the dip in the stock markets thatsubsidized those losses throughout the 1990s. A deductible now couldbe $25,000.How much coverage does your firm need? One million dollarsis plenty for most companies, but those going through reorganizationsthat result in many lay-offs probably need more.Every single New Jersey employer needs to consider the coverage,says Thurman. In other states, only employers with a certain numberof employees can be sued for employment discrimination, but no suchlimitation applies in New Jersey. “Under New Jersey law,”says Thurman, “every employer is covered, no matter how many employeeshe has.” This, he says, means that “every employee is a potentialplaintiff.”Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
