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Manage Your Wrongful Discharge Risks

Manage Your Wrongful Discharge Risks
We have some big liability risks connected with firing somebody. Let’s now look at how you can, perhaps manage those risks and risks management falls within two categories. The first category relates to performance reviews. In other words, when you look at the three types of firing. The question is can you move the firing from the no cause category to good cause? Because if you can show there was good cause for firing, then the liability is eliminated. I had a student in one of my classes once, she was at Energy Company HR Director and this is the way she put it. She said, we’re an at will company. Which means, we can fire our employees at will.
And we’ll make them sign an agreement when we hire them, stating we can fire you at will, but we always try to show cause as a precautionary measure. So let’s assume that you have been hired, as a manager at a company. And one of the first things you would do as a manager is to look at the quality of your talent, look at the quality of your employees. When you do that, you realize you’ve got a problem with one of your employees. This is a poor performing person and you want to fire this person and let’s assume that even though you could fire at will, you want to try to show cause. So, you look at the employee’s performance reviews.
Now, what are you going to find at a typical company? Well, probably the past performance reviews are going to look something like this. Great. Great. Great performer and then it comes time for your first performance review. Terrible. So, you’ve got a problem here and the problem basically boils down to honesty. A lot of employers, a lot of managers and supervisors are reluctant to say honestly what they think about performance. And this is an example from an actual company where the company use the ten point scale in evaluating employees. And the way the scale workout in practice is, is that if you are a very good employee, you got a ten. If your employment performance was acceptable, you received a nine.
If it was unacceptable, you got an eight. So on a ten point scale, even unacceptable performances received a very high score. So the catch is as a manager, being honest in your performance reviews, so that you can show cause if necessary. This is very important for the company. But as pointed out by legendary CEO Jack Welch, it’s also being fair to employees. It’s not fair to employees to basically tell them you’re doing a great job when they’re not. You’re not helping them to develop. You’re not helping them understand the problems with their performance. Jack Welch appeared on the University of Michigan campus a while ago and this is the way he put it during his talk on campus.
Don’t any of you managers think you’re being kind, because you give good appraisals. That is the cruelest thing you can do to a failing employee. One of my students said that he attended a lecture by Welch in which Welch asked the crowd, how many of you think that your company is honest? And 90% of the hands went up. And then Welch asked the crowd, how many of you think that your companies give honest performance reviews? Only 10% of the hands went up. So, that’s the challenge in risk management. Honest performance reviews. Lets now move on to the other risk management approach and that deals with corporate communications.
A few years ago, I was invited to Texas by a large corporation and they wanted me to give a legal briefing to what they called fast track managers. These were managers who were high performers and who were moving up quickly through the corporate ranks. And before I went to the company, before I flew down to Texas, I picked up some recruiting literature that the company had provided the Roth School of Business and this is what I discovered in one of the recruiting brochures. It says, each new employee at this company participates in an orientation program. And quote, at the end of the program, they are placed in permanent assignments consistent with their performance and career goals.
Now based on our discussion of the law, do you see a problem with this language? Is there anything that bothers you about this language? Please hit Pause and write down your answer.
There’s one word in here that should have jumped out at you and should have bothered you a lot and that’s the word, permanent. What this company in effect is telling employees or this could be interpreted by courts as telling employees despite the employment at will rule, we are hiring you in a permanent position. So, I went down to Texas and I gave my presentation to these fast-tracked managers. And there were a couple of HR people in the crowd and I mentioned this during my presentation, I mentioned this language and I saw both of them flinch when I mentioned the language.
And at the end of the talk, they walked up to me and they said, can we have a copy of that recruiting pamphlet? And I gave them my copy. Next year, I was invited back to do another presentation. And again, before leaving, I picked up the company’s latest recruiting brochure and I noticed that they had changed the language slightly. This is the way it now read. After you are hired, a dynamic career may be waiting for you, but they completely eliminated the word permanent. So, this relates to the contract exception to the employee law. You don’t want to use language that can lead the employee to believe that you are creating a contract that overrides the employment at will rule.
It could be not only written documents, it could be something that is said orally. An HR manager in one of my courses told me that she attended a company banquet and at the banquet, the CEO stood up. He was feeling very good at the banquet. Maybe he had a couple drinks, I’m not sure. But he said, I want you to know that as long as you work hard, you’ll always have a job here. And she said, she almost fell out of her chair when he said that. Because it’s statements like that that override the employment at will rule, because of the contract exception.
So those are the two key approaches that you could use for risk management, as it applies to the employment at will rule.
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Making Successful Decisions through the Strategy, Law & Ethics Model

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