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Tough economy leads to suits over jobs

By   /   Friday, August 29th, 2008  /   Comments Off on Tough economy leads to suits over jobs

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From Westlake Village to Paso Robles, employment attorneys say they see a rise of 30 percent in legal claims of wrongful termination over the past year.

“Because of tough economic times, we’re seeing employers doing reductions in force, trying to eliminate weaker employees,” said Jonathan

Fraser Light, chairman of the employment and labor law group at Oxnard-based Nordman Cormany Hair & Compton. “Employees, in turn, are looking for ways to go after employers.”

In addition to more lawsuits, Kathryn Eppright, chairwoman of the employment law practice group of Andre, Morris & Buttery, which has offices in San Luis Obispo and Santa Maria, said she has seen a 30 to 40 percent increase in employers contacting her for advice about how to conduct layoffs. “It’s probably been the most common issue this year,” Eppright said.

The number of employees who file wrongful termination suits in the Tri-Counties remains limited. In July and August 2007, 13 such complaints were filed, compared with 17 filed in the same period this year, according to a Business Times analysis.

But those numbers don’t track how often employers are put on notice that an employee intends to sue.

“Once or twice a week I have to talk to an employer about what it will cost for them to litigate versus what it will cost to pay someone off and get them to go away,” said Karen Gabler, a partner at Nordman Cormany. “I’ve had a number of them call it legal extortion.”

The percentage of laid-off employees who allege wrongful termination doesn’t seem to have increased, attorneys say. Instead, the rise in claims is proportional to thet rise in job cuts.

or example, Linda Gulledge, a partner in Ventura-based employee-side Gulledge Law Group, has seen a steady increase in employees from residential construction firms.

“It’s not necessarily that [construction companies] are doing anything bad or worse than anyone else,” Gulledge said. “It’s just that they’re laying off more employees.”

Workers are more aware of their rights than in the past, attorneys say. And employers may be surprised at which employees take legal action.
Employee-side attorney Bruce Anticouni, founder of Santa Barbara-based Anticouni & Associates, said that excepting sexual harassment, a “clear majority” of wrongful termination allegations his firm handles come from employees who made more than $100,000.

Those employees often tap Anticouni to try to negotiate a better severance package from an employer. “The leverage there will be based on the potential for the individual to actually bring a lawsuit,” Anticouni said.

For employers, decisions about job cuts have become increasingly complex. Even what seems a simple move – firing the highest-paid employees first, to cut costs – can be fraught with risk.

“That leads right into an age discrimination dispute,” Gabler said. “The courts have decided you can’t look at salary alone because it disproportionately affects older workers.”

As with most civil cases, about 95 percent of wrongful termination suits filed settle before they reach court, attorneys say. But that number might be shrinking.

In rosier economic times, companies would stand on principle, shelling out the money to take a case to court when they knew they could win. But tight balance sheets have made those decisions a number game.

Even in a streamlined trial – one in which a judge issues a summary judgment – costs can range up to $25,000, and far higher if proceedings drag on.

“[Employees] are well aware that the company is willing to settle for $20,000 instead of spending $200,000 to litigate the claim,” Gabler said.

The result is that “companies are paying out money in settlements they clearly should win because it’s a business decision.”

Attorneys emphasize that even in a rough economy, very few terminations result in a legal dispute. And many of the ones that do are preventable, they say, by maintaining good relations with employees.

“If [employees] feel like they got the bum’s rush and don’t understand what happened to them, that can be very disturbing and hurtful to them,” Gulledge said. “The dollar you spend on employee relations is worth $100 you would spend on litigation.”

But warm feelings go only so far. Attorneys advise setting out clear warnings before firing an employee, although there’s no “magic number” to how many are needed.

“You want to set expectations and let employees fire themselves,” Light said. “The best thing you can do is give them an opportunity to improve and let them know how long they have to do it.”

But if there’s one take-away piece of advice on which all employment attorneys agree, it’s this: Document incidents early and often. A paper trail leading up to a termination is crucial to winning a trial.

“Most people on a jury are going to be employees,” said Doug Large, a senior partner at Santa Barbara-based Archbald & Spray. “If you have that documentation, that helps them understand what you’ve done.”

If the lead-up to a firing isn’t documented as it happens, attorneys say, it will have to be documented after a legal dispute has broken out, by lawyers taking depositions – a far costlier alternative.

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