How to Minimize the Risk of a Lawsuit Using HR Software


HR Analyst, Software Advice

As a business owner, every potential job applicant, employee and former employee represents a potential plaintiff in a lawsuit against your company. An employee may believe he or she was wrongfully terminated, an applicant may believe he or she was not hired based on discrimination or an employee may feel your company owes him or her extra pay or benefits.

If your company finds itself in a lawsuit, will you be prepared with the important documentation needed to defend your business?

HR software could be your best bet for avoiding litigation or increasing your chances of a successful litigation outcome when it comes to an employee-employer lawsuit. By taking advantage of some of the applications within an HRMS that assist with documentation, time and attendance tracking, and employee evaluations, companies can minimize the risk of litigation.

Protect Against Wage and Hour Claims

When it comes to employee-employer lawsuits, many times the defending company is left to rely on the plaintiff’s own records.

“In almost every case that we deal with that reaches litigation, there are instances where better organization and documentation would provide us with a better opportunity to defend the case,” says Brian Ussery of The Law Office of Brian Ussery LLC. “It’s very rare that we come across a perfectly executed human resource model.”

According to Ussery, discrimination, harassment and retaliation have always been the “bread and butter” lawsuits when dealing with the employer-employee relationship. However, wage and hours claims as well as leave of absence benefits claims have become the hot-button topics more recently.

“When you’re dealing with these types of claims related to the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), oftentimes you’re just dealing with simple math and being able to identify and calculate the number of hours an employee has worked in a given work week to determine if you owe them overtime pay, or the number of hours worked to be entitled FMLA benefits.”

Workforce management systems help HR departments keep better track of employee scheduling, attendance and hours worked, which could be key in determining if a plaintiff is entitled to additional compensation or leave.

“Wage and hour claims are very difficult to defend against if you don’t have a good record keeping system in place. As a practicing lawyer, these are the claims I’m often defending against because [FLSA] is an easy statute to violate,” says Gino Benedetti, Chief Human Resources Officer and partner with Dilworth Paxson LLC. “From the standpoint of an HRMS, time and attendance modules are excellent for defending against wage and hour claims.”

Protect Against Failure to Hire Claims

While failure to hire claims aren’t as common as wage and hour or termination claims, companies can still take advantage of their HRMS to ensure they have the proper documentation and consistent processes in place for screening and interviewing job applicants.

“In cases such as these, we try to prove that the employer treated the applicant in the same consistent manner as they did with other applicants and that the reason they decided to pass was due to some legitimate reason based on qualifications or the applicant’s performance during the interview process as compared with applicant they ultimately hired,” says Ussery.

In addition to being able to electronically manage the recruiting, interviewing and hiring processes, applicant tracking software can help companies implement a more consistent application and interview process.

Employers can enforce a company-wide online application and consistent interview processes based on objective criteria for evaluating candidates, and then formalize those processes within an applicant tracking system.

“Having consistent documentation will be crucial if an applicant decides to bring up a lawsuit because they feel they should have been hired,” says Benedetti.

Protect Against Wrongful Termination Claims

In lawsuits based on wrongful termination, usually a former employee is relying on a federal or state statute such as Title VII, which prohibits discrimination on the basis of a protected classification. If an employer chooses to let go of an employee based on poor performance, the company needs to be able to prove the employee was consistently evaluated and was not able to meet the position requirements even after communicating that feedback to the employee.

Companies may miss the opportunity for consistency by not creating standardized employee evaluation processes with consistent documentation, evaluation time frames and grading criteria.

“We see supervisors write performance down on a cocktail napkin, and we see supervisors write feedback down on a very thorough, disciplinary document,” says Ussery. It’s hard if there’s no consistency between the forms within the documentation to glean the necessary information needed to defend a company in court.”

One of the ways employee performance evaluation software systems can help is by automating the time consuming task of regularly evaluating employees. These systems can track performance, help supervisors track and schedule monthly or yearly reviews and then share the information with authorized users across the company.

However, at the end of the day, it’s up to the employer to evaluate employees accurately and communicate those evaluations to them.

“You can have all the bells and whistles when it comes to performance management systems, but unless you sit down with people when they make mistakes, document it and review it, no system is going to help you unless you’re disciplined to do it.” – Gino Benedetti

Tips to Start Minimizing Risk Now

Workforce management, applicant tracking and employee evaluation systems are some HR applications that could minimize an employer’s risk in regards to wage and hour, failure to hire, and wrongful termination claims. But according to experts in the areas of employment law and HR systems, there are some simple steps companies can take using HR software to further mitigate risk.

“Companies need to make sure their employee handbooks or policy manuals are up to date,” says Benedetti. “And they need to review them annually as employment laws are always changing.”

Another tip for companies to minimize overall risk is to follow their application and interview process to a T, even if that requires extra time and energy to make sure they’re hiring the right people.

“I think a good HRMS will prevent companies from hiring people too quickly,” says Ed Mills, co-founder of Omniprise. “If you have a good process in place that hiring managers have to follow, you reduce wasted time and money spent hiring the wrong people.”

We caught up with Mills for a video interview to discuss the topic even more:

The information in this blog post is for educational purposes only and should not be construed as legal advice. You should contact your attorney to obtain advice with respect to any particular issue related to employment law.

Thumbnail images courtesy of Horia Varlan.

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