Magazine article Risk Management

Reducing Employment-Related Litigation Risks

Magazine article Risk Management

Reducing Employment-Related Litigation Risks

Article excerpt

Over the last few years, alternative dispute resolution (ADR), which involves the arbitration or mediation of disputes, has become increasingly popular for companies hoping to reduce litigation costs. The growth of ADR has been prompted by the explosion in employment rights litigation and the courts' poor record in handling claims expeditiously, fairly and at a reasonable cost to all parties. Indeed, there is a correlation between the surge in such litigation and the heightened concern with individual rights that captivated the hearts and minds of people during the 1970s. Now, however, litigation related to employment rights has increased at a phenomenal rate.

Over the past few decades, litigation has increased by over 2,000 percent, jury awards are averaging $1 million each in California, and recent federal law changes have "California-ized" the litigation laws throughout the rest of the country. Consequently, plaintiff tort lawyers that would not consider taking employment law cases five years ago are now advertising to pull those cases into their offices; consider, for example, the "Call Law-1000" ads on television and in the Sunday newspaper advertising for attorneys who are in business simply to "help" the average working man or woman. Plaintiffs' attorneys are to the 1990s what unions were to the 1960s -- and they can be a lot more expensive to businesses.

As risk and human resources manager for Turner Bros. Trucking Inc. since 1979, I have spent a great amount of energy on defensive strategies against third-party tort claims, escalating workers' compensation losses and Title VII employment exposures. Turner Bros. Trucking Inc. is a small, highly specialized transportation firm that tears down oil drilling rigs, services drill pipe, operates large hydraulic cranes and performs heavy-haul services in 48 states. In 1992, the company began to utilize ADR by entering into binding arbitration agreements with its employees. Under the particular ADR method chosen, known as employment dispute resolution (EDR), Turner Bros. Trucking Inc. joined a network of companies that actually uses employees as adjudicators for Title VII and personal injury disputes. Aside from constituting a new risk management tool, the EDR approach facilitates the desired corporate culture changes required to pursue a total quality management (TQM) effort. Many of these changes are brought about by intensive management and supervisory employee relations training that accompanies the EDR process. EDR, then, can be used as a risk management tool to reduce company losses and legal expenses.

EDR AND LITIGATION

First, some background is required on the recent history of employment rights-related litigation. Over the last few years, a number of significant changes have occurred in this area. For example, the 1991 Civil Rights Act expanded civil liberties and enlarged the windows for recovery for discrimination based on race, sex, age, national origin and religion. In 1992, the Americans with Disabilities Act (ADA) began receiving major priority in the minds of both litigators and those litigated against. During 1994, it is probable that the monetary caps on these Title VII violations will be removed and juries will respond accordingly. This is likely to have a positive effect on the employment market. In states that have undergone workers' compensation reform, the legal industry may replace losses in case volume with disability suits at a rate that is much faster than that with which the U.S. auto industry responded to foreign competitors and quality circles.

During the decades when the U.S. legal industry was in a radical growth mode, ADR consistently received "most favored theory" status by judges, legislatures and court administrators because of its potential to ease the legal overload on the courts. ADR continues to receive priority billing as the legal wave of the future. For example, at a recent legislative session, Sen. …

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