Letting employees go is never easy. But it can become even more difficult if you fail to do it right.

When an employee feels that he or she was unfairly terminated, choices for the employee are often few and emotions can fuel the fire, resulting in a lawsuit against the employer. To protect yourself, you must ensure that your records and the way they are kept are extremely tight. Any holes in the process could present an opportunity for an employee to sue, says Thomas Paxton, shareholder at Garan Lucow Miller PC.

“State and federal legislation over the years has actually increased the ways that employees can sue their employers,” says Paxton.

Whistleblower acts, Family and Medical Leave Act, the Americans with Disabilities Act and Title VII all present opportunities for disgruntled employees to sue. The result can be costly lawsuits that can severely impact a business’s bottom line and reputation.

“An employee could get a verdict that includes years of lost wages that can reach into the millions,” says Paxton. “And even if you win, it is very costly to defend these suits.”

Smart Business spoke with Paxton about how maintaining solid records can protect you in the case of an employee lawsuit.

What key documents should a company maintain to protect itself against employee lawsuits?

The two most important documents a company can have are a solid job application and updated, accurate job descriptions. The job application should not ask for irrelevant information, which requests a candidate to reveal discriminatory data. Never ask for an applicant’s photo. Do not request a birth date. Do not request information for factors that identify someone’s membership in a protected class, including age, gender or race.

The application should also include a statement that the applicant signs to agree to comply with the company’s rules and regulations. This component can go a long way at trial if you can take out an employee-plaintiff’s job application and show a signed statement that he or she agreed to follow the rules.

Second, maintaining updated, accurate job descriptions is critical for defining employees’ roles when a worker claims he or she cannot perform a certain duty. A good job description gives employers and employees a foundation to objectively determine the employee’s actual performance. Further documentation of incidents in which job duties were not performed can help support the employer’s case that any decision was made because of legitimate, nondiscriminatory reasons.

These two documents, along with wage and hour information, rate or basis of pay and terms of compensation should be kept in a personnel file separate from any employee medical records.

How should employees’ health records be maintained?

The U.S. Equal Employment Opportunity Commission mandates that employers file employees’ medical records separately from personnel records to protect against making employment decisions based on protected criteria, as medical conditions are irrelevant to job requirements.

Some occupations require keeping certain medical records on file. Medical records may also be on file if an employee applies for a disability benefit, such as FMLA. Separating personnel and medical files will help protect an employer in case an employee claims that he or she was wrongfully terminated or was demoted because of the employer’s perception of a disability or an actual disability that is unrelated to someone’s employment or that person’s ability to do the job.  If you keep medical and personnel records in the same file, it would be difficult to make a defense in a lawsuit that you did not know about the employee’s medical condition when you made the business decision.

What processes can an employer implement to minimize its liability in the event of a lawsuit?

Consistently review and document the performance you expect from your employees. Hold employees accountable for performing duties outlined in their job descriptions. File this information. Most important, train supervisors and other managers in the company to immediately and objectively document any and all performance issues.

It goes back to the old saying, ‘Get it on paper.’ Adding to that, get it on paper, on time. Always document performance issues as soon as they occur. This can be as simple as placing a note in the employee’s file. Document what happened and when, and the results of the situation. If you wait to document a reason for terminating an employee based on performance until after a lawsuit is filed and after you talk to your attorney, the documentation won’t hold any clout in court.

Further, when job descriptions or duties change, always update those documents so that they remain current to the requirements of the position.

Where can a company get started to ensure proper documentation?

The first step is to conduct a review of your records and record-keeping processes. It’s a good idea to enlist a professional with experience in employment law who can identify any gaps in your record-keeping process. It’s a far better investment to protect your business by instituting a record-keeping process than it is to defend your company in a costly employee lawsuit.

Your lawyer should be readily willing and capable of reviewing your processes and records so as to minimize the possibility of litigation and to maximize the successful defense of a filed lawsuit. Also know that maintaining well-documented processes is a cultural commitment. It requires the cooperation of all leaders in your organization, from the CEO to the managers. Once you institute a solid system, you need to train everyone on your policies and procedures so that there are no surprises down the road.

Thomas Paxton is a shareholder at Garan Lucow Miller PC in Detroit, Mich. Reach him at (313) 446-5518 or tpaxton@garanlucow.com.

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Published in Detroit