5 Ways to Protect Against Discrimination Lawsuits

1. Use an Arbitration Agreement

“If an employer has a working arbitration agreement that requires the employees to pursue the claim in arbitration as opposed to in a court of law, if it’s done properly it can really have a significant impact on the number of claims that are brought.

In the process of litigating or arbitrating those claims, you can get a better control over the runaway claim because you’re not worried so much about being in a very plaintiff-friendly jurisdiction. For some of my dealer clients in particular parts of the country that are known for being very aggressively pro-employee or pro-plaintiff, it’s helpful to consider entering into an arbitration agreement. Jury trial waivers can be helpful as well. Arbitration agreements that have class action waivers can be very effective, too, because that waiver will prevent the individual from getting a class action up and running. Class action cases are very costly because they’re so big.

There has been pushback by the National Labor Relations Board. The Board has taken the position that arbitration agreements that contain class action waivers are in violation of the National Labor Relations Act. The thinking there is that if the NLRA prohibits an employer from doing things to prevent employees from acting in concert with one another, then they’re saying that’s what you’re doing with an arbitration agreement with a class waiver—you’re saying: “You may not participate in litigation with those other co-employees.’

Now, employers say, ‘Well, wait a second. Participating in litigation isn’t really a term and condition of employment.’ It’s not the same thing. It remains to be seen how that’s going to shake out. I think we have to wait to see what a Trump administration and its Department of Labor will think about this. I would suspect the NLRB’s approach to arbitration agreements won’t get much traction in the new Trump DOL, but it remains to be seen. So, arbitration agreements are one best practices we can look to in order to keep claims down and manage them effectively.”

2. Invest in a Better Organizational System

“Another thing that is very helpful is having some system in place that would enable an employer to produce those documents in an efficient way right at the beginning of a case. For example, if there’s an arbitration agreement, it’s knowing that there’s a system, methodology, or automation process that enables the employer to quickly spit out, ‘Yeah, here’s the arbitration agreement the employee signed. Here’s the harassment policy that the employee signed. Here’s the reporting procedure and the open door policy that the employee signed.’ Getting those things quickly and effectively in litigation and getting them produced in discovery can help change the direction of litigation at an early stage.

In the old days, it used to be that was just your personnel file. But technologically savvy dealerships and other employers have a lot of this automated now in a way that can make sure they always have all this information instead of simply hoping it’s in the personnel file when they need to go get it for a case.”

3. Be Prepared to Pay for Arbitration

“In my experience, arbitration will cost about two-thirds of what litigation would cost, in terms of attorney fees. In part that’s because there’s less time for the actual work to be done. You’ve got a shorter fuse. Instead of being 18 months to trial, maybe you’re looking at 8 months to trial.

Also, by their nature, mandatory and binding employment arbitration has very limited review, so you’re often not going to be dealing with appeals, and appeals of appeals and those kinds of things. That tends to keep the cost down.

There’s a flip side of it, though. In a court, you’re not paying for the judge. You don’t pay a fee, other than the filing fee if you’re the plaintiff. An arbitration fee can be expensive. You could look at paying an arbitrator, from beginning to end of a case, about $25,000. So, while you’re saving money on one end, you have to recognize that you will be paying costs on the front end, and those somewhat offset the savings of arbitration.

But, by far, the real value of arbitration in terms of cost savings is that plaintiff’s lawyers don’t have as much leverage to try to scare an employer away from a courtroom because the courtroom’s jury system is stacked against the employer. There are certainly jurisdictions where the lawyers will tell you, ‘No, the cases are worth double here to settle because we’ve got access to this jury pool here, and we have to take that into account.’ Arbitration tends to neutralize that and makes the claim’s value more consistent across the board.”

4. Document Everything

“In my experience, there are few automobile dealerships or other industry employers where there are managers and supervisors out there who are prone to intentional discrimination, where they say, ‘I just don’t like Hispanics,’ or ‘I don’t like Muslims’ or ‘I don’t like women.’ That’s rare to hear that in this day and age.

What we have found is that error and oversight is the real risk area. It’s the perception of having inadequate documentation. It’s the perception of unequal treatment between one employee and the other that creates the suggestion of discrimination. That perception becomes reality when you’re in a courtroom or even in front of an arbitrator. So, the little things that really help create the perception of fairness can protect you down the line.

Now, it’s certainly the case that supervisors need to be trained on what they can and cannot do or should and should not do in dealing with their employees. But, for most people, it’s just a question of getting them to learn how the basic blocking and tackling of management works. If you follow those guidances, then you are generally going to be fine and avoid lawsuits.”

5. When in Doubt, Audit

“It’s always good to take a critical look at yourself and decide whether or not there are weaknesses in your existing system. That kind of self-critical analysis is the best way to get a handle on what you need to do to make sure you can avoid these suits. It might be bringing in a consultant or a lawyer to review your policies and practices to make sure you’re doing things correctly. It can mean a full-blown payroll audit to make sure you’re paying your employees properly. Or, in the case of a car dealership where you’ve got so many exemptions that exist that are unique to car dealerships, audits can sometimes point out areas where perhaps you might not be taking advantage of an exemption that you could otherwise take advantage of.”