In today’s world of corporate belt-tightening and budget cutbacks, you might find yourself wondering whether the expense of an HR staff is actually justified by the benefits. After all, HR doesn’t create revenue for the company — it doesn’t operate the machinery that produces the widgets, and it doesn’t drive sales.
In fact, the perception might be that HR actually costs money — a reasonable accommodation here, additional leave for an employee there, more training, more evaluations, more record keeping, and more consultations with expensive lawyers. But having HR ensure compliance with myriad employment laws is a small price compared to the potential costs of employment litigation.
HR Guide to Employment Law: A practical compliance reference manual covering 14 topics
An ounce of prevention is worth a pound of cure
There’s no question that employment litigation is a huge and growing problem for employers. Race, sex, and age discrimination claims have increased between 20 and 40 percent, depending on the category, in the past five years. Disability discrimination claims are up 10 percent from last year alone.
On top of factors such as the poor economy and high unemployment rates, the Obama administration has announced its intention to increase both awareness and enforcement of employment laws. Its plans include a national awareness campaign of key labor laws, increased enforcement of wage and hour laws, and additional staffing at the Equal Employment Opportunity Commission (EEOC).
Not only have the number of claims increased in recent years, but the median award for employment-related claims has also increased. In 2008, the median award was $326,640. In 2009, that number skyrocketed by 60 percent — and that doesn’t include the cost to litigate an employment discrimination case, generally a minimum of $150,000, and the possibility that you, as the employer, may have to pay the employee’s attorneys’ fees if you lose.
In the end, an employment law mistake could easily cost your company well over a half million dollars. And given that employers win jury cases only about 38 percent of the time, litigation is an extremely costly gamble.
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Case in point
In 2010, the First U.S. Circuit Court of Appeals decided a retaliation case that cost the U.S. Department of Justice more than $600,000 in damages alone. The employee, who was terminated after telling the FBI about prisoner abuse, was awarded actual damages of $360,000.
To add to the Justice Department’s woes, the jury then tacked on an additional $250,000 in punitive damages. The First Circuit upheld the punitive damages award as reasonable. Other recent big-dollar employment payouts include Texaco ($176 million), Coca-Cola ($192 million), and Shoney’s ($105 million) to settle race discrimination claims, and Home Depot ($104 million), State Farm Insurance ($157 million), and Publix Markets ($81 million) to settle sex and gender discrimination claims.
Considering that an HR generalist makes an average of $33,000 to $73,000 depending on years of experience and location, an ounce of prevention really is worth a pound of cure.
The employment law field is constantly changing. In 2009 alone, we saw employee-friendly changes to the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and COBRA as well as new federal laws relating to fair pay and genetic nondiscrimination.
Last year also brought a slew of state laws designed to help employees, including protections for nursing mothers and an extended period to file discrimination claims. The list doesn’t even begin to touch the many changes brought about by the hundreds of new court decisions and administrative regulations and guidelines that were issued.
Most busy managers don’t have time to keep on top of the ever- shifting sands of employment law. If you weigh the burden of protecting your company from successful employment suits against the cost of failure, HR is looking like a better deal than ever!