Proactive employee relations practices = Lower risk of litigation for manufacturers

Every handbook should contain these “Top-5” policies, and risk managers should ensure they are drafted to comply with applicable law

This is the final column in a three-part series aimed at helping manufacturing companies avoid litigation. In part one, we recommended that companies regularly review their existing insurance policies and programs, with an eye toward previous issues as well as toward future growth and development. In part two, we addressed how manufacturers can accurately assess exposure to risk related to product liability claims.

Just as smart insurance and products liability practices are essential in effective risk management by manufacturers, so are good, proactive employee relations practices. Often overlooked, such practices can play the deciding role in helping to prevent or, at a minimum, helping a company successfully and efficiently defend against, a legal claim from a rogue employee otherwise might be source of tremendous financial, operational and public relations stressors on a company.

From the employee relations perspective, effective risk management must include a thoughtful audit of a company’s personnel policies and relevant training history, and a working plan for effective implementation and enforcement going forward.

The easiest place to start an employment audit is by reviewing current employee-related policies. In that respect, a good employee handbook is a must. Though the content of the handbook will differ depending on the culture, needs and locale(s) of a business, every handbook should contain the following “Top-5” policies, and risk managers should ensure they are drafted to comply with applicable law:

1. At-will employment: An employee handbook should convey the general policy of at-will employment, reflecting that either the employer or the employee may terminate the employment relationship at any time, for any lawful reason, with or without notice. While an at-will employment policy has long been the staple of any employee handbook, the National Labor Relations Board (NLRB) recently put this policy to the test, questioning whether it might be interpreted as interfering with employees’ rights to discuss and attempt to change their work conditions, including through joining a union.

Regardless of whether the company is unionized, a poorly worded at-will policy may draw unwanted attention from the NLRB. Thus, it is important to review the company’s at-will policy with fresh eyes to ensure it serves its purpose in a legally compliant manner. On a related note, an employee handbook also should contain a prominent disclaimer that it is not intended and should not be interpreted as creating a contract of employment for any set term; and well-worded disciplinary policies giving management the flexibility to take appropriate corrective action, if, when and as appropriate on a case-by-case basis, without being held to a progressive discipline procedure.

2. Equal employment opportunity / non-discrimination: These policies also are a “must-have” for any employee handbook. Just as it is relatively easy to write these policies correctly, it also is easy to get them wrong, including by failing to include the appropriate protected categories or a mandatory complaint procedure to report any related complaints and concerns.

3. Anti-harassment: A harassment lawsuit, particularly a sexual harassment lawsuit, can involve protracted litigation and greatly damage a company’s reputation. An updated, compliant anti-harassment policy should help prevent harassment from occurring and, to the extent such conduct does occur, to mitigate its harmful effects through mandatory internal reporting, investigation and remedial action procedures. In federal litigation, maintaining and consistently enforcing a well-written anti-harassment policy can make all the difference between whether the company will be held liable for the alleged conduct, or whether the suit will be dismissed before it gets to a trial.

4. Wage and hour: Often neglected or boiler-plated in an employee handbook, these policies are essential in establishing and enforcing effective, legal time management and pay practices, and in providing a defense to companies in lawsuits over the payment of wages and benefits. As such claims are frequent contenders for class actions targeting manufacturers given the nature of their business, it is imperative to ensure that the company’s wage and hour policies — including policies as to employee classification, recording of time, overtime, and paid time off — are in good working order.

5. Communications systems and social media: In the last two decades, rapidly evolving technologies have entirely transformed how businesses, and their employees, operate and communicate. Yet, incredibly, many companies continue to rely on archaic systems communications policies that focus more on telephones and facsimiles than computer systems, and related email, texts and Internet and social media posts and activities that have come to define modern communication. It is essential to have updated communications systems and, often, social media policies in place, to effectively communicate to employees what they can and cannot do, and what they should expect, relative to privacy and potential disciplinary ramifications when they use company-provided computer communications systems.

It should be noted that such policies have also recently generated a great deal of unwanted attention from the NLRB, so it is important to write them in with the eye toward ensuring that will not be deemed to inappropriately interfere with or chill employees’ rights to discuss their terms and conditions of work.

Of course, a good handbook is hardly worth the paper it is written on unless it is consistently and effectively enforced. Policy enforcement should begin with the company’s leadership, and specifically the leadership’s awareness of and commitment to upholding and enforcing personnel policies in a consistent and effective manner. That requires risk managers to communicate key handbook policies whenever new employees join the company, and also during periodic training intervals thereafter. Though often dreaded, policy training really does not have to be, and should not be, “boring” or “tedious.” If done well, it should be informative and insightful in helping management and subordinate employees to recognize and resolve workplace issues before they turn into legal problems.

Risk management through effective restrictive covenant agreements

In addition to ensuring that the business has solid employment policies and procedures in place, manufacturers should be proactive about the measures being taken to protect the company’s proprietary information, products, customers and employees from the competition. Well-drafted, enforced — and enforceable — restrictive covenant agreements are essential in helping a company to achieve these important goals.

In reviewing restrictive covenants, manufacturers should keep in mind that restrictive covenant law is constantly evolving and can vary significantly state-to-state. A restriction that is certain to be upheld in one state may be deemed a patently overbroad and unlawful in another. In Illinois, restrictive covenants have been routinely enforced so long as they have been appropriately tailored in time and scope, and based on a legitimate business interest. Just recently, however, one Illinois Appellate Court ruled that a restrictive covenant will be enforced only if supported by a minimum of two years of continued employment as consideration — an offer of employment or employment lasting less than two years will not suffice.

Thus, crafting an enforceable restrictive covenant is a fine art and should be done by experienced, competent attorneys who are not only familiar with the applicable law, but who will take the time needed to understand the company’s business protections appropriately required to stave off harmful disclosure, solicitation and competition activities.

In conclusion, experienced, successful risk managers at manufacturing companies know that effective risk management requires constant vigilance and proactive follow-up. Taking effective, efficient steps now to ensure that the business is protected with appropriate insurance coverage, smart products practices, and working employee relations policies and practices can make all the difference in preventing expensive, protracted and image-damaging legal claims later.

Contributing Author

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Tonya G. Newman

Tonya Newman is a partner in the General Litigation and Insurance Policyholder practice groups of Neal, Gerber & Eisenberg LLP (Chicago). She devotes most...

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Contributing Author

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Sonya Rosenberg

Sonya Rosenberg is an attorney in Neal, Gerber & Eisenberg’s Labor & Employment Practice Group. Her experience includes counseling employers through the many...

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