What CHROs Need to Know About the Legal System

February 16, 2021

What CHROs Need to Know About the Legal System

Years ago, when I was still practicing employment law, the CHRO of a $1 billion company with a 30-member HR team asked me to speak to the group about claim prevention. While presenting my prepared material, I discovered to my great surprise that even though this HR team had dealt repeatedly with employee administrative claims and employment litigation, it had an almost total lack of understanding of the real dynamics of the legal system.

Improvising a scenario, I drew a picture of an unhappy person on a giant whiteboard. I then drew lines showing the various paths this disgruntled employee might take in the legal system: representation by counsel, pro se, demand letters, administrative filings, state court, federal court, statutory claims, common law claims, mediation, arbitration, trial. I also drew lines the various ways claims end—motions to dismiss, summary judgment, trial, appeal, settlement and claim withdrawal. I added stratagems defense attorneys use to derail, or at least slow down the plaintiffs’ momentum—statute of limitations, jurisdiction or venue challenges, offers of judgment, unconditional offers of reinstatement, arbitration agreements. By the time I was done, the entire whiteboard was filled. It looked like a mind map on steroids.

Afterward, the CHRO told me that my example was more valuable than the stuff I’d been hired to cover.

Employment Lawyers Paint an Inaccurately Bleak Picture

In my lawyer days, I often spoke at HR programs. Like most of my colleagues, I shared my best legal horror stories, the worst of the worst, the nightmare of the nightmares. What we lawyers typically didn't share were the innumerable claims that got dismissed or were settled early and cheaply. In this way, we skewed reality for HR professionals.

In my 25 years of practice, the most expensive claim I ever defended involved a plaintiff's boutique firm that decided to make my Fortune 100 client its shining example to build the firm’s brand. After many years of battle in state and federal agencies and state and federal courts, individual claims, class action claims, and so on, we settled the case for less than what either side had incurred in legal fees. The ultimate tab for my client (litigation and settlement cost) was about $2.5 million, a sizable number yet one that in revenue my client exceeded each day by lunchtime. 

Otherwise, the overwhelming majority of claims fell into the pattern of early and inexpensive resolution.

What This Lack of Understanding Means

In my experience, HR professionals tend to greatly overestimate and overvalue claim risk. Even where there are serious problems in the way an employee was treated and he or she moves into the legal system, there are plenty of obstacles and challenges before the employee collects a nickel, including potential defenses and early claim resolution opportunities.

Most jurisdictions in this country tend to be employer friendly. It’s a huge uphill climb for a plaintiff to achieve the nightmare HR scenario—a seven-figure judgment upheld on appeal. Even in relatively employee-friendly jurisdictions such as Portland, Oregon, where I previously practiced, there are still many ways to resolve claims quickly and cheaply.

Like doctors fearful of medical malpractice claims, HR professionals practice way too much defensive “medicine.” It’s unnecessary, wasteful and counterproductive. 

The Solution

The solution is two-fold:

1. When dealing with a claim, hire a lawyer that will demonstrate these three traits:

  • First-rate employment law knowledge and skills.
  • First-rate responsiveness. 
  • Commitment to early and inexpensive claim resolution. 

2. Replace an obsession with compliance and claim prevention with an obsession with workplace cultures built on trust, respect, integrity, transparency and diversity.

A better understanding of the legal system can set the HR profession free, enabling it to maximize its true organizational value.

The Authors: 

Jathan Janove, J.D., is a former employment attorney and author of Managing to Stay Out of Court: How to Avoid the 8 Deadly Sins of Mismanagement, The Star Profile: A Management Tool to Unleash Employee Potential and Hard-Won Wisdom: True Stories from the Management Trenches.