1. Employee handbooks

Many companies struggle with creating and implementing an employee handbook, especially those with less than 50 employees. Instead of spending the time and money to create and implement this important human resource policy manual, they take the “ostrich” approach and bury their heads in the sand. Other companies believe that if they have an employee handbook in place, it could create an employee contract between the employees and the company or could create liability if the employer failed to follow its own handbook procedures.

However, in today’s environment the U.S. Supreme Court has held that if an employer does not have the proper policies and procedures in place, then it loses its defense to a harassment lawsuit. This means that the value of such a claim will escalate unnecessarily. Accordingly, we believe it is imperative for all insured’s to have a handbook.

2. Mandatory Arbitration Agreements

In an effort to control the cost of litigation, employers increasingly are turning to arbitration and mediation to resolve employment-related disputes. An increasing number of employers are requiring as a condition of employment that the applicants and employees give up their right to pursue employment discrimination claims in court and agree to resolve disputes through binding arbitration.

Some employees have challenged the enforceability of these agreements by bringing employment discrimination actions to courts. The EEOC, while acknowledging case law enforcing specific mandatory arbitration agreements, nonetheless believes that such agreements are inconsistent with the civil rights laws. However, the courts have made it clear that such agreements are enforceable. The EEOC did win a ruling, however, that allows them to file a lawsuit independent of the employee on his behalf, since the agreement is between the employer and the employee.

It is still too early to tell whether the advantages of binding arbitration outweigh the disadvantages. Some of the advantages of binding arbitration are reduced legal fees, avoidance of large, emotionally based jury awards, less adverse publicity (arbitration awards are usually private) and less administrative time spent by management assisting in the defense of the claim.

Disadvantages of a binding arbitration agreement include an inability to appeal an arbitration decision and that the losing party may be required to accept an incorrect and possibly unjust decision by the arbitrator. Also, since an employee must sign an arbitration agreement when accepting an job, many feel this is a condition of employment that harms both the individual’s civil rights as well as the public’s interest in eradicating discrimination.