A New Problem on the Horizon: Negligent Retention
By Mel Kleiman, President, Humetrics
Through a special arrangement,
presented here for discussion is a summary of a current article from
the Kleiman HRExchange blog.
From a legal standpoint, most employers take
pains to avoid hiring the wrong person: negligent hiring. Now, with turnover
down because employees are staying in jobs (even ones they don’t like)
just for the job security, the bigger problem could be negligent retention.
Negligent hiring occurs when an employer
places an unfit person in an employment situation that entails an unreasonable
risk of harm to others. Negligent retention is closely related, but these
actions allege negligence after an employee is hired rather than at the time
of hire. This happens when you keep employees on board who you know you shouldn’t
— people who don’t like their jobs and who would normally leave if times were
better, but who just stick around.
By keeping these employees on the payroll, you risk being sued by your other
employees or your customers if that dissatisfied hanger-on does something or
causes something to happen that in some way harms them.
The fastest growing area
of lawsuits in this country effecting retailers is related to employment
law. According to Jury Verdicts Research 2007:
- Employee lawsuits have risen
400 percent in the past 20 years to the currently level of 6.5 claims
per 1,000 employees annually.
- In any employment case filed
in federal court, there is a 16 percent chance the award will exceed
$1 million and a 67 percent chance that the award will exceed $100,000
(not including attorney fees).
- The average compensatory
award in all federal court employment cases was $493,534 and reflects
a 45 percent increase since 2000. (A compensatory award does not include
punitive damages or attorney fees.)
- In State courts, compensatory
awards are up 39 percent while wrongful termination claims are up 260
- If an employment lawsuit
goes to trial, plaintiffs are more likely to win 67 percent of cases
in State court and 63 percent in federal court.
- The cost to settle an employment
lawsuit has grown significantly over the last five years, from an average
of $130,476 in 2001 to $310,845 in 2006.
These general statistics are sobering and are cause for
concern to all organizations. Compounding these are recent changes in Federal
and State laws that affect almost all organizations. There are a number of
safeguards and procedures that management should have in place:
- Making sure you have a structured interviewing and
performance appraisal process;
- Making sure all of your managers have had
adequate interview training and training on how to deal with difficult
- Making sure you check references and document
the answers you get;
- Checking for criminal records;
- Drug testing prior to hiring and random testing after hiring;
- Taking corrective action or investigating
any complaint against a present employee;
- Making sure an employee who does something
to jeopardize another employee or customer is removed from the payroll.
How should retailers manage negligent hiring and negligent retention
situations given the threat of lawsuits? What ways are there to get
rid of underperforming employees without resorting to complications
that can accompany firing?