Mitigating employment practices liability risks

While CPA firms may think their personnel would never sue them, the prevalence of employment practices claims says otherwise. Firms may feel that there is little that they can do to avoid becoming a statistic. However, employers can implement policies and practices to assist in mitigating the risk of these claims. We interviewed Brandon Saxon, J.D., a partner and chair of the employment practice group at the law firm Gordon & Rees in San Diego, to obtain his perspective on what firms can proactively do to manage employment practices risks.

Which types of employment claims against professional firms do you see frequently?

Brandon Saxon: Claims of discrimination, harassment, and retaliation are most common in employment litigation against professional firms. As expected in an industry primarily staffed by highly educated and financially competent employees, employment claims against professional firms tend to be highly complex. What makes retaliation claims dangerous? Saxon: Retaliation is any adverse action taken against an employee after they have exercised a right considered to be a legally protected activity, such as engaging in whistleblowing. Due to the broad scope of retaliation, there is often confusion as to how an employer can address retaliation claims, especially when the claim may be applied to any protected activity engaged in by an employee during their employment with the firm. Documentation of employee performance, as well as the reasons for any adverse action, can assist a firm in defending a retaliation case.

What common issues do you see when defending employment practices claims?

Saxon: When defending claims related to discrimination, harassment, and/or wrongful termination, lack of documentation is the biggest hurdle. Insufficient documentation of the employee’s interactions during their employment makes the defense of claims shift from somewhat manageable to downright challenging.

Documentation of the employee’s interactions is critical. Unfortunately, insufficient documentation is the norm, rather than the exception, in employment claims. Many interactions with employees take place verbally and are not subsequently memorialized in writing. There also may be miscommunications about the level of detail and/or documentation needed prior to taking a potentially adverse employment action against an employee.

Why is documentation so important?

Saxon: As with professional liability claims, documentation is the foundation of any good defense of an employment practices claim. Without it, these cases become “he said, she said” claims, where the finder of fact (jury or arbitrator) will make a determination based on the credibility of the witnesses. It is in the best interest of the firm to record as much detail as possible. The proper documentation of performance, employee interactions, and any potential instances of conflict, including the resolution of such, can be used by your attorney as proof that the firm took necessary steps leading up to the employment action. A performance review may feel like a tedious task in the moment, but it is imperative for the longevity of the firm.

In legal actions involving discrimination, the narrative of a case is first established by the employee upon filing their complaint. The employer must change that narrative. This is possible if they have followed recommended practices when engaging with employees and in the handling of complaints or before taking any adverse action — including, but not limited to, writing detailed accounts of all employee reprimands; the signing and dating of all documents by supervising personnel, witnesses, and the employee; and proper structuring of employee action reform, such as a performance improvement plan.

What should a firm do when it is made aware of allegations of discrimination, harassment, and/or retaliation?

Saxon: An effective response is swift and thorough. Generally, we recommend the below plan. Prior to establishing any policy, it is essential to consult with an employment attorney to tailor recommendations to your organization.

• Document, distribute, and discuss. Bring the allegations to the attention of all relevant personnel within one business day. It’s sufficient to simply send an email to management with the details of the allegations.
• Appoint an investigator. When an allegation has been made, some may feel personally targeted by the allegations. A firm cannot allow emotions and ego to interfere with the handling of allegations. Instead, appoint a designated human resources employee or a third-party investigator or attorney experienced and trained in handling investigations related to discrimination, harassment, and/or retaliation. Ensure that the individual has no reporting or personal relationship to the complainant or the source of the allegations.
• Cooperate and produce all necessary documentation. Relevant documents that relate to the allegations may include, but are not limited to, all communication relating to the employee, testimony from the employee, and prior incidences of discipline and similar documents from others named in the complaint.
• Communicate with management and those involved with the investigation, keeping it internal until it is completed. Once the investigator has reached their conclusions, they will recommend a response and next steps. It is imperative to follow these recommendations, as the investigator is impartial and has no stake in the outcome.
• Monitor the progress of the response and continuously follow up with the employee. It is in the best interest of the firm to keep the complainant comfortable and informed throughout the process, especially if they remain in your employ. Doing so helps you gauge their reaction how they feel about the firm’s response to their complaint, thus enabling the firm to better anticipate, and prepare for, what may come next.

What practices can firms implement to assist in mitigating employment practices liability risk?

Saxon: There are many things that a firm can do to help protect itself from many of the employment claims we commonly see, including the following:

• Establish clear internal handling policies that guide employees and management.
• Proactively train all employees.
• Remember that a workplace is an amalgamation of many different kinds of people with diverse experiences. Foster a positive and productive relationship by encouraging open lines of communication to best serve everyone involved.
• Document employee interactions. This is key, as set forth above.
• Maintain the utmost professional conduct, especially leading up to a disciplinary action or termination. Any and all conversations pertaining to an employee’s termination have the potential to be discoverable, and it never benefits the firm when there are unnecessary comments about the employee.
• Avoid acting in haste. While it may be attractive to terminate an employee as soon as possible, you must consider the potential cost of doing so. There is almost never a reason to rush the termination of what may be considered a troublesome employee.
• Engage employment counsel that is familiar with the laws and regulations in the applicable jurisdiction(s) to help create employee handbooks, policies, and procedures.
• Consider consulting with employment counsel prior to any termination.

Illegal reprisals

56%

The portion of all charges filed with the U.S. Equal Employment Opportunity Commission during fiscal year 2021 that included a claim of retaliation.

Source: U.S. EEOC.

Laura Lapidus, Esq., is a risk control director at CNA. For more information about this article, please contact specialtyriskcontrol@cna.com. Brandon Saxon is a partner and chair of the employment practice group in the San Diego office of Gordon & Rees and can be reached at bsaxon@grsm.com.

Continental Casualty Company, one of the CNA insurance companies, is the underwriter of the AICPA Professional Liability Insurance Program. Aon Insurance Services, the National Program Administrator for the AICPA Professional Liability Program, is available at 800-221-3023 or visit cpai.com.

This article provides information, rather than advice or opinion. It is accurate to the best of the author’s knowledge as of the article date. This article should not be viewed as a substitute for recommendations of a retained professional. Such consultation is recommended in applying this material in any particular factual situations.

Examples are for illustrative purposes only and not intended to establish any standards of care, serve as legal advice, or acknowledge any given factual situation is covered under any CNA insurance policy. The relevant insurance policy provides actual terms, coverages, amounts, conditions, and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice.