Settle or Defend? Spend $25k to save $50k? I choose doing things right and saving even more.

I was recently sharing some HR war stories, and I was reminded of this anecdote.

I was contacted by one of my managers regarding an employee who was to be terminated for attendance issues. The manager supplied me with the employee's record, which included previous disciplinary action for attendance matters. The disciplinary action was perfect. It referred to the dates of the incidents and policy. It cited the next step in the disciplinary action process, should the employee have another offense. The disciplinary action forms were signed by the employee and the manager.

It seemed cut and dry. I approved the termination. The employee signed the termination form and did not mention any concern or dissent with the decision.

A month later, I received a letter from an attorney representing the employee asking about why her workers' compensation claim had not been filed. I opened an investigation into the matter only to determine that she had not filed a workers' compensation claim. I forwarded the letter to our attorney and provided all supporting documentation including her personnel file and my memo regarding the review of her termination. I also filed her claim with out workers' compensation carrier.

Within two weeks, the attorney contacted us again, claiming we terminated her to prevent paying her workers' compensation claim. This was absolutely untrue, but her allegations created a convincing case. She claimed that she reported her injury to her supervisor. The supervisor claimed she had no knowledge of the report.

The former employee's attorney stated that she wanted $25,000 as a settlement.

I contacted our attorney, and she advised that we should settle. I could not believe it. I take those kinds of accusations personally. I always strive to do the right thing by all parties. I did not want to pay the money and thereby admit wrong-doing.

Our attorney laughed and told me not to take it personally. She assured me we had taken all of the correct steps but admitted that the cost of defending this claim would be much higher than paying the settlement. She said it could cost us as much as $50,000 to defend the claim.

It was not my money, and I would have preferred to pay the lawyer $50,000 than to pay $25,000 to someone who falsely accused us of violating her rights. I brought the situation to our in-house counsel and our CFO for review. They agreed with me and thought our case was strong enough to defend. In stead of settling for $25,000, we offered to settle the matter for $1,000, and considered it a nuisance matter.

The ex-employee counter offered for $5,000. We held firm at $1,000, and she accepted. It pained me to offer her even that amount. Still, it beat $25,000 or $50,000.

Despite no mal intent or wrong-doing on our part, the situation would pass the prima facie test and we could have faced significant cost, either through settlement or attorney fees. Luckily, we had sufficient documentation to support our decision and we were able to settle it as a nuisance matter.

The moral here is that even when you try your best and take all the appropriate steps, you can still be exposed. I refer back to the three edicts of HR: Fair Treatment, Consistency, and Documentation. They are your best defense!