Layoffs Leave Law Firms Vulnerable to Employment Practices Lawsuits
HOUSTON, March 12, 2009 -- “Even law firms are not immune to employment practices liability suits—especially as they now are forced to lay off employees
to cope with the economic downturn,” an insurance executive told a group of managing attorneys, law firm human resources managers
and insurance agents and brokers meeting here and in Dallas.
Roy Tyson, the worldwide assistant employment practices liability manager for the Chubb Group of Insurance Companies, made
his remarks during presentations on how law firms can mitigate the increased exposure of employment practices liability (EPL)
lawsuits as they reduce their workforce. He noted that the legal services industry lost 7,000 jobs in 2008, according to
the U.S. Department of Labor.
“The growing trend toward more single-plaintiff EPL lawsuits will hit small to midsize firms the hardest,” said Tyson. “These
firms may find it difficult to bear the financial burden of a lawsuit without insurance protection.”
In addition to insurance, Tyson recommended that law firms consider some critical steps when planning staff reductions:
- Evaluate the overall anticipated impact of the layoff, including the potential for litigation as well as public scrutiny.
- Use quantitative criteria such as tenure and performance, rather than “soft” criteria such as social situations and financial
hardship, to determine which employees to let go. Be consistent in applying the criteria, which should be communicated to
all employees.
- Review the demographics of the staff that will be laid off to eliminate any appearance of discrimination. Consider the status
of each employee, including whether he or she recently requested a leave under the Family Medical Leave Act or filed a workers
compensation claim.
- Use outside counsel to evaluate employment practices and severance policies. Law firms should refrain from self-diagnosis.
“Most important,” said Tyson, “remember to treat all employees—those who will be laid off and those who will stay—with dignity.
Laying off employees is unpleasant, but firms that try to do the right thing can help mitigate the potential for an even more
unpleasant EPL lawsuit.”
Chubb has insured law firms for nearly 30 years and currently insures 95% of the law firms listed in The American Lawyer magazine’s “Am Law 200.”
The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property
and casualty insurance for personal and commercial customers worldwide through 8,500 independent agents and brokers. Chubb's
global network includes branches and affiliates throughout North America, Europe, Latin America, Asia and Australia.
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