Risk Of Retaliation Lawsuits On The Rise

Marla Pietrowski was just trying to help when she blew the whistle on a co-worker in 2009. Pietrowski and the other worker were employed at a nonprofit that helps ex-convicts transition back to society. Pietrowski thought it highly inappropriate.

Pietrowski told supervisors about the co-worker’s comments. Instead of the person being disciplined, Pietrowski said she was retaliated against and ultimately wrongfully fired. She sued her former employer, the Kintock Group of Philadelphia, for wrongful termination.

A Philadelphia jury this past March awarded Pietrowski $1.5 million in punitive damages, $100,000 for pain and suffering, and almost $78,000 in back pay. The suit alleged the harassment began in 2009 and wrongful termination in 2011 after Pietrowski reported the co-worker for comments the person made alluding to someone selling drugs. The co-worker also brought his 8-year-old daughter to the workplace, which the suit said both put the girl in danger and possibly violated the parole of numerous sex offenders then enrolled in the Kintock program.

According to the lawsuit, Kintock hit back. Pietrowski was allegedly passed over for a promotion and encountered hostility. She was fired in 2011 for “gross misconduct (false accusations),” according to court documents.

“I feel so thankful to the jury for their ability to see that I was the victim of abuse of power and that employees who stand up to their employers and voice concerns about wrongdoing in the workplace should not fear being fired,” said Pietrowski in a statement released by her lawyers at the Philadelphia, Pa., firm Console Law Offices.

“The Kintock Group respectfully maintains that it had appropriate grounds for termination in this case and that the action taken was not in retaliation for any concerns raised by the plaintiff,” said the organization via a statement emailed to The NonProfit Times. “In keeping with good business practice, the company will continue to review and refine its policies and procedures to ensure our diligence in these matters meets the highest standards.” Citing “post-trial activities,” the Kintock Group declined further comment.

These types of retaliation lawsuits and others falling under employee practices liability are increasingly common, according to risk management experts. Melanie Lockwood Herman, executive director of the Nonprofit Risk Management Center in Leesburg, Va., said there is no repository of court cases against nonprofits. Anecdotally, however, she and others said retaliation and discrimination lawsuits against nonprofits are on the rise.

“When somebody loses a job in a recession, it takes longer to get a new job, so there’s incentive to bring a claim,” said Herman. “In a robust job economy, there’s no real incentive to sue” because it is easier for the terminated employee to find other work, she said.

An indicator of trends, said Herman, is the Equal Employment Opportunity Commission (EEOC). An EEOC filing is not civil litigation but rather an administration claim. It is nonetheless representative of trends in employment lawsuits around the country, she said.

EEOC claims have jumped from roughly 83,000 in 2007 to just fewer than 100,000 in each of 2010, 2011 and 2012, an increase of some 20 percent. Some 38 percent of those 2012 claims were from alleged retaliation, and 33 percent from alleged racial discrimination. Retaliation claims overtook racial discrimination claims as most common for the first time in 2010.

Though the worst of the recession is over, Herman and Nonprofit Risk Management Center board member Michael Schraer believe the nonprofit sector is a few years behind the for-profit sector. For nonprofits, “some of the revenues go down immediately with the economy, but in others they might have had multi-year funding agreements,” said Schraer, senior vice president of global employment practices liability and not-for-profit manager for Warren, N.J. insurance firm Chubb. “Nonprofits might have only been feeling things in 2010, 2011, 2012 and 2013. It’s a one-and-a-half or two-year type of lag.”

Adam Cole is managing partner of accounting professional services firm BDO’s  Nonprofits’ Greater New York Healthcare and Nonprofit Practices in New York City. He said that people are less hesitant to sue nonprofits these days. “Maybe five or 10 years ago, people didn’t think to sue nonprofits, but now they realize what they contribute to the GDP (gross domestic product) and people realize they’re legitimate businesses,” he said.

That reticence has disappeared to some extent. “(People) see nonprofits and see endowment funds, reserves, operating revenue at $50 million,” said Cole. “People are more prone to litigate when they have a chance to do so.”

The preponderance of employment practices lawsuits is not new, said Jeffrey Tenenbaum, partner at law firm Venable LLC and chair of the firm’s Washington, D.C., nonprofit practice. Tenenbaum has seen an increase in the number of claims the past few years.

“This has been the number one category (for lawsuits) against nonprofits for as long as I can remember,” said Tenenbaum. “That doesn’t mean the number hasn’t gone up. My sense, based on anecdotal evidence, is that it has. When the job becomes even more important, people are going to fighter harder to hold on to it or get some financial remuneration.”

Jeff Collins and Mark Konchan of Philadelphia Insurance Companies (PHLY) said they’ve seen a rise in automobile claims and lawsuits during the past two or three years. In a tough economy, said Collins, vice president of PHLY’s commercial lines division, “some­times nonprofits are short on finances and maybe they might skip some risk management practices, such as driver training, record checks or maintenance procedures.”

There’s turnover in nonprofits, he continued, “so sometimes drivers are servicing more routes, there’s new employees or they’re driving vehicles they may not be familiar with.” The more vehicles a nonprofit has on the road, said Collins and Konchan, the bigger the chance for an auto-related claim or lawsuit.

Also on the rise, said Collins, are claims and lawsuits stemming from alleged abuse and molestation. “We’ve been seeing an increase from the past two or three years, by as much as 50 percent,” he said. High-profile cases in the media, most notably the Jerry Sandusky case in which the former assistant coach of the Penn State University football team was convicted on multiple counts of child molestation, raise public consciousness of abuse and molestation and often encourage victims to come forward.

“There’s just a lot of exposure out there,” said Collins. “The frequency has arisen due to circumstances and people disclosing more. But any time you’ve got abuse and molestation, you’ve got the factor of recidivism,” which can lead to higher instances of claims and lawsuits due to multiple victims.

For all types of claims and lawsuits, mitigation starts with preparation. Front-loading the work by putting in place clear policies, procedures and best practices, and following them, will limit the number of lawsuits and claims against your organization. Proper documentation of disciplinary actions against employees is one of the most effective ways to protect your organization from employment liability lawsuits, said Herman.

“Anticipate the potential for departing employees to bring claims,” she said. “I recommend providing the employee with a letter about the legal reasons for termination. Never tell someone they’re being laid off when they’re being let go for poor performance. Explain the reasons.”

According to Cole, human resources departments are documenting things better. “I think they’re doing more to make sure when they separate (from an employee), they’re protected.”

Cole suggests organizations do an enterprise risk assessment, an overall assessment of risks to the organization, from the IT system breaking down to the risk of fraud and theft to reputational risks. He also advocates for a detailed employee handbook, an accounting procedures handbook and a conflict of interest policy. “All of these are best practices that, if followed and implemented, result in better behavior,” he said. “When you educate people and have the right tone at the top, you have a better chance of protecting yourself and avoiding litigation.”

Cole and Tenenbaum both said there’s no way to stop someone from suing, but having policies in place and following them can increase the likelihood of a favorable outcome for your nonprofit. “They go hand in hand,” said Tenenbaum. “It all starts with having good employment policies codified in the employee handbook.”

Tenenbaum said following through on the procedures you have is key to defending yourself. “I can’t count how many times a nonprofit comes to us and says the employee is doing a poor job. We say, ‘Show us the personnel file,’ and (the employee has) nothing but glowing reviews. That inconsistency is very difficult do deal with and makes it more difficult for the employer to do what they want. I find it’s not that they lack good policy, they lack consistent enforcement of policies.”

If an employee is performing poorly, you must document the poor performance and all the steps you’ve taken to rectify it. Having documented evidence of poor performance is important to show that an employee has been terminated for the right reasons.

Have insurance policies in place and know what they cover, said Herman. “Verify that the organization has employment practices liability insurance (EPLI), which is typically a portion of directors and officers liability,” she said. “Take time to understand what’s covered; is it covered for complaints with EEOC, or limited to monetary damages from lawsuits?”

Herman said there is one insurance policy that helps more than any other. You can’t buy it anywhere; you can only cultivate it. “Treat any departing employee with compassion and respect,” she said. “The Golden Rule is still the best risk management strategy: treat others like you’d want to be treated.”  NPT