A three-year dispute between Knickerbocker Russell and one of its employees was settled this year in a jury trial, but not before the company ran up $150,000 in legal fees defending against the claims of a former employee in an age discrimination suit.
While most such claims are settled before they reach trial, the tiny minority that advance to the courtroom, like the case Knickerbocker Russell faced, can be distracting and draining on a company’s resources.
Knickerbocker Russell rents and sells equipment to building contractors, with most of its revenue coming through its force of sales representatives who cover specific sales territories. The reps, who own their own trucks, are paid on a straight commission basis. They contact customers and potential clients in their territories and are responsible for transporting equipment between Knickerbocker Russell’s facility and the customer’s.
The work can be strenuous and demanding, but it can also be financially rewarding. In some cases, salesmen earn six-figure annual incomes.
“They can make a pretty good living, especially if they hustle,” says Howard Creese, vice president and general manager of Knickerbocker Russell.
A lagging effort
Through the early 1990s, however, one salesman’s performance consistently lagged behind the others. Despite several discussions with the employee about his performance and some remedial actions the company took to help him get his sales up, including having Creese accompany him on some of his daily runs to try to identify new customers and help him work more efficiently, the employee’s sales, according to Creese, remained unacceptably low.
In 1996, Knickerbocker Russell’s management decided to fire the 51-year-old salesman, replacing him with a 30-year-old employee who had no prior sales experience.
The fired worker thus initiated an action against Knickerbocker Russell, claiming age discrimination because the company terminated and replaced him with a younger worker. Further, according to his lawsuit, he maintained that his sales hadn’t fallen off because of a lack of effort on his part, but because the company had slashed his sales territory in half and had given the more lucrative portion to a younger salesman.
Documentation shortcomings
To complicate matters, Knickerbocker Russell had left itself vulnerable to an age discrimination suit on a couple of fronts. While it claimed it had spoken with the plaintiff on several occasions regarding his performance, none of the discussions had been documented.
Eric Reif, a partner with Pietragallo, Bosick & Gordon and one of the lawyers who represented Knickerbocker Russell, explains that it is not unusual for smaller companies to fail to document such actions. He advises that it is important to do so, however, if the business owner wants to protect his company against age discrimination actions.
Questionable comments
Additionally, Reif explains that during some of those discussions, a company official made comments that could be interpreted as age-related, remarks that could have been damaging to Knickerbocker Russell’s case.
“Companies have to be very careful about any type of comment, even if it’s in a joking context, that can be construed as being age-related,” says Reif.
Fortunately for Knickerbocker Russell, its lawyers were able to mount a successful defense based on a number of facts. First, they pointed out during the trial that the company had little motivation to get rid of a salesman who was a good producer, since salesmen are paid on a straight commission basis.
Second, company officials testified that the plaintiff had made comments on several occasions intimating that he was well off financially and didn’t need to work.
The discovery process confirmed that, in fact, the plaintiff had accumulated considerable wealth, a revelation that Reif says he believes blunted some of the sympathy that juries often harbor for an employee who has been fired and alleges age discrimination.
Finally, the company had a large proportion of long-time employees, some with 30 or more years of service. A majority of its workers, in fact, were over the age of 40, including Creese and the vice president of sales.
“I think that gave the jury a good understanding of why the age claim made no sense,” says Reif.
Beyond its direct costs, the case created disruption and distractions at the company over its run through the legal system. Five days of court appearances by managers and the company’s owner took key people away from their jobs, and other employees in the company thought they might have to testify.
“Some of the people were pretty anxious and nervous about being called to testify,” says Creese.
Avoiding litigation
Going to court can be costly, especially if a plaintiff wins the case. An employer who loses can be forced to reinstate the worker, pay back wages and cover the plaintiff’s legal expenses.
While it may not be impossible for an employer to avoid age-discrimination claims entirely, Reif advises that there are things companies can do to lower their risks.
Many such actions begin with the filing of a complaint with the Equal Employment Opportunity Commission or with the state Human Relations Commission. Those agencies will launch an investigation that involves contacting the employer to gather information.
Reif advises employers to seek counsel even before any investigation has begun or they have been contacted by a government agency. Details provided to the investigators may not be complete or may provide information that could be used against the employer by the plaintiff, Reif warns.
Reif says that employers may even want to consider purchasing insurance to protect themselves in the event that an employee files suit.
While some companies may not have full-fledged human resources departments, discussions with employees regarding their performance should be documented in any case. If an employee is terminated, employers should describe in detail the reasons for the termination. Employers may consider using a prepared script to be read to the employee when dismissal takes place and making sure that at least one other person witnesses the transaction.
And it pays to take care when it comes to filling a vacant position. It’s important to be able to demonstrate that the company hasn’t excluded anyone on the basis of age in the process of promoting someone or finding a replacement.
Says Reif: “You ought to be able to justify that decision and show that the criteria was fair.” How to reach: Pietragallo, Bosick & Gordon at (412) 263-2000
Ray Marano ([email protected]) is associate editor of SBN magazine.
