retained search: the corporate justiciation for quality.

KEYWORDS: retained search, executive benefits.

A corporate sponsored retained search program doesn't exist in isolation. retained search can be conceptually linked to the company benefits program, the litigation avoidance program, or to the marketing/sales function.

WHEN retained search IS LINKED TO BENEFITS

In an era when companies are trying to prioritize excessive benefit costs, it only makes sense to sharply prune retained search benefits for departing employees.

The rationale is compelling.

These employees are, by definition, departing. Why bother? Let's focus on the minimum required. Let's compare ourselves with what other companies are providing and shoot for "low average."

There is no value in being generous.

In addition to having no value, any arrangement which is crafted for one executive may serve as a precedent in the future. There are corporate policy issues to consider. retained search costs are easy to keep down. Let's do it.

WHEN retained search IS LINKED TO LITIGATION AVOIDANCE

A quality retained search program is traditionally part of a generous severance package designed to incent departing executives to sign waivers of rights to sue.

The role of quality retained search is to help executives quickly focus attention on the future.

The enclosed USA TODAY story states that:

• 13% of lawsuits against corporations were for wrongful termination. This figure represents a 77% increase in four years.
• Wrongful termination lawsuits are second only to shareholder lawsuits in frequency.
• Between 1995 and 1996, the median jury award against companies shot up by 38%. Out-of-court settlements, however, increased by 138%.

These figures do not include legal fees. They also do not include the costs of disrupting normal operations to comply with the discovery phase of a lawsuit.

These figures represent only Federal litigation statistics. More actions against the company are taken at the State level.

In this context, a quality retained search program is a relatively inexpensive component of a litigation avoidance program.

WHEN retained search IS LINKED TO THE MARKETING FUNCTION

The USA TODAY story doesn't comment on the fact that competition to attract outstanding employees in 1998 is fierce. Notices of wrongful termination lawsuits can show up on 10K filings and on D&B Reports. In an incestuous industry, the word easily spreads through the grapevine.

How does one put a cost on the downgrading of the company in the eyes of employees, prospective employees, and prospective customers?

ARE YOU SURE THAT SOON-TO-BE FORMER EMPLOYEE WON'T BE IN A POSITION TO RECOMMEND YOUR PRODUCTS OR SERVICES IN THE FUTURE?

Stan Davis and Chris Meyer are co-authors of BLUR ( Reading, MA: AddisonWesley, 1998). Both are associated with Ernst & Young.

The authors ask, "Can you imagine listing something that has vanished as an asset?"

An executive who departs the company doesn't vanish.

"After all," they argue, "Where's that person going? As (employee) churn becomes a fact of life, it won't be enough to weather it. You have to learn to exploit it.

"Most of the people who come through your doors will not remain in your direct employee. But (you want them) in the company's economic web for a long time."

A well crafted severance program can link the human resources function with the marketing function.

The USA TODAY article follows.

Laurence J. Stybel,Ed.D. & Maryanne Peabody
Co-Founders
STYBEL PEABODY & ASSOCIATES
Corporate Sponsored Career Consultation for Executives Who Report to Boards Boston, MA
Tel: 781 736 0900
E mail: stybel@aol.com
Website: The Board of Directors Resource Center (www.stybelpeabody.com)

USA TODAY
Fired workers fight back . . . and win
Laws, juries shift protection to terminated employees

By Del Jones

Thur., April 2, 1998

Computer specialist Tina Flores was doing her job when she stumbled upon evidence that a co-worker was getting cancer medicine for her dog Otis and billing it to the company's health insurer.

Flores reported the co-worker and the ax came down. On Flores.

Until recently, Flores' only recourse would have been finding another job. A centuries-old common law known as ``employment at-will'' lets employers fire workers for any or no reason provided there is no union or other contract and discrimination laws aren't broken.

But those walls of employer protection are crumbling. In August, a unanimous seven-person Denver jury of blue collar workers and middle managers awarded Flores $207,830.

In the 1990s, it's getting more difficult to fire workers. Employment lawyers, who are finding inventive ways to skirt at-will laws, describe the shift as a workplace revolution. Some predict it's just a matter of time before almost anyone who is fired could get a day in court. In many cases, fired workers suspected of stealing, being rude to customers or harassing co-workers are suing and often winning.

More than 24,000 wrongful termination lawsuits were filed in federal court last year, up 77% from 1993. Short-staffed federal judges say wrongful termination cases are the biggest source of new litigation. Including state courts, there were 50,000 cases or more in 1997, estimates Dave Condon, a lawyer and vice president of Edgewater Holdings, one of about 70 insurance companies in the sizzling field of wrongful termination coverage. The industry predicts such insurance will expand from $130 million in premiums now to $1 billion in five years.

Judges still throw out many wrongful termination lawsuits. But creative lawyers are getting more of them to juries. And jurors are often swayed by appeals to fairness. They are finding for the workers more than half the time.

That is forcing more paperwork on employers as they update job descriptions, employee handbooks and performance reviews. They must now thoroughly investigate before firing employees for violations such as taking drugs, and they are buying software to track details such as phone complaints from customers about workers.

At-will may still be the law of the land, but ``the exceptions have swallowed the rule,'' says lawyer Paul Tobias, author of Litigating Wrongful Discharge Claims, a book of advice for fired workers.

Changes in law

Driving the revolution are new federal laws, higher monetary awards and settlements, and creative lawyers. The 1964 Civil Rights Act first cracked at-will employment by allowing fired workers to sue for discrimination. In the last few years:

The Civil Rights Restoration Act of 1991 greatly strengthened the 1964 law by letting plaintiffs recover not just back wages but legal fees and punitive damages up to $300,000. Under those conditions, lawyers accept far more cases.

Whistle-blower laws let workers sue if they are fired for reporting illegal acts by their companies.

Last month, the Supreme Court added same-sex harassment to the list. It had already expanded the definition of sexual harassment a decade ago to include work environments that are hostile. A small leap is the autocratic boss, who can make the environment hostile to any worker.

The Family and Medical Leave Act of 1993 lets workers sue if they are fired for taking up to 12 weeks of unpaid time off to care for a sick family member.

An amendment to the Fair Credit Reporting Act means companies can be sued if they fire someone due to a criminal record turned up in a background check if they don't give the worker an opportunity to refute it.

Courts are still sorting out the 1992 Americans With Disabilities Act. Some have ruled that workers can sue for being fired because of drug addiction or not doing a job properly due to stress.

At-will employment now applies only to white men, younger than 40, who have never been under stress, Condon says. ``The ground has shifted beneath employers' feet, and most don't realize it yet.''

Large companies do. ``I'm swamped,'' says Nabisco lawyer Barbara Ann Sellinger. She says other companies report a four-fold increase in employment lawsuits over the past five years.

Companies say the sudden shift is hurting job creation because they are reluctant to hire unproven workers they can't fire. A survey of California small-business owners found that 31% would be willing to hire welfare recipients if the government subsidized wages. But 77% said they would take a chance if they had the freedom to fire them without being sued.

Employers wary

The threat of being sued is driving many companies to hire workers from temporary services or to outsource entire departments. Tom Lucas, CEO of Performance Nursery in southern California, says he used to find full-time workers by employing them part time during the busy season. Now, to avoid potential lawsuits, he allows his staff to work overtime.

Last July, a Washington state jury awarded $711,517 to fired Safeway district manager Jim Bulman. He had influenced pay raises for his two sons, who were clerks, until they were making more than clerks with seniority. Safeway says it fired him for dishonest conduct. But the jury decided that Safeway should have relied on its anti-nepotism policy, which would have permitted the sons to resign.

Without Safeway's policy, ``I would not have gotten this before a jury,'' said Bulman's lawyer Andrew Kinstler. Safeway has appealed to the state Supreme Court. Legal creativity likewise got the case involving Otis the dog and his cancer medication before a jury. Flores' lawyer, Jeffrey Sandman, argued that his client was a quasi-whistle-blower because she reported alleged fraudulent acts of a co-worker.

Flores' former employer, American Pharmaceutical Services, says she was fired for breaking the company rule that prohibits divulging information found in confidential computer files. There's no disputing that Flores was a good worker, says American Pharmaceutical's lawyer Barry Epstein. But the company should not be punished for its integrity, he says. ``It doesn't take much courage to fire only lousy employees.''

Shop room worker Dean Mowls was fired for stealing -- he says borrowing -- $325 in parts from his employer, Ohio Power. An arbitrator, required by Mowls' union, found in favor of the company.

That didn't stop Mowls from suing -- not for being fired but for defamation because Ohio Power said he was a thief. A jury awarded Mowls $75,000. Ohio Power is appealing. Five years ago, the case would not have gotten to trial, says Mowls' lawyer, Socrates Space.

In other recent cases, a worker won a lawsuit for being fired for hiring a lawyer after slipping and falling at a client's office, and a saleswoman sued and won after being fired for allegedly speaking Spanish to keep an English-speaking customer from comprehending.

``The courts are looking for every little straw to pick up in favor of the employee,'' Space says.

Litigation soaring

Companies are sued most often by shareholders, but wrongful termination cases have shot into second place, according to a survey by management consultant Watson Wyatt Worldwide. Last year, 13% of lawsuits were for wrongful termination vs. 5% for discrimination and 3% for harassment.

Juries awarded a median $205,794 for wrongful termination in 1996, up 38% from $149,385 in 1995, according to Jury Verdict Research. In cases that were settled out of court, the median award jumped to $81,250 in 1996 from $38,000 in 1995 and $25,000 in 1994. Jury Research Services says the average compensatory award for wrongful termination was $532,000 last year, more than the average for sex discrimination ($501,000) or disability discrimination ($158,000).

Short of major tort reform, companies believe at-will laws will continue to erode.

Worse, they say, is that they are left vulnerable no matter what they do. In a much-publicized case, Miller Brewing thought it was preventing a lawsuit by firing a manager accused of sexually harassing a female co-worker by using a joke he saw on the television program Seinfeld. The manager, Jerold Mackenzie, sued for wrongful termination. A 10-woman, two-man jury awarded Mackenzie $26 million. Miller is still appealing