Inexperienced Managers And Poor Training: A Recipe For Disaster

A SPECIAL REPORT by Tripp Scott's Paul Lopez and Jennifer Wahba. As Published in HR.com

Managers should receive training in the federal and state laws that apply to the company’s business.

A company's management team is entrusted to oversee day-to-day operations including, but not limited to, internal workplace issues, such as compliance with a number of employment-law related statutes and regulations.  

Key experience in these areas is essential to properly mitigate against a company's potential exposure.  As of August 2022, while the unemployment rate in the United States rose to 3.7%, the labor force participation rate also increased slightly.1

What is concerning is that given the recent tight labor market2,  many companies and small businesses are being forced to hire inexperienced employees to fill such senior management positions, which undoubtedly will lead to potentially significant exposure for these organizations. 

Generally, management positions should be filled by individuals, who have the proper training and experience in the industry so that they can avoid legal pitfalls under relevant state or federal laws. Managers may be responsible for making decisions, creating efficient processes, and motivating their teams to perform at their best.3 

Perhaps one of the most important roles of being a manager is ensuring that the company is complying with its legal obligations as they relate to employees. 

For example, depending on the number of employees a company has and whether its employees are eligible, the company may be bound by several federal laws: (1) Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits discrimination against employees based on several protected classes, including race, sex, and religion4;  (2) the Family and Medical Leave Act (“FMLA”), which allows employees to take unpaid family or medical leave with continued health insurance coverage5;  (3) the Fair Labor Standards Act (“FLSA”), which requires employers to pay minimum wages and overtime pay6;  and (4) the Occupational Safety and Health Act of 1970 (“OSHA”), which prescribes certain minimum safety and health standards for workers.7 

Aside from these limited examples of federal laws, each company will be regulated by its own state’s laws. If the company has employees working in several states, the company should be advised that it may also be bound by several states’ laws, which may sometimes conflict with each other. 

A manager should also be aware of some other general legal principles found across all states’ laws: respondeat superior, which is a theory that allows a company to be held liable for the negligence of its employees; and general negligence, including negligent hiring, retention, or supervision, which requires a company to exercise a certain standard of care in all its business, including in hiring and supervising employees. And while not every state may have codified laws on certain topics, companies should also ensure that they have adequate policies in place for other areas that may lead to litigation, such as employee management of funds; bookkeeping and document retention; mental-health policies; and cybersecurity and data breaches. 

Consequently, managers should receive basic and, ultimately, advanced training in the federal and state laws that apply to the company’s business. As best practices, managers should have a general understanding of which employees are eligible under which laws, whether the company has a required reporting process for alleged legal violations, how the company investigates and ultimately deals with employee reports or grievances, and a follow-up process with employees to assuage their concerns. Without this proper training—or without the experience in how these polices work as a practical matter—managers risk exposing the company to liability for failing to comply with the law or for having inadequate safeguards in place. 

Even if the manager is not the proper person to address employees’ complaints, the manager should be able to direct employees to the proper point of contact. Though not feasible for small businesses, if possible, more than one manager should be well-versed in the fundamental basics of the company’s legal obligations, either through the company’s own legal department or by outsourcing the training to some other entity that can provide adequate training. 

Senior executives should also establish checks and balances on managers’ duties. When employees face a problem in the workplace, they are much more likely to go directly to a supervisor than to executive management. In fact, it’s possible that executive management may never hear of certain employee complaints. Although senior executives need not be informed of every single complaint occurring in the company’s day-to-day affairs, they should establish a clear line of communication that ensures that management is properly performing its role in the legal context. 

For example, during performance reviews, managers themselves may be evaluated on their ability to stay current on legal developments that affect the employees. If managers have already been hired without the ideal level of experience, then senior executives should budget for in-house or outsourced courses or programs to train managers on the basics of legal compliance in the industry. Lastly, senior executives should focus on prevention, not just correction, of legal issues. Potential legal blind spots should be assessed before a problem arises, and managers should likewise notify senior executives when they see potential areas of concern. 

While these steps may seem costly at the outset, they will likely save the company hundreds of thousands of dollars in the long run in avoiding legal judgments.