Suiting Up With a new breed of professional plantiffs on the prowl, closely screening job applicants could save you lots of dough.

The payroll clerk you hired a month ago has sued your businessfor sexual harassment, alleging that her supervisor made unwelcomeadvances. The Equal Employment Opportunity Commission (EEOC)dismissed her claim as having no reasonable cause, but she suedanyway. Just defending the lawsuit could cost you $50,000 in legalfees, not to mention the time and effort required to gatherevidence. If you lose, it could cost far more. The plaintiff hasoffered to settle for $10,000. What should you do?

Hundreds of entrepreneurs would lean toward paying thesettlement just to cut their losses. And that's what a newbreed of con artists is counting on. Michael D. Karpeles, anemployment attorney with Goldberg, Kohn, Bell, Black, Rosenbloom& Moritz Ltd. in Chicago, explains that professional plaintiffschange jobs frequently with the chief intent of finding a grievanceand threatening to sue. "Seeking out potential litigation is afull-time job for chronic suers, who threaten legal action wheneverthey think there's the slightest hint of provocation that couldresult in a cash settlement," Karpeles says. "Itdoesn't matter if there's a legitimate claim; the perceivedthreat alone is often enough to prompt some companies tosettle."

It's difficult to track these people or gauge the prevalenceof their scam because many agree to a quick settlement without everfiling formal charges. Even when they do file a lawsuit, asettlement agreement would effectively hide the matter from publicscrutiny. After all, one reason companies are so eager to settle istheir desire to avoid negative publicity. However, some statisticsfrom the EEOC provide a hint of the growing problem. In 1992, 33percent of the 10,532 resolved sexual harassment claims filed withthe EEOC were classified as having no reasonable cause. By 1998,the number of resolved sexual harassment claims had ballooned to15,618, and 42 percent of them were classified as having noreasonable cause. Likewise, EEOC statistics for 1998 show that 61percent of the 15,191 charges of age discrimination and 70 percentof the racial discrimination charges had no reasonable cause. Youcan see the potential for abuse.

"People sue knowing it's cheaper for the company tosettle and pay $15,000 rather than spend $30,000 and win,"Karpeles says. "Employers sued on meritless claims have tochoose between their principles and their pocketbooks." Suchscams are especially rough on small businesses, he adds, becausethey can't afford to defend themselves against frivolouslawsuits.

Steven C. Bahls, dean of Capital University Law School inColumbus, Ohio, teaches entrepreneurship law. Freelance writer JaneEaster Bahls specializes in business and legal topics.

Fighting Back

Sometimes it pays to fight back. In one recent case decided bythe U.S. Court of Appeals for the Seventh Circuit, a male loanoriginator for a mortgage company in Indianapolis claimed that thefemale loan processor he worked with exposed her breasts to him,sat on his desk and made sexual advances at work and over thetelephone--all of which she flatly denied. In his sexual harassmentlawsuit, he produced a memo supposedly written by their branchmanager to another superior acknowledging that the harassment wasgoing on and suggesting that the easiest way to stop the loanoriginator's complaints would be to get rid of him. The branchmanager said she never wrote the memo, although it appeared to bearher signature.

Attorneys for the mortgage company discovered the plaintiff hadsued three former employers. In one case, he had produced anemployment contract granting him favorable terms, bearing thesignature of a company agent who denied ever having seen thedocument. While evidence of the plaintiff's history oflitigation is normally not admissible in a subsequent lawsuit, theU.S. District Court for the Southern District of Indiana allowed itin because it suggested the plaintiff's method ofoperation--suing his employers and forging incriminating documentsto introduce as evidence. The district court ruled in favor of theemployer, and the U.S. Court of Appeals for the Seventh Circuitupheld its decision.

The company might have been able to avoid the whole problem ifit had identified the plaintiff as a chronic suer before offeringhim a job in the first place. That's the best way to deal withthe problem, Karpeles says, because otherwise your only options arespending money to settle the lawsuit or spending money to take itto court. Be careful, though, because federal law prohibitsemployers from retaliating against a job applicant for havingexercised the right to complain to the EEOC or state human rightsagencies over alleged discrimination.

Screening Applicants

It's not easy to identify a professional plaintiff in thehiring process, however, because out-of-court settlements don'tappear on the public record. So even if you search diligently, youmay not uncover a history of lawsuits. But that doesn't meanyou're out of luck. Karpeles offers the followingsuggestions:

• Be suspicious of job candidates whose work histories show jobchanges every year or two.

• When verifying prior employment, pay attention if the prioremployers' references are very brief and limited to mundanevirtues. "Often, these are attempts to hide realproblems," Karpeles contends.

• Let the applicant do most of the talking in the interview, andschedule follow-up interviews if necessary to give you a bettersense of the candidate's past.

• After screening applicants for job skills and experience, baseyour final selection on the candidates' work-related values andattitudes. Look for someone whose work ethic matches yourcompany's culture.

• To minimize the chance of being charged with discrimination,make sure your policies are written clearly and your procedures areconsistent. By producing a well-written employee handbook, youcreate strong evidence of your consistent policies for any futureemployment lawsuit.

Don't agree to settle every claim out of court. Consider theevidence carefully, and if the claim appears to be merely anattempt to extort money from the company, don't give in.Getting the case to court where a judge can throw it out is one wayto put the plaintiff's name on the public record for thebenefit of future employers. The more employers fight chronicsuers, the less profitable their scams will be.

"Prevention is the best way to avoid legal problems,"Karpeles concludes. "Employers need to do their best to screenout professional plaintiffs while creating a work environment thatgives little reason for anyone to sue."