Ineffective or unskilled managers can cause you to lose your best talent, and present one of the biggest exposures to an employment practices liability lawsuit.

In fact, one in eight U.S. companies faces the prospect of having an employment charge filed against them each year, according to the insurance provider Hiscox.

Of the credit union claims filed with CUNA Mutual Group’s Management Professional Liability Policy, approximately 50% of all claim dollars relate to employment practices liability losses.

These losses often involve discrimination, harassment, and/or retaliation. Even with seasoned human resource (HR) professionals, up-to-date policies, and the latest workforce management technology, a poorly trained—or just plain bad—manager can negatively impact the credit union.

The impact reflects both financial and reputational risk.

Take these actions to avoid this loss trend:

• Train managers on existing policies and expectations of behavior. Be specific when discussing discrimination, harassment, and anti-retaliation policies. Be extremely clear about what you consider acceptable and unacceptable behavior.

• Stress that the responsibility to comply with these policies extends beyond the branch office environment and includes off-site meetings, training, and celebrations. Communicate to managers that the credit union doesn’t tolerate retaliatory conduct based on an employee’s complaint of discrimination or harassment, as well as participation in any investigatory proceedings.

• Apply policies consistently among all employees. Preferential treatment or inconsistencies can make for a devastating discrimination argument against your credit union.

Make sure a manager doesn’t recommend termination for one employee, where he or she might only have issued a verbal warning to another.

• Provide proper documentation, especially as it relates to progressive discipline. Managers must document performance improvement discussions and any other disciplinary actions.

A paper trail proves the manager’s decision was well thought-out and that the credit union gave the employee an opportunity to correct the behavior.

• Avoid poorly administered performance evaluations. Missing or inadequate performance evaluations can undermine any employment-related decision.

If a manager isn’t completing performance evaluations within the required timeframes, or is avoiding uncomfortable conversations with underperforming employees, you might have a problem. Know when to engage your HR department in the evaluation process.

• Don’t terminate carelessly. Terminating an employee is never an easy decision, but doing it too quickly can harm your credit union’s image and even make you look discriminatory. Whether it’s a layoff, policy violation, or poor performance, managers should clearly understand the reasoning behind the decision.

Treat the affected employee with respect and honesty, including manager participation with employee questions regarding the termination. Always discuss a potential termination with HR prior to making a final decision, and be sure someone from HR is present when you deliver the message.

The best formula for success is to direct a well-managed credit union complete with consistent training and communication with all managers and staff. Monitor managers so they know what the credit union expects of them and why.

This approach can minimize the risk of an employment practice claim and put you in the best position to defend your actions.

CARLOS MOLINA is a risk consultant with CUNA Mutual Group.

This article first appeared in Credit Union Directors Newsletter. which provides strategic insights for policymakers. Subscribe now to the print or PDF version.