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NM No. 1 in employee lawsuits

We’re No. 1. Which, I hate to admit, always strikes me as ominous when I hear it said about New Mexico.

Hiscox, a Bermuda-based family of companies that describes itself as a “specialist insurer,” recently issued a jacobsen_joel_BizOreport comparing “employee lawsuit risk” for the 50 states plus Washington, D.C. The report concluded that New Mexico employers face “a 66 percent higher chance of facing an employee charge than the national average.” That’s the highest risk in the nation.

Although the title of Hiscox’s study refers to lawsuits, its data were actually drawn from claims filed with the federal Equal Employment Opportunity Commission and the state Human Rights Bureau. Generally, employees must file a claim with one or the other commission before bringing an actual lawsuit. According to Hiscox, “most” claims never make it past the commission stage.

What explains New Mexico’s position on top of the list? One obvious possibility is that the study is flawed. The report is vague about its methodology. I emailed Hiscox for additional information and received a polite response, but no additional information. But two Albuquerque employment lawyers I spoke to, Barbara G. Stephenson and Donald G. Gilpin, told me they found it plausible that New Mexico would rank high in national comparisons.

One important reason is that New Mexico’s Human Rights Act, our anti-discrimination law, applies to companies with four or more employees, while federal law generally reaches only companies with 15 or more. For age discrimination, federal law applies only to companies with 20 or more employees.

The threshold number of employees required by other states varies. The Texas Commission on Human Rights Act, for instance, applies only to companies with 15 or more employees. So New Mexico may have more claims per capita because our statute casts a wider net. Or, to put it another way, many acts of discrimination prohibited in New Mexico are beyond the reach of the law in Texas and elsewhere.

Stephenson, who represents employers, says that she would expect more claims to be filed in states whose laws prohibit more practices. She mentioned California as an example of a state with a dense network of laws regulating business and, indeed, California ranks fourth among the states, with a 40 percent increased risk of employee claims.

New Mexico law isn’t an extensive as California’s, but it is still broader than federal law. New Mexico prohibits discrimination against gays and transgender people, who receive no protection under the federal EEOC statute, although just this past week President Obama proposed changing that. According to ACLU figures, 22 states and D.C. currently prohibit discrimination based on sexuality, which is another way of saying that the rest still permit it. That presumably accounts for some additional claims in New Mexico, although Stephenson reports it’s not an active area of practice.

New Mexico also prohibits discrimination based on “spousal affiliation,” a phrase I found mysterious. Gilpin, who represents employees, explained it with an example from his practice. A woman was married to a man with AIDS. Husband and wife had separate health insurance through their respective employers. When he lost his coverage, she tried to add him to hers. Her employer fired her before the change could take effect, in what seems to have been a transparent effort to hold down medical costs. That was discrimination based on spousal affiliation and it’s illegal under New Mexico law.

Another possible explanation for the high ranking, one that contradicts New Mexicans’ cherished self-image, is that there’s more discrimination here than elsewhere. It’s notable that five of the top 10 states in Hiscox’s ranking are former members of the Confederacy. But while New Mexico was hardly innocent of Jim Crow laws, the legacy of segregation doesn’t go far to explain the statewide ranking today. On the other hand, the sheer diversity of New Mexico multiplies the possible combinations that could result in discrimination.

Stephenson points out that New Mexico’s workforce includes a very high percentage of government workers. According to data compiled by the Wall Street Journal in 2014, only three other (large and relatively underpopulated) states have more government workers per capita than New Mexico. The civil service protections enjoyed by such a large segment of the workforce might contribute to a general expectation of a vested right to one’s job, Stephenson suggests.

Then, too, she notes that New Mexico’s appellate courts are highly receptive to claims of employment discrimination. While few employment claims ever reach them, nonetheless, the judges at the top establish the law and the tone. She also describes the local EEOC office as “fairly aggressive.”

Together, these theories describe systemwide forces contributing to New Mexico’s high ranking. But, ultimately, an individual worker’s decision to file a discrimination claim is a personal one. Gilpin, the plaintiff’s lawyer, sees the decision-making process going through a series of steps.

Step one: New Mexico is an “at-will” state, meaning that employers are not required to give a reason for firing an employee. Supervisors who wish to spare themselves an embarrassing or upsetting scene lower the ax without warning or explanation. That leaves the fired worker trying to make sense of the disaster with no information beyond the obvious: “I was the only ____ in that division and I was the only one they canned.”

Step two: Generally speaking, a fired employee is entitled to unemployment compensation unless he or she was fired for misconduct but, over the past few years, the definition of “misconduct” has expanded, according to Gilpin.

He told me the story of a waitress who was nearly killed by a drunk driver as she drove home from work. It took months to recover from her injuries. In the interim, the restaurant had no choice but to replace her. But when she filed for unemployment benefits, the restaurant fought back, claiming she was fired for “misconduct” – failure to show up for work. Amazingly enough, the hearing officer ruled in favor of the restaurant. That decision was reversed on appeal to the district court, but it shows how the wind is currently blowing.

In one important way, the expanding meaning of “misconduct” has helped employers, reducing premiums. But when an employee is fired without explanation and the employer then tries to keep him or her from receiving the relative pittance that might prevent eviction or foreclosure, it “feels personal,” Gilpin says.

Step three: Discrimination claims against an employer have to be filed within 300 days. That puts pressure on the employee to decide whether to file during a period when he or she is feeling most angry and desperate. Given that it costs nothing to file a claim, why wouldn’t you? As Gilpin says, “It’s fight or flight, right?”

Gilpin suggests a longer statute of limitations would allow workers to put off the decision to file until after they find a new job, when many would choose to let the matter go.

The Hiscox report, freely available online, has some suggestions for employers about avoiding claims. But I think the best advice (after “don’t discriminate or retaliate”) addresses Gilpin’s step one. Performance-based termination should always be preceded by fair warning and termination for any reason should be accompanied by an honest explanation. For employers, doing the decent thing is also self-protection.

Attorney Marshall G. Martin in private practice in Albuquerque. He has experience in complex litigation, including securities, antitrust and lender liability law. He also has represented banks, and private and public companies. He can be reached at 505-228-8506 or mgm@marshallgmartin.com.

 

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