How HR Managers Must Deal with Legal and Regulatory Challenges in Organizations

What Happens When Employees Sue their Employers?

By definition, corporates deal with contractual exchanges between the various entities that make up the internal and external systems in which they exist.

Whether it is dealing with customers, or suppliers and vendors, and more importantly, the employees, corporates undertake all these transactions that are covered by legal and regulatory rules and regulations.

Specifically, the Employer Employee Relationship is one where the HR or the Human Resource Managers must be cognizant of the challenges and the problems that arise and can arise from non performance of the contractual obligations by either side.

For instance, disgruntled employees can sue the organizations for breach of contractual terms and conditions when they are paid less than the promised salary or bonuses.

In addition, employees can also sue the organizations in matters related to gender, sexual, and racial discrimination.

Apart from this, employees can also sue the corporates for arbitrary firing or layoff without Cause Célèbre or in plain words, no plausible reason.

In all these cases the HR Managers are directly involved since these and other such issues are in the domain of people management which is the area in which the HR professionals work.

What Happens When Employers Sue the Employees?

On the other hand, employers can also sue the employees for non performance and non completion of contractual obligations.

For instance, if a particular employee is found to have violated the terms and conditions of the contract, he or she can be summarily fired or dismissed with immediate effect with no restitution or can also be taken to court for recovery of the monies lost on account of such violations.

However, in our experience, we have found that corporates usually prefer to reach out of court settlements with employees in such cases as the costs of legal challenges do not justify the benefits.

Of course, this is not to say that corporates shy away from court cases for all types of violations as in case of IP or Intellectual Property Theft and Hacking as well as Stealing Confidential Data often result in the employers insisting on suitable punitive action against the employees.

Indeed, where the benefits of legal action outweigh the costs, HR Managers often recommend legal cases to be filed against the errant employees and vice versa, where the reverse is true, then they prefer to fire the employees rather than drag them to court.

How HR Managers Take a Carrot and Stick Approach in Potential Legal Cases

As can be seen from the discussion so far, HR Managers often take a Cold and Rational View of the cases and decide on the appropriate course of action.

While the HR Managers are expected to be sensitive and empathic towards the employees sine people management demands soft skill based approaches, they are also expected to be ruthless in matters where the contract or the compact between the employers and the employees is broken.

Indeed, it is often said that HRM or Human Resource Management works through a Carrot and Stick approach wherein the former works in some cases and the latter works in other cases.

In all matters related to legal and regulatory challenges, the HR managers are expected to Go by the Book or in other words, play by the rules governing the Employer Employee Relationship.

In other words, they decide according to the Organizational policies as well as prevailing Laws of the Land when dealing with violations.

On the other hand, often it is the employees who are hesitant to drag their employers to court since from a pragmatic view point, they are aware that such courses of action can jeopardize their careers and besmirch their reputations.

The #MeToo Movement, Learned Helplessness, and Tipping Point

Continuing the last point, such behavior from the employees can be explained by using Organizational theory wherein the term Learned Helplessness pertains to the visible and invisible and the overt and covert ways in which the Big Corporates can easily ride roughshod over the employees who challenge them in court.

Indeed, in our experience we have found many women and racial minority employees preferring to change jobs rather than take on their employers when they are discriminated or prejudiced against at the workplace.

This phenomenon is not restricted to India or any other developing country alone as the recent cases of the #MeToo movement brought into the open such behavior across the advanced Western world wherein women employees preferred to arrive at a settlement with their employers rather than insisting on legal justice and punishments for their harassers.

Many experts opine that this movement is the Tipping Point as far as the Legal and Regulatory Challenges that HR Professionals deal with since for the first time, the HR managers are expected to act in ways that satisfies the principle of Natural Justice for both the Employers and the Employees.

In other words, the key challenge for the HR professionals is to choose sides rather than go only by the principle of reputational damages and cold cost benefit analyses.


Lastly, given these and other challenges, it is our view that the HR Managers are a bit constrained here as more often than not, it is the Top Leadership which dictates the course of action.

This again poses an Ethical and Moral Challenge for the HR staff.

Thus, like Doctors, the HR professionals too must make a choice between adherence to the organizational approaches and the call of duty.

To conclude, in such challenging times for all parties, it is better to take a humane approach so that at the end of the day, one can sleep easy with a clear conscience.

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Human Resource Management