First and foremost, compliance with the law is important because it is the right thing to do. Although you may disagree with the specific applications of some of the laws we discuss, the primary requirement of all these laws is to mandate good management practice. The earliest of the EEO laws requires that male and female employees who do the same job for the same organization receive the same pay. This is the right thing to do. A more recent EEO law requires that applicants or employees who are able to perform a job should not be discriminated against because of a disability. This, too, is the right thing to do.

Operating within these laws has benefits beyond simple legal compliance. Compensation practices that discriminate against women not only create potential legal liability, but also lead to poor employee morale and low job satisfaction, which can, in turn, lead to poor job performance. Discriminating against qualified employees with disabilities makes no sense; in discriminating, the organization hurts itself by not hiring and retaining the best employees. McDonald’s has taken the lead in hiring youth with learning disabilities. This is socially responsible and has created a positive impression among many customers.3

A firm’s HR department has considerable responsibilities with respect to HR law. These include keeping records, writing and implementing good HR policies, and monitoring the firm’s HR decisions. However, if managers make poor decisions, the HR department will not always be able to resolve the situation. For instance, if a manager gives a poor employee an excellent performance rating, the HR department cannot undo the damage and provide the documentation necessary to support a decision to terminate the employee.

Nor can a firm’s legal department magically solve problems created by managers. One of the key functions of legal counsel, whether internal or external, is to try to limit damage after it has occurred. Managers should work to prevent the damage from happening in the first place.

Members of the HR department support managers who have to make HR decisions with legal implications. HR staff may monitor managers’ decisions or act as consultants. For example:

• ▪ A supervisor wants to discharge an employee for unexcused absences and consults the HR department to determine whether there is enough evidence to discharge this person for “just cause.” The HR department can help the manager and the company avoid a lawsuit for “wrongful discharge.”

• ▪ A manager receives a phone call from a company that is inquiring about the qualifications of a former employee. The manager is not sure how of much information in the former employee’s work history to reveal, so she seeks the HR department’s advice. HR can help the manager and the company avoid a lawsuit for defamation (damage to an employee’s reputation as a result of giving out false information to a third party).

Considerable financial liabilities can occur when HR laws are broken or perceived to be broken. Typical court awards to victims of age, sex, race, or disability discrimination range from $50,000 to $300,000, depending on the size of the employer. Nonetheless, individual awards can actually be much larger.4 In 2001, the U.S. federal appeals court upheld a jury verdict awarding Troy Swinton $1.03 million for punitive damages, back wages, and emotional stress for racial discrimination suffered at U.S. Mat in Woodinville, Washington. The only African American of 140 employees, Swinton was subjected to a regular stream of racial “jokes” and slurs during his six months of employment.5

Organizations may also face a public relations nightmare when discrimination charges are publicized. In highly publicized cases in the early 1990s, several individual store managers and employees of Denny’s restaurant chain were alleged to have discriminated against African American customers. Not only did the company subsequently have to pay $46 million to African American patrons and $8.7 million in legal fees to settle these complaints, but the company’s image with customers was damaged as well.6 In recent years, though, Denny’s has made major strides: As of 2007, minorities owned 43 percent of Denny’s 1,030 franchised restaurants. African Americans owned 23, Hispanics owned 60, and Asians owned 359. In 1993, only one franchised restaurant was owned by an African American. Further, Fortune has consistently recognized Denny’s at the top ranks of its survey of “America’s 50 Best Companies for Minorities.”7