Using Technology and Process Improvement to Prevent Labor and Employment Claims
Nearly 5 million people in the United States work in retail sales, a number that has increased by half a million since the end of the recession. After a period of extensive growth and expansion, nearly 7,000 of them worked at hhgregg, a big-box appliance, electronics, and furniture retailer headquartered in Indianapolis. Retail is a highly litigious industry that experiences significant employee turnover and labor and employment claims. Legal departments are kept busy complying with laws that differ from state to state. By the time Heather Greenawald joined the company as its first in-house attorney, labor and employment legal spend averaged nearly $70,000 monthly. In collaboration with Chief Human Resources Officer Charlie Young, Greenawald quickly recognized L&E as an area of spending that had to be brought under control.
“Being the first lawyer on staff was an advantage,” Greenawald says. “There were no established processes to follow, so it made me think creatively.”
The large employment team was operating in a kind of legal Wild West, each member working with his or her own preferred outside counsel when the occasion arose, and often asking one-off questions. The company had been working with one local firm for more than 30 years, but no one seemed sure of the rates hhgregg was paying.
“Outside counsel were unable to see the big picture,” says Greenawald, who had worked closely with the procurement group when she was at Sallie Mae. “It seemed that there was pricing pressure that could be brought to bear. I wanted alternative fee arrangements, discounts—a mutually beneficial relationship.”
Greenawald and Young, who had significant experience in labor and employment matters and working with outside counsel at Sears, issued an RFP seeking outside counsel to manage L&E issues, and to increase efficiency and budget predictability. They asked candidates to propose technology and value-added solutions that would improve their ability to quickly resolve L&E issues. “We looked to ensure cost certainty through alternative fee structures, to gain support across all 50 states, and a robust technology solution,” says Young.
The Atlanta-based firm of Ogletree, Deakins, Nash, Smoak, & Stewart, P.C., was selected, and a national flat-fee arrangement negotiated. According to Shareholder Chuck Baldwin, the firm has a penchant for innovation that was handed down by one of its founding partners. A big flat-fee deal with Tyco more than a decade ago gave the firm an opportunity to get out in front with large portfolio work; they subsequently productized the experience as the “Ogletree Deakins Advantage.”
“The questions hhgregg asked were very forward-thinking and teamwork-based,” says Baldwin. “It was clear that they were looking for a true partner as they sought process improvement in how they handled these issues.”
The engagement began with a daylong meeting during which Ogletree Deakins relationship managers came to hhgregg headquarters in Indianapolis to meet with the internal employment staff, who were involved in the RFP process and the transition away from the incumbent.
Next, the team took the step that would be critical to the adoption of hhgregg’s new preventive stance. Ogletree Deakins conducted an audit that analyzed past litigation, company policies, and employment documents to identify problematic practices, as well as specific needs for employee training, personnel or policy changes. Changes included revising the associate employment agreement to include a mandatory arbitration clause, and proactively training management staff in HR-related matters. For hhgregg, which had been “targeted by plaintiffs’ lawyers for wage-and-hour issues,” according to Baldwin, the mandatory arbitration clause was “a real catalyst in mitigating wage-and-hour class action lawsuits,” Young says. A dedicated legal project analyst at Ogletree Deakins coordinated the relationship, maintaining responsibility for plans and budgets, status reports, status meetings, and an annual review.
Technology tools were put in place to streamline and support the handling of L&E issues and to provide consistent guidance. They included software for tracking detailed information and status on administrative discrimination charges, a secure extranet for communication and information sharing, a secure intranet used by Ogletree Deakins staff as a centralized location for matter management, and a knowledge management collection curated by a reference librarian. Best of all was a proprietary web-based, self-help resource for staying in compliance with federal and state employment laws called O-D Comply, says Greenawald, that “allowed us to model the implications of a change in pay or policy. It’s a fabulous tool.”
To achieve more efficient and cost effective handling of legal requests, the National Employee Relations Manager at hhgregg became the point person for managing staff requests for legal advice. A customized extranet containing a web-based compliance tool and a log of past counseling requests was implemented, which can be accessed for a solution. If no pre-determined solution is found, a request is sent to Ogletree Deakins and handled by an attorney with subject matter expertise. Response time plummeted from an average of 8 or 9 days to a matter of minutes.
Other results are just as impressive: hhgregg has realized savings of more than 44 percent in outside legal spend during the first two years of engagement. Claims have been reduced by 60 percent and litigation by 74 percent. hhgregg’s average settlement amount is 27 percent of the national average.
It’s a partnership and a solution for the long run, says current hhgregg General Counsel Candace Bankovich. “In a retail environment with so many employees, one of my first concerns would have been labor and employment,” she says. “This arrangement makes me feel comfortable. We haven’t had a single-plaintiff employment litigation matter for two years, so we are doing something right.”