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Does your company's good name help or hurt in a lawsuit?

A good company reputation should help you in a lawsuit, shouldn't it?

Experts say that the research shows that a company's good name does, generally, go a long way in discrimination lawsuits. However, be warned -- that good name can also come back to haunt you if your company is found liable.

Essentially, researches have learned that a company's general prestige does help insulate it somewhat when dealing with claims of discrimination by employees. Juries are more inclined to see a prestigious company with a charitable eye -- believing that companies that are held out to be pinnacles of good behavior are, in fact, good companies. The juries put more weight on a prestigious company's claims of innocence and, albeit unconsciously, require a stronger showing of proof from a plaintiff who alleges discrimination.

On the other hand, if the plaintiff does satisfy the juror's demands and shows that some form of discrimination took place, jurors are apt to feel more betrayed by that company with the sterling reputation than they would another company with a less elevated reputation.

This research tells companies a lot about what the public is willing to believe about corporate America -- which isn't all bad. It also tells them that the retribution will be fierce, however, when companies fall into disgrace.

Researchers have called the tendency of juries to believe the best of good companies the "halo effect." Conversely, they've called the reaction to a company's failure to live up to the standards they espouse the "halo tax." Juries are likely to award victims of discrimination by so-called prestigious firms three times as much in punitive measures as they do victims of discrimination at other companies. Punitive damages are designed solely to punish a defendant's bad behavior.

In fact, companies with repeat problems with discrimination aren't treated as harshly as those whose once-golden reputations get suddenly sullied.

The message that companies should take from this is simple: If you've demonstrated that you're an excellent employer, juries will give you a little extra consideration. However, if they feel deceived, they'll punish you harshly through financial judgments.

Source: KelloggInsight, "Juries Treat Prestigious Companies Differently in Employment Discrimination Suits," Mary Hunter-McDonnell and Brayden King, accessed March 02, 2018

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