Editor’s Note: “War Stories” are drawn from the claims files of Camico, a CPA-directed insurer and risk management program for accountants, and illustrate some of the dangers and pitfalls in the accounting profession. All names have been changed.

The midsized CPA firm of Hitchens & Hyde (H&H) was interested in recruiting staff with better qualifications to take over some of the work being performed by the aging founders and partners, Harold Hitchens and Richard Hyde. Ideally, the new recruits would prove themselves worthy of being groomed for partnership, thereby enabling Hitchens and Hyde to transition into retirement.

Classified ads were not attracting enough qualified candidates, so Hitchens, following the example of some of the Big Four firms, posted ads on three of the major social media sites, indicating that the firm was seeking “young” talent interested in a career with the firm. As soon as the posts were sent out, another partner informed Hitchens that the word “young” implied discrimination against people on the basis of age, so Hitchens retracted the posts from the three sites and sent three new posts without the word “young” in them.

As a result of these ads, the firm hired two managers from two other CPA firms. The recruits showed a lot of promise for the partner track. A few months later, however, the firm decided to dismiss two other middle-aged employees, who were less-than-productive and had never sufficiently developed their professional skills, according to the firm’s standards.

Upon termination, the two sued the firm, alleging violations of the Age Discrimination in Employment Act of 1967 (ADEA). Despite the fact that Hitchens had retracted the earlier social media posts referring to “young” talent, the posts had already been forwarded by email from one of the H&H staff people to the other staffers. The older employees had kept a copy of the posts, in case H&H could be accused of age discrimination.

The two terminated employees also alleged that the firm had not provided them with enough training, mentoring and work opportunities to develop professionally, compared with the opportunities provided to the new hires. They also alleged that the firm had failed to engage them in an interactive process that would have provided them with the feedback necessary for them to recognize performance deficits, to improve performance and to meet the expectations of the partners.

The jury agreed with the allegations and awarded a verdict of $2 million against the firm, which was ordered to repudiate the posts referring to “young” people and to inform all employees of the verdict.

Loss prevention tips

A firm’s recruitment advertising should be reviewed in advance by human resources counsel for compliance with laws prohibiting discrimination on the basis of age, race, color, sex, religion, disability and other attributes in hiring, training, promoting and firing.

The firm must be able to clearly articulate a legitimate reason for selecting a particular employee for a work force reduction. If an employee can demonstrate discrimination based on a federal or state protection, the employer may be subject to a lawsuit, as well as severe fines and penalties.

Employers may consider providing employees with a financial severance package, which is contingent upon a signed release from the employee. The language used in these agreements is regulated, to a certain degree, by federal and state laws, and must contain certain verbiage. A poorly written agreement can increase exposure and ultimately work against the employer.

Emily Franchi is the loss prevention specialist for employment practices with Camico (www. camico.com). For Camico policyholders who have Employment Practices Liability coverage and 1 to 30 employees, she provides support on a variety of human resources management issues, focusing on employee relations and legislative compliance for the workplace.

For information on the Camico program, call Camico directly at 800-652-1772, or contact: (Upstate) Reggie DeJean, Lawley Service, Inc., 716-849-8618, and (Downstate) Dan Hudson, Chesapeake Professional Liability Brokers, Inc., 410-757-1932.