|
One of the most significant, though often overlooked, benefits of tapping an AMC is the tremendous reduction in potential legal liability. BY HUGH K. WEBSTER The leading source of lawsuits and other legal claims against associations, and for-profit companies is the employment relationship. Insurance companies report that a staggering 70 percent to 80 percent of all claims made against associations and association directors and officers are employment-related. Statistics regarding court filings and the experience of association attorneys nationwide confirm these numbers. Charges of discrimination (based on race, sex, age, etc.) are perhaps the most common, but employment-related claims can emanate from any number of alleged wrongs. Federal and state statutes regarding pension issues (such as ERISA), unemployment compensation, workers' compensation, and overtime compensation also produce thousands of claims against employers annually. Further, while most attention is focused on federal employment laws, state and local laws can be even broader and more burdensome on employers. The damages or other remedies that employees can recover include everything from back pay, front pay, attorney's fees, court costs, expert witness fees, punitive damages, and mental anguish, to name a few. The good news is that AMCs relieve their association clients of the burden of employment-related liability by assuming 100 percent of the risk. This is because the individuals who staff the association are employees of the AMC, not the association. As a result, by making the decision to be managed by an AMC, an association avoids the single largest area of legal liability for itself and its directors and officers. The AMC is, in effect, an independent contractor of the association client, and it is well settled in the law that the employees of an independent contractor may seek legal recourse solely against that contractor, as their employer, and not against any firm or other person for whom the contractor performs services. In fact, there is no legal relationship between an association and the AMC employees upon which a lawsuit could be based. Certainly if an association is displeased with the performance of the staff, it has ample avenues of redress with respect to the AMC itself, but this does not translate into a legal relationship between an association and the association staff who are employees of the AMC. A core aspect of the fiduciary duty of association boards of directors is helping ensure that the association avoids liability. The prospect of eliminating as much as two-thirds or more of the potential claims against an association, therefore, must be given serious consideration by any board. As just noted, this is exactly what an association can accomplish by choosing AMC management. Certainly there are other considerations, but this one is particularly compelling. Hugh K. Webster is partner at Webster, Chamberlain and Bean in Washington, DC; (202) 785-9500; hwebster@wc-b.com. Mr. Webster serves as legal counsel to AMC Institute and participates in the ASAE legal section council. The World of Employee Claims This is just a partial list of the kinds of claims that employees can bring:
|
|
