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What Goes Around . . .

Making promises to employees and then giving them the boot? They'll be back--carrying lawsuits that could damage your company.

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This story appears in the October 2001 issue of Entrepreneur. Subscribe »

What's piling up almost as fast as the number of newlydefunct dotcoms? Lawsuits filed by former employees of thosecompanies, people who were relying on inflated promises of bigmoney. In Minneapolis, former employees of Wwwrrr Inc. sued theWeb-based learning company after it shut down withoutwarning-and without paying two weeks of wages or reimbursingemployees for expenses. In the Silicon Valley, a top executive suedthe company where she'd worked for conspiracy, claiming thatshe was purposely fired right before her stock options would havevested. Wherever the New Economy is slowing down, employees who gotburned are filing suit over fraudulent inducement, breach ofcontract or violation of labor law.

"But You Said . . ."

Jeff Tanenbaum, anattorney with Littler Mendelson in San Francisco, calls the trend"disappointment lawsuits." With the labor market tight,owners of fast-growth small firms lured people away from stablejobs with promises of wealth. Within months, some of thosecompanies went under, leaving the employees with a goose egg.

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