What to Do If an Employee Sues You or Your Company

Stay calm, getting sued by an employee does not mean you'll experience into an insurmountable loss.

learn more about Ejiofor Francis

By Ejiofor Francis

undefined undefined | Getty Images

Opinions expressed by Entrepreneur contributors are their own.

Research reveals that over one in every 10 small business owners get sued by their employees or customers. A study from the U.S. Chamber Institute of Legal Reform also showed 43% of small businesses were either threatened with a lawsuit or battled with one.

Lawsuits can do tremendous financial and emotional damage, but there are smart ways to handle employee lawsuits to ensure that you protect your company and its finances, and are able to focus on business cash flow, sales and your other employees.

Why employees sue a company

Irrespective of the level of care, concern, great pay, and good working environment you provide your employees, there may still be unsatisfied workers who feel they've been treated unjustly. And if that's the case, these workers may take extra steps to show their displeasure, and that may be evident in litigation.

More so, employees who believe they are unfairly treated may sue for retribution. A lawsuit may also be filed just to make up for the finance that will be lost as a result of the job termination. Accordingly, there are different reasons for employee lawsuits and some of these are:

Wrongful termination

● Wage and salary violations

Injury due to negligence on the part of the employer

● Violation of the Immigration and Nationality Act (INA)

● EEOC federal workplace discrimination laws violations

● Harassment at the work or uncomfortable working conditions

● Fired for bad performance even after being applauded for good performance

How to reduce the level of threat from an employee lawsuit

The best ways to reduce the level of threat to your small business:

1. Expect the lawsuit

Even before a business lawsuit is filed, you'll be sent a legal demand letter that is either written by the employee in question, their attorney, or another entity. This letter often requires that your company takes corrective steps. The letter may also threaten to sue your business if the demands are not met. Accordingly, send the demand letters to an attorney with the right level of expertise. They'll be able to examine the content of the letter and determine its credibility.

2. Seek legal help

The next move, if you do get sued, is to seek legal help or advice from a professional defense attorney or law firm. You may already have a lawyer that handles your company's legal cases, but it is better to resort to an attorney that specializes in handling a particular lawsuit.

For instance, whether your company is faced with a criminal case, civil case or an employee lawsuit, it's best you seek an attorney who understands the basic phases of criminal lawsuits, civil lawsuits or employee lawsuits respectively and on time. Strategically, this is to ensure that they can handle every complex nature of the case. More so, It will prevent you from attracting more legal issues to your company. Much more, you'll have more understanding of what you're dealing with and what could potentially come out of the lawsuit.

3. Do not contact the plaintiff directly

Do not contact the plaintiff directly, given that you may say or do things that may implicate you in the law court. Communication will be established with the employee by your attorney and that of the plaintiff's. And lest we forget, you need to respond to the lawsuit within the stipulated time frame you were given.

4. Safeguard your finance

At this point, you need to protect your finances be it those from the business or your personal income. If there's the slightest chance that there will be a trial, you need to protect your finances from being claimed legally. In this case, you can get good business insurance that will protect your finances. There is liability insurance which helps save your business from any potential claim that may be laid on it.

5. Contact your insurance provider

If you already have an insurance provider, you also need to reach out to them. There are business insurance policies that cover small businesses when lawsuits of this nature arise. However, do not automatically assume that your insurance will cover you. This is because the circumstances of the suit may make it non-coverable by the policy. Nonetheless, an employer's liability insurance will help to cover lawsuits from your employees.

6. Remain calm

While this may sound like a difficult thing to do especially if you're angry or feeling frustrated about the lawsuit, it is better to stay calm and be optimistic that things will work out. You also need to ensure that your business processes are running smoothly and not affected by the legal action.

7. Protect yourself from future lawsuits

Unarguably, the lawsuit you may be facing now may not be the last of its kind. Other employees may want to take the same path, which is why you need to create a solid HR foundation that will involve updating the employee handbook. Also, employees can be offered anti-harassment and anti-discrimination training and a well-detailed procedure on how complaints should be filed.

Be smart about protecting yourself

Getting sued by an employee does not mean you'll run into an insurmountable loss. For the latter not to happen, you need to smartly plan how to handle these threats. It'll ensure at the end of the day, you do not draw more legal problems while trying to handle the one at hand. Much more, it will not be at the expense of your small business.

Ejiofor Francis

Entrepreneur Leadership Network Writer

Entrepreneur, Freelance Writer

Ejiofor Francis is a freelance writer, researcher, physicist and advocate of high-quality digital marketing. He has over five years of experience helping companies create winning content distribution strategies. You can check out his company website EffectiveMarketingIdeas.com for more information.

Related Topics

Editor's Pick

Have More Responsibilities at Work, But No Pay Bump? Use This Script to Get the Raise You Deserve.
Black and Asian Founders Face Opposition at All Levels — Here's Why That Has to Change
Business News

This OnlyFans Star Was Once Part of a Fanatical MLM Cult. "I Was Forced Into Celibacy."

Cami Strella was lured into a multilevel marketing scheme but escaped to start her own six-figure-a-month business.


Invest in Yourself: 10 Things Every Working Woman Should Do This Year

When striving for success, it is easy to forget about your mental and physical health. But without health, you cannot fully succeed. Follow these ten lifestyle strategies for success in your personal and professional life.

Business News

'Completely Absurd': The Average U.S. Male Can't Fit Into Universal Studio's New 'Blatantly Fatphobic' Mario Kart Ride

Mario Kart: Bowser's Challenge formally opens to the public as a part of Super Nintendo World inside of Universal Studios Hollywood on February 17.

Thought Leaders

5 Small Daily Habits Self-Made Millionaires Use to Grow Their Wealth

We've all seen what self-made millionaires look like on TV, but it's a lot more subtle than that. Brian Tracy researched what small daily habits these successful entrepreneurs adopted on their journey from rags to riches.

Business Ideas

55 Small Business Ideas To Start Right Now

To start one of these home-based businesses, you don't need a lot of funding -- just energy, passion and the drive to succeed.