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Protect Your Small Business from Employee Lawsuits

Employee lawsuits are one of the biggest risks that small businesses face. These legal proceedings are not only expensive and time consuming but also pose significant threat to damage the reputation of your company. Worst still, they can demoralize your employees. It is therefore imperative to protect your small business from possible employee lawsuits.

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Employee lawsuits are one of the biggest risks that small businesses face. These legal proceedings are not only expensive and time consuming but also pose significant threat to damage the reputation of your company. Worst still, they can demoralize your employees. It is therefore imperative to protect your small business from possible employee lawsuits.

Most employment lawsuits are related to wrongfully termination, i.e. if an employee feels he/she has been fired wrongfully, the disgruntled former employee can appoint employment law attorneys and file litigation against the company.

Common forms of employee lawsuits include:

  • Discrimination: According to the U.S. Equal Employment Opportunity Commission (EEOC), it is against the law to terminate an employee owing to his/her age, color, sex, religion, disability, sexual preference, national origin, and/or genetic information. Most employee lawsuits are based on discrimination. In 2014 alone, EEOC received 88,778 of these charges.
  • Discriminatory Discharge: It occurs when an employee is laid off just because he/she falls into any of the above mentioned legally protected category.
  • Retaliation:This employee lawsuit occurs when an employee is terminated due to his/her association with a legally protected activity, including
    • Reporting a federal violation committed by the company to the authorities
    • Filing a claim of discrimination
    • Participating in investigation of such a claim
    • Refusing to be involved in an illegal act like refusing to lie or distort the truth during a federal investigation
  • Harassment: This includes offensive conduct of the company related to any of the categories mentioned above. Harassment also includes physical assaults, offensive jokes, name-calling, threats, objects or pictures, or anything that interfere with the employee’s performance at work.

Typically, employers point out violation of one or more specific company policies as a reason when terminating an employee. However, citing the policies may not be enough always especially if the company has a history of such behavior. You also need to prove that the employee has actually violated a policy and provide necessary documents in support of your action. Besides, you have to prove the fact that you maintain a similar attitude for everyone else who violates the policy without any exception.

Employee laws vary from state to state. It is therefore essential to know and understand the laws related to your state in order to safeguard your business from employee lawsuits. Talking to an experienced business attorney is your best option here. For example, an Austin business lawyer can help you understand laws related to employment discrimination and complaints in Texas and how you can protect your company from possible threats.

Protecting Your Business from Employee Lawsuits

Small businesses are often targeted because people assume that they are most likely to negotiate a settlement rather than defending a lawsuit. At times, litigation proceedings are unavoidable. But as a small business entrepreneur you should do everything in your hand to protect your company from possible legal threats. Here are 3 tips to help you avoid and fight against possible employee lawsuits.

  1. Avoiding Lawsuits Related to Employee Firing and Discipline

The following are some best practices to avoid employee termination related lawsuits.

  • Have written job descriptions and clearly mention responsibilities as well as performance expectations
  • Clearly communicate across the company how you enforce the requirements
  • Encourage employees to communicate workplace or performance related issues clearly and have proper process for the same
  • Establish high standards of work ethics and a specific discipline process

As an employer you are responsible for terminating an employee. It is important to ensure that it is not wrongful termination. The following are some tips to help you in this context.

Provide feedback, constructive criticism and further instructions about improving performance and/or workplace behavior verbally as well as in written documents i.e. through emails. In other words, communicate that there are performance issues and/or conflict in the workplace that the particular employee needs to address.

If the subpar performance or behavior of the employee persists, document the same with respect to the job description and performance expectations mentioned during the time of recruitment/promotion. Provide a copy of the document to the employee and the reporting manger (if applicable) and also get it signed by the employee so that you can later protect your company from any EEOC charges.

Before firing the employee, do have an affirmative written agreement specifying the behavior or performance issue(s) that he/she needs to correct. The biggest and most common mistake made by small business owners is not having such management discipline in place.

Keeping proper records and having a management discipline actually leave little room for losing a lawsuit.

  1. Mind Your Words and Actions

Simply stay away from anything (including conducting any business and/or making public announcements and potentially slanderous statements) that are likely to be considered questionable and damage your business image. Even if you maintain proper business ethics, working for other organizations that commit shoddy business practices can ruin your company’s name and drag you to the court.

Also, limit any possible conflicts of interest. Try to avoid situations that may result in a conflict of interest.

  1. Hire a Competent Business Attorney

Appointing a business lawyer is one of the very first things you need to do when opening your start-up. The attorney will be responsible to create all legal contacts, including employment agreements. He or she will also take care of all the legal proceedings if you have been sued by a disgruntled former employee.

It is therefore essential to appoint an attorney who is familiar with your local employment and business laws and has prior experience in your particular field. Finding a good attorney, however, can be a challenge for new entrepreneurs. Ask for professional references from other small business owners or from your local chamber of commerce. Additionally, you can search online and make cold calling to find a good attorney who has experience in dealing with employee lawsuits.


Remember that defending your company against employee lawsuits is a time taking and expensive affair. It is therefore crucial to establish and enforce strong company policies and organizational procedures to avoid such legal proceedings in the first place. Consult with an experienced business lawyer who can handle employment law issues on behalf of your company on an ongoing basis, including preparing legal documents and employment contracts.