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Steps to take if an employee sues your company

As a business owner, you do your best to do right by your employees. But even so, there may come a time when you just don't see eye to eye with a worker, which results in a disagreement and potential lawsuit.

If an employee sues your company, it's critical that you don't sweep it under the rug. Even if you don't believe they have a legitimate claim, you can't ignore it and hope it goes away.

Instead, here are some key steps to take:

  • Review your employee handbook: This will provide more information related to the reason for the lawsuit, the person's legal rights and the steps you should be taking as an employer. For example, if an employee sues your company for sexual harassment, review the portion of your handbook that outlines how you should deal with such an accusation.
  • Understand the law and your legal rights: Regardless of the reason for the lawsuit, learn as much as you can about the law, your legal rights and the potential impact on your company. For instance, in the event of a lawsuit regarding overtime pay or minimum wage, take the time to better understand the Fair Labor Standards Act (FLSA).
  • Document everything: If it has anything to do with the lawsuit, make note of it and keep the documentation in a safe place. An example of this is payroll records in the event of an overtime lawsuit. You want to be able to back up your claims with facts.
  • Talk to the employee: It may be past this stage, but if you can work things out without heading to court it's often the best decision for both parties. But again, remember to document the entire conversation, as this will protect you against any lies the individual may tell in the future.

Regardless of your industry, company size or revenue, you never want to find that a current or former employee is suing you. Not only does this cost you time and money, but it can also take a toll on the way your business runs.

Understanding your legal rights and the steps you can take to protect them will give you some peace of mind during this challenging time.

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Kenneth J. Sargoy
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