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How to Avoid Getting Sued by Your Employee

by Michelle Fleckner / July 10, 2017

For a small or medium business, one employee lawsuit could have life-altering consequences, endangering the health of the firm you've spent your life building. These lawsuits are up by 400 percent in 20 years. While the figures are scary,  you can protect yourself from the crippling expense and devastating consequence of most HR lawsuits.

The Data on Employee Lawsuits

According to the Equal Employment Opportunity Commission, there were 88,778 allegations of workplace discrimination in 2014, and 133 lawsuits filed. Race was a factor in over one-third of the incidents and sex (gender, sexual harassment, and pregnancy-related employment discrimination) was a factor in 29.3 percent of incidents. Employees claimed discrimination over disability 28.6 percent of the time, and age-related discrimination 23.2 percent of the time. Troublingly, over 40 percent of the alleged incidents were retaliatory. 

The EEOC returned $22.5 million in relief to wronged employees in 2014. As the numbers show, there are serious financial ramifications if you are sued by the EEOC, from the cost of defending your organization to the damages your business must pay if found guilty. 

While the data shows that many employees feel they were discriminated against at work, it is often a surprise for employers when a lawsuit is formally filed. Rather than believe your company is immune from a lawsuit — and risk a nasty surprise when one is filed — doesn't it make sense to acknowledge that the risk is not only real but is growing, then take steps to protect your workplace and reduce the risk?

5 Types of Lawsuits You Need to Guard Against 

These 5 types of lawsuits are common and defensible: 

  1. Personal injury - Whether an employee is hurt in an accident or develops a chronic pain condition as a result of work conditions, these lawsuit are common. While you pay for worker's compensation insurance to reduce your financial liability, it's smart to be proactive about workplace safety. By implementing training, responding proactively to safety issues on site, and cultivating a culture of safety, you can protect your staff from injury and refute legal allegations that you were negligent or otherwise shirked your responsibility as an employer. 
  2. Overtime - The Fair Labor Standards Act governs overtime pay. Under the act, employers must monitor the hours all staff work and pay overtime when required. Employees that are hourly and non-salaried are eligible for overtime pay when certain conditions are met. If you fail to pay overtime, or alter time records of employees so you do not have to pay overtime, you could be sued. 
  3. Discrimination - As the EEOC data shows, it's more common than you might think to file for discrimination. "Protected classes" under the law — where employees are allowed to file for discrimination if they feel they were unfairly targeted — include race, national origin, color, religion, disability, age, sexual orientation, family or marital status, and veteran status. Employees who belong to one or more of these classes and who believe they were working satisfactorily can file a lawsuit if they believe they were treated unfairly. For instance, if an employee may believe they were denied a promotion or faced reduced hours at work because of their status, they can file. Established protocols, for instance, in hiring or promoting from within can help disprove the employee's allegations of discrimination. 
  4. Harassment - Sexual harassment is perhaps the most well-known harassment charge, but employees can also file lawsuits if they were verbally or emotionally harassed (i.e. workplace bullying). These incidents are particularly easy to avoid as employees will often try to settle matters in HR before initiating a lawsuit, so employers have a chance to investigate and respond appropriately before matters escalate. 
  5. Wrongful termination – Employees can file for wrongful termination if they believe their termination was unlawful, for instance if they were fired after whistleblowing or after taking time off to care for a family member. As with discrimination, the onus is on the employer to disprove the employee's allegations though evidence and record keeping. 

By preparing to avoid these 5 common lawsuits, you can greatly reduce the odds of an HR lawsuit.

How to Avoid an HR Lawsuit

Even if the employee's lawsuit is frivolous, you must still defend against it. This can be costly for your business. The matter of reputation cost is a factor if it is reported in the press. It should go without saying, measures you take to lower your risk of the HR lawsuit are worth your time and money. 

These steps will help your HR team follow best practices. In the event that you are sued, you'll have what you need to prove your side of the story. Better still, by following these steps you'll reduce the odds of an incident escalating to a lawsuit and avoid the headache of getting sued. Incorporate these practices at your workplace: 

  • Document everything. Document every interaction with an employee from initial interview to exit. A paper trail will be invaluable in the event someone sues. Have employee reviews and performance evaluations recorded. When there's a need for discipline — say, for an attendance record issue — write everything up. Documentation isn't just for problem employees; it can help you prove that an employee has met all the benchmarks for promotion (or conversely, that another has not). 
  • Train managers. When you devote time to train your resources, you will avoid a lot of issues. Supervisors and managers must be trained in sexual harassment, workplace bullying, discrimination, and worker safety. It's also advisable that you train supervisors on managerial skills, as this will equip them with the decision making and critical thinking skills needed to handle any issues that arise with sensitivity, and potentially help you avoid a lawsuit by escalating sensitive matters up the chain of command. Employees, as well, should receive training in these areas, especially as regards staying safe on the job. 
  • Comply with federal, state and local laws. Be familiar with federal, state, and local laws regarding employment discrimination. When you evidence familiarity with laws, you are less likely to be sued in retaliation by an overzealous attorney (and, of course, more likely to win a suit by demonstrating your awareness of critical laws). Along with learning about the current laws, you will need to stay educated on top of any changes to laws including overtime pay, hours, wages, and FLSA changes. 
  • Be consistent. Be consistent with all employees, and ensure that workplace policies are consistent as well. If you unintentionally favor certain workers or create policies that punish another class of workers, this could be considered discrimination. One example would be if an employee asked for a day off for religious observance and you denied the request. If only employees of a certain gender were promoted in a recent wave of promotions, you could be sued for gender discrimination unless you could prove none of the other candidates were qualified. The best defense against these cases is to create fair policies for all workers, enforce rules evenly, and make sure your employees adhere to the same legal standards. 
  • Update your rules as policies change. Employers must adhere to the Fair Labor Standards Act, state wage and hour laws, and federal wage and hour laws. Top areas where employers get into trouble here are paying overtime pay incorrectly or mis-classifying workers as independent contractors. If you incorrectly interpret rules or polices, you could be sued by the state or federal Department of Labor. 
  • Document everything clearly. You never know what you may need, or when a conversation sheds new light on a situation. When documentation is a top priority at the organizational level, it will be easy to dig through an employee's records to find evidence that supports your side of the story. It's critical that any problems with conduct in the workplace be documented, but it's also important to keep a paper trail for accomplishments and benchmarks. This can help you prove, for instance, that a candidate who earned a promotion did so in a fair manner, so you can beat a charge of favoritism. 

Keeping Proper Documentation

As a general best practice, strive to make sure documentation would tell the whole story of what happened, even if you were not there to add context. While it may seem like an undue burden on staff to keep significant records, these records will save you significant time (not to mention stress) if an employee files a lawsuit.

When it comes to something like progressive discipline, it's critical that your paper trail prove that your organization took steps along the way to fix things. This can disprove an employee's claim that they were unfairly targeted. 

Develop guidelines for performance evaluations. Managers should strive to be truthful and thorough when rating employees, especially when someone is underperforming. A rating that does not accurately reflect an employee's performance not only makes it harder to prove a case later on, it prohibits the employee from having a growth experience. 

Instruct managers to document verbal conversations as well as email exchanges. After a face to face meeting with an employee, managers should take notes on what was said and how the individual responded. Proper documentation of face to face conversations can help you avoid "he-said-she-said" allegations.

In some cases, managers may worry about terminating an employee and create excessive documentation leading up to the termination. This strategy can backfire, lending support to an employee's claim that a firing was retaliatory, for instance. Documentation should always be balanced, consistent, and fair across the board. If you start keeping more detailed records around one individual's late arrivals, for instance, it's best to give all late arrivals the same notice. 

Documentation will also show you where your organization may be at risk of a lawsuit. By documenting performance reviews and promotions, for instance, you might find that a cultural value of gender parity or diversity in hiring is not being upheld when promoting employees. When something like this comes to light, your organization can take positive steps to reinforce your commitment to diversity and gender parity, perhaps by viewing gaps on a resume with more lenience, since women are more likely to take time off to care for ill relatives. Whenever you notice patterns in the data, you have the opportunity to be a more inclusive organization, so the record keeping can benefit your business in other ways. 

What to Do If You Are Sued

While these steps will help you avoid the majority of lawsuits, you never know when someone will file a claim. An employee may feel they were wronged and decide to lash out, even if you did everything correctly. In this case, all you can do is comply with the proceedings, remain calm, and trust that the truth will come out. 

As soon as you are aware there is a lawsuit filed against you, retain counsel. The sooner you act, the more time your attorney has to familiarize themselves with the individual's employment record and put together a plan. The worst thing you can do after a lawsuit has been filed is go into denial about it — yet this is precisely what many do! 

Stay calm; panicking about baseless allegations not only wastes time and energy, it can distract other employees from doing their jobs.  If you've incorporated these suggestions into your human resources department and if the accusation is baseless, then the evidence is on your side. Rather than engage with the plaintiff, refer all matters to your attorney. Your attorney will build a case that disproves the plaintiff's allegations, they will find witnesses who can corroborate your story, and they will use the paper trail of documentation to show that you acted in good faith. 


Platinum Group is a full service human capital management resource that allows businesses to manage their payroll, benefits, compliance and other various human resources functions in a way that maximizes efficiency and eliminates redundancies.

For more information about Platinum Group please visit our website.

Platinum Group is headquartered in Asheville, NC with locations in Raleigh, NC; Greensboro, NC; and Charlotte, NC.

Tags: Payroll & Human Resources Employee Lawsuits

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Michelle Fleckner

Michelle Fleckner

Michelle joined the team in 2017 as VP of HCM Solutions. Her interest is in helping companies identify areas where streamlining and automating would benefit their HR & Payroll departments. Her strengths are organization planning, revenue generation, customer retention & business process automation.