Minimizing the Risk of Employee Lawsuits

The only guarantees against facing a lawsuit from an employee is to either enter into a severance agreement (a viable option in some situations) with each terminated employee or do not hire employees - impractical solutions for many businesses.

In cases of termination, the most common complaint from ex-employees is that he/she was not treated fairly which often stems from two reasons: (1) the cause of the termination was not disclosed at all or adequately; or (2) if the cause was disclosed, the employee was not given a chance to correct the performance deficiency prior to termination.

While for liability purposes, employers can treat at-will employees unfairly, arbitrarily and/or capriciously, it is not wise to do so as acting in this fashion can undermine morale, result in high turnover, and diminish profits/productivity. Attorneys fees and costs alone in defending a defensible termination case are often substantial.

To reduce the risk of lawsuits from ex-employees, employers should address performance issues as they arise to the extent practical which can benefit both parties. Objective and timely communication is the key. This approach provides the employee with an opportunity to correct a performance deficiency, and, for the employer, can reduce the loss in productivity/profit realized from an underperforming employee. All such communications should always be documented in a memo to the employee's personnel file which does not necessarily have to be provided the employee. If the employee denies the deficiency exists and/or refuses or is unable to make the necessary adjustment in his/her performance, an objective basis exists for termination which can protect against a lawsuit for wrongful termination in violation of public policy - the only recognized legal claim for an at-will employee.

Communication, objectivity and documentation are the keys to reducing the perception by an employee that he/she was treated unfairly and the risk of unmeritorious but expensive to defend lawsuits.