What can an employer do to minimize the risk of a lawsuit by a laid-off employee?
The best way to avoid a lawsuit is by providing a severance agreement in which the employee releases the employer from any claim. The best time to do that is at the time of the termination, so the employee isn’t out of work six months down the road, worried that he or she won’t be able to get another job and decides to file suit. That person will probably sue the former employer for a lot more than what they would have accepted in the severance agreement.
That’s the best way to get around a potential lawsuit, but it’s not cheap. As an employer, you have to be able to defend that the severance was a fair settlement of potential claims that the employee could have against you. It has to be a reasonably substantial amount of money. It can’t be $100; we’re talking in the thousands or tens of thousands of dollars.
But the exact amount is tricky, because once you start this practice, you’re going to be measured against it in the future.
Once a suit has been filed against you, what do you need to think about?
If you have employment practice liability insurance, notify the carrier because it will likely assign an attorney to the case. Or if you don’t have insurance, contact your corporate attorney who can make referrals, or ask other business owners who have gone through a lawsuit who they would recommend. Then interview at least two of the attorneys, ideally more, to determine if that person is aligned with you on how to approach your case.
You also need to secure all documents, both electronic and hard copies, that relate to the case. Don’t delete or change anything, and make sure you keep everything. It could be months or more than a year before you get to court, and that is not the time to be looking for e-mails.
You need to be very careful about who you include in knowledge of the suit, because you don’t know who at your company is friends with the disgruntled former employee and who’s going to share information with that person. And the fact that there is a pending lawsuit is not something that you want to announce to the whole company anyway.
Be discrete about how you manage data relating to the case. Often you’ll need to notify the IT person, because that person is the one securing the data, but you need to communicate that the matter is confidential and should not be discussed.
What advice would you give an employer who is facing a lawsuit?
It’s a distraction and it’s a challenge to manage your focus on the day-to-day business matters. The most successful management of lawsuits are the cases in which employers are able to classify the suit as just another business issue. Put it on the agenda of items that you’re dealing with and keep it in that perspective, rather than having the Chicken Little reaction that the sky is falling.
Know that you will get through it, it will be resolved one way or the other, and life will go on. Be confident in knowing that other business owners have been through it and survived.
S. A. “Sam” Murray is CEO of ManagEase. Reach her at (714) 378-0880 or [email protected].