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According to research, about one in every ten small business owners is sued by one of their employees or customers. Additionally, according to a study by the US Chamber Institute for Legal Reform, 43% of small firms have been threatened with or have faced a lawsuit.
While litigation can be extremely costly and emotionally draining, there are prudent approaches to handle employee lawsuits that safeguard your firm and its finances while allowing you to focus on business cash flow, sales, and other employees.
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Why do employees sue their employers?
Regardless of how much care, concern, excellent compensation, and a positive work atmosphere you provide your employees, there may still be dissatisfied employees who believe they have been treated unfairly. And if that is the case, these employees may take additional actions to demonstrate their dissatisfaction, which may be visible during litigation.
Additionally, employees who believe they have been treated unfairly may sue for vengeance. A lawsuit may also be launched to recoup financial losses incurred as a result of the job termination. As a result, there are numerous reasons for employee lawsuits, including the following:
- Termination in error
- Infractions of wages and salaries
- Injuries caused by the employer’s negligence
- VIOLATION OF THE IMMIGRATION AND NATURAL RESOURCES ACT (INA)
- Violations of the EEOC’s statutory workplace discrimination laws
- Harassment at work or unsatisfactory working conditions
- Fired for poor performance despite being commended for excellent performance
Related: 6 Important Areas of Law Every Business Owner Needs to Know
How to mitigate the threat of an employee lawsuit
The most effective strategies for reducing the amount of hazard to your small business include the following:
1. Anticipate the lawsuit
Even before a business lawsuit is filed, you will receive a legal demand letter sent by the employee, their attorney, or another organization. This letter frequently compels your business to take corrective action. Additionally, if the demands are not met, the letter may threaten to sue your firm. As such, send the demand letters to a lawyer with the appropriate level of experience. They will be able to study the letter’s content and establish its legitimacy.
2. Seek legal assistance
If you are sued, the next step is to obtain legal counsel or representation from an experienced defense attorney or law firm. While you may already have a lawyer who handles legal matters for your business, it is prudent to retain the services of an attorney who specializes in managing a certain type of lawsuit.
For example, if your business is facing a criminal case, a civil case, or an employee lawsuit, it is prudent to retain an attorney who is familiar with the fundamental phases of criminal lawsuits, civil lawsuits, and employee lawsuits, respectively. Strategically, this is to ensure that they are capable of handling cases of any complexity. Additionally, it will keep your business from drawing additional legal troubles. Much more importantly, you’ll gain a better knowledge of the situation and what may result from the litigation.
3. Avoid direct contact with the plaintiff.
Avoid direct contact with the plaintiff, as you may say or do things that could get you in legal trouble. Your attorney and the plaintiff’s attorney will communicate with the employee. And, lest we forget, you must answer to the lawsuit within the time period specified in the lawsuit.
4. Protect your financial well-being
At this stage, you must safeguard your finances, whether they are business-related or personal. If there is even the tiniest possibility of a trial, you must safeguard your finances against legal claims. In this instance, you can obtain adequate company insurance to safeguard your finances. There is liability insurance, which assists in defending your firm against any potential claims.
5. Make contact with your insurance company.
Additionally, if you already have an insurance provider, you should contact them. There are company insurance packages that protect small enterprises from these types of disputes. However, do not assume that your insurance will cover you automatically. This is because the suit’s circumstances may render it uninsurable under the policy. Employer liability insurance, on the other hand, will help cover lawsuits brought by your employees.
6. Remain composed
While this may sound challenging, especially if you’re angry or frustrated about the case, it’s preferable to maintain your composure and hope that things will work out. Additionally, you must guarantee that your business procedures continue to run efficiently and are unaffected by the legal action.
7. Defend yourself against future litigation
Without a doubt, the litigation you are currently facing is not the last of its sort. Other employees may wish to follow suit, which is why you must have a strong human resource foundation, which includes updating the employee handbook. Additionally, staff can receive anti-harassment and anti-discrimination training, as well as a comprehensive protocol for filing complaints.
Related: 7 Types of Insurance You Need to Protect Your Business
Take precautions to safeguard your safety.
Being sued by an employee does not automatically imply that you will suffer an overwhelming loss. To avoid the latter, you must carefully determine how to address these threats. It will ensure that you do not create additional legal issues while attempting to resolve the current one. Much more importantly, none of this will come at the expense of your small business.