Facing an employee lawsuit is one of the most challenging situations a business owner can face. Whether it’s a lawsuit for wrongful termination, discrimination, unpaid wages, or any other issue, the process can be stressful, time-consuming, and costly. However, how you respond can significantly affect the outcome and your monetary exposure. Here’s a comprehensive guide on what to do if you find yourself in this situation.
1. Remain Calm and Professional
Receiving notice of an employee lawsuit can be alarming, but it’s crucial to stay calm. Avoid any impulsive reactions such as contacting the employee, retaliating against someone, discussing the case publicly, or destroying documents. Instead, take a moment to gather your thoughts and approach the situation methodically while being mindful of fast approaching deadlines.
2. Do Not Ignore the Lawsuit
Ignoring a lawsuit is one of the worst things you can do, take it seriously as there are steps that need to be taken right away. If you fail to respond within the given timeframe, typically 20 to 30 days depending on your jurisdiction, the court may issue a default judgment against you. This could mean losing the case automatically and being liable for damages, regardless of the merits of the claim. So, for your own good, do not postpone dealing with it or table it.
3. Review the Complaint to Determine Who is Being Sued
The lawsuit will identify who exactly is being sued. It may be several individuals, companies, and even decision-makers. An attorney can help you identify early on if those being sued need to have separate counsel as their interests may not always be aligned.
4. Consult with an Attorney Immediately
As soon as you are aware of the employee lawsuit, contact an attorney who practices employment law. It’s important to understand the type of claim as the way to approach it and defend it could vary significantly depending on the issues raised. Each claim has legal elements that require a specific approach to defend them successfully. You could also have multiple claims together in the same lawsuit, each of which must be assessed and defended. An experienced attorney is crucial early on to develop a strategy that is consistent from the beginning and will help you understand the nature of the claim, assess the risks, and guide you through the legal process. Even if you believe the claim is baseless, having legal representation is essential to protect your business.
5. Notify Your Insurance Provider
If you have employment practices liability insurance (EPLI), notify your insurance carrier as soon as possible as there are typically notice requirements in order to obtain coverage. EPLI policies typically cover claims related to wrongful termination, discrimination, harassment, and other employment-related issues. Your insurer may provide legal representation or cover some of the costs associated with the lawsuit. A good practice when shopping for EPLI is to reserve the right of selecting your own attorney, that way you can save money by choosing the attorney you regularly trust, work with and is familiar with your business practices.
6. Preserve All Relevant Documents
Document preservation is critical in any legal dispute. All information related to the employee lawsuit must be preserved, whether it is in electronic format or hard copy. If you have any document retention or destruction policies in place, you must place them on hold and consult with your lawyer to prepare a litigation hold for everyone involved within the company. Gather all documents, emails, text messages, and other communications related to the employee and the issue at hand. This includes performance evaluations, disciplinary records, payroll records, and any relevant policies or procedures. Do not destroy, alter, or hide any documents, as this could be seen as evidence tampering and could severely damage your case.
7. Develop a Legal Strategy with Your Attorney
Your attorney will work with you to develop a strategy for responding to the lawsuit. This may involve filing a response to the complaint, negotiating a settlement, or preparing for trial. Consider if the lawsuit had previously been filed with an administrative/government agency such as the Department of Labor, EEOC, NLRB, or any unemployment agency or workers compensation proceeding. In that case, it’s important to review all documents filed with the agency, including company position statements and responses, so that you remain consistent with your defense and responses to the allegations in the lawsuit. Your attorney will also advise you on how to handle internal communications and interactions with current employees during this time.
8. Consider the Option of Settlement
In many cases, settling the lawsuit out of court may be in your best interest. A settlement can save you time, legal fees, and the uncertainty of a trial. Your attorney can help you negotiate a fair settlement that minimizes your liability while protecting your business’s reputation.
9. Prepare for Discovery
If the lawsuit proceeds, the discovery phase will begin. During this phase, both parties will exchange information and evidence related to the case. This can include depositions, document requests, and interrogatories. Be prepared for this process, as it can be lengthy and invasive. Your attorney will help you navigate discovery and ensure that your responses are accurate and timely.
10. Protect Your Business and Reputation
A lawsuit can harm your business’s reputation, particularly if it becomes public. To mitigate this, be mindful of your communications and how you present yourself to employees, customers, and the media. Avoid discussing the case publicly or on social media, and instruct your employees to do the same. Your attorney can help you craft a communication strategy that protects your brand while complying with legal requirements.
11. Understand the Possible Outcomes
Lawsuits can end in various ways, including dismissal, settlement, or a court judgment. It’s essential to understand the possible outcomes and their implications for your business and your finances. If the case goes to trial, be prepared for the possibility of an unfavorable verdict, and discuss with your attorney the potential for appeals or other post-trial motions.
12. Learn from the Experience
While going through an employee lawsuit is never pleasant, it can be a valuable learning experience. Use this opportunity to consider what led to it. Was the lawsuit completely unexpected or did you identify any preliminary issues that suggested a lawsuit was coming? Work with human resources and your attorney to review your company’s policies and practices to identify any areas that may need to be reviewed. Consider implementing additional training for managers and employees, updating your employee handbook, or conducting regular audits of your employment practices to prevent future issues.
Conclusion
A lawsuit from an employee or former employee is a serious matter that requires careful handling. By remaining calm, seeking legal counsel, preserving documents, and considering all your options, you can navigate this challenging situation more effectively. Remember, the actions you take early on can have a significant impact on the outcome of the case and the future of your business.
This guide aims to provide a comprehensive overview, but every legal case is unique. Always consult with a qualified attorney to get advice tailored to your specific situation and industry.
If you have any questions or would like more information on the issues discussed above, please contact us.
Please Note: This is not legal advice and you should not act on it. At the time this article was written, the information contained within it was current based on the prevailing law at the time. Laws and precedents are subject to change, so this information may not be up to date. Always speak with a law firm regarding any legal situation to get the most current information available.