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.
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. The way to approach and defend a claim could vary significantly depending on the issues raised, and you could 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 consistent strategy from the beginning. 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 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. A good practice when shopping for EPLI is to reserve the right to select your own attorney, so you can choose the attorney you regularly trust and who is familiar with your business practices.
6. Preserve All Relevant Documents
Document preservation is critical in any legal dispute. 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, including performance evaluations, disciplinary records, and payroll records. 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 — which may involve filing a response to the complaint, negotiating a settlement, or preparing for trial. Consider whether the lawsuit had previously been filed with an administrative or government agency such as the Department of Labor, EEOC, NLRB, or an unemployment or workers’ compensation proceeding. If so, review all documents filed with the agency so that you remain consistent with your defense.
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, which can include depositions, document requests, and interrogatories. Be prepared, 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. 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.
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. Work with human resources and your attorney to review your company’s policies and practices to identify any areas that may need to be addressed. 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.
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 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.