While employees may be friends or even feel like family, it is possible for them to sue you. Lawsuits by employees may arise despite treating employees well. They unsettle everyone, may generate hurt feelings and can threaten the integrity of your firm. But what should you do when you’re getting sued by an employee?
Don’t Assume You Are Too Small
Some business owners think they’re too small to be sued under various government rules, but that’s rarely the case. The FLSA applies to companies with a gross revenue of half a million dollars. Discrimination cases can be filed against small businesses. Depending on what state you’re in, it could be filed against you even if you have as few as four people. This means you cannot dismiss the lawsuit out of hand and you may need an attorney.
First and foremost, remain calm. Don’t get angry. You may say something you’ll regret, or worse, do something that hurts your case long term. Don’t try to explain yourself. Don’t grill them as to why they filed the lawsuit. Contact an attorney as soon as you’ve been notified of the lawsuit. Work with a firm like Tully Rinckey so that they can guide you. One benefit of bringing them in as soon as possible is that they will handle communications with the employee and/or their lawyer.
Understand the Law
The Federal Fair Labor Standards Act addresses wages and benefits. This is a common source of lawsuits by employees. The number of cases involving employees who think they should be paid overtime is booming. Contract work that blurs the line between contractor and employee is another area. Understand whether or not someone is an employee or a contractor. Take the time to become familiar with the Equal Employment Opportunity Commission’s regulations as well.
When faced with a lawsuit, you need to gather evidence. This process is made easier by having policies to document everything and retain that documentation.
Keep employee and payroll records for at least a decade. If you don’t have records of employee hours and pay, employees could claim any pay rate and hours when demanding unpaid wages. If there are reports that you paid employees in-house, the government gets involved and starts looking for unpaid taxes, too. It is infinitely safer to keep these records. You should also have a policy of formal documentation for things like employee warnings, write-ups regarding infractions and poor performance reviews.
Have Policies in Place to Protect the Company
Don’t download a company handbook off the internet; it may not comply with state-specific regulations you must meet, and it probably doesn’t address everything related to your industry or business practices. Work with an attorney to draft an employee handbook and company procedures that enforce its rules. Then train every one per these company policies. Your company should have a clear policy on how to report discrimination and harassment. Have an open door for reporting all such complaints. Set guidelines for how incidents will be reported and how the investigative process will work.
While you can do anything in your power to reduce the chances of litigation, there are plenty of reasons why an employer could be sued by an employee. The best you can do is minimize the risk of it happening and deal with it properly when it occurs.