Many employers, especially small businesses, think of their employees like family. They feel a close bond with their teams, united by a common goal to drive the business forward. And very often, that may be true. But occasionally, a current, past, or prospective employee becomes disgruntled because of a real or imagined slight on the part of the employer, and they sue.
Cases of employee lawsuits at large, well-known companies often make headlines. However, a small business may be just as likely to find itself as a defendant in a lawsuit where the consequences can be even more dire to the business. In fact, research indicates that one in five small and mid-sized businesses (under 500 employees) will face an employment charge, which will cost an average of $125,000 to defend, including expenses such as attorney’s fees and settlement costs.
Employees may sue their employer for any number of reasons, justified or not. Some of the most common reasons include:
This is the single biggest reason employees sue. Retaliation occurs when an employee blows the whistle on something they think the employer is doing wrong, but then feels as though they have been punished for doing so. This can create a setting for retaliation.
Many lawsuits are brought against employers for wrongful termination. Treat every termination with respect, since a terminated employee may feel that he or she has nothing left to lose. Make sure to follow federal, state, and local legal procedures to the letter. It is often better not to surprise an employee. If he or she is not cutting it, explain where the work is not up to your standards. Speak with your Human Resources representative or attorney about how next to proceed, including documenting every email, phone call and meeting you have with the employee regarding their performance.
Although most employers understand the seriousness and consequences of harassment, it can occur even if the perpetrator is not the employee’s supervisor or even by someone outside the company. Employees have brought suits against employers who did nothing to stop harassment by customers or vendors of the company – and they’ve won. Be vigilant in your efforts to maintain an appropriate and safe working environment, and make sure that those who demonstrate offensive behavior are dealt with and made to know that such conduct is not welcome at your business.
A common thread in all employee lawsuits comes down to this: the employee feels that they have been treated unfairly. Even companies that go to great pains to ensure fair treatment of employees can still be sued. Even if a suit has no merit, the cost to defend your business can be significant, both in terms of time, money and your reputation.
Every family has conflict, even your business ‘family.’ Take the time to understand why employees might sue and how you can prevent it. Fostering a professional environment and encouraging employees to report concerns before they become larger issues will help avoid potential litigation, allowing you to better ensure that employees are happy, treated fairly and your business performs as it should.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.