The best way to for an employer to avoid a claim or lawsuit by a former
employee is to obtain a release from the employee upon termination of
their employment. This can usually be obtained in return for their severance
pay. Generally, unless an employee has a written contract, they are not
entitled to severance pay or extended health insurance benefits. Accordingly,
an employer can (and usually should) offer severance pay and an extension
of benefits in return for a release by the employee of all claims he/she
may have against the company.
In addition, the employee should also release any claims against any individual
employees, because they are potential defendants in a lawsuit for damages.
Many companies provide severance already, but do not obtain a release
in exchange – that is a wasted opportunity to obtain legal protection
and avoid claims and litigation. Moreover, if the employee refuses to
sign a release it is better for the employer to know that immediately,
so that you can prepare for any claim that he/she may file and also avoid
paying severance to someone who is planning on brining a claim against
you. A severance payment may be used to finance the attorney hired to
bring a claim or lawsuit against you.
If an employer has a written contract with the employee that already provides
severance, they may have to be creative to come up with something else
to offer the employee in return for the release of claims. If the employee
did not sign a release and brings a claim, an employer should contact
an attorney immediately. I would also preserve all evidence relating to
the employee’s tenure with the firm. Be especially sure to document
the basis for terminating the employee – this can mean getting statements
from witnesses and other employees while the facts are clear in their minds.
Other evidence includes emails, work product, and their personnel file.
It is important that people who can testify to the employee’s poor
performance (or any other reasons for his termination) be contacted so
that you can call on them if and when needed to be a witness in the case.
All of this is important because if an employee succeeds in bringing a
claim for damages, they could be entitled to a large recovery, including
compensation for lost wages, pain and suffering, emotional distress and
Finally, many employees can make claims, but do not. Overall, disgruntled
employees and ones who are facing financial need are the most likely to
bring a claim. Therefore, being a “good employer” is the best
way to avoid claims. Also, be especially discrete, compassionate, and
considerate when terminating someone's employment so as not to inflame
the employee or hurt their pride. Many people file suit so that they can
blame the termination on the employer, rather than themselves. Accordingly,
a good option is to approach an employee and offer them a chance to resign
before you terminate them. This allows them to save face and also avoid
the damage to their resume that being terminated from a job can cause.
Overall, terminating someone's employment is a traumatic and emotional
experience. It is wise for all parties involved to get through this event
without lawyers, lawsuits, or claims for damages. The cost of a severance
is usually outweighed by the savings in attorneys' fees, court costs,
time, and emotional capital that result from avoiding a protracted dispute