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How Employers Can Avoid Lawsuits by Former Employees

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 other damages.

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 and litigation.