Stay Out of the Courtroom: Five Ways to Minimize the Risk of Employee Lawsuits

Every time a business owner hires or fires an employee, they face the possibility of a lawsuit. The newly hired employee may one day decide that the company owes them additional pay and benefits, or that discrimination played a role in a disciplinary proceeding. The employee who was let go may initiate a wrongful termination lawsuit.

While there are no absolute guarantees that a business owner won’t spend time and money fighting an employee’s claims in court, here we are going to address five ways that the risk of such lawsuits can be minimized.

  1. Communicate all workplace policies in writing

All employers need to put their policies in writing. An employee handbook, accompanied by stand-alone memos that announce new policies or clarify existing ones, will make the organization’s rules and expectations clear and act as a first line of defense against employment law claims. As an added precaution, all handbooks and memos should be reviewed by an attorney or human resources professional.

  1. Make employee goals objective

Employers need to use objective measures to communicate their expectations to employees. Subjective standards are much harder to defend in court. Objective reviews and feedback can also help employees do better at their jobs, bypassing the need for additional discipline or ultimate discharge.

  1. Address performance issues as they arise.

Terminated employees often claim that the reason for the termination was not fully disclosed or, if it was, they were denied the chance to correct the performance issue beforehand. Although employers can legally fire at-will employees for any reason that does not violate worker rights or labor laws, the costs of defending a wrongful dismissal claim are expensive and better avoided.

The solution is to address performance problems as they occur. These discussions should be documented and placed in the employee’s personnel file. If the employee insists that there are no problems and / or does not make the necessary performance adjustments, there is an objective basis for terminating them.

  1. Pay overtime to employees who work more than 40 hours a week.

State and federal wage and hour laws apply to nearly every employer. In California, all employees, even salaried ones, may be entitled to overtime pay unless they qualify for one or more of the exemptions (including Executive, Administrative, Professional, and Computer Professional). Overtime is defined simply as any hours worked over 8 in a day or 40 in a week. The best way to avoid the cost and interruption of compensation claims is to ensure that employees are all paid in compliance with applicable laws.

  1. Follow discrimination law.

Employers cannot discriminate on the basis of gender, race, age, disability, religion, national origin, or pregnancy status. California also prohibits discrimination on the basis of sexual orientation.

If a business owner follows these guidelines, they can substantially reduce their risk of employee lawsuits. If you’d like to discuss this important topic in greater depth, please contact me today to set up a consultation.

Integrated General Counsel
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