Help Avoid Employee Lawsuits

As an employer, it is your responsibility to maintain a safe, nondiscriminatory workplace where employees are treated fairly and consistently. It is important to establish policies and procedures that clearly explain employer and employee obligations and to hold regular performance reviews that let employees know where they stand and where they need improvement. By upholding your legal obligations, consistently documenting an employee’s performance, addressing complaints promptly, and maintaining open lines of communication with your employees, you should be able to avoid most employee lawsuits.


Adopting Clear and Concise Policies and Procedures

  1. Draft clear policies and procedures. One reason that employees may feel that they were treated unfairly or fired unjustifiably is because they did not have a clear understanding of the company’s policies and procedures. It is important that your business draft an employee handbook that clearly explains the company’s rules regarding reviews, job requirements, promotion, vacation and sick leave, disciplinary process, and any other topics relevant to employment.
    • The handbook should be written in a way that is easy for an employee to understand and follow. [1]
    • The employee should confirm in writing, (dated and signed), that they have read and understood the handbook contents fully.
  2. Avoid subjectivity. While an employer has the right to create standards for employee evaluation, it is very important that each employee is evaluated based on the standards set out in the handbook. Employee obligations and performance requirements should be related to each position and have measurable goals outlined in the handbook. This gives employers a clear guide for evaluating employees and details for employees what they must do to meet the requirements for the position.[2]
  3. Have your handbook reviewed by an employment lawyer. Once you have set forth your company’s rules and regulations in an employee handbook, you should have the handbook reviewed by an employment lawyer. An employment lawyer will review your handbook and make sure it is in compliance with employment law, the Americans with Disabilities Act (ADA), and any other relevant law. A lawyer will also be able to make sure that your handbook is not misleading, and does not create any inadvertent promises to employees.[3]
  4. Revise and update your policies. You should regularly have your polices and procedures reviewed by an employment lawyer to ensure that they are consistent with evolving laws. If you update your policies and procedures make sure that you provide all employees with a copy of the new document or at least provide them notice of the new document and a link to where they can access the revised handbook.
    • If possible, you should have your employees either sign an acknowledgement that they received the document or email. If you are in a larger company or you don’t want to print the document, make sure that the document is emailed to all employees.[4]

Conducting Effective Hiring Procedures

  1. Investigate potential employees’ backgrounds. When you evaluating potential employees, it is important that you closely evaluate the person’s work history to determine whether he or she has been a problem employee for past employers. One way to evaluate an employee’s past performance is by checking his or her references. Some previous employers will only provide verification of employment but others will provide positive recommendations for good employees. You should also interview all potential employees and ask why he or she left her previous positions. The offered reason may give you some insight into the person’s work history and ability to succeed at your company.[5]
  2. Question gaps on a résumé. A potential red flag when interviewing a prospective employee is gaps in the person’s resume or many positions only held for a short time. If the person has not worked for long stretches of time or changes jobs often it is important for you to discuss this in the employment interview. If the potential employee does not provide you with good justifications for gaps in employment or for changing jobs frequently, you may want to hire someone else.[6]
  3. Explain the employee handbook. During your initial interview with a prospective employee, you should clearly outline the expectations for the position as set forth in your employee handbook. During the employee’s first day, the employee should be given a copy of the employee handbook and he or she should sign an acknowledgement stating that the handbook was received. Your human resources person or the employee’s supervisor should explain the policies and procedures and tell the employee to let them know whether they have any questions after reviewing the material.[7]
  4. Avoid making promises about the employee’s future with the company. A mistake that employer’s make and for which they are later sued is making promises that the employer does not intend to keep or cannot keep. For example, if you offer an employee a position and state that this is a long-term position so that the employee leaves his or her current job for your company, you may be creating an implied contract. If you later fire that employee after only a short period of time has passed, the employee may have a case for breach of an implied contract.
    • An employer can be optimistic about a person’s future with the company. However, an employer should be careful not to make statements that imply a definitive commitment to long-term employment, such as “We want you to retire with this company.”
    • Avoid promises about the future, including promises about potential compensation and employment.[8]

Training Effective Managers and Supervisors

  1. Educate mangers and supervisors on legal responsibilities and best practices. Regardless of the size of your company, you should have all of your managers take part in antidiscrimination training. This ensures that your managers are aware of their legal responsibilities, can recognize discriminatory behavior, and allows you to hold your managers and supervisors accountable for their conduct.[9] Additionally, in order to have a productive workplace, it may benefit your company to have your managers trained in effective employee relations.
    • Employee training for best practices can include how to document performance, give efficient and effective feedback, how to review employees for their performance rather than their individual traits, and other management techniques.
    • Management training should also include an overview of employment law, antidiscrimination law and law related to people with disabilities. By educating managers on their legal responsibilities, you are lessening the likelihood of an employee lawsuit.[10]
  2. Institute anti-discrimination policies. It is important that managers not only be instructed in their legal responsibilities but also that your business adopt policies and procedures related to discrimination and harassment. There should be a clear path for an employee to report harassment or discrimination by another employee or a manager. Make sure that your policy sets for the procedures for an employee to report his or her supervisor for inappropriate or unlawful conduct.[11]
  3. Instruct managers on how to document employee performance. It is important that mangers and supervisors document employee performance and disciplinary actions consistently and uniformly for all employees. As part of manager training, they should be instructed on how to complete employee evaluations and that all poor performance should be documented. Managers must understand that if they are going to write up one person for specific conduct that they must write up everyone who engages in that conduct. If the company has a practice of giving a verbal warning before a written warning, managers must consistently follow the company’s policies.[12]
  4. Subject managers and supervisors to annual reviews. Business owners or others should review manager’s performance and evaluate the performance reviews that the manager gave for consistency, fairness, and legality. If numerous employees refuse to sign their performance reviews or challenge a manager’s evaluation of their work, it is important for you to determine whether the manager is successfully performing his or her duties and appropriately following the companies policies and procedures.[13]
  5. Acknowledge mistakes. If your policies are imprecise or your managers fail to follow the policies appropriately, it is important for the company to acknowledge and rectify any mistakes. This may include rewriting the policies and procedures or disciplining an ineffective or inappropriate manager. It is important to handle the consequences of the mistakes fairly and treat your employees respectfully.

Communicating Clearly and Treating Employees Fairly

  1. Provide honest and direct feedback. All businesses should have a regular review process for its employees. During this process it is very important that managers give honest feedback about how the employee is performing his or her job. If you are giving an employee a bad performance review, you should speak in specific terms, explaining in what ways the person was failing to meet the job requirements. You should also provide the employee with concrete examples on how he or she can improve her performance.[14]
    • You are not judging a person on his or her personality but rather how the employee performs the essential tasks of the job.
    • Similarly, when offering praise for a job well done, that praise should be based on performance not on non-job related trait such as age.[15]
    • If your are consistently providing honest feedback about your employee’s performance, an employee should not be surprised if after numerous poor performance reviews you make a decision to terminate your employment relationship.[16]
  2. Treat your employees consistently. If you reward an employee for good performance with a cash bonus or time-off award, do not give these same benefits to poor performing employees. While some business owners may feel badly about withholding bonuses or giving smaller raises, an underperforming employee can use your awards as evidence countering a termination based on poor performance.[17]
  3. Treat your employees respectfully. It is important to respect that your employee’s have private lives and that an employee has a right to his or her privacy. You should be as accommodating as possible to family emergencies or personal obligations. This may lessen the likelihood of an employee filing a lawsuit against your company.
    • Although it may surprise you, this simple step can often eliminate or greatly reduce your chances of getting sued. Most employment lawsuits are not brought solely because of discrimination or some other legal claim, but because the boss was mistreating an employee. Managers who do not respect their employees will get sued more often. Even if a manager does nothing wrong and the lawsuit is thrown out, these cases drive up the legal costs of an organization. People do not want to sue individuals they like and respect.
  4. Be fair. While it may be that you have to lay off a number of employees due to downsizing, if you have maintained a positive and fair workplace, employees may be less likely to file a lawsuit. In order to treat employees fairly, you should follow the company’s policies and procedures, treat employees consistently, be honest during performance reviews and answer employee’s questions candidly. It is very important, with regards to disciplinary proceedings, that you handle matters consistently so that an employee does not feel as if he or she has been singled out.[18]

Addressing Complaints Promptly

  1. Establish a grievance process. It is important that you establish a clear method for making complaints so that employees do not fear retribution from supervisors or coworkers. You should also have a way for employees to dispute their performance evaluations or disciplinary actions, if they feel the actions were unfair.
    • You can have both an informal process and formal process for grievance. An informal process may be that the employee verbally reports their grievance to a supervisor and a formal process may include a written statement or other documentation of the grievance.[19]
  2. Communicate with your employees. Employers should both listen to their employees’ complaints and ideas and keep employees informed about issues that may impact his or her job. By having transparency and an open dialogue between employers and employees, you minimize the likelihood of misunderstandings that could lead to a lawsuit.
  3. Address complaints when they arise. If an employee raises a complaint, you should investigate the complaint promptly, and tell the for example a key employee is out of the office, explain to the reporting employee why there is a delay and when the investigation will occur.[20]
  4. Follow the law. As an employer, it is important that you educate yourself and your managers on employment-related law, and discrimination and harassment. By receiving training about the law, writing an effective employee handbook, creating an atmosphere of inclusivity and responding to any claims of harassment or discrimination, you can protect yourself against lawsuits.[21]
    • You may need to provide accommodations for people with disabilities.
    • You cannot terminate employees for actions related to public policy, such as serving on a jury, refusing to engage in price fixing or in retaliation for a workers’ compensation claim.
    • Do not discriminate against employees based on race, gender, age, sexual orientation, or national origin.
    • Do not engage in or allow any type of harassment in your company.[22]

Terminating Employees Properly

  1. Document performance problems as they occur. As discussed above, you should be evaluating all of your employees’ performances on a regular basis. If you have a consistently underperforming employee, you must document his or her performance, discuss the performance with the employee, provide concrete ways to improve and explain the consequences of the employee’s failure to meet expectations. By documenting the employee’s poor performance as it occurs, you have provided the employee with notice of the company’s expectations and the opportunity to improve his or her work.[23]
  2. End the employment relationship carefully. If you decide to terminate an employee for poor performance, you want to do so personally and with care. You should call them into your office and clearly state that they are being terminated and explain why. An employee who seems surprised by the fact that they are being fired is more likely to sue.[24]
    • If you fire an employee for poor performance who has consistently had positive performance reviews, the employee may file a lawsuit stating that you fired the employee for a discriminatory reason since there is no evidence of poor performance.[25]
  3. Consider offering a severance amount or other assistance. In order to keep a positive relationship with your employee, you can consider offering the terminated employee a small severance amount. Some employers offer employees a severance amount so long as they agree to sign a waiver stating that they are not going to file a lawsuit.[26]
    • Before making this type of offer, you should consult an attorney to make sure you are not violating any employment laws.


  • It is important to have open and honest communication with your employees so that they understand your expectations as well as their rights.

Related Articles

  • Fire an Employee Compassionately