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How To Protect Yourself From Employee Lawsuits

 A lawyer stands behind his desk, holding out a paper with the word lawsuit in capital letters across the top.

Owning your own business can be a way for you to work on your own terms and allow you to offer opportunities to others through employment. At the same time, having employees also comes with certain risks, including being named in employee lawsuits. Fortunately, there are ways you can protect yourself. An experienced business litigation and employer defense lawyer from Schwab & Gasparini may be able to explain more about the steps you can take to protect yourself against employee lawsuits. Consider contacting one of their offices to learn more: Syracuse office at (315) 422-1333, Albany office at (518) 591-4664, or White Plains and Hudson Valley offices at (914) 304-4353.

Why You Are Vulnerable to Employee Lawsuits 

When someone chooses to become an employer, they place themselves in a position of authority over someone else. They are responsible for the actions their employees take on behalf of the business and may be held legally responsible for them. Employers also take on certain obligations, including following federal and Chapter 31 of the Consolidated Laws of New York, which governs labor and employment throughout the state. Employers who violate these laws can face legal action against their business. 

Risks of Employee Lawsuits 

An employee lawsuit can do significant damage to a company. Some of the potential consequences employers may face when sued include:

  • Losing money – If the employer is found guilty of the allegations, they may be required to pay the plaintiff significant monetary damages. Even if the employer is vindicated, they may still lose money in legal fees, including the costs of hiring an attorney, as most employers facing a lawsuit prefer to have their business represented by a legal professional. 
  • Developing a bad reputation – Employee lawsuits can cause negative publicity that can affect a company’s goodwill and profit margin.
  • Paying increased insurance premiums – Even if the claim is resolved through insurance, an employer may be facing increased insurance premiums when it is time to renew their insurance policy.

Most Common Employee Lawsuits 

There can be many different types of employee lawsuits. Some of the most common include:

  • Wage and hour violations – These violations include not paying employees minimum wage as set by New York State Department of Labor, not paying overtime when required, or not paying for the hours an employee actually works. 
  • Discrimination – Employees are generally protected from discrimination by the United States Equal Employment Opportunity Commission in the workplace due to their race, ethnicity, color, nationality, religion, sex, age (if 40 or older), or disability. These federal protections include the right to be free from workplace harassment that rises to the level of a hostile work environment. 
  • Wrongful termination – Employees who are fired may feel wronged and may file a claim based on wrongful termination. New York is considered an at-will employment state, so either party to the relationship can end the relationship for whatever reason, as long as it is not an illegal reason, such as discrimination on the basis of a protected status or in retaliation for a legally protected action. Nonetheless, employees may file wrongful termination suits when they believe their employment contract has been breached, the reason for termination was illegal, or they had an implied employment contract. If a business has established in an employee contract grounds for termination that are more restrictive than state law, then in general both employer and employee may be bound by the terms of a contract both have signed, as long as the contract itself is held to be legally valid. 

Ways To Protect Yourself From Employee Lawsuits

Fortunately, employers are not completely at the mercy of whether an employee wants to sue or not. There are some proactive steps employers can take to protect themselves from employee lawsuits.

Follow the Law

Before hiring their first employee, employers should learn about the various laws, rules, and regulations with which they will need to comply. There are a number of rules employers will need to follow regarding employee pay, documentation, and confidentiality. Additionally, businesses may need to put certain documents and policies in place, such as anti-discrimination policies and workplace safety provisions. If you need assistance in creating appropriate documents and policies, Schwab & Gasparini may be able to assist you.

Documenting compliance with these various rules is also important. Employers may especially wish to maintain the following forms of documentation::

  • Job descriptions
  • Employee records
  • Performance reviews
  • Safety audits
  • Employee manuals or handbooks
  • Safety trainings
  • Remediation trainings

By following the various laws and consistently applying documented company policies, employers may be able to avoid many legal claims against their businesses. Documentation can help employers defend themselves if they face false allegations. 

Conduct Investigations

If misconduct is reported, it is important that employers conduct a workplace investigation to determine if the allegations are founded. Conducting a prompt, unbiased investigation can sometimes protect the business from liability and demonstrate to the accusing party, as well as to authorities if needed, that the employer is taking the allegations seriously and acting on them. In instances where the allegations prove to be founded, taking appropriate action and documenting it carefully can also help in avoiding a lawsuit or mitigating its damage to the company’s prospects.

Classify Employees Properly

Some employers classify employees as “exempt” from overtime pay calculations mandated by state and federal laws in order to avoid having to pay those employees overtime wages. However, if employees are misclassified in this way, the company may wind up owing the aggrieved employees unpaid wages and having to pay penalties.

Another common wage and hour violation claim that can lead to employee lawsuits is that a worker has been misclassified as an independent contractor when they are really an employee. Some employers try to outsource work to independent contractors in order to avoid providing them with benefits and complying with the complex rules reserved for employees. In some cases, businesses may also wish to work with independent contractors to complete tasks that are not part of daily operations, or to expand their potential manpower or breadth of expertise for the limited duration of a special project, when it might not make sense to add a new position to the permanent payroll. However, if an employer is found to have misclassified an employee, they may be responsible for compensating the worker commensurate with what they would have earned as an employee versus as an independent contractor. Employers concerned about ensuring appropriate employee vs. independent contractors may wish to consult the resources provided by the Internal Revenue Service (IRS).

Purchase Insurance

In addition to a general liability policy, employers might also consider purchasing employment practices liability insurance. While the terms of this type of insurance can vary, it generally provides protection against employment claims based on the following:

  • Discrimination 
  • Sexual harassment
  • Wrongful termination 
  • Breach of contract
  • Mismanagement of employee benefits
  • Mistakes in the hiring, firing, or disciplining of workers

Some employers are wary of paying additional insurance premiums, but these often pale in comparison to the type of money the business may have to pay to defend against an employee lawsuit. The cost of this type of insurance may depend on several factors, including the following:

  • Size of business
  • Industry 
  • Type of business
  • Number of employees
  • Risk factors, such as a history of previous lawsuits

Consider Retaining a Lawyer

Some employers opt to hire a lawyer. While this is not required by law, an attorney may be able to assist by evaluating the company’s existing practices and recommending procedures to ensure compliance with all relevant rules.

Consider Contacting a Business Litigation and Employer Defense Lawyer for Help

Employee lawsuits can negatively affect a business for years to come. Therefore, it is important to take steps to protect yourself against them. An experienced business litigation and employer defense lawyer from Schwab & Gasparini may be able to review your situation and explain some proactive strategies for protecting your business from costly and time-consuming litigation. Consider contacting one of their four New York offices for an appointment: Syracuse at (315) 422-1333, Albany at (518) 591-4664, or White Plains and Hudson Valley at (914) 304-4353.

Sun Jan 21 2024, 12:00am