What to Do When an Employee Sues Your Small Business

lawyer and client

According to the U.S. Chamber Institute of Legal Reform, 43 percent of small businesses are threatened with or have battled a lawsuit. This high percentage means that small business owners must have the appropriate protection against future litigation.

It’s also important that you know what to do in case you get sued. Lawsuits can quickly spin out of control, dealing tremendous damage to your finances and reputation. Among the most common litigation faced by businesses, the majority of them are filed by employees.

As such, you should be prepared in the event that your employee takes you to court.

1. Get legal advice from a licensed attorney

The first thing you should do is seek the legal counsel of an experienced business litigation lawyer. If you don’t have a company lawyer, make sure to look for an attorney that specializes in lawsuits such as the one you’re facing.

Your lawyer will advise you on what to do and what not to do to avoid incriminating yourself and the company. For instance, you’re not supposed to communicate directly with the employee who filed the suit. This prevents you from saying anything that can be used against you.

Following the advice of your lawyer will make it easier to build you a solid defense, reducing the threat to your business.

Review the details of the suit will the help of your lawyer. The attorney will determine if it’s possible to dismiss the action entirely. Otherwise, you’ll proceed with reviewing the allegations and preparing for the suit.

2. Alert your insurance provider

Every business should have general liability insurance. Some policies provide coverage for lawsuits, specifically ones filed by your employees. But this doesn’t automatically mean that your insurance will cover you, which is why you have to communicate with your provider early on in the litigation process.

If your policy can cover the suit, the money usually goes to your attorney’s fees, court costs, and the settlement you’re liable to pay.

3. Collect information

Client consulting lawyer

Gather all the records you have on the employee suing you and all the information related to the case. This information is a crucial part of your legal defense, which you can use in court or in arbitration proceedings.

Your lawyer will also ask for documents and other information to build your defense. Be sure to provide them with accurate, honest data to strengthen your case.

4. Work toward settlement

Your attorney will advise you to settle if they see that it’s the best decision for your business. If that’s the case, then consider settling. It may feel like giving up, but settling is sometimes the most strategic option.

A settlement makes sense if pursuing litigation would cost you sizable legal fees and if the ruling is unpredictable or possibly expensive. Settling is the least time-consuming and most cost-efficient choice, which is the best thing for your company. It also prevents the lawsuit from getting messier, hurting your reputation more.

The most important thing when you’re being sued by an employee is to listen to legal counsel. They’ll help you handle the threat and make sure that you don’t draw more legal problems on top of the one you already have.

Additionally, remember to have the necessary legal protections for your business. Get liability insurance, create a solid HR foundation, and update the employee handbook to inform your staff of the proper procedure for filing complaints.

Scroll to Top