An ex-employee lawsuit can be an expensive hassle, even if you eventually win. What are the best ways to avoid being sued by former employees?
A small business owner's strategy to prevent legal problems should begin well before you hire the employee. Setting rules early, and making sure everyone knows them, can pay off in the long run.
With that in mind, here are five tips to avoid legal quarrels with workers after they leave your company:
Establish standard termination policies and procedures. You, your managers, and your employees should know what grounds may lead to a firing, and the procedure to follow when that happens. Failing to explain why an employee is being fired, even if he's an at-will employee, may raise suspicions about possible illegality and lead to an ex-employee lawsuit, warns Inside Counsel, a magazine for corporate attorneys. At least two high-ranking company reps should be present when an employee is let go, the magazine suggests.
Require non-compete and non-disclosure agreements. At least one state requires non-compete agreements to be signed alongside an employment offer, Inside Counsel advises. Non-compete and non-disclosure clauses may also be unlawful if they're overbroad, so you may want to consult a local employment attorney to make sure they're on point.
Get it in writing. A written explanation about an employee's termination may work to defend you in a lawsuit. It's also wise to make ex-employees sign acknowledgments that they've returned all company property and deleted all company data from their own devices, Inside Counsel suggests.
Ensure proper post-termination actions. Make sure ex-workers get their final paychecks and compensation for unused vacation time, as required by law. Also make sure you have a plan to handle reference requests, as that could also lead to an ex-employee lawsuit.