How to Handle a Wrongful Termination Claim as an Employer

If you receive a demand letter, get notice of an administrative charge against your company, or are served with a complaint in an employment lawsuit, you need to talk to a lawyer.

In most cases, an employer won't hear from a fired employee after the employee's last day of work, except for handling routine matters like continuation of health insurance or returning company property.

Sometimes, however, a fired employee will challenge his or her termination. An employee might claim that he or she was discriminated against, retaliated against, or otherwise wrongfully terminated, for example. Once you learn that an employee is planning to take legal action against your company, you'll want to hire a lawyer.

How You Might Learn of a Former Employee's Claims

There are several ways you might find out that a fired employee is planning legal action. Of course, you might just hear it through the grapevine or in some other accidental way. Here are a few other ways you might learn of a potential lawsuit:

  • The employee's comments. An employee might threaten to sue during the termination meeting, claim to have hired a lawyer, or otherwise indicate that legal action might be coming (for example, by refusing to sign a release of claims). This doesn't mean the employee will go through with it, but it's a good indication that a lawsuit is under consideration.
  • A demand letter. If the employee hires an attorney, the attorney's likely first course of action is to send your company a demand letter, outlining the employee's legal claims and asking you to settle the issue. A demand letter may include an actual "demand," in the form of a requested dollar amount, or it may simply invite you to start negotiating.
  • An administrative charge or complaint. If the employee complains to a government agency, such as the Equal Employment Opportunity Commission (EEOC), a state fair employment practices agency, or the federal or state labor department, the agency will inform you of the complaint. For example, if an employee files a charge of discrimination at the EEOC, your company will receive a copy, alone with instructions about how to respond.
  • A lawsuit. It's not the most common strategy, but some employment attorneys dispense with informal demands and just file a complaint in court. (If an employee is making discrimination claims under federal law, the employee must file an administrative charge with the EEOC first, so you'll get notice that way before you are served with legal papers.)

How to Respond

How should you respond when you learn that an employee has filed or is considering legal action? It's a trick question -- you shouldn't. Your lawyer should, which means your first call should be to the company's attorney (or to start looking for one, if you don't yet have one). Everything you say and do after learning of an employee's lawsuit may have consequences down the road. Your attorney can help you assess the strength of the employee's legal claims, what evidence might exist to support or attack those claims, and whether you should consider settling or decide to fight it out. Your attorney can respond to an employee's demand letter, put together your company's response to an administrative charge, or prepare a legal response (called an Answer) to the employee's lawsuit.

It's important to act quickly when you find out an employee is planning to sue. There are short time limits for responding to a lawsuit or an administrative charge. Even if an employee hasn't yet taken one of these more formal steps, a quick response might help you nip the problem in the bud, either through settlement or through explaining why the employee's claims have no merit. An employee's attorney has only the employee's version of events to go on at the beginning. If your lawyer can lay out the evidence and information supporting the termination, it might make the attorney think twice about proceeding (or at least advise settling for a lower amount).

Don't Destroy Evidence

In employment lawsuits, employers hold many of the cards, simply because they have most of the documents, information, and other evidence relating to the employee's work history. This sometimes tempts an unscrupulous employer to get rid of evidence that might hurt its claims, figuring that the employee might never learn of it. This is a big mistake -- and it's illegal. Once a company knows that it is (or might soon be) facing a lawsuit, it has a legal duty to preserve all evidence that might be relevant to the case. In some situations, this might require a company to override its usual protocols for email purges and document shredding, in order to make sure relevant evidence is kept. An experienced lawyer can help you figure out what your obligations are, but the important thing to remember is that you shouldn't get rid of any evidence in the meantime.

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