So You’re Facing A Wrongful Termination Lawsuit: What Do You Do?

A Funny Man Is FiredYou’re strapped onto a nuclear megaton bomb with a timer, and it says 12 seconds on there. It’ll explode once it hits zero, reducing you into a pile of ash along with the rest of the universe unless you do something. Maybe you’re not specialized in weaponry or bomb disarmament, but you do have a paper clip handy, every episode of MacGyver on hand and enough spit to wad up a ball of toilet paper (however handy that may be).

You’re sweating at the brow, and adrenaline rushes couldn’t be quicker through your veins. Quite honestly, that’s no different than when you receive word that you are now facing the perilous wrongful termination lawsuit. The bane of every company’s existence

Of Course, There Are Some Companies Deserving Such Lawsuits

The labor laws are there for a reason. Don’t for one second think that some companies out there believe they can get away with firing employees for certain personal or greedy reasons. Fair is fair, and if you have to fire somebody, you better fire someone for a valid and legal reason, especially if it’s written down on a terms of agreement policy or statement upon initial employment.

That being said, even the most innocent companies out there face frivolous lawsuits, and they can put a major damper on the finances due to attorney fees, court costs and just major wastes of time. The best you, as a corporation, can do is try to weather the storm. But how?

Avoid Immediate Settlements

This is the first thing you should examine doing. Upon receiving that letter from the courts stating that you’re being sued for wrongful termination, you have a couple options — plead guilty and settle, or contest it.

The former’s not an option; the latter, though, may be a possibility, as long as you’re willing to weather that storm and take a brunt of the finances. Why can this possibly be a good thing, though?

For the sake of truth, and the fact that you have the legal industry on your side with quite possibly a terms of service agreement, employee training manual and all kinds of written documentation to prove that you had every right to fire the person — you have an immediate right to defend your company. Don’t discount that.

Settling out of court is a cop-out, basically. You’re sending the message to just about any employee that all they need to do to get a load of money in a straight bag is to threaten you in writing. The cost of settling can be miles more than if you took it to court.

Case in point, there was one case in the mid-90s — leaving the name of the company out — facing a wrongful termination suit over an employee fired for poor performance. Because that company, though, took the lawsuit to court, ensured quality representation and had the facts available for the court to review, it wasn’t hard for the case to go in favor of the employer. Sure, it took about six months of litigation and $10K in attorney fees, but in the end, for the sake of the employer’s reputation — in the long run — it’s worth every penny.

Draft Those Written Policies

Of course, you don’t stand a chance in winning against a lawsuit, even if you had every right to fire the person, if you don’t have that legal documentation. This isn’t simply due to the fact that it’s essential evidence presented for your side. Why?

Courts will make it a point to note that you obviously didn’t have any policies laid out as to why you fired the employee. One company faced that judgment back in 1998, at first thinking it would be a clean sweep due to an employee’s insubordination after repeated oral and written warnings. Testimony was clear and convincing except for one important fact: the company never actually had the legal written policies in place!

Because of that, the Department of Labor drafted the decision and mandated that the company pay $10K in legal fees, costing the corporation even higher insurance premiums. You can bet that said company then decided to draft those written policies, lesson learned, to ensure that such a case doesn’t happen again.

Keep Your Eyes Open

A good business lawyer knows that this rule is number one. As a CEO, you keep your ears to the grindstone. If you hear that there are problems in your office, write down the complaints. Get all the details. File it all in a little cabinet. Just in case you need that information for court, you can easily pull it all out and present it to your attorney as he or she licks his or her lips with delight at the “evidence.”

The point is this: you might be firing someone for some reason and not realize that the person really deserved termination for something else as well. Keep a close eye on your employees. Document everything. When you see that there are difficulties, ask your other employees for formal complaints in writing, and then be sure to issue a written warning to the offending employee in question. Keep all that information safe.

All of those actions documented can be extremely verifiable, especially if you save the notes. The employee might deny it as much as he or she wants, but the fact of the matter is this: you’ve got the papers to prove it. You can be accused of just about anything, but having all that paperwork, that proof, in your hands makes you bulletproof, to some degree.

You’ve Successfully Defused Your Bomb

That doesn’t mean, though, that you won’t get strapped onto another one some time soon. Wrongful termination lawsuits can be pretty common. Be prepared. While the quick fixes — such as a wad of toilet paper, paper clips and all those MacGyver episodes — can get you out of the tight jams real fast, soon that stress can put a damper on your business and ruin your reputation.

Take note of these strategies. They are tried and true. Many businesses were able to get out of lawsuits somewhat unscathed and better for it because of it. Do the research and make sure you standardize this with your company. It might be the best thing you’ll ever do.

Matt Faustman is the CEO at UpCounsel. You can follow his business insights on Twitter at @upcounsel.