Why a Company May Sue an Employee
An employer can file a lawsuit against an employee for a particular reason. If an employee hurts the company in some way, the company may sue the employee. The company may seek compensatory damages, punitive damages, attorney fees, injunctive relief, and any other form of remedy the law permits. A company may sue an employee for breach of contract, invasion of rights, violation of covenant not to compete, theft, or even fraud.
When an employee is terminated, the company might sue for defamation. This is particularly common when the employee is terminated due to bad behavior, but the employee denies the bad behavior and tells others that he was terminated because the company is discriminatory. In such cases , the company might sue the employee for defamation per se (without the need to show damages) if he or she claims that the company is committed to deviant behavior (is racist or sexist).
A company might also sue an employee who stole trade secrets or breached a confidentiality agreement. Employers often require employees to sign confidentiality agreements to protect trade secrets, customer lists, proprietary information, and other information. If an employee starts using this information after leaving the company, the company might sue for either breach of contract, misappropriation of trade secret, or both. California law, for example, has a penal code specifically against unauthorized computer data access.
The most common reasons a company might sue an employee after termination is not fraud or stealing company property. The vast majority of disputes are related to money and benefits, whether for unpaid wages, overtime, commissions, vacation time, pensions and 401(k)s, bonuses, insurance and medical reimbursement for post-termination treatments.
Legal Grounds to Sue an Employee
Legal Preconditions for Suing an Employee
For a company to have the legal grounds to sue former employees, several prerequisites must be satisfied. One of the primary requirements is the existence of an enforceable contract between the parties, which the employee has breached.
The most straightforward and enforceable contract is a written employment agreement between the company and the employee. For example, a commission employee who contracts with the company to a certain level of sales revenue, but fails to generate that revenue per the agreement can be successfully sued for breach of contract. Similarly, an employee who, at the outset of his or her employment, executes a non-compete agreement but later engages in competition may be successfully sued for breach of contract. In such cases, the existence of an enforceable contract between the company and the employee is critical.
However, even if a company does not have explicit written or enforceable agreements with its employees, it may still be able to successfully sue an employee. For example, if an employee signs a non-compete agreement and subsequently violates it, the violation can be deemed a crime per se, as an employee’s post-employment work is subject to trade secrets laws. Still other types of contracts may be implied contracts or covenants. For example, where an employee breaches an understanding that he or she will not release certain information to competitors, the employee may be successfully sued.
How Does a Company Sue an Employee
The company needs to file a lawsuit against an employee in court and serve the employee with the lawsuit. If an employee does not have the means to afford a lawyer, the company can file a lawsuit with a request for free legal representation, through Legal Services of the Virgin Islands. Most lawsuits filed with the company as the plaintiff are filed against the employee as the defendant(s). The company as the plaintiff will need to pursue the lawsuit by attending hearings and litigation. Someone will need to be designated as the employee’s agent or representative to receive any notices of hearings and other documents that may be sent from the court. The company will also need an attorney to represent the company as a party in the case. The attorney will provide the legal expertise required to sue an employee and is needed for all aspects of the case. An attorney can also determine if pursuing a lawsuit against the employee is worth the time and expense.
If a time restraint might prevent the company from suing the employee, the court can allow for a proceeding before filing the complaint. This is called a special proceeding.
Consequences to Employees
The consequences of a company suing a current or former employee can vary depending on the allegations made by the company in its lawsuit. For example, if a company sues an employee for actual theft, it may be trying to recover property that the employee allegedly took. In such an instance, the company may be seeking to recover the value of specific property that it can identify and equitably divide between the company and the plaintiff-employees. In these cases, employees risk losing the actual property or the market value of that property. Companies may also sue employees for violating legal obligations, like confidentiality agreements or non-compete contracts. A lawsuit of this nature may seek injunctive relief, essentially asking the court to block the employee from engaging in the misconduct alleged. For example, suppose your prior employer sued you in an effort to prevent you from working for a competitor. In this case , a court may grant an injunction that prohibits you from working in the competitor’s business for a specific period of time. This injunction should not go on indefinitely, but it is within a court’s power to prevent you from working in the same field as your prior employer for a limited time. Today, lawsuits to recover damages in a civil court usually come with a financial penalty. That is, the plaintiff may be awarded monetary damages for the losses caused by the defendant’s conduct. For example, if your former employer successfully sued you in a non-compete agreement case, the court could potentially award the plaintiff all of the revenues your former employer lost when you worked for its competitor. Most employment lawsuits are filed against former employees because law firms often develop their civil litigation practices by representing companies and businesses, and these cases are more common than those for prospective or current employees.
Preventative Measures for Employees
It is always better to prevent a lawsuit than to defend against one. There are many steps an employee can take to ensure that he or she does not end up in court against his or her former employer. One of the most easy-to-abide by and most important rules is to know one’s own contracts. If you do not know about contractual obligations, such as non-compete agreements, non-solicitation agreements or confidentiality agreements, you are unlikely to be aware of the types of legal consequences you could face. You should know if you are bound by any such agreements. If you are unaware of any agreements and your employer brings a lawsuit against you – you cannot then claim that it was all a mistake. As long as such contracts are understandable, you will be bound by them. As such, the most important information is to do your own research into what exactly your company may sue you for. If you believe, for example, that your employer has been monitoring, surveilling or hacking into your email, your best measure to prevent a lawsuit would be to delete your work email – especially if the contents of your work emails could harm or spoil the company’s reputation. Even if you have done nothing wrong, the best option to avoid being sued is to minimize your risk. Additionally, even if you are able to look at what your company can do to you, what can you do to your company? Your best defense is to act in good faith and with professional judgement. This means ensuring that you do not take any actions outside of the bounds of your work duties and responsibilities. For example, if a new project is unfolding at work, it may be beneficial to sit back and not offer your input – instead following and completing the task as you are instructed. If you have a bad gut feeling about your involvement in the new project, it does not matter how much the company desires this project to be completed decently and in a timely manner – it is not worth putting yourself at risk for your employer.
Alternatives to Lawsuits
Before a company considers filing a lawsuit against an employee, there are several alternative dispute resolution (ADR) methods that it might pursue. These options include mediation, conciliation, facilitation, case management conference, and arbitration. A company may even offer to have a neutral arbitrator decide the case. (See our article on Alternatives to Litigation for various types of dispute resolution clauses.)
If a company has a written or verbal dispute resolution policy , the company can require the employee to follow the procedures in the policy. If the policy directs the employee to follow certain procedures, but the parties follow other procedures, then they may be found to have waived the benefits of the policy. If a company has an ADR policy but has not required the employee to follow the policy, the company has not waived its right to require the employee to follow the policy.
The employee can refuse ADR if the employee believes that it does not provide the employee with fundamental fairness.