How to handle threats of litigation from former employees

Starting a business takes a lot of work between securing funding, space and talent to get it off the ground. If you have the right business and the right team to make it through the first few years, that work can pay off. However, threats of litigation from former employees can be a nightmare for business owners. And with recent layoffs in the wake of the recession, employment law claims are up.

The good news is receiving a threat of a lawsuit from a former employee doesn’t need to be the end of the world. There are some steps you can take to gather information and protect yourself in the event of business litigation.

First of all, and most importantly, don’t go it alone. Speak to a business and employment litigation attorney immediately so they can help you determine the best course of action.

If a lawsuit has been filed, look at all of the defendants named and try to figure out where your business fits in. If you are being named because you sold minor amounts of a product at issue, or because your business is only tangentially involved in the conflict, it may be possible to get dismissed from the case with little hassle.

Also consider doing some basic research on your own. You may discover that an intellectual property lawsuit has risen over a patent that is invalid or expired, for example. You should also research your business insurance policy, which may cover some legal claims.

Similarly, look into the state of any contracts you have with related parties, particularly manufacturers and suppliers if a product is at the heart of the claim. These contracts may specify who is responsible in the event of legal action.

To prevent these claims from arising in the first place, make sure your business has strong anti-harassment, anti-discrimination and anti-retaliation policies in place and try to treat your employees well in general. While employees are still working for your business, investigate any claims in good faith.

If you are a business owner facing threats of litigation from a former employee, it is essential to seek help from an experienced business and commercial litigation attorney. They can help you protect your business and seek the best possible outcome in your case.

Source: Businessweek, “When a Small Employer Gets Sued by a Former Worker,” Karen E. Klein, Oct. 22, 2012

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