You want to do everything you can to keep your company out of legal hot water, don’t you?  One of the ways you can do that is by becoming more familiar with the most common types of lawsuits filed by employees and former employees.  In general, they far outnumber the amount of lawsuits filed against companies by consumers (with certain industry-specific exceptions), and generally have some of the highest financial consequences. It is in your best interest to guard against these types of lawsuit as best you can.

Below you’ll find the four of the most common types of employee lawsuits, and the steps you and your business can take to avoid them.


These types of lawsuits are filed when employees feel that their employer or their supervisor has discriminated against hem illegally.  Discrimination lawsuits are based on:

  • Race
  • Religion
  • Sex
  • Gender association
  • Age
  • Nationality
  • Disability

These types of suits are often filed after an employee is passed up for a promotion or terminated due to poor performance.  However, the employee, generally in an upset state after having suffered a figurative “slap in the face,” may be seeing discrimination where there was none to begin with.

To avoid these types of lawsuits, don’t discriminate.  Not even unintentionally.  From the hiring process right through termination you cannot discriminate based on any of the factors above.  Something as innocuous as viewing a job seeker’s photograph erroneously attached to a resume could put you in a tight situation if you decide not to hire that individual.

It’s also important to go through your company documents (employee handbook, policies, etc.) to ensure there is no discriminatory language therein.


Harassment can come from a supervisor, a boss, or even another worker. In every case the business can be held at least partially liable for the damages.  Harassment lawsuits often stem from sexually charged conversations, “off color” jokes, or active hostility toward one or more employees.  However, harassment can be non-sexual as well. Bullying in the workplace is another example of a type of harassment that could lead to a lawsuit.

To avoid these types of lawsuits, it’s important that you have an existing harassment policy on the books, and that every employee is made aware of the policy.

Next, do not tolerate harassment of any kind.  If harassment claims are made, investigate every instance thoroughly and refer to your existing harassment policies for appropriate punishments.

Never dismiss harassment claims.


Injuries are common at work.  They are also a common source of lawsuits against employers.  While there is some basis for many personal injury lawsuits, the key component of any such successful litigation is negligence.

The plaintiff must prove that the employer knew of a dangerous situation and that they failed to do anything to prevent an accident (such as repairing a faulty railing or safety shutoff).

While it’s important to respond to every safety issue brought to your attention by employees, vendors, and anyone else who visits your facilities, it’s also important for your business to be proactive.  Follow all applicable guidelines including OSHA regulations, inspect all equipment on a regular basis, ensure all of your safety equipment (fire extinguishers, eyewash stations etc.) is in working order, and give employees the necessary training they need to do their jobs safely.

Wrongful Termination

Wrongful termination lawsuits are generally filed when an employee feels they have been fired for an inappropriate reason.  Generally these lawsuits hinge on the employee’s contract (in writing or even “implied”), and to avoid a lawsuit, employers must prove the termination was a righteous one.

You can avoid wrongful termination lawsuits by keeping accurate records.  These should include employee performance reports (if any), copies of all contractual documentation, and copies of any sort of punitive measures taken against the employee.  These documents will come in handy when you have to prove that you had a good reason for the termination.

You can also avoid these types of lawsuits by “terminating with tact.”  An employee’s emotions come into play whenever such a lawsuit is filed.  If you can take measures (such as providing references or even helping the terminated employee job hunt) to minimize the impact of termination, you’ll likely earn a reprieve in the employees mind.  In essence, if you can soften the blow, the employee will be less likely to be vindictive and file a punitive lawsuit.

Settling May Not Be Your Best Option

When many businesses (both large and small) are faced with any sort of lawsuit, their first knee-jerk reaction is almost always to settle out of court.  This is generally viewed as a cost-savings measure and can sometimes save face.  However, settling (at least in some sense) is admitting culpability.

A report in the New York Times shows that while settling is often an attractive option for small businesses, it may not always be the best option.  The article references the business practices of Jeffrey Herold, owner of West Coast Trends.  The company has faced three wrongful termination lawsuits over the course of its growth.  The first two settled out of court and cost him untold (and undisclosable amounts) but the third, he fought . . . and won.  Herold kept records of conversations he had (both digitally through email and over the phone) with his sales manager.  He was able to show the court that the manager’s performance had indeed been declining and that the individual had been warned prior to his termination.  When it became clear that the manager wasn’t going to get the $2 million award he was seeking, he began dropping proposed settlement amounts until he reached $10,000.  Herold accepted this bid on the condition that the manager and his lawyer had to turn over a written apology simply to expedite the process (and curb his legal fees).

The case mentioned above is one example that shows that settling (especially before going to trial) might not always be the best option for your business.

About the author

Matt Faustman

Matt Faustman

Matt is the co-founder and CEO at UpCounsel. Matt believes in the power of online platforms to change antiquated ways of life and founded UpCounsel to make legal services efficiently accessible. He is responsible for our overall vision and growth of the UpCounsel platform. Before founding UpCounsel, Matt practiced as a startup and business attorney.

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