The Clarity Blog

4 Common Employee Lawsuits & Tips to Prevent Them


Think about this:

An employee at your jewelry business continues to arrive late to his shift. After a month of this occurring and no change in behavior, you decide that it's in your best interest to fire this person.

Now, did you just make an effective management decision, or commit a misguided human resources error that could potentially cost your business hundreds of thousands of dollars?

It may have seemed like a reasonable action to take at the time, but remember that there is usually more than one side to a story.

Could it have been that this employee thought he was indeed arriving on time and felt that his were never informed of his tardiness? After not being able to locate a position description, employee handbook, performance review, or written warning that addressed his behavior, a case could be made for wrongful termination.

Continue reading for tips to prevent employee lawsuits

In today’s litigious society, the accusations don't always stop there. Charges of harassment and discrimination can also be filed and the resulting settlement or verdict could be enormous.

Unfortunately, such lawsuits are becoming more common and can significantly impact business owners – especially owners of small businesses that don’t have the benefit of staffing a dedicated human resources department or legal professionals.

However, being proactive and adopting proper hiring, firing, and employee-relations procedures along with adequate insurance – can help develop a workplace where these common employee lawsuits are less likely to occur.

Implement these important tips into your employment practice procedures*:

Wrongful refusal to employ a qualified applicant

Following the same screening, interviewing, and hiring procedures for every applicant is important.  A consistent and documented hiring practice can help remove any unintentional biases and will assist you in hiring the applicant that suits your business the best.

If a wrongful refusal to employ claim were made, you would then be able to show the process you went through and provide a rational explanation for the decision to not hire a qualified applicant.

Wrongful deprivation of career opportunity, demotion, evaluation, reassignment or discipline

Much like your hiring process, your review process with all employees must be consistent and well-documented. Holding regular performance reviews with your employees not only provides a healthy and productive workplace but also helps employees understand their responsibilities and your expectations.

Clarifying the criteria on which they’re being evaluated can make their jobs more satisfying and allows managers to systematically determine if the time is right to provide an opportunity, demotion, reassignment, or disciplinary action.

Your review process with all employees must be consistent and well-documented

Once again, a documented process can provide a strong argument against any claims like these that are made.

Wrongful termination

Your business’s ability to document performance reviews and clearly communicate with staff is essential, especially if a situation arises that may lead to termination or other disciplinary action. Addressing issues early on and explaining the potential implications of not meeting certain standards will help eliminate the possibility of a lawsuit.  

The most difficult part of the termination process is when you have to inform an employee of his dismissal. When doing so, always be respectful, but make the reasons for his departure known.

Your previous communications and documented performance reviews are intended to make this unsurprising to the employee if he did not achieved certain standards.

Unlawful work-related harassment, coercion, discrimination or humiliation**

Stay up to date on any applicable federal, state or local statutes that create a protected class. For example, there have been many milestone pieces of legislation at the federal level, such as:

The Equal Pay Act of 1963: If men and women perform equal work in the same workplace, it is illegal to pay them different wages.

Title VII of the Civil Rights Act of 1964: Ultimately, a person’s race, color, religion, national origin, or sex can’t be the basis of discrimination. Also, unless it poses problems to business operations, employers must reasonably accommodate the sincere religious beliefs of their employees and applicants.

The Age Discrimination in Employment Act of 1967: In addition to the protected classes defined in the Civil Rights Act of 1964, individuals 40 or older are also protected against discrimination.

Title I of the Americans with Disabilities Act of 1990: This law made it illegal to discriminate against a person who is disabled – yet qualified – in state and local governments, as well as the private sector. Much like Title VII, reasonable accommodations must be made for employees who have known physical or mental disabilities, unless it poses problems to business operations.
Sections 102 and 103 of the Civil Rights Act of 1991: As an amendment to Title I and Title VII, this law permits monetary damages in cases of intentional discrimination.

It’s important to note that these laws also make it illegal to retaliate against a person because he complained, filed charges, or participated in an investigation regarding employment discrimination.

When prevention isn't enough

Even businesses that are extremely dedicated to following these practices are still at risk for an employee-related lawsuit. An employment practices liability policy can protect your business when a delicate workplace situation arises.

Having an EPL policy with Jewelers Mutual also means that you have access to additional loss prevention tools from industry experts, such as a direct legal hotline to Jackson Lewis, LLP.

Contact us to learn how you can access these valuable resources!

*This is a brief overview for informational purposes only and does not constitute legal advice.  Consult an attorney for advice regarding your individual situation. Coverage is subject to policy terms and conditions.

**Source: Equal Employment Opportunity Commission,