My Employee Is Suing Me, Now What?

Business is slow. Things are not working out. Or whatever other excuse you gave when firing your employee was not enough to prevent him or her from hiring a labor law attorney to sue you and your company for various labor law violations and maybe even for wrongful termination.

Many of my employer clients complain that “I was so good to him.” “I bought him lunch everyday.” “I helped her by giving her a job eventhough she is an illegal alien.” Or, “I loaned him money.” How can he sue me? Easy, it does not matter how nice the employer thinks they were to their employee or if the employee is an illegal alien. if an employer violates the labor laws, they will most likely get sued.

So now the day has come. A stranger knocks on your door and confirms your name. A stack of papers is handed to you while being told “You’ve been served.” The complaint looks menacing and demands an obnoxious amount of money in damages. What do you do now?

First, note the date that you were served. You have 30 days from there to file a response to the lawsuit. If you are late, the employee’s lawyer can seek to enter a default judgment against you.

Next, gather up all of the documents you have about this employee, including their resume, pay records, time records, performance reviews, tax forms, applications, etc. Then, find an attorney who practices employment law and actually has trial experience. Consult with the attorney to discuss the strategies and defenses. However, before you sign the retainer agreement, you must make a business decision about the fees and costs.

Defending a lawsuit is expensive. Even if your lawyer agrees to lower his rate to below $200 an hour, you can expect to pay $2,500 to $5,000 a month through to trial. During trial, the fees and costs will skyrocket. And, in the end, even if you win, you will most likely not be able to recover your attorney’s fees and costs from the employee. The downturn is that if you lose, not only have you lost the money you spent on your own defense, you will have to pay whatever the judge or jury awards to the employee in addition to his or her attorney’s fees and costs. The amount of attorney’s fees and costs I have been awarded when I win cases for my employee clients range from as low as $90,000 to as high as $350,000.00.

Thus, carefully consider your options before deciding to fight. If you are eligible for a Chapter 7 bankruptcy, you should consider this route as it will wipe away most lawsuits and debts for you. Consult an experienced bankruptcy attorney for more information. You should also consider makng an early settlement offer directly to the employee.

There is no law that prevents an employer from directly contacting the Plaintiff employee to try to settle the case. In fact, this is what the Courts encourage parties to do. Depending on how the employment relationship ended, it may be a good idea to make a friendly visit to the employee’s home or even a phone call and try to talk things out with the goal of settling the claims out of court.

If you can’t settle the claims directly, and bankruptcy is not an option, then you have no choice but to fight to protect your business and your assets. Ask your lawyer to arrange a custom fee agreement with you to fit your budget. Most lawyers will be happy to do so, and if yours won’t, find another lawyer who will fight for you in your budget.

In order for the Plaintiff to prevail, they must put on evidence that you violated the law and thus owe them money, such as unpaid overtime wages, stolen tips, paystub penalties, etc. Unfortunately, if you have been paying a fixed salary to your employee in cash with no paystubs or time records, you will most likely lose because of the fact that California’s labor laws are designed to protect employees. Remember, if you lose at trial, you may lose big. If there is no chance that you can win, then you should minimize your risk and loss by settling through mediation or a settlement conference. During a mediation or settlement conference, a third pary neutral, such as a judge or experienced attorney, will meet privately with you and your lawyer, and separately with the Plaintiff and their lawyer to try to settle the case. The mediator or judge will terrify you about the horrible losses you will suffer if you lose at trial, and will do the same with the Plaintiff with warnings of their potential losses that if they win and can’t collect they judgment against you. However, note that the Plaintiff has much less to lose than you in this situation. Remember that because employees will be entitled to recover their own attorney’s fees and costs from you in most cases, it will be a good idea to try to mediate as early as possible to prevent their lawyer from racking up the fees and costs to earn more money. If you are going to mediate, do it as soon as possible to save money. The longer you wait, the more likely that the litigation process will stir up emotions and make things very ugly. Once that happens, you will have to pay more money to settle or risk losing everything after trial.

In the end, consider a lawsuit as any other business matter and accordingly you must make a business decision about how to handle it. The worst thing you can do is to make a decision based on raw emotion.

Please note that the information I am providing here in this entry, or in my website is NOT to be construed as legal advice nor is it meant to form an attorney-client relationship. If you want a free legal consultation, please call or email me anytime.