In Focus: Protecting Your Business From Employee Lawsuits

By Douglas Lipsky

As the contemporary workplace continues to evolve, it is crucial for employers to understand their rights and obligations under state and federal employment laws and to establish policies and procedures that clarify their relationships with employees. By working with the right employment law attorney, you can protect your business from employee lawsuits.

Formalize Employee Policies and Procedures

No matter how small or large your business is, employee policies should be memorialized in a comprehensive handbook. In short, the objective of an employee handbook is to clarify the company’s expectations of all workers and to inform them of the company’s code of conduct.

In this regard, it is essential to spell out the company’s policies regarding discrimination and harassment, and the consequences for violations. In addition, a well-conceived employee handbook will cover policies such as compensation, benefits, paid time off, medical and family leave procedures, equal opportunity employment guidelines, as well as social media and internet usage rules.

Classify Employees Properly

Employees must be properly classified as exempt, non-exempt, or independent contractors and compensation for hourly wages and overtime work must adhere to the federal Fair Labor Standards Act (FLSA) as well as any applicable state wage and hour laws.

Protect Your Intellectual Property

A business that is bringing new products to the market or holding other valuable, confidential information must protect its intellectual property. While securing patents and trademarks may be a consideration, it is also necessary to utilize non-disclosure and non-compete agreements.

A non-disclosure agreement is designed to prevent an employee from sharing confidential business information with anyone outside of the company. A non-compete agreement will block an employee from working for a competitor within a specific geographic location for a certain period of time after his or her employment ends. In order to be valid, the agreement must not be overly restrictive, however. In any event, these agreements can help prevent trade secret theft, the misappropriation of intellectual property.

Obtain Business Insurance

While a general liability policy can give you blanket protection against a variety of lawsuits, there are specific types of insurance that are directed at certain disputes. Directors and Officers Insurance (D&O), for example, indemnifies directors and officers from claims that are brought against them individually over with business activity. Another type of insurance coverage, Employment Practices Liability Insurance (EPLI), covers legal expenses arising from employee lawsuits, such as discrimination, harassment, retaliation and wrongful termination.

The Bottom Line

Employment-related disputes that rise to the level of civil litigation can be costly, adversely impact a business’ reputation in the marketplace, disrupt operations and harm employee morale. With so much at stake, it is crucial to mitigate the risk of employee lawsuits.

About the Author
Douglas Lipsky is a co-founding partner of Lipsky Lowe LLP. He has extensive experience in all areas of employment law, including discrimination, sexual harassment, hostile work environment, retaliation, wrongful discharge, breach of contract, unpaid overtime, and unpaid tips. He also represents clients in complex wage and hour claims, including collective actions under the federal Fair Labor Standards Act and class actions under the laws of many different states. If you have questions about this article, contact Douglas today.