Can An Employer Sue an Employee?

While it is common knowledge that employees have the legal right to file lawsuits against their employers for issues such as discrimination or wrongful termination, the reverse scenario, where employers sue their employees, is less discussed but equally significant.

Understanding Employer and Employee Rights

Employment law serves as the guidepost for understanding the rights of both employers and employees.

The Legal Shield: What Protects Employees?

Employees enjoy a set of protections under employment law, serving as a "legal shield" in the workplace. These protections fall into three primary categories: unfair treatment, workplace safety, and wage and hour issues. For example, laws like the Civil Rights Act safeguard employees against unfair discrimination and harassment. In another instance, OSHA regulations guarantee a safe and healthy working environment. Lastly, wage and hour laws ensure employees receive suitable, timely pay. However, these rights are not an absolute defense. An employer can take legal action if an employee participates in illegal activities such as theft, breach of contract, or confidential information disclosure.

The Employer’s Perspective: What Is Allowed?

Employers have a set of legal permissions within their rights when dealing with employees. While an employer’s primary focus lies in maintaining a productive work environment, protecting their assets constitutes an important aspect as well. For instance, if an employee engages in actions detrimental to the company, such as sharing trade secrets or violating non-compete clauses, the employer can resort to legal avenues for redressal. Furthermore, cases of gross misconduct, dishonesty, or fraudulent activities also provide sufficient grounds for employers to sue.

Can an Employer Sue an Employee?

An employer can sue an employee. However, this is not an everyday occurrence. There is a perception that employers cannot sue their employees or that their capacity to do so is quite limited. Reality tells a different story. If an employee breaches a contract or fails to fulfill legal obligations, the employer usually has grounds to bring a lawsuit.

An example is when an employee shares confidential trade secrets in violation of an NDA (Non-Disclosure Agreement), causing financial damage to the company. In such conditions, the employer could rightfully seek legal action against the employee. While employee protection laws exist, they do not grant immunity to employees who engage in illegal activities or actions against their employment contract.

Common Reasons for Employers to Sue Employees

Employers often need to exercise their rights and take legal action against employees under specific circumstances. Some of the more common scenarios that result in an employer suing an employee include the following:

Breach of Contract

Violating the terms of an employment contract constitutes a breach. This typically involves incidents like not meeting job duties, leaving before the contract term, or violating non-disclosure or non-compete clauses. For example, if an employee's contract stipulates, they cannot work for a competitor for 18 months post-employment, yet they join a competitor within that window, it presents grounds for a lawsuit.

Disclosure of Confidential Information

A business's success largely depends on its ability to protect confidential information such as intellectual property, customer lists, or proprietary methods. Employees entrusted with this information are obliged by law not to disclose it. Employers can sue for damages if an employee shares this information with competitors or the public, hurting the company's competitive edge.

Property Damage

Cases involving property damage generally concern tangible assets but can also include intangible ones such as patents, copyrights, or brand reputation. Employers can hold employees accountable for tangible property damage, like damaging company cars or equipment. Employers can also seek damages for tarnishing the company's reputation if an employee's actions lead to a public scandal harming the business image.

Non-Competes and Trade Secrets

Non-compete agreements restrict employees from entering into competition with their previous employers within a specific period and geographic scope.? However, the current law and regulations involving non-compete agreements are in flux. The federal government and individual states currently have often contradictory approaches in this area. Employers need to be able to adapt depending on what the final law and regulations may become.

Trade secret violations occur when employees disclose a company’s secret methods or formulations to competitors. Violations of either condition permit employers to sue. For instance, if an employee from a renowned software company discloses their coding algorithms, which are trade secrets, to a rival company, it can lead to serious financial damages and legal repercussions.

Steps Employers Need to Take Before Suing

Employers wanting to pursue litigation may need to take specific steps before they can sue an employee. These steps generally include the following:

Consulting a Legal Professional

Before heading into a legal battle, employers often seek the guidance of a legal professional. This person, typically an attorney experienced in employment law, imparts valuable advice about potential legal implications and outcomes. By clearly understanding the lawsuit's scope, these professionals help employers understand whether there is a valid claim or not, considering the situation. For instance, if an employee has breached a non-disclosure agreement by leaking trade secrets, the attorney may be able to help identify and define the legal implications of this specific breach.

Gathering Evidence

After consulting a professional, employers will need to gather evidence. Critical for the suit's success, evidence includes but is not limited to correspondences, contracts, documents backing up the claim, and testimonials. They provide detailed accounts illustrating the nature and extent of transgressions committed by an employee. When an employer accuses an employee of damaging property, they will gather evidence like surveillance footage, photos of damaged property, records of expenses incurred because of the damage, and anything else that directly substantiates the claim.

Alternatives to Lawsuits

Employers do not necessarily have to file a lawsuit to resolve issues with employees. They actually have several avenues at their disposal to resolve these disputes.

Mediation and Arbitration

Mediation and arbitration serve as efficient alternatives to lawsuits. According to the Department of Commerce, in mediation, a neutral third party helps both employer and employee reach a voluntary resolution. This process emphasizes collaborative problem-solving that preserves relationships among parties. For instance, a dispute over unauthorized disclosure of company secrets can be resolved privately in mediation, thereby reducing potential damage to the company's reputation.

Arbitration, on the other hand, employs a designated arbitrator who makes binding decisions after hearing arguments from both parties. For example, if an employee is accused of breaching the terms of a non-compete agreement, the matter can be resolved in arbitration. Employers often prefer this method, as it is typically faster, more confidential, and less expensive than taking the case to court.

Internal Disciplinary Procedures

Internal disciplinary procedures offer another alternative to lawsuits. Implementing a well-defined internal process to handle employee misconduct helps maintain workplace harmony and affirm the company's commitment to justice. The process usually involves a sequence of actions, starting with an informal warning, followed by formal warnings, and culminating in dismissal, depending on the severity of the misconduct. For example, if an employee repeatedly uses company time to conduct personal business, the employer can follow the established disciplinary procedures to address the issue before considering legal action. By doing so, the company addresses the problem promptly and minimizes potential legal risks.

Conclusion

Employers have the right to sue employees for misconduct, such as sharing trade secrets or breaching contracts. However, it is crucial to consider the potential financial implications and effects of these lawsuits on the company, including morale.