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3 ways employers can reduce the risk of employee litigation

On Behalf of | Aug 2, 2023 | Employment Law

Every new addition to a company’s employee roster will mean adjustments for the organization. The company will need to cover the cost of salary and benefits, provide adequate training as someone transitions into their new role and respond to any interpersonal conflicts that may arise from the introduction of a new individual to an existing team.

Employees are as much a potential source of liability for organizations as they are the generators of company revenue. A worker’s failure could cost a company thousands if they do poor work on a construction project or turn out defective units on a production line. They might also cost a company far more if they end up suing the business later.

Employee lawsuits can cause economic hardship and can do real damage to an organization’s reputation as an employer. Thankfully, there are a few ways for businesses to reduce the likelihood of facing a costly lawsuit brought by an employee by adding special terms to their employment contracts.

Address conflict resolution

When negotiating an employment contract, many businesses integrate a conflict resolution clause that will help them head off frivolous litigation. Such clauses will require that workers or former employees pursue an amicable means of resolving the conflict before initiating litigation, such as arbitration or mediation.

Clear compensation and severance policies

Many employee lawsuits have to do with unmet wage and benefit expectations. Workers may believe they should have received a bonus or commission that they did not qualify for or receive from the company. They may believe they should receive overtime wages even though technically they are exempt. Sometimes, workers bring claims because they believe that they should have received severance pay when exiting a position at a company. Businesses with very clear written policies in their contracts about exactly what kind of compensation a worker can receive and what severance they may qualify for might be less likely to face wage and compensation-related lawsuits.

Performance and disciplinary standards

Whether a company has a progressive disciplinary system or a quarterly performance review using a specific set of metrics, it is important to have clear rules in an employee contract related to when an employee may face discipline and what consequences they may face. Adhering to those rules internally by documenting poor performance or behavioral issues will reduce the likelihood of workers bringing claims related to wrongful termination or discrimination if they end up losing their job or are unable to qualify for promotion because of their conduct at work.

Contracts negotiated at the beginning of an employment arrangement allow companies to protect against some of the risks that accompany a new hire. Putting together custom contracts after seeking personalized legal guidance is one way to reduce the likelihood of a disappointed employee filing a lawsuit against the business later.