What Do You Need to Know About Your Legal Rights as an Employer?
When people think about legal disputes between companies and employees, they often imagine scenarios where an employee is bringing a lawsuit against their employer. However, it is also possible for a company to take legal action against an employee who has caused financial or reputational harm to their business. If you’re an employer who is considering suing an employee, it’s essential to understand your rights and what steps you can take to safeguard yourself and the company you’ve worked so hard to build. Resolvere Law PLLC has extensive litigation experience, and we can leverage our knowledge and skills to help you craft an appropriate agreement and/or pursue a case in order to protect your interests.
Some clients may have existing employee or contractor service agreements, which need to be reviewed or updated; and others need assistance preparing them. Some employers may likewise have specific concerns and need assistance with a non-compete agreement, for example, which needs to be crafted with care and may include restrictions for future employment in a defined period of time and geographic scope restrictions for future employment opportunities. A common thread to employer – employee or contractor agreements includes the protection of confidential data, trade secrets, customer lists, etc.
When Can a Company Sue an Employee?
Unfortunately, it can be more challenging for a company to successfully sue an employee or former employee than for an employee to sue a company and win, but it is possible. An essential part of any business litigation case that a company must consider is what grounds they have for taking legal action.
The law only allows employers to sue employees under specific circumstances. An experienced business litigation lawyer can evaluate your case and determine if you have valid grounds to sue. The following are six of the most commonly cited grounds for lawsuits against employees.
Violation of Non-Solicitation or Non-Compete Agreements
Companies work hard to build their brand, reputation, and customer base. To protect your business, you may require employees to sign agreements or clauses as a condition of their employment.
Non-solicitation agreements prohibit employees from poaching customers from your company after moving to a new employer or starting their own business. A non-compete agreement can prevent an employee from taking a job within the same field in the same geographic area or working for a competitor. While some states do not allow non-compete agreements, Arizona courts will enforce an agreement if it is properly written, has a reasonable time limit and conditions, and is for a legitimate business purpose.
Theft of Company Property or Trade Secrets
If an employee steals company property, such as computers, tools, commercial vehicles, or machinery, they can be held liable for the losses they caused the company. Destruction of company property can also lead to a valid lawsuit. Sometimes the stolen property is less tangible, but the effects of the theft can be just as harmful. Employees may take company knowledge, processes, formulas, recipes, or other information considered a trade secret. This situation often overlaps with an intellectual property dispute, particularly if the employee utilized their knowledge at another company.
Breach of Fiduciary Duty
An employee has a duty to act in the best interests of their employer. If they keep business leads or other opportunities for themselves during the course of their job with an eye to changing employment or starting their own company, they can be subject to legal action. The employee is harming their employer by taking away opportunities for contractual relationships and interfering with the conduct of the business.
Sometimes employees leave on bad terms and may make angry statements about your company. These statements are usually considered opinions and are protected by free speech. However, if the employee knowingly makes false public statements that could harm your company’s reputation or business, you may have grounds for a lawsuit, even if you have not yet suffered any monetary losses.
Non-Disclosure Agreement (NDA) Breach
Some jobs involve dealing with confidential or proprietary information. A non-disclosure agreement is a contract that prohibits an employee from discussing the sensitive information they learned during their employment. Breaching this agreement can open an employee to a civil lawsuit and serious financial penalties.
Violating an Employment Contract
Employment contracts may include various clauses governing an employee’s relationship with the company during and after their employment. For example, many companies have provisions that prevent individuals who have quit from offering their former coworkers job opportunities at their new place of work.
This stops people from raiding valuable employees after they leave. Some contracts include stipulations about how much notice the employee is required to give the company if they are quitting, especially if they are in a role that could be difficult to fill. Professional lawyers for workplace dispute mediation can help you create enforceable contracts and assist you with your litigation needs when necessary.
Can an Employee Be Sued for Negligence?
Generally, an employee cannot be held liable for negligent actions, even if those actions caused harm to your company. Employee mistakes and carelessness are considered one of the risks of doing business. While the at-fault employee may be terminated with cause, they usually can’t be held financially responsible for their error. However, there are some exceptions. If the employee’s actions are particularly egregious and rise to the level of “gross negligence,” they may be liable for damages. Also, if the employee’s negligent actions result in a lawsuit against the company, the employer may take legal action to seek indemnity and recover their losses from the employee. Negligence cases are complicated and highly situation-specific. We recommend consulting a skilled lawyer to learn more about your legal rights in your unique circumstance.
When Should I Reach Out to a Lawyer for Help?
The law surrounding lawsuits filed by employers against employees is complex. It can be beneficial to consult with a litigation lawyer when considering your legal options or as you move forward with a legal claim. There are a myriad of situations that may require the retention of counsel, including obvious situations that involve the theft of tangible equipment or the destruction of property; and other situations may be more subtle and include employees who steal from the company by using its resources, funds or property to secure new employment, which may be a breach of contract.
As an employer with best practices in mind, you should have a lawyer review your hiring practices, employee manuals, and employee agreements. You may want to consult with a lawyer if you are considering terminating an employee, given potential legal risks associated with doing so. Or you may need to contact our firm if you have a situation that demands immediate attention and action.
If you are unsure of whether you need an attorney, the best course of action is to schedule a consultation. During this meeting, you will have the opportunity to discuss the specifics of your case and receive guidance on how to proceed. Don’t hesitate to contact Resolvere Law PLLC at (480) 568-1327 today for assistance.