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10 Common Employer Mistakes That Lead to Employee Lawsuits

written by: N Nayab•edited by: Jean Scheid•updated: 1/12/2011

Lawsuits are a drag on any business, taking away time and resources best spent on core business operations. Employee lawsuits are even worse, for regardless of its merits, they tend to create a bad impression. Read on for common employer mistakes that lead to employee lawsuits.

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    1. Arbitrary Terminations

    Common Employer Mistakes That Lead to Employee Lawsuits Most states allow “at will" employment, but require employers to adhere to the legal requirements and reasonable personnel practices when terminating employees.

    Firing arbitrarily, without notice or fair warning invites resentment and employees at the receiving end may take legal recourse. Terminated employees may sue for money, revenge, and or vindication.

    A basic mistake many employers make is not having an employee handbook that documents company policies and procedures, or not following the procedures outlined in the handbook when terminating employees. One essential inclusion in the employment handbook is the stipulation that employment is “at-will" and the specification that termination need not be only for “just cause." The court also considers the implied or informal contract developed throughout the nature of employment relationship, and expects employers to adhere to such conventions developed.

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    2. Wrong Terminations

    “At will termination" does not give employers unlimited power to fire at will. Various legislation and case laws place restrictions on employers firing employees for many situations. Some of such situations include:

    • Terminating employees for age, race, religion, skin color, sex, national origin, sexual orientation, or disability status considerations.
    • Terminating employees in retaliation for filing a claim with Occupational Safety and Health Administration (OSHA), the Equal Employment Opportunity Commission (EEOC), or a workman's compensation claim.
    • When the employee takes an extended leave of absence for medical reasons covered under the Family Medical Leave Act (FMLA), or taking entitled leave based on company policy.
    • Denying employees reaching some milestones that would make them eligible for special monetary and or non-monetary benefits, to cut costs.
    • Firing for non-satisfactory work performance after placing the employee in severe working conditions purposefully and with malicious intent, with such conditions not implemented across an entire workforce or department.

    One key consideration is timing. Terminating an employee soon after the employee complains of discrimination or other unlawful conduct prompts the court to decide on wrongful termination, in retaliation for employee exercising his or her rights, even when this may not be the case.

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    3. Rude Behavior

    One common employer mistake that leads to employee lawsuits is failing to treat terminated employees with dignity.

    Escorting the employee out in an obvious or heavy-handed manner without allowing them gather personal belongings, badmouthing the employee with co-workers, deducting or withholding from the employee's final paycheck, and providing negative references can all prompt the employee to seek revenge through lawsuits.

    A related mistake is where the employer threatens the employee to resign voluntarily, trying to escape lawsuits for unlawful terminations. Chances are this would only add to the chances of a lawsuit.

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    4. Broken Promises

    Another common employer mistake that leads to employee lawsuits is broken promises. The company not adhering to its promises, whether they be oral or written, related to pay, working conditions, or other matters of employment under any pretext invariably causes resentment among the employees, and may lead to lawsuits for breach of contract or promissory estoppel, besides discrimination.

    Companies would do well not to commit to anything that it is not a sure thing, or which may change with time, unless the company specifies this fact.

    Please continue to Page 2 for more reasons lawsuits are filed when an employer threatens an employee.

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    Lies and cover ups, discrimination or perceived discrimination, and the tendency to ignore problems are other common employer mistakes that lead to employee lawsuits. Such mistakes tend to slight the employee, prompting them to take revenge through lawsuits.
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    5. Lies and Cover Ups

    Common Employer Mistakes That Lead to Employee Lawsuits Lies and cover-ups are the surest way for matters to reach the court. For instance, discharging employees for performance related issues but telling them that the reason is due to job elimination is a sure way of said employees taking the matter to court as soon as the company makes new hires to replace them.

    Word of the cover-up or misdeeds by shredding documents, deleting files or throwing away documentation gets around and can sow the seeds of lawsuits as well. Honesty is still the best policy, and companies would do well to stick to the truth.

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    6. Discrimination

    Discrimination lawsuits are the most common type of workplace related lawsuits. Employees can file lawsuits accusing the company of overlooking them for promotions, denying hikes, terminations, or unfavorable working conditions based on gender, color, race, creed, religion, national origin, pregnancy, childbirth, marital status, public assistance status, disability, sexual orientation, age, or membership in a local anti-discrimination commission.

    Compliance of all federal and state anti-discrimination laws is a must for employers to prevent anti-discrimination lawsuits, and this requires tweaking the company’s anti-discrimination policies and sexual discrimination policies to reflect all such laws.

    Many companies do have such anti-discrimination policies, but managers fail to comply with such policies when making decisions, causing disgruntled employees to file charges with the Equal Employment Opportunity Commission (EEOC).

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    7. Ignoring Problems

    Another common common employer mistake that leads to employee lawsuits is ignoring problems. Failing to take heed of employee grievances, ignoring performance issues, not paying due attention to early warning signs of some brewing discontent, and not disciplining employees for some minor issues all sow the seed for long term major problems that can end in lawsuits.

    Failing to take heed of performance issues and not withholding annual hikes or favorable appraisal reports can for instance, lead employees to believe that they perform at satisfactory levels, causing resentment when ultimately punished for performance related issues.

    Ignoring pervasive conduct such as inappropriate joke emails or passing detrimental comments only increases the risk of victims taking the employer to court and also encourages others to do the same.

    Please continue to Page 3 for more common employer mistakes that lead to employee lawsuits.

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    Wage related mistakes rank among the most common employer mistakes that lead to employee lawsuits. Irrespective of the mistake, the underlying reason for the mistake is invariably managerial ignorance, and the best way to prevent such mistakes is through training.
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    8. Improper Documentation

    Common Employer Mistakes That Lead to Employee Lawsuits Very often employees feel discriminated against simply because the company does not follow set procedures when making decisions, or even when following the correct procedure, they still do not document warnings in writing.

    Employers need to warn an employee in writing of any performance or discipline issue that could result in termination, and hold a proper inquiry, allowing the employee to state his or her case before initiating disciplinary action. The disciplinary action should state a legitimate business reason for the action and remain consistent with other disciplinary actions that have taken place in similar situations.

    Image Credit: Kiel

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    9. Wage Related Mistakes

    One major area of work related litigation is wage and hour litigation.

    Common employer mistakes that lead to employee lawsuits related to wages and hours laws include:

    • Considering employees as “exempt" when paying them
    • Not paying overtime even when allowing an employee to take extra work home to catch up
    • Docking exempt employee's pay for partial day absence
    • Allowing employees “comp time" off instead of overtime pay
    • Failure to pay employees for expenses incurred in the discharge of their duties. California labor laws, for instance, require reimbursement of non-commuting mileage, cell phone expense, Internet expense, and office supplies
    • Not paying severance pay when promised by contract, written policy, or well-established practice
    • Not allowing exempt employees cash for unused vacation time even when it is allowed under company policy.

    The dangers with pay related litigation is class action lawsuits that can cause heavy liability to the company.

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    10. Training

    Very often employee anger arising from perceived unfair treatment rather than the illegality of any action generates lawsuits. Unfair treatment can take many forms such as discrimination, shabby treatment, or insulting one's intelligence through lies and cover-ups. The underlying reasons, however, remain common--the unawareness of managers. Employers would do well to train their managers on anti-harassment and sensitivity training and drive home the importance of adherence to company policies.

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    1. Gentry Locke Rakes & Moore. “Six Common Mistakes Employers Make Which Can Lead to Wage and Hour Claims." Retrieved 07 January 2011
    2. Krause Kalfayan Benink & Slavens, LLP. “California Overtime Laws: Top 4 Common Employer Mistakes." Retrieved 07 january 2011
    3. Boisvert, Robert, C. Jr. “Sure-Fire Firing Mistakes" retrieved 07 January 2011.
    4. “10 Most Common Managerial Mistakes That Lead to Litigation". Retrieved 07 January 2011.