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Employee Lawsuit Protection

Asset Protection Tips for entrepreneurs, medical practice professionals and small business owners. How to put a plan in place to avoid an employee lawsuit.

The Equal Employment Opportunity Commission (EEOC) receives over 100,000 employee claims filed in a fiscal year resulting in nearly half a billion dollars of employer’s money being secured for relief by the EEOC. 10% of wrongful termination and discrimination cases are awarded $1 Million+ settlements, with an average of $40,000 per settlement. Legal fees for court trials in these cases average $45,000 in defense costs.

No matter how well prepared you are, you can still become victim to a Robin Hood judge who wants to transfer your wealth to an employee looking for an easy buck. Establishing an asset protection trust for your hard-earned wealth and dividing your business empire into a series of properly filed and maintained companies before the bullets start to fly is a good start. That being said, below we will discuss some additional warnings and corresponding precautions to take.

The most common employment claims are for wrongful termination, discrimination (based on many factors, age, sex, religion), sexual harassment, retaliation, whistle blowing and more. Race discrimination used to top the charts, however retaliation has become the top cited form of discrimination claim.

Unfortunately these figures are on the rise. We assist more and more business owners and medical practice owners who are concerned with employee lawsuit vulnerability. There are many reason why this is happening, both socially and economically, however it means that it’s never been more important to protect yourself and your business from an EEOC claim.

As soon as an employee files an unemployment claim, his or her mailbox is filled with mail from law firms offering free consultations boasting big payouts. It would cost a person nothing to try because a majority of these firms offer services on a contingent fee basis.

Business Protection

Carrying EPLI (employment practices liability insurance) offers limited protection to the business depending on your state and insurance policy. Depending on your your business is structured, your personal assets may not be protected.

Personal Asset Protection

Finding yourself in an employee lawsuit could be big and costly, not just in legal fees, but in your time as well. You can take your wealth off of the lawsuit radar for good with a proper asset protection plan.

Avoiding the Lawsuit

The best outcome you could wish for is to never be faced with a lawsuit. The only thing you can do is to protect your assets from lawsuits and be detailed about your employee policies and management.

Managing employees is challenging because we all want to be a nice person and well liked in the workplace. Unfortunately that’s where most of the problems arise. The most problematic management responsibility, in a legal sense, is hiring, firing and discipline in proper and effective ways.

Employee Firing and Discipline Tips

  • Have written job descriptions with responsibilities and performance expectations
  • Communicate clearly how you enforce your requirements
  • Encourage and enable employees to communicate any issues in the workplace or their performance
  • Establish a specific discipline process and high standards

Firing an employee is a process in which you, the business owner, are responsible. Here’s a four-step discipline plan for employees that can help you avoid an EEOC lawsuit.

Initially, constructive criticism, further instructions and feedback (good or bad) are delivered verbally. This is as simple as communicating to your employee that there is a performance issue or conflict in the workplace that he or she needs to assess.

If an employee’s subpar behavior or performance persists, you write down exactly what the performance issue is. Then reference the job description that they interviewed for with your performance expectations, discipline process and responsibilities clearly defined. Provide a copy to the employee. This all becomes a pillar in your case against an EEOC charge.

Before firing your employee, the final management discipline action is to have an affirmative written agreement that specifies the performance or behavior that needs to be corrected. The agreement will tie everything together, the employee agreement with employee responsibilities, performance expectations as well as your discipline plan. In the agreement the employee should agree to specific changes in his or her performance and behavior.


  • The most common mistake made by managers is not keeping records of underperformance or bad employee behavior
  • Verbal warnings and discipline often ends up into a hearsay battle
  • With detailed documentation of repeat offense with an employee signature would leave little chances of losing a lawsuit, or even finding a lawyer to sue


When it comes time to terminate an employee after all of your management efforts have failed, you must have this process defined. Start with security; access, keys, passwords, entry cards or other security items such as alarm codes should all be addressed first. A witness is recommended during this process which should include a final interview that is documented, if possible. If the employee has compensation coming, write a check on the spot (if you can), including any severance or other offering you may have at the time of termination. Finally, encourage feedback, either at the time of the final interview, or in writing later with a form that you provide.

You cannot avoid the lawsuit threat, however you can minimize your vulnerability through strong practices and policies as well as protecting your business and personal assets from being targeted in a lawsuit.

Workplace Tips

A growing field of employee issues is bullying in the workplace. Where sexual harassment lead the pack for years, today an employee can be intimidated and create an HR nightmare these days.

If you are aware of sexual harassment or workplace bullying, you must investigate the allegation quickly, fairly and have some procedures in the event that the allegation is true. This is done through having forms for written complaints, investigation and witness interview as well as a discipline action policy plan. When you investigate and document findings you significantly reduce the risk of a terminated employee having a legitimate case.

Age discrimination in today’s world plays a small role in department of labor complaints. There are baby-boomers applying for jobs and as an employer you’re not allowed to ask if they are close to retiring or other aged related questions. One client of ours, for example, was downsizing a medium sized business and chose to let go of all employees over the age of 50. It created a mega lawsuit that likely could have been avoided.