"What Do I Do If I'm Being Sued?"

It’s no secret that employees don’t always part with an employer on the best of terms. When things don’t end well, though, there’s often more at stake than hurt feelings. If a former worker sues, the resulting litigation can cost a company dearly.

Disgruntled employees sue for many reasons, attorneys say. Common claims include wrongful termination, sexual harassment, discrimination and workplace safety violations. Oftentimes, however, the underlying impetus for the suits was a toxic work environment. Lawyer Nate Hill has some succinct advice for employers: “Don’t be a jerk.” Often, fired workers seek legal representation due to an undefined sense of unfairness or mistreatment by an unpleasant supervisor, and it’s only after speaking to a lawyer that specific illegal business practices are revealed, says Hill, an employment law attorney with Arizona law firm Jackson White. “Believe it or not, employees who are treated kindly by their former employer – regardless of why the employment ended – are often very reluctant to sue their employer, even if there is a strong legal basis to do so,” he adds.

But making the cut of an annual “best places to work” list won’t necessarily insulate a firm from all legal action, so what steps should a company take if litigation is imminent?

Check your insurance coverage. Your insurance plan may cover the former worker’s claims, but the insurer often opts to use its own legal counsel in such cases, says Gordon Berger, an attorney with national labor and employment law firm Ford Harrison. “Not reporting the claim through insurance is a mistake, as the carrier negotiates favorable rates with law firms,” Berger advises.

Contact your lawyer (or hire one). If your insurance doesn’t cover the claim, or allows you to choose your own counsel, this should be the immediate next step. Your lawyer will guide you through the process, helping you avoid costly missteps.

Document everything. It’s a good idea, in general, to have a carefully worded, attorney-vetted employee manual that spells out your policies, plus regular performance reviews, incident reports and other paperwork. “I’m a big believer in having a lot of stuff in writing,” says Marshall Atkinson, chief operating officer of Wisconsin-based apparel decorator Visual Impressions. “It’s one of those things where we’re trying to cover our bases in case there is an issue.” After being sued, having that clear documentation on hand is essential. However, don’t create new documents, such as summaries of the events leading up to the employee’s termination, without your lawyer’s OK, says Lauren Bloom, a Virginia attorney who specializes in business ethics.

Avoid the temptation to delete. Direct your employees to preserve all documents relating to the lawsuit, even if they may be embarrassing, Bloom adds. This goes for electronic communication, like emails, Facebook posts, texts and tweets, as well as paper documents. “Tempting as it may be to have problematic documents disappear, management has to establish and enforce an absolute prohibition on document destruction,” she says.

Consider settling. Litigation is expensive. Sometimes, especially if the former employee is not asking for a lot of money, it makes sense to negotiate a settlement, even in cases where the employer sees no wrongdoing, Berger says.