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How Can I Protect My Company After An Employee Files a Frivolous Lawsuit?
Sadly, it's not uncommon for unhappy employees to file meritless lawsuits against their companies. In most instances, it is to avoid a planned termination. If an employee has brought a frivolous claim against your company, after a reasonable investigation of the facts and law, and the purported claims do not state a viable cause of action, we can filed motions to hold attorneys, and their clients, jointly liable for pursuing frivolous claims.
However, we only can file these motions in limited circumstances, and our clients have always used the award to resolve the lawsuits. The most commonly pled employment claims either do not allow an employer to recover at all, or only limited recovery, and only against the employees themselves, not their counsel. Because the employees often times cannot satisfy any such judgment, the award is only as good as the paper it was written on.
What Should You Do?
Your options will change based on a variety of issues that are likely to change the course of how you wish to proceed. The options available will depend on a variety of factors, such as:
- the notice of claims, whether oral or written, directly or indirectly, if it is a lawyer letter, an administrative charge, or a lawsuit, and the stage of proceedings,
- the forum in which you will be adjudicating the issues are critical,
- the potential legal claims raised or anticipated, including:
- the potential legal exposure that exists beyond the employee at issue for unknown and often unrelated violations by the employer. For example, even if this employee’s claims are bogus, if we find that the employee has been misclassified under wage and hour laws either as an independent contractor or exempt employee, this will have significant repercussions for the employer because it typically effects all of the other potentially misclassified employees who are performing the same or similar functions.
In all these situations, we analyze the forum, the notice, the issues, timing, and propose options that are best suited for the employer after conducting an upfront investigation of known facts and current law.
What Happens If The Complaint is Filed Right Before We Terminate Them?
Occasionally, the day before a previously scheduled meeting to terminate an employee, that employee will send an email claiming that their supervisor has been harassing and retaliating against them. The company knows this is a frivolous accusation and made solely to avoid termination. But what should the employer do next?
You should expect to enter a lawsuit claiming, at the very least, unlawful harassment, retaliation, wrongful termination, and failure to prevent harassment and retaliation, in violation of the California Fair Employment and Housing Act. Even if you are correct that the employee’s claim is frivolous to avoid termination, the mere timing of the complaint and termination decision will raise legally viable claims.
In these situations, an immediate investigation of the employee’s allegations by a qualified investigator who has no affiliation with the parties or issues is required with the decision to terminate held in abeyance. The outcome of the investigation will dictate how the employer will proceed to minimize liability.
Speak With a California Labor and Employment Lawyer
When the facts support a cross-complaint that has caused damages to the employer, we strongly recommend pursuing all such claims, especially as it can offset any damages awarded to the employee, and regardless of collection, a strong cross-complaint is effective in defending frivolous cases and sends a strong message to your workforce. If you need helping defending against a frivolous California employment lawsuit, contact Lisa Sherman to schedule a free intial consultation at 213-341-4417. Not ready to chat just yet? Consider downloading one of our employee termination legal guides.
What is an Employee Entitled to Recover if Unlawful Harassment by a Supervisor is Substantiated?
Under California’s Fair Employment and Housing Act (FEHA), an employee who prevails on a claim of unlawful harassment is entitled to recover damages which generally include compensatory damages, which generally include, medical expenses, physical or property damages, if any, emotional distress, and economic damages, if any, caused by the harassment.
Liability lies against the supervisor in his or her individual capacity, and the employer, who is strictly liable for the actions of the supervisor.
If the supervisor is a director, officer or managing agent of the corporation or the corporation ratified (explicitly or implicitly) approved the supervisor’s conduct, and the alleged conduct meets the requirements for recovery of punitive damages, the employee may also be awarded punitive damages. In addition, the employee as the prevailing party will recover the costs of suit and “reasonable” attorneys’ fees. Intentional conduct, such as, punitive damages is not covered by insurance.
Employer Just Received Notice of a Lawsuit for Failure to Terminate Supervisor after Employees' Claims of Harassment. Now what?
You must retain experienced employment counsel to represent your company in the lawsuit. If the conduct has stopped and you did take corrective action against the supervisor, then you have abided by your legal obligations. These employees cannot demand that an employer terminate another employee merely because they are not happy with the outcome.
Your counsel should send a letter to the employees’ attorney, if represented, informing them of the law, as well as, reminding them of their legal obligations under Cal. Code of Civ. Proc. § 128.7 in pursuing frivolous claims that are not supported by the facts or the law.
What is Required Upon Receipt of a Notice of Charge of Discrimination and Right to Sue Letter?
This is the first step an employee takes before initiating legal action for violations of federal or state discrimination laws. The employee must file a charge of discrimination with the DFEH within one year of the alleged discriminatory conduct. As is typically the case, the employee requests an immediate right to sue letter from the DFEH which means that the DFEH closes its file and does not conduct an investigation of the allegations.
The employee has one year from the date the right to sue letter was issued to initiate legal action.
If you have not conducted an investigation of all the allegations in the employee’s charge of discrimination, you must do so now as the DFEH charge triggers an employer’s obligation to preserve all potentially relevant information, issue legal hold notices to persons who may be in possession of potentially relevant information and investigate. Retain experienced employment counsel immediately to further direct the actions.
Company Receives Notice of Audit by Administrative Agency. Should they Retain an Attorney?
It is highly recommended that you retain experienced employment counsel to represent you in connection with any audit. Misclassification of employees and contractors is significant because if one agency determines that members of your workforce are misclassified, your company has likely violated several other state and federal laws. The agencies typically report their findings to one another which may result in additional audits/investigations.
Retaining counsel to navigate the process and work cooperatively with these agencies is highly recommended.
Company Receives Notice of Wage and Hour Claims from Dept. of Labor Standards Enforcement. What Should They Do?
The Department of Labor Standards and Enforcement (DLSE) is the state of California’s administrative agency that enforces California’s wage and hour laws. Typically, after filing the claim, the DLSE will schedule a settlement conference with a representative who will attempt to settle the matter. If the case does not settle, it will be set for hearing. It is important that you retain counsel to ascertain exposure to liability and represent you at the settlement conference and the hearing.
Prior to retaining counsel, obtain copies of all payroll, time and vacation records, as well as copies of the final paycheck and when it was provided to the employee.
Are there any Affirmative Defenses Employers Can Rely Upon to Defeat Employment-related Claims made by Employees?
Yes, the good news is that there are a lot of affirmative defenses that are raised by the employer typically when it files an answer to a civil complaint (i.e., lawsuit) that if proven will defeat one or more claims alleged by an employee, in whole or in part.
The most common affirmative defenses include, but are not limited to:
- Failure to state a claim upon which relief can be granted;
- Barred by the Statute of limitations;
- Failure to exhaust administrative remedies required by state or federal laws;
- No standing to assert the claims or causes of action within the Complaint;
- Lack of Jurisdiction;
- Barred by Res Judicata and/or Collateral Estoppel;
- Preempted by state or federal laws;
- Improper Venue;
- Not employed by Defendant;
- Barred by Negligence/Fault of others;
- Laches (plaintiff unreasonably delayed in seeking the relief requested to the prejudice of defendant);
- Waiver (plaintiff failed to object to the alleged conduct of defendant and has voluntarily relinquished known rights);
- Estoppel (plaintiff's separate, individual deeds, conduct, omissions and actions led defendant to rely reasonably and properly on such with respect to the transactions at issue);
- Barred by unclean hands or after-acquired evidence:
- Barred by Business Judgment Rule:
- Barred by Avoidable Consequences Defense;
- Prompt Corrective Action was taken;
- Mixed Motive defense; and
- Employed at-will/Lawful Termination.
How Long Does an Employee Have to File a Lawsuit against the Company after Termination or Separation?
The statute of limitations (i.e. the time period to pursue legal action) varies depending the cause of action alleged and underlying laws that apply. Federal statute of limitations provisions set forth the limitations for suits filed in federal courts. State law statute of limitations provisions vary by state and according to the type of case or claim. In California, the statute of limitations for wrongful termination claims varies depending on the type of lawsuit filed. The most common employment claims are:
- Wrongful Termination in Violation of Public Policy
The statute of limitations based on violation of public policy is two years after the date of the termination took place.
- Wrongful Termination based upon Unlawful Discrimination, Harassment, and/or Retaliation under Federal or State Laws.
An employee has the choice of filing under Title VII (federal law) or the Fair Employment and Housing Act (FEHA -state law), although almost always, California employees file claims under FEHA because it is far more employee-friendly.
If the employee files a charge under FEHA, an employee has one year to file a charge of wrongful termination based on discriminatory, harassing or retaliatory acts. A charge is filed with the DFEH, and if the Department does not resolve the case, it issues a notice of right to sue.
Alternatively, an employee can request an immediate right to sue, in which case, no investigation is conducted and the Department issues an immediate right to sue. In either instance, an employee has one year from issuance of the right to sue notice to file a lawsuit in court.
- Wrongful Termination based upon a Breach of Written or Implied Contract
When a written employment contract is in place and the termination violates one of the provisions therein, an employee has four years to file a claim of wrongful termination. The four years will begin from the date that the breach occurred rather than from the date of termination. However, if the employment contract is implied, because of a laws or facts based on the actions and behavior of the employer and employee, the statute of limitations is two years from the date of the breach.