How to not get sued

a wooden judge's hammer on top of a wooden table

The answer is – don’t have a business, don’t have employees, don’t leave your house. Okay, okay, we know, that’s extreme. The reality is we live in a very litigious time and without getting into a discussion about the good or the bad of it let’s talk about how to manage your employees while minimizing your risk.


The first piece of advice we offer is to make sure that you are hiring the right people. The right people goes beyond hiring those who have the experience, education, and skillset that you’re seeking. It also includes finding people who match your company culture, are consistent in practicing the values that your company believes in, and is looking to be part of a team not just pick up a paycheck. When looking to fill a position keep this mantra in mind – be quick to fire, and slow to hire. Of course, I don’t mean fire at will, we will talk about that in a bit. Just don’t rush to fill a seat. The costs of a bad hire can reach up to $25,000! Plus the soft costs like reduced moral, reputation, lost productivity, etc.  


Next make clear your expectations for each person‘s role and what you will hold them accountable for. Then hold them accountable! We repeat, hold them accountable! Be clear, be consistent, be someone you would want to work for. When people aren’t performing talk to them immediately, don’t wait, bad news does not get better with time. And be consistent, do this for every single employee – your superstar, your weakest link, your Average Joe, everyone – hold them all accountable, consistently in real time. Then document, document, document. If it isn’t documented it didn’t happen (at least that’s what the employee or the plaintiff’s attorney is going to say when there is a dispute).

Know when it’s time to go

Know when it’s time to separate. Nobody likes terminating anybody, no matter how egregious their actions may be, it’s not fun to know that you’re taking someone’s livelihood away. But if you’ve done everything properly, meaning you made clear expectations, held them accountable, and were consistent, at the end of the day the individual losing their job is the one who’s taking their own livelihood away because they’ve been given all the tools to do their job and every opportunity to perform and they’ve chosen not to.

We’ve seen it time after time, an employer avoids the difficult conversations, waits to separate, and then when its finally to a breaking point the situation worsens and the employer has a very hard time terminating the employee without creating more risk. 

Keep it strictly business 

With all that you do in business and employment keep it strictly business. While it’s tempting to want to be friends with everyone, you are not required to nor should you try to be every employees friend. You are there boss/business owner and you are all there to perform certain duties for the success of the business, not to be buddies. Now of course we want to like those who we spend the majority of our day with but again we are not entitled to be friends with each other and as the leader being friendly with your employee – discussing things that are not work related, sharing information, obtaining information from employees that is not work related, etc. – can put you in a precarious situation if things ever go south. 

Employers are prohibited from making employment decisions based on protective characteristics (e.g. characteristics like age, race, gender, religion, and the list goes on). Employers also have a duty to protect employees from harassment in the workplace. These are complex conversations for another day, but today the key take away is that becoming too friendly with employees, and/or learning too much about them outside of a professional relationship, could result in lines being blurred. Then when allegations of harassment and discrimination are made it becomes harder to defend against them. 

It’s all about the $$$

The last tip for today is be sure you understand your State, City, County and the Federal government‘s wage and hour requirements. These are complex. Repeat, these are complex, don’t under estimate them. Overtime in California is not just 1.5 times an employee’s base rate. If you provide other compensation such as bonuses, commissions, or even things like housing allowances, you are required to include that in an employee’s compensation and calculate overtime off of that total. That’s just one example. In the state of California, we have very complex wage and hour laws, and many other states are following suit. 

Employers in all states also have to make sure they properly classify employees as Exempt or Nonexempt, and as contractors (aka 1099’ers) versus W-2 employees, and the list goes on. 

Be sure you know what the rules are that apply to you. Many people don’t fully understand them (though think they do). There is so much value in using consultants, employment attorneys, and others who are specialized in this area to make sure everything you are doing is correct. Class action lawsuits are very expensive and on the wage and hour front not difficult to create. Take for example the Paystub, one piece of required information missing could cost you up $4,000 per employee (more on that here), and every single employee would be a party to that class action. 

While this was not intended to scare you away from ever hiring an employee, it is important that you understand the risk and know the challenges ahead of time. None of them are insurmountable, but putting your head in the sand, or thinking that you definitely have everything covered (trust us we hear it often) is a sure fire way to get yourself in trouble. It happens to even the best employers. It’s hard to run a business, you’ve got a lot on your plate (most people don’t understand until they’ve been there), so don’t do it alone – seek out experts to help you so you can focus on doing what you do best, running your business. 

Need help, have questions, scared of your employees?? Just Ask Us.