Can an Ex-Employee Be Sued by an Employer?

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Everyone knows that employees can sue their employers for a wide variety of reasons, but some people still wonder if employees can be sued by an ex-employer. The answer, unsurprisingly, is yes, although it is more difficult for an employer to sue an employee than vice versa. An employer suing an employee for damages must have a valid legal reason, and with sufficient evidence to prove the case, the employer can win.

TL;DR (Too Long; Didn't Read)

While it is less common for an employee to be sued by an ex-employer than vice versa, it is possible.

Employee Sued by an Ex-Employer

If an employee has violated a legally binding clause from the company's policies, broken a contract or agreement with the company or has violated the law in a way that harms the employer, the employer may have grounds to sue. The lawsuit doesn't always have to be for financial gain but also can be for the purpose of stopping an employee from taking particular action, such as working for a competitor, or to force him to take an action, such as returning stolen property.

Some of the most common causes of lawsuits against employees are:

  • Negligence.
  • Breach of contract.
  • Failure to provide sufficient notice prior to resignation.
  • Defamation.
  • Breaches of fidelity.
  • Theft.

Before you decide to sue a former employee, it is critical that you fully review your company's policies and rules as well as any contracts and agreements signed by the employee with a lawyer experienced in your state's employment laws. You need to ensure your case is on solid legal ground before you go on to pursue action against the employee.

Suing an Employee for Negligence

One of the most common reasons employers contact lawyers about suing a former employee is because the employer suffered a financial loss related to the employee's negligence. Employees cannot be sued for simple negligence, but an employee can be sued for damages paid to a third party if she acted with gross negligence.

An employer may also be able to sue in limited cases where the employee was a 1). "skilled worker" who 2). took intentional or reckless actions that involved fraud or intentional wrongdoing beyond the scope of her authority and 3). she was a director or officer who should have been held to a reasonable standard when it comes to exercising business judgments, and her actions fell below this standard.

Breach of Contract

Employees are often sued by an employer for breach of contract after violating the provisions of a contract. Of course, in this case, the employee must have signed a contract that is legally binding under state law. Some of the most common reasons employees are sued for breach of contract are for violating noncompete agreements, nonsolicitation agreements and nondisclosure agreements.

If an employer wishes to sue after a breach of contract, it must act quickly in order to seek a mandatory order prohibiting the continuation of the action. The lawsuit may enable the employer to recover compensation related to damages from the breach of contract and may force the employee to permanently cease the activity.

Limits of Noncompete Agreements

A noncompete agreement places limits and restrictions on a former employee's ability to work for competing companies or to start his own competing business for a set period of time after leaving the employer.

Because these agreements can place difficult restrictions on an employee's ability to obtain future employment in his area of expertise, most states have very detailed guidelines on these agreements. In fact, California, Montana, North Dakota, Oklahoma and Oregon have effectively banned noncompete agreements, and other states have restrictions regarding how they are used. For example, in New Hampshire, the noncompete agreement can only be presented with an initial job offer or a change in job classification.

Viability of Nonsolicitation Agreements

Even in states where noncompete agreements are illegal, nonsolicitation agreements may be allowed. These contracts prohibit an employee from taking customers or other employees from the former employer.

Again, though, these are subject to a number of different rules depending on the state, so before you sue, it is imperative that you review your agreement with a lawyer who is familiar with your state's employment laws. In some states, these agreements can only prevent solicitation while the employee is still working at a company or for a certain time period after leaving the company.

Nondisclosure Agreements to Protect Information

Almost all states allow for the use of nondisclosure agreements for protecting company secrets, and if your state prohibits noncompete agreements, you can at least prohibit past employees from sharing such information with competitors in this manner. In fact, in some positions, the employee may find it difficult to avoid sharing information with a new company operating in a similar field and may therefore choose to avoid working for a competing business as a result.

Employees sometimes violate their nondisclosure agreements by stealing confidential documents or other files with the intention to share them with a competitor or the press or to use them in their own competing companies. If you believe your employee has stolen or is sharing classified information after signing an NDA, this can be grounds for a lawsuit.

Lack of Notice of Termination

When a highly qualified employee leaves a company with no notice, she can be leaving the employer in a lurch while the business spends time seeking a suitable replacement. In some cases, you can sue an employee who left without providing adequate notice if you lost revenue as a result.

The rules regarding this reason for suing a former employee vary drastically by state. In some states, you can only sue on these grounds if you specify the amount of notice required in a contract. In other states, you cannot require that an employee give a set amount of notice. In fact, in California, you cannot even require an employee to give a certain amount of notice even if you offer 100 percent of the usual compensation and benefits during that time.

On the other hand, in states without laws prohibiting mandatory notice, some employers have even won lawsuits where they did not have a contractual requirement specifying a set amount of notice. In these cases, the courts simply reasoned that a senior employee who was difficult to replace did not offer enough notification for the employer to find a suitable replacement, which resulted in the company losing money.

Employee Defamation Lawsuits

Defamation is one of those things that almost anyone can sue anyone for as long as there is just cause, and that includes an employer suing an ex-employee. In these cases, the employer must prove that the employee has said something that she knew to be false that harmed the employer's reputation. This could range from posting something on social media all the way to telling a lie about the company to a reporter.

Breach of Duty of Fidelity

Employees are expected to work to the benefit of their companies while at work, and failing to do so means they have breached their duty of fidelity. This duty exists even without a contract to make it official.

You can sue your employee for breach of duty of fidelity if you believe he took part in an activity that disregarded your company's interest during his term of employment. You are much more likely to win these cases if they are against a senior employee as opposed to an entry-level worker doing nothing more than making telemarketing calls.

Lawsuits After Employee Thefts

You can also take legal action against an employee for theft. While you probably wouldn't want to file a lawsuit against someone who stole a stapler and some pens, if an employee stole a laptop and iPad, you may very well wish to sue if he refuses to return the items.

You can also sue for intentional destruction of property if he smashed a printer or his desk or other expensive items or furniture before leaving, although you cannot sue for accidental destruction of property.

References

About the Author

Jill Harness is a blogger with experience researching and writing on all types of subjects including business topics. She specializes in writing SEO content for private clients, particularly attorneys. You can find out more about Jill's experience and learn how to contact her through her website, www.jillharness.com.