“I did nothing wrong! Fight the battle to the end.” That’s the order an angry employer gives lawyers after being served notice of a wrongful discharge suit.
But there are good reasons for a less aggressive approach: Settling out of court. Three such reasons are the cost of litigation, the finality of out-of-court settlements, and the need to get on with business.
1) Cost of Litigation
Several years ago a study by the Rand Corporation revealed a company’s average defense costs for a wrongful discharge suit were $81,000. The average payment to the employee who successfully pressed a wrongful discharge suit was $208,000. (These figures were based on California cases. Average costs for wrongful discharge suits will vary by state, and today will be higher.)
2) Finality of Settlements
When you settle out of court, you know what you get for your money. For example, you know a lump sum payment of $14,000 closes the books. There’s no admission of wrongdoing. In the future, you’re still free to fight any other wrongful discharge suits.
In a legal action, you don’t know whether your money buys you victory or defeat. Even in the best cases, when the facts weigh heavily in your favor, attorneys can’t guarantee the verdict of a fickle jury. (In some cases, juries have awarded a wronged employee more money than he or she actually requested.)
3) Get Back to Business
You don’t have enough time now to run your business. You have less time when you commit yourself to lengthy legal proceedings. Trials — and the appeals which follow — drag through the halls of justice for an eternity. But out-of-court settlements let you get on with business.
A wrongful discharge storm also clouds business decisions. For instance, Sally tells a judge after you fired her, you hired a 30-year-old man. She says this is proof you are guilty of age and sex discrimination. Every business decision you make may be viewed unfavorably in court.
What Not to Do
The Rand Corp. study examined jury verdicts in 120 wrongful discharge cases. Plaintiffs won 81 of those cases. The average compensation judgment was $388,500. But that’s not all. In 40 of those cases, juries awarded punitive damages averaging $523,170.
To avoid a wrongful discharge lawsuit, here’s what NOT to do.
- Do not say or write anything about an employee or former employee which is not truthful and accurate.
- Do not say or write anything about an employee or a former employee which you can’t document.
- Don’t make any promises you can’t keep. A jury is likely to construe a promise as a binding contract.
- Always conduct a termination interview and have outgoing employees sign a form stating they received everything they were entitled to (such as vacation pay, severance pay) and the settlement was fair. Your attorney can help draft the form.
A Contrary View
“Caving in” and settling an employee-related legal action (like a wrongful discharge lawsuit) isn’t always the best approach. Three reasons why an employer may want to defend against such legal actions are:
- The employer has a solid, strong defense which is well-documented and supported by reliable witnesses.
- Legal precedents clearly support the employer’s position.
- Settlement out of court could set a precedent that encourages other employees to file similar legal actions.
Before making decisions involving employee-related legal actions, always consult an attorney familiar with employment law.