You Snooze, You Lose: What an Employer Should First Do When Notified of a Legal Action

woman uses magnifying glass to check contractIt is never pleasant to receive notice of a legal proceeding against you, and employers often wait until the last minute to deal with it, or do worse by trying to eliminate relevant evidence.  Employers are reluctant to hire lawyers early because they believe it will be expensive and complicated. So, what should an employer do after it receives notice of a legal action?  Do the three Ps:  hire a Professional, Preserve evidence, and conduct a Preliminary Investigation.

Hire a Professional

Should an employer hire an attorney if it receives a lawsuit complaint or other notice of a claim? Absolutely, and right away (though, if an employer has applicable liability insurance, then it should place its insurer on notice of the claim and work with the appointed defense lawyer; this article focuses on self-insured employers and employers with high deductibles or self-insured retentions) .  In California, corporate employers must hire lawyers to defend lawsuits, so there is no choice.  Individuals who are employers (e.g., sole proprietorships) may defend themselves in court, but this strategy won’t likely end well. Many employers usually don’t know whether or what information is harmful or helpful and sometimes don’t know what information should be confidential. Your innocent phone call with the opposing attorney (without your lawyer) could result in unnecessary or inadvertent disclosure of harmful information to the other side. Hiring an experienced employment lawyer will reduce or eliminate these risks.

Preserve Evidence

Be sure you preserve all relevant evidence. The evidence will be in the form of documents, policies and procedures, e-mails, text messages, website data, videotapes, photographs, and any other tangible or digital record of acts or omissions that relate to the issues and facts alleged against your company. That evidence is stored at work, on backup servers, company-issued computers and other devices, and personal computers and devices. Failure to preserve relevant evidence could eventually lead to court-ordered monetary penalties or evidence penalties, including an order barring the company from using defenses and related helpful evidence at trial or an instruction to the jury that the company purposely destroyed evidence.  It is a crime to intentionally destroy or conceal evidence that you know is relevant to a lawsuit. (Cal. Penal Code § 135). So, maintain all relevant evidence, including evidence that you “think” might be bad for you. Evidence appearing detrimental can later be explained or excluded from evidence. Again, your lawyer will help you identify the evidence issues and avoid the potential land mines of evidence destruction.

Conduct a Preliminary Investigation

As soon as possible, investigate (or preferably have your attorney investigate) the merits of the claim and of any defenses to assess liability. First, read the complaint, notice, or letter that sets forth the factual and legal allegations and consider whether the evidence supports or refutes those claims. Here’s where the assistance of counsel is of great importance. An experienced attorney knows what evidence the claimant or plaintiff needs to prove his or her claim. Also, the conclusions of the preliminary investigation, if issued by an attorney, will likely be deemed confidential under the attorney-work product doctrine or the attorney-client privilege; thus, a negative conclusion, as determined by your attorney, will be protected from later disclosure.

Second, be mindful of deadlines. There are deadlines for responding to lawsuits, to the EEOC’s complaints, and to other state and local proceedings that enforce rules in the workplace.  The opposing attorney or agency will be steps ahead of you – probably having interviewed former and even current employees to obtain information and signed statements. Do your investigation as soon as possible.

Third, be open to early resolution. If the investigation confirms there is merit to even some of the employee’s claims, the employer should explore early settlement, rather than fighting. Since many of California’s employment statutes authorize courts to award attorney’s fees to a prevailing claimant or plaintiff, it usually makes economic sense for an employer to settle “bad” claims early and before the opposing attorney has amassed a sizeable legal bill.  Early resolution can be accomplished by direct negotiations or mediation (usually by a retired judge or attorney).

So, the next time you or your company receives notice of a claim or lawsuit, remember the three Ps – hire a Professional, Preserve evidence, and conduct a Preliminary Investigation.

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