My Employee Is Suing Me. Now What?

This is a situation that is familiar to almost any SaaS company — an employee lawsuit.

Whether real or perceived, sexual harassment, discrimination, wage, overtime, and wrongful termination are all situations that may cause a lawsuit.

According to Hiscox, the total cost to defend these cases, which did not involve any malicious acts by the SaaS company, was over $160K.

This is compounded by the fact that 25% of SaaS companies are sued by former or current employees.

An employee’s personal data and privacy may also be at risk in employee lawsuits. In Rojas v. HSBC Card Services, a California suit, an employee sued her employer for recording private conversations she had on a work phone. Even though HSBC routinely monitors calls on company phones, the California Court of Appeals reversed a previous ruling in favor of the plaintiff. Both sides must consent to the recording of a call for it to be admissible in court.

Recently, Panda Express was accused of discriminating against non-US workers. Part of the settlement requires Panda Express to pay $600,000 to affected workers. The lawsuit claims that Panda Express discriminated against workers who were not permanent citizens in requiring them to confirm their legal status and work authorization but not US citizens.

The cost to defend against these lawsuits was hundreds of thousands of dollars, even though there was no malicious act on the part of the business.

There Are Several Types Of Employee Lawsuits


  • Age
  • Race
  • Sex
  • Religion
  • Disabilities
  • Pregnancy
  • And More

Prior to getting hired by ASM, a woman was required to submit a drug test. She was diagnosed with Crohn’s disease and treated with medical marijuana. Because she failed the drug test, she was terminated from her job. This led to a state law disability claim.

The court ruled that medical marijuana use is protected by the ADA and that employers must provide reasonable accommodations (for example, inquiring whether there is a different treatment for the illness).


Employer retaliation is when an employee is demoted, has their hours or pay cut, is terminated, or receives a negative performance review after making a discrimination or harassment complaint or whistleblowing about their employer. An employee may not be terminated for engaging in protected activities.

After Jose Juarez reported unethical and fraudulent activities taking place at the RadioShack store where he used to work as a store manager, he was fired. This led to Juarez vs RadioShack Corp.

Wrongful Termination

An employee who has been terminated for reasons other than poor performance is said to have been wrongfully terminated. Here are the most common scenarios:

  • Discrimination
  • Workers Comp Claim
  • Refusal to Commit Illegal Act

Poor performance is often a mitigating factor in wrongful termination lawsuits, making them difficult to prove. However, defending against them still costs thousands of dollars.

Charles E. Saccio v. Antonio R. Romasanta, is a wrongful termination case surrounding the th claim of age discrimination. Mr. Saccio was fired after complaining about references to his age and then replaced by a younger employee with no prior experience.

The employee had received regular bonuses and raises and had never been written up for poor performance. The court ordered the employer to pay the employee $500,000 in back pay and punitive damages.


Harassment is an offensive action against a specific person, whereas discrimination relates to unfair treatment. If a woman is demeaned for being a woman, for example, she is a victim of harassment. Discrimination based on gender, on the other hand, occurs if a woman is denied a job because she is a woman.

In 2016, Gretchen Carlson v. Roger Ailes was a significant sexual harassment case. Ms. Carlson, a previous broadcaster, filed a sexual harassment claim against Roger Ailes, the CEO of Fox, for firing her for refusing his advances and for subjecting her to “pervasive harassment” while at work.

Risk Management For Employee Lawsuits:

How can you reduce the likelihood that these practices will occur at your company, thus reducing the risk of employee litigation? Several methods have been proven to help protect your business and your employees.

Internal Policies & Training

Strict anti-discrimination and anti-harassment policies are one of the most effective ways to prevent unethical behavior. Here are some examples:

  • Describing these policies and the consequences of such behavior in the employee handbook.
  • Having each employee sign a consent form upon hiring to make them aware of these policies

An employee should be able to report an incident in multiple ways, as well as outline the company’s investigation process if the policies are properly written. Disciplinary actions should also be clearly stated.

Policies aside, training your employees on behavior that may be considered harassment or discrimination is crucial. America is a crossroads of cultures, so certain actions that are not considered harassment elsewhere may very well be considered such here. Employees should be informed of what behavior constitutes harassment and what characteristics are protected by law such as age, gender, etc.

In addition to implementing anti-discrimination and anti-harassment policies, managers should receive extra training to prevent retaliation. They should be able to identify a possible harassment or discrimination situation and intervene to prevent it from getting worse.

Work Environment & Cultural

An open-door policy is one way to reduce discrimination at work by establishing a discrimination-free culture and work environment. Employees who feel that their complaints will be heard are more confident when establishing a discrimination-free culture and work environment. Policy adherence and professionalism in dealing with the situation in a confidential manner are the best ways to create a work environment that promotes equality and confidence.


An Employment Practices Liability (EPL) insurance policy is a fantastic tool to prevent employment practices liability lawsuits. We’ve discussed how those working for a business can be protected by a great environment and policies, but what happens if a lawsuit occurs? The answer is an EPL insurance policy! Lawyers aren’t cheap, and defending a lawsuit can be costly. Whether it’s frivolous or has merit, it must be defended. An EPL insurance policy covers claims like those we mentioned earlier.

An EPL policy will cover any settlement awarded to the plaintiff, provided that there are no exclusions. It is important to review your policy in detail to ensure that you are aware of the coverage that it provides.

Employees are bringing more of these types of lawsuits (see the medical marijuana case we discussed earlier), and recent cases have established precedents that are sure to bring more of them. It is important to assess your company’s needs and practices to see how insurance coverage can protect it. This will help you protect the SaaS company you worked so hard to build.