In today's Freedom Friday blog and email newsletter, I want to answer what might appear to be a strange question.  When it comes to employment law, everyone knows that employees frequently sue their employers, either for workers' compensation, or for wage and hour disputes.  However, there are times when it is appropriate for an employer to sue an employee, or likewise a business to sue an independent contractor.  So, in today's Freedom Friday blog and email newsletter, I'm answering the question, “Why should my business sue an employee, or likewise an independent contractor?”

There are specific circumstances when an employee's or independent contractor's actions can cause harm or financial loss to a business.  Here are five reasons why it would be appropriate for a business to sue an (former) employee or likewise an independent contractor:

1.  Fraud

The first reason why it would be appropriate for a business to sue a former employee or independent contractor is fraud.  I've inserted the term “former,” because if your employee or independent contractor has allegedly committed any of these acts, be it fraud or something else listed below, the employee or independent contractor should be terminated for cause.  Now, fraud occurs when an employee or independent contractor intentionally deceives the business for personal gain.  This can occur when an employee seeks false expense reimbursements by submitting fake receipts, claiming hours that they did not actually work on their timecard, or providing false credentials on a job application.  Similar issues can arise with independent contractors, especially with billing the business for the services that the independent contractors provided.

2.    Embezzlement

The second reason why it would be appropriate for a business to sue a former employee or independent contractor is embezzlement.  If an employee or independent contractor steals funds belonging to the business, inventory, trade secrets, or other assets, the business can sue for conversion, which is essentially civil theft.  Common examples of such embezzlement or theft include stealing money from an account belonging to the business, taking confidential information for personal use or using the same to benefit a competitor, and misusing company property for unauthorized uses.

3.     Breach of Contract

The third reason why it would be appropriate for a business to sue a former employee or independent contractor is for breach of contract, specifically for breach of an employment agreement, or breach of the independent contractor agreement.  Many businesses have contracts with employees and/or independent contractors that outline specific work responsibilities, including non-compete agreements, confidentiality (non-disclosure) agreements, and/or specific work responsibilities.  When an employee or independent contractor violates the terms of the contract, a business can sue for damages.  Common examples of this type of breach of contract include working for a competitor in violation of a non-compete agreement, disclosing trade secrets or other confidential information in violation of a non-disclosure agreement, and failing to fulfill specific work responsibilities as otherwise outlined in the contract.

4.    Defamation

The fourth reason why it would be appropriate for a business to sue a former employee or independent contractor is defamation (or for reputational damages), and this is especially the case if the same is prohibited in the employment agreement or the independent contractor agreement.  A business may have grounds for a defamation lawsuit if an employee or independent contractor makes false or misleading statements which damage the business's reputation.  This can include false accusations regarding the company or its management, posting such statements on social media, and misleading claims which damage business relationships.  In such instances, the business is required to prove that these statements were false, made with malicious intent, and resulted in actual damages (such as lost revenues, etc.).

5.    Negligence

The fifth reason why it would be appropriate for a business to sue a former employee or independent contractor is negligence.  A business may sue for negligence if an employee's or an independent contractor's conduct caused the business either financial harm (actual damages), legal liability, or both.  Some examples of negligent conduct by an employee or independent contractor include fraudulent claims by an account representative leading to a lawsuit against the company, an employee or an independent contractor failing to follow safety procedures resulting in accidents or regulatory violations, and unauthorized disclosure of confidential information leading to lawsuits or regulatory issues.  In such cases, the business is required to show that the employee or independent contractor had a duty of care, violated that duty, and caused actual damages to the business.

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