Can an Employer Sue An Employee

What are an employer’s rights to legal remedies when it comes to the employment relationship?

There are many circumstances under which an employee can sue an employer or file a complaint, but legal resources speak less frequently about employers suing employees. 

If you are wondering whether an employer suing an employee is an option, know that the answer is yes. While the opportunities for suing an employee aren’t as numerous, there are multiple scenarios in which an employer can seek legal recourse against an employee. 

Can an Employer Sue an Employee for Negligence?

When you have employees, there is a likelihood that an employee will damage your business or its patrons. The possibility exists that your employee’s actions could invite a lawsuit, and a lawsuit against your employee could mean a lawsuit against you. Under the doctrine of respondeat superior or vicarious liability, a victim of your employee’s negligence can sue you for damages.

With this kind of exposure to liability, you may be asking, Can an employer sue an employee for poor performance? Or, Can an employer sue an employee for a mistake? In certain circumstances, the answer is yes. 

In St. Anthony’s Hospital v. Whitfield, 946 S.W.2d 174, the Texas Court of Appeals ruled that if an employer was sued and made to pay for damages caused by an employee’s negligence, the employer could then sue the employee. When an employer sues an employee for negligence under these circumstances, what the employer is seeking is called indemnity.

If the employer wins its indemnity case, the employee must pay the employer back for the money it had to pay in the original negligence case. The employer can only recover damages in this kind of indemnity case if its liability is wholly vicarious. An employer cannot recover in an indemnity case if it has any direct fault for the original negligence, such as fault for an equipment failure or negligent hiring. 

An Employer Can Sue an Employee for Theft

Unfortunately, an employee could betray you by diverting company funds for their personal use, or by taking company property. Under those circumstances, you can sue the employee for theft and recover the value of what was stolen. If a high-level employee stole funds, property, or opportunities from you, you can sue for breach of fiduciary duty

An Employer Can Sue an Employee for Misappropriation of Trade Secrets

If your employee improperly uses any of your business formulas, devices, or information not known to the public, you can sue them for misappropriation of trade secrets. When determining whether an employee misappropriated your trade secrets, Texas courts consider:

  • The extent to which the information is known outside your business;
  • The extent to which others involved in your business know the information;
  • The measures you took to keep the information secret; 
  • The value of the information to you and your competitors;
  • The money and effort you put into developing the information; and
  • The difficulty with which the information could be acquired or duplicated by others.

If a court finds an employee liable for misappropriation of your trade secrets, you can receive relief. Relief can be damages for your financial loss, damages for the employee’s unjust enrichment, and injunctive relief

An Employer Can Sue an Employee for Defamation

You can sue an employee for making false, damaging statements about your business. In this age of social media, an employee’s false and damaging post against your business could be subject to damages in a libel suit.

Libel is the written form of defamation. Under Texas law, you can only maintain a defamation suit if you timely asked your employee to correct or retract their false statement, or if your employee already corrected or retracted their statement. 

Employers Can File Many Kinds of Lawsuits Against Employees for Breach of Contract

In some circumstances, a relationship between an employee and employer is based on a contract. If an employment contract was the basis of the relationship between you and your employee, you can sue them for breaching the contract terms. Common employment contract terms include:

  • Confidentiality agreements,
  • Non-compete clauses,
  • Non-solicitation clauses, and 
  • Other terms of employment.

Employment contract terms should be very clear regarding your expectations of the employee and what they can expect from you. 

Can an Employer Sue an Employee for Quitting?

Your right to sue an employee for quitting depends on the circumstances of the employment. Texas is generally a right-to-work state. This means employers and employees can end the employment relationship at any time and for almost any reason without liability.

While general Texas rules do not allow an employer to sue an employee for quitting, an employer can sue an employee who quits in violation of an employment contract. If an employee agrees by contract to stay with an employer for a specific period of time, or if they agree to give adequate notice before leaving, an employer can sue the employee for their failure to fulfill the agreement. 

Are Non-Compete Clauses Enforceable?

Yes, non-compete clauses are enforceable in a lawsuit. But the clause terms must be reasonable if you want to prevent your former employee from working for a competitor. Your non-compete clause must be reasonable in its duration, geographical area, and scope of activity.

Your non-compete clause cannot eliminate all possibilities for a former employee to work in their field. You must also show how you would be harmed without enforcement of the clause and how the clause is not an unreasonable burden on an employee’s ability to work. 

An experienced business attorney can help you determine if you have the right to sue an employee under the terms of an employment contract.  

Protect Your Business Rights by Contacting an Attorney

You have rights if a current or former employee mistreats you. Legal action against an employee’s mistreatment may be your best option to protect your business, but it isn’t always easy.

The lawyers at The Hunnicutt Law Group have decades of business law experience and are focused on helping you achieve professional success. We have the skills to litigate, negotiate, and protect your assets. Contact us online today, or call us at 214-361-6740 for a free consultation. 

Author Photo

J. Stephen Hunnicutt

Our founding attorney, Stephen Hunnicutt, set the precedent for a commitment to excellence and a focus on the client. With 25 years of experience, he has handled countless cases involving business litigation and commercial litigation. Over the years, Attorney Hunnicutt has worked as in-house counsel for a Fortune 500 energy company, a large firm, a small firm, and finally, in his own practice.

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