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You can reduce your risk of an employee lawsuit

Doing good business often comes down to finding ways to manage risks. That's particularly true when it comes to your employees.

You can seriously mitigate your risk of an employee lawsuit by following these steps:

Recruit carefully

Review your application and interview policies and make sure that everything from the questions you ask to the forms you use are in compliance with the law. Offer job candidates a very clear job description so that you communicate from the start what will be expected.

Put your policies in writing

If you're running a small business, you may think there's no need for written policies. Not so. Your employee handbook protects your employees and also protects you. It helps communicate discipline policies and keeps you from accusations of unfair treatment.

Respond to complaints

If an employee comes to you with a complaint, that means he or she is looking for someone to listen and offer a resolution. This gives you a perfect opportunity to avoid a lawsuit. Make an open-door policy on complaints or have some other established process for your employees to use. Make sure they know that they won't face retaliation by coming to you.

Pay attention to the payroll

Don't ever engage in risky (and illegal) payroll behaviors, like "shifting" someone's hours from one week to the next in order to avoid overtime. Pay everyone correctly and make sure your managers do the same. The pennies someone tries to save on payroll now can cost thousands of dollars in legal fees later.

Make performance evaluations count

Performance evaluations help weed out employees who can't -- or won't -- do their jobs. Treat them seriously and use them for their intended purpose. Let your good employees know that they're doing fine. Talk to those that need improvement about their situation and be honest. Your goal is to get the employee to reform.

Most mistakes in business that end up in lawsuits with former employees come from one of two things -- a failure to communicate unambiguously or cutting corners. Don't get caught in either trap. They're much easier to avoid than defend.

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