Don't Sue Former Employees If You Care About Reputation
When it comes to filing a lawsuit against a former employee, companies, particularly those that trade on their good reputation, might want to think carefully before pulling the litigation trigger.
Sure, companies don't want to be seen as weak, but when push comes to shove, former employees are not very likely to have deep enough pockets to satisfy judgments, begging the question of whether it's good business judgment to even file an action. After all, litigation is full of surprise and risk, and investors really only care about the bottom line, despite what the company's mission might proclaim.
Refund for Bad Apples
If an employee violates criminal statutes, handing over the case to the proper authorities is proper. However, if a company is left with no other recourse but to file a civil action, that must be carefully weighed against the possibility of reputational harm.
Take for example the recent debacle unfolding over at Tesla. An employee tasked with overseeing some processes at the company's battery manufacturing plant released information to a journalist regarding what he believed to be unsafe production practices, as well as environmental and corporate waste. Tesla and Elon Musk have, in response, orchestrated a campaign to paint that now-former employee as a disgruntled liar, and hacker, intent on harming Tesla because he wasn't promoted.
The former employee, Martin Tripp, however, tells a much different story about how he protested the use of unsafe batteries and other practices, was ignored and met with resistance, and was then directly called a "horrible human being" by Musk. Surprisingly, Tesla claims that Tripp "hacked" their systems, but Tripp insists he doesn't even know how to code, and merely queried databases he had access to.
Leaning Into Controversy
In today's environment of sensationalized media attention and social media scandals, companies need to be wise about how they handle disputes. The best course of action these days is to lean into the fact that the company made a mistake, apologize, and promptly correct the problem. A few great, recent examples include:
- H&M faced intense scrutiny when it sued a graffiti artist claiming copyright violations.
- Bike maker Trek almost went full Farley before realizing that amicable settlement is always the best route when dealing with deceased celebrity publicity rights.
For Elon Musk, the matter seems a bit more personal, and looking at how he is handling controversy, it shows. Though considered wildly successful by nearly any measure, Musk's handling of the Tripp incident, regardless of the outcome, isn't likely to reflect well upon him, nor Tesla. Musk, like other powerful corporations, really just shouldn't play the victim card and should think carefully before suing a former employee that claims to be helping the public by disclosing private information (especially if that employee has a good faith belief that they are reporting something unlawful or corrupt).
- Tesla Sues Employee for Data Theft, Media Statements (FindLaw's In-House)
- Whistleblower 101 and Other Lessons for Corporate Counsel (FindLaw's In-House)
- Hey GC: Get the AC Inspected and Fixed, or Else! (FindLaw's In-House)