What You Need to Know About Whether an Employer can Sue an Employee for a Mistake

An employer may decide to sue an employee for many reasons. Here’s everything you need to know about an employer suing an employee for a mistake.

In general, an employer can legally sue an employee for a mistake. However, if an employer successfully sues an employee, the employee may not have sufficient funds to satisfy the judgment against them. Regardless of the employee’s financial ability to repay the employer, an employer’s execution of a lawsuit will send a message to other employees.

Reasons for an Employer to Sue an Employee

Common reasons for an employer to sue an employee include:

  • Negligence,
  • Violating non-compete clauses,
  • Violating non-solicitation agreements,
  • Breach of fiduciary duty,
  • Violating no raid provision,
  • Failure to provide reasonable notice of resignation,
  • Defamation,
  • Using company resources to find new employment,
  • Theft of trade secrets, and
  • Employee theft.

Related: Can an Employer Sue an Employee for Poor Performance?

Can Employers Sue Employees For Negligence?

Usually, an employee is not held liable for ordinary carelessness or negligence in their duties. On the other hand, if an employee behaves outside of the scope of reasonableness, ultimately causing damage or injury on property or to persons, an employer is legally allowed to sue an employee for negligence. Because the circumstances that led to harm and other consequences are essential to a lawsuit for negligence, an employer must consult with an experienced employment attorney.


Defamation is defined as damage to one’s good reputation, which constitutes a crime. An employer may sue their employee for defamation if the employee spreads false information which hurts the employer’s or business’s reputation.

The following must be true to have a defamation claim:

  • The employee made a false and defamatory statement about the employer or the business;
  • The employee communicated the lie to a third party;
  • The communication was not privileged;
  • The employee was at least negligent as to the truth of the statement made;
  • The lie led to actual harm to the employer or the business.
  • Non-Compete Agreement

Employers utilize Non-Compete Agreements to prevent an employee from using the information they learned at the employer’s company to work for a competitor. Even after the employee’s departure, the terms of a non-compete agreement extend for some time. If an employee breaches the non-compete agreement, the employer can request a court order to enforce the agreement.

Related: What to Ask for in an Employment Discrimination Settlement

Breach of Fiduciary Duty

Employees owe a duty of loyalty to act in the best interest of their employer’s business. A breach of fiduciary duty signifies the employee betrays the employer’s business by not acting in its best interest.

Examples of breach of fiduciary duty include:

  • Acting on behalf of another entity with contrary interests,
  • Acting in a way that benefits the employee at the expense of the employer,
  • Failing to disclose beneficial information to the employer,
  • Disclosing confidential company information to a third party,
  • Failing to use reasonable care to complete work responsibilities,
  • Taking a business deal intended for the employer, is also known as “usurpation of corporate opportunity.”
  • Using Company Resources to Find New Employment

Some examples that constitute using company resources to find new employment include:

  • Using lunch hours or breaks to interview for another position,
  • Using company emails, funds, or property in hopes of securing new employment,
  • Relying on company travel funds to attend an interview for a different job,
  • Using a company email address to communicate with a new employer proves detrimental to the current employer’s business.

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