What You Need to Know About Whether an Employer can Sue an Employee for Poor Performance

As an employee, you may wonder whether or not your employer can sue you for poor performance. Here’s everything you need to know on if your employer can sue you for poor performance.

States have varying labor laws. The only way an employee could sue an employee for poor performance is if the employee acted negligently. However, if an employee did not act negligently, an employer probably cannot sue them solely based on poor performance.

State Law

Labor laws vary by state. Employees and employers should understand their rights specific to their state. The U.S. Department of Labor has resources regarding state labor offices, state minimum wage laws, state child labor laws, and other state labor laws, linked here.


An employer may sue an employee on a performance basis if they act negligently. If an employee acts outside of the scope of reasonableness and causes severe negative consequences, like injury to property or other people, an employer may sue on the grounds of negligence. The negative consequences of negligence may cause poor job performance, and an employer who could sue the employee for poor performance under negligence.

One common way employers sue employees for negligence is evidenced in St. Anthony’s Hospital v. Whitfield. In this case, a customer successfully sued an employer due to an employee’s negligence, and the employer had to pay for damages. After the case, the employer sued the employee for indemnity, meaning the employee needed to compensate their employer for the damages the employer paid the customer. The case presents an example of an employer suing an employee for poor performance. However, an employer can only win an indemnity case if the negligence was solely an employee’s fault.

Related: What to Ask for in an Employment Discrimination Settlement

Other Reasons to Sue an Employee

Although an employer likely cannot sue an employee based on poor performance alone, an employer may sue an employee for other reasons:

Employee theft

Employees commit employee theft when they steal company funds or resources, like computers or other tangible equipment.

Violating contract

Employee contracts can be extensive and include non-compete clauses, non-solicitation agreements, or no raid provisions. If an employee violates their contract, an employer may have the right to sue them.

Defamation or libel

If an employee speaks poorly of an employer and their words bring negative consequences to the employer, the employer may sue for defamation. If the employee publishes the negative comments, via social media or some other source, an employee may sue the employer for libel.

A breach of fiduciary duty

An employee has a fiduciary duty to their employer, meaning employees are obligated to act in their employer’s best interest. An employer may sue an employee if they believe the employee has breached their fiduciary duty. A breach of fiduciary duty could include taking bad business deals or soliciting new contracts or clients to other companies.

Related: How to File an Employment Discrimination Complaint

What happens if an employee performs poorly but did not act negligently?

If an employee performs poorly but not negligently, the most reasonable solution would be to fire the employee. However, employers must understand their respective state labor laws and read over the employee’s contract before firing out to avoid violating any established agreements.

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