Principal Attorney
Most employment-related legal disputes involve employees suing their employers, but there are instances where an employer may have grounds to sue an employee—during or after their employment. From fraud and embezzlement to contract violations and misconduct, Texas law allows businesses to take legal action against employees who cause financial harm, violate agreements, or engage in unlawful behavior.
At Sul Lee Law Firm, we help Texas business owners and employers understand their rights and pursue legal action when necessary to protect their interests. If you’re considering suing an employee, it’s important to understand the legal grounds for doing so and how Texas law applies.
Legal Grounds for an Employer to Sue an Employee in Texas
Employers can sue employees under specific circumstances where the employee’s actions have caused harm or financial loss. Some of the most common reasons include:
Fraud and Misrepresentation
Fraud occurs when an employee intentionally deceives their employer for personal gain. Some examples of fraud in the workplace include:
- False expense reimbursements: Submitting fake receipts or inflating expenses.
- Timecard fraud: Claiming hours not actually worked.
- Providing false credentials: Misrepresenting qualifications or experience on a job application.
Employers who suffer financial losses due to fraud may file a civil lawsuit to recover damages. In some cases, fraud may also lead to criminal charges.
Embezzlement and Theft
If an employee steals company funds, inventory, trade secrets, or other valuable assets, the employer has the right to sue for damages and restitution. Common forms of workplace theft include:
- Stealing money from a company account
- Taking confidential company information for personal use or to benefit a competitor
- Misusing company property for unauthorized purposes
Embezzlement is both a civil and criminal offense, meaning an employer can file a lawsuit for damages while law enforcement may also pursue criminal prosecution.
Breach of Employment Contracts
Many employers have contracts with employees that outline specific obligations, including non-compete agreements, confidentiality agreements, or performance expectations. When an employee violates the terms of their contract, an employer can sue for damages. Common examples include:
- Working for a competitor in violation of a non-compete agreement
- Disclosing trade secrets in breach of a confidentiality clause
- Failing to fulfill job duties as outlined in an employment contract
Texas courts generally enforce reasonable non-compete and confidentiality agreements, provided they protect a legitimate business interest.
Defamation and Damage to Reputation
An employer may have grounds for a defamation lawsuit if an employee makes false statements that harm the company’s reputation. This could include:
- Spreading false accusations about the company or its leadership
- Posting defamatory statements on social media
- Making misleading claims that damage business relationships
However, employers must prove that the statements were false, made with malicious intent, and resulted in actual harm.
Negligence and Misconduct Leading to Financial Loss
An employer may sue for negligence if an employee’s careless actions cause the company financial harm or legal liability. Examples include:
- A salesperson making fraudulent claims that lead to lawsuits against the company
- An employee failing to follow safety protocols, resulting in workplace accidents or OSHA violations
- Unauthorized disclosures of confidential client data, leading to lawsuits or regulatory penalties
Employers must show that the employee had a duty of care, violated that duty, and caused measurable damage.
Overtime and Paycheck Fraud
Texas employers may sue employees who engage in wage fraud, including:
- Falsifying overtime records to receive extra pay
- Accepting pay for unworked hours
- Manipulating payroll systems to inflate wages
While wage disputes typically involve employees suing employers, Texas employers have the right to take legal action against workers who intentionally defraud the payroll system.
Misuse of Company Intellectual Property
Employees with access to trade secrets, proprietary technology, or business strategies may attempt to use that information for personal gain. Texas employers can sue if an employee:
- Leaks confidential company data
- Uses company-developed software or inventions without permission
- Passes sensitive information to a competitor
The Texas Uniform Trade Secrets Act (TUTSA) provides strong protections for businesses, allowing companies to sue for damages, lost profits, and injunctive relief to stop further harm.
What Should Employers Consider Before Suing an Employee?
While Texas law allows employers to take legal action, lawsuits against employees should be approached carefully. Consider the following:
- Does the employee have the resources to pay damages? Lawsuits can be costly, and if the employee lacks assets, recovering compensation may be difficult.
- Will the lawsuit damage company morale? Suing an employee can create tension among staff, especially if the case is highly publicized.
- Is alternative dispute resolution an option? Some disputes may be resolved through mediation or arbitration, avoiding lengthy court battles.
- Do you have strong evidence? Employers should document all misconduct thoroughly to prove damages in court.
Protect Your Business with Sul Lee Law Firm
If an employee has caused financial harm, violated company policies, or engaged in fraud, you have the legal right to protect your business. At Sul Lee Law Firm, we help Texas employers navigate complex employment disputes, build strong cases, and pursue the best legal strategies for resolving conflicts.
Don’t let employee misconduct go unchecked—take action today. Contact Sul Lee Law Firm to discuss your case and explore your legal options.