Common HR Missteps that Could Lead to Lawsuits and How to Avoid Them

26 January 2026

Let’s face it—HR isn’t just about planning team-building events or handing out pay stubs. It's a delicate balancing act—one part rule enforcer, one part employee advocate, and one big part legal line-dancer. And when HR makes a move in the wrong direction (even if it’s unintentional), it can send companies spiraling into serious legal trouble. Yep, we’re talking lawsuits. Costly, reputation-shattering, stress-inducing lawsuits.

So, whether you're a business owner wearing multiple hats or an HR professional trying to keep things airtight, it pays—literally and figuratively—to know what not to do.

In this article, we’ll break down the most common HR blunders that land companies in legal hot water and arm you with the knowledge to sidestep them like a pro.

The High Stakes of HR Blunders

When HR moves go wrong, the fallout can be brutal. Think employee lawsuits, government fines, toxic workplace culture, and a not-so-lovely feature in the local news. Not to mention a torpedo straight to your employer branding. Nobody wants to apply to—or stay at—a sinking ship.

The good news? Most of these legal landmines are totally avoidable. You just need to know where they’re hiding.

1. Sloppy Hiring Practices

Let’s start at the beginning—the hiring process. It may seem simple: post a job ad, screen resumes, hold interviews, hire the best candidate. But there are loads of pitfalls here.

What Can Go Wrong?

- Asking illegal questions during interviews (like "Are you planning to have kids?" or "How old are you?")
- Discriminating, even unintentionally, based on age, race, gender, religion, disability, or other protected characteristics
- Not keeping proper documentation of the hiring process

You might think you’re just making “gut decisions” or going with “culture fit,” but if those decisions disproportionately exclude certain protected groups, you’re playing with fire.

How to Avoid It

- Train your hiring managers in legal interviewing practices.
- Use structured interviews and scoring systems.
- Document why each hiring decision was made.
- Focus on job-related qualifications only.
- Always include EEOC-compliant language in job listings.

Hiring mistakes don’t just open the door to discrimination lawsuits—they also set the tone for your company culture. Start smart.

2. Inconsistent Disciplinary Actions

Ever heard someone say, “But Bob did the same thing and got away with it!”? That’s the sound of a lawsuit knocking on your door.

What Can Go Wrong?

- Firing or punishing one employee while letting others off the hook for the same behavior
- Having no clear policy outlining disciplinary procedures
- Making decisions based on emotions or favoritism

Inconsistent discipline is like parenting where one kid gets grounded for missing curfew and the other gets a high five. Not only unfair—it’s lawsuit-bait.

How to Avoid It

- Create a straightforward, well-documented disciplinary policy.
- Apply rules and consequences equally.
- Document every disciplinary conversation or action.
- Train managers to stay neutral and follow the policy.

Consistency is your legal best friend. Treat it like your HR Bible.

3. Misclassifying Employees

This one’s a biggie—and the government is watching.

What Can Go Wrong?

- Classifying workers as independent contractors when they’re legally employees
- Exempt vs. non-exempt confusion leading to unpaid overtime
- Denying benefits or protections to misclassified workers

Misclassification can result in back pay, penalties, and tax trouble—and trust us, the IRS doesn’t play around.

How to Avoid It

- Use the IRS and Department of Labor guidelines to classify workers.
- If unsure, consult with legal or HR experts.
- Re-evaluate classifications as roles evolve, especially with remote/freelance growth.

The bottom line? If it walks like an employee and quacks like an employee, it’s probably not a contractor.

4. Ignoring Harassment Complaints

It doesn't matter if you're running a startup with a ping-pong table and kombucha on tap—harassment can happen anywhere. And how HR handles it can make or break a company.

What Can Go Wrong?

- Brushing off complaints as gossip or drama
- Not investigating thoroughly—or at all
- Retaliating against the person who reported it

One mishandled complaint can quickly become a courtroom showdown.

How to Avoid It

- Establish a clear anti-harassment policy.
- Educate employees on how (and where) to report issues.
- Investigate all complaints promptly and fairly.
- Protect the complainant from retaliation.

This isn’t just about avoiding lawsuits—it’s about creating a workplace people actually want to be a part of.

5. Weak Record-Keeping

Think of HR files like crime scene evidence—if it never happened on paper, it basically didn’t happen at all.

What Can Go Wrong?

- No documentation of employee issues or warnings
- Missing tax forms, I-9s, or benefit records
- Inadequate performance reviews or inconsistently tracked attendance

Lawsuits love a paper trail. If you don’t have one, you’re defenseless.

How to Avoid It

- Use secure, centralized HR software to keep records organized.
- Document everything: interviews, incidents, feedback, promotions, warnings.
- Follow federal and state guidelines for document retention.

Pro tip: Even if you’re going digital, make sure you’re backing everything up.

6. Skipping Performance Reviews or Making Them Useless

Nobody loves performance reviews—but skipping or botching them can come back to haunt you.

What Can Go Wrong?

- Terminating an employee for “poor performance” even though their reviews say they’re doing great
- No documentation of underperformance
- Overly vague feedback (e.g., “Keep up the good work!”)

When it’s time to fire someone, you need a solid paper trail to justify it.

How to Avoid It

- Give honest, constructive feedback regularly—not just once a year
- Be specific and consistent in reviews
- Use measurable goals and performance metrics

Performance reviews should be a mirror, not a magic trick. Don’t pretend all’s well if it’s not.

7. Not Accommodating Disabilities

Failing to accommodate an employee with a disability—not only a lawsuit risk but also just, well, not cool.

What Can Go Wrong?

- Refusing to provide reasonable accommodations
- Ignoring accommodation requests completely
- Firing or demoting someone for requesting accommodations

The Americans with Disabilities Act (ADA) is crystal clear on this.

How to Avoid It

- Know your responsibilities under ADA.
- Engage in an “interactive process” to find reasonable accommodations.
- Keep medical information confidential.
- Document all related conversations and decisions.

Accessibility isn’t just about ramps and handrails—it’s about respect and equity too.

8. Overlooking State and Local Laws

Think federal law is all you need to worry about? Think again. States and even cities often have their own rules—and some are way stricter.

What Can Go Wrong?

- Paying below the local minimum wage
- Violating city-specific paid sick leave laws
- Misapplying cannabis or drug testing regulations in states where laws have changed

You can be fully compliant federally and still get slapped with a lawsuit locally.

How to Avoid It

- Stay updated on HR laws across all your locations.
- Subscribe to legal or HR bulletins.
- Partner with legal experts or hire compliance advisors.

Laws are like weather—they change constantly. Don’t get caught without an umbrella.

9. Retaliating Against Complaints or Whistleblowers

You’d be shocked how often this happens. Someone reports an issue—think harassment, safety violation, or wage complaint—and suddenly they’re demoted, isolated, or fired.

What Can Go Wrong?

- Terminating or disciplining employees soon after they speak up
- Creating an environment that discourages people from reporting
- Failing to protect whistleblowers from peer retaliation

This kind of retaliation is illegal—and will backfire faster than you can say “hostile work environment.”

How to Avoid It

- Take every complaint seriously, even if it seems minor.
- Ensure that your follow-up doesn’t look like punishment.
- Track retaliation claims with a keen eye.

Your role isn’t just to enforce rules—it’s to protect voices too.

10. Firing Without Cause or Documentation

Getting rid of a “problem employee” may feel like the easiest way to solve an issue, but if you don’t do it by the book, you’re better off not doing it at all.

What Can Go Wrong?

- Termination without any documentation of warnings or poor performance
- Letting emotions drive the decision
- Firing someone from a protected class without legal justification

Even in "at-will" states, firing can still lead to wrongful termination lawsuits if not handled properly.

How to Avoid It

- Document a clear trail of performance or behavioral issues.
- Follow your disciplinary policy step by step.
- Conduct exit interviews and keep records.

Think of firing as surgery: precise, documented, and always the last option.

Wrapping It Up: Your HR Insurance Policy

HR is like walking a tightrope over a pit of legal fire—one wrong move and… well, you get it. But if you know what to watch out for, you can keep your balance and avoid getting burned.

It all boils down to being intentional: consistent processes, fair treatment, proper documentation, and a genuine commitment to doing things the right way. And don’t underestimate the power of training—your managers are often your first line of defense against legal messes.

So take a deep breath, audit your current HR practices, and fill the gaps before they become lawsuits. Future you (and your legal team) will be grateful.