There’s nothing more dangerous to a company than a rogue manager, one who makes up his or her own rules and constantly puts the business at risk. But even the best managers sometimes make mistakes that put their companies at risk for lawsuits.

In 2011, companies paid out 54.3 million dollars in Title VII lawsuits alone. And while that’s down significantly from the previous year’s total of 74 million dollars, it’s still a huge payout that could be avoided if managers were better at handling some of the day-to-day challenges that come with the job of managing people.

With that in mind, here are seven of the most common management mistakes that have the potential to spark expensive employment lawsuits:

Ignoring Employee Complaints

Employees often approach their managers first with complaints of harassment, bullying or other workplace misconduct. By brushing off an employee complaint, no matter how frivolous it may seem, a manager is laying the groundwork for a lawsuit. Every employee complaint should be documented and investigated to see if it has merit.

Knee-Jerk Firing

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When an employee is absent frequently, doesn’t do the job properly, causes distractions at work or shows signs of substance abuse, it disrupts work and creates stress for managers. It’s easy to get caught up in the fact that the employee is causing problems and fire the person for not doing his or her job.

This can be a discrimination lawsuit waiting to happen. The employee could be ill, pregnant, or in another protected class. There could be legitimate reasons the employee is performing the way he or she is, and this needs to be explored and documented with the cooperation of HR before any action is taken. In fact, any termination should go through HR.

Looking at Employees’ Personal Social Media

When an employee rants about the company on social media, it’s tempting to react without thinking. But firing an employee for complaining about working conditions publicly can bring about a lawsuit. The National Labor Relations Act prohibits companies from firing an employee in retaliation for engaging in concerted protected activity.

Violating an employee’s privacy rights by using nefarious means to access his or her social media accounts or email is also a dangerous practice and can invite a lawsuit. It’s best to let employees’ personal lives remain personal.

Not Documenting Performance Issues

Managers who fail to document their employees’ performance issues, or give satisfactory reviews when performance is not satisfactory, are inviting a lawsuit if the employee is every terminated for poor performance. When the employee is fired, not only is he or she surprised, but in a good position to allege that the termination must have been for a discriminatory reason because there were no documented performance issues.

It’s also unfair to employees to give them the impression they are performing adequately when, in fact, they need to improve. It robs them of the opportunity to become the stellar employees they may want to be.

Ignoring Overtime Policies

Companies may require that employees work overtime, but they must pay for the overtime they work. A manager who encourages non-exempt employees to work through lunch or stay late without compensation is setting the company up for a lawsuit.

Overlooking Minor Offenses

Small acts of theft can lead to much bigger ones. Some of the biggest frauds perpetrated against companies started as small lapses in judgment. An employee takes a bit of petty cash here, overstates travel expenses there, and next thing you know, you have a full-fledged fraud scheme in the making.

Compromising Confidential Information

Managers who aren’t diligent about protecting confidential information, such as customer lists, formulas or marketing strategies, put the company’s IP at risk. Not only do they leave IP vulnerable to outside predators, but in the event that an employee steals the company’s intellectual property the courts may not enforce company confidentiality agreements if managers can be shown to have been violating them. 

Investing the necessary time and resources into management training today ensures mangers know what to do in every situation, and can pay for itself many times over in lawsuits avoided tomorrow.