Question: We just found out that a former employee was awarded a default judgment of $75,000 against our company, but we didn’t even hear about the lawsuit until just now. Is there a way to get the judgment reversed since we didn’t receive the legal documents?
Answer: Maybe. The first step is to figure out who was formally served with the initial lawsuit documents, if anyone, and what happened to them from there. Every company is required to designate a specific “registered agent” who is authorized to receive service of legal documents on behalf of the company. Companies may also be required to designate a “resident agent” in each state where the company does business. Often these agents work for a vendor that’s in the business of accepting service of legal documents. In other words, the registered or resident agent for your company may not even work for your company or have any other affiliation with it. If the registered or resident agent is served with a lawsuit, then your company is deemed to have received the notice. In any event, you’ll need to contact your outside litigation counsel right away to determine your legal options.
Recent Sex Discrimination Lawsuit: Words of Caution
A case was recently decided in Maryland on this very issue, but it didn’t go well for the employer. The employee filed a sex discrimination lawsuit in court against her former employer. She filed a Proof of Service showing that she had properly served the lawsuit documents on the employer’s registered agent. When the employer failed to respond to the suit or appear in the case, the employee received a default judgment against the employer for over $75,000. It wasn’t until the employer received notice that its bank account was being garnished that the employer became aware of the lawsuit and the default judgment. The employer tried to have the default judgment overturned, but the court refused because the employer was technically on notice of the lawsuit when its registered agent received the legal documents (Hawkins v. MV Transportation, Inc., MD, Nov. 2017).
Due Diligence to Prevent Lawsuits and Default Judgments
You can protect yourself against this scenario by gathering some basic information now. First, you can identify the registered agent and resident agents for your company by searching state websites such as these: California, Idaho, Oregon, Washington.
Next, contact those agents to find out what instructions they’ve been given for forwarding the legal documents they receive on behalf of your organization. Usually, the agent has specific instructions about who to forward documents to at the company and what method to use for delivery. It’s a good idea to instruct each agent to provide copies of the documents to at least two specific people at the company, one of whom should be the person in charge of Human Resources if the document involves a current or former employee.
Tips for Employers
Be sure that important incoming mail is opened immediately and stamped with the date received. If it’s a legal notice, alert the appropriate individuals such as your business attorney, employment practices liability insurer, and company officials. Ignoring such a document is never a good idea! If you receive a notice that an employee or applicant has filed an official complaint filed with a government agency, immediately reach out to your employment attorney so you can try to resolve the issue before it goes to litigation. If you’re not a Vigilant member, we encourage you to learn more about our unlimited employment law advice services available for a flat, monthly fee and to follow us on LinkedIn for industry updates.