Employers must know and follow federal and state regulations concerning employee dismissal. If they don't they could become defendants in employee-initiated lawsuits and wind up paying legal fees and settlements. Preventing lawsuits is a matter of preventive measures. When hiring a new employee, immediately explain disciplinary policies. Have rules written out in a company handbook. When a problem occurs, deal with it immediately. Always treat all employees equally when addressing performance problems. Make sure you know all regulations and follow them whenever dismissing an employee.