One clarification though - we weren't looking to push her out. She informed us (me, actually) that she was looking to quit and wanted to walk away. I'd asked her to stay on for a while and she did. In the end, she was planning again to quit and, instead, I offered the paid leave of absence.
We definitely could (should?) have taken steps to avoid the lawsuit early on and we probably didn't treat the case as seriously as it ended up being, but that's much easier seen in hindsight, I think.
I wonder if a clean break (with severance) would have avoided this issue altogether - I'm not exactly sure that would have worked either.
Do you realize that saving face is incredibly important in Philippine culture? Or, more generally, how much do either of you really know about Philippine culture? Just because they have a strong American influence, it does not mean Philippine people are American.
Sorry you went through this, but based on what you wrote, this sounds like a case where you didn't know enough about the culture before you set up shop.
I'd say my understanding was better than most Americans in my position coming out here, but it's grown significantly in the last 4+ years, for sure. I do think this played a role, but I don't think it was a primary issue.
As best as I tried to explain what happened factually in the 3K+ word article, I definitely wasn't able to include everything.
As an expat entrepreneur, holding back on getting your business rolling while you take time to learn more about the culture sounds nice, but isn't realistic. How many months (years?) would you have spent learning the culture before starting your business here?
a) Learn about the local culture and try your damnedest to conform to their culture. This includes things like talking to other Americans who have started businesses there, reading as much as possible about the culture, finding a trusted local to serve as a de facto guide, and admitting that you don't know what you don't know.
b) Do things the exact way you would do them at home.
In your situation, you had a trusted local guide who was doing a fine job of running things. Then, you demoted her. When she complained about Joe's management style, you didn't take that as a hint, instead you carried on as you had before. In this case, option B cost significantly more time and money than option A would have.
International business is intensely hard and I'm not criticizing you. If you'd like to hear about my own sizable screwup, you can email me!
On that note, your comment that "[you] weren't looking to push her out" is worth unpacking. If you've ever broken up with a boy/girlfriend, you know that afterward, each person has his or her own narrative of what "really happened," which each person believes with total sincerity. It's a valuable to to step out of your own head, and try to understand enough about the other person's situation to be able to articulate their narrative. Third parties, whether juries or your own employees, will judge you based on the strength of those competing narratives.
1) Don't be sloppy (and don't get emotional, because that'll make you sloppy);
2) Whenever you're dealing with a counter-party, try to understand where they're coming from.
There was clearly a mismatch between how the author saw Karen's position and how Karen saw it, one that was undoubtedly aggravated by the lack of documentation. Look at the situation from Karen's side. She started out running the business in the Philippines. Joe came in a year later and took over, effectively demoting her. After discussing the situation, the owners proposed an 80% pay-cut and 4-month leave of absence, something most reasonable people would interpret as a signal that they were being pushed out. Depending on Philippine law, this could have qualified as wrongful termination (most countries are not as employer-friendly with regards to terminations as the U.S.) When Karen sued, the author assumed it must have been some sort of shakedown, because he couldn't see how it could be a legitimate grievance. This established the paranoia that ultimately led them to ignoring calls from their own attorney.
If the authors had tried to empathize with Karen in the first place: 1) they could've taken actions to avoid the lawsuit; 2) realized that Karen had a pretty compelling case, and treated the suit with the seriousness it warranted. All this probably could have been avoided by some thinking and a severance payment that was less than the time and money wasted on the legal proceeding.