Prevent Wrongful Termination Lawsuits

A wrongful termination lawsuit occurs when a former employee files suit against the former employer alleging that he or she was fired without cause or for an illegal purpose. A wrongful termination lawsuit can cost a business financially as well as suppress employee morale. By spending some time learning about employment laws and implementing company policies, an employer can prevent wrongful termination lawsuits from happening in the first place.

Steps

Understanding Employment Law

  1. Understand the basics of “at will” employment. In the United States, the default relationship is “at-will” employment. In “at will” employment, the employer can fire the employee for any reason or no reason at all. Limitations on the “at will” doctrine are created by employment contracts, anti-discrimination law, and certain public policies.[1]
    • The only state that does not have “at will” employment is Montana.
  2. Read sample employment contracts. Try to find sample contracts in your field and analyze what terms are generally offered employees. An employment contract is an agreement between the employer and the employee. You should see how other employers define the employment terms in their contracts.
    • Look especially at whether the contract states that employment is “at will” or whether it list grounds for dismissal (“cause”). Common definitions of “cause” include fraud, theft, or embezzlement; willful misconduct that harms a company's reputation, products, services, or customers; intentional violation of any law; continued failure to perform duties; unauthorized disclosure of trade secrets; being charged with a felony or misdemeanor.[2]
    • You can try to find sample employment contracts online.
    • If you can't find any, then you may want to consult with an employment attorney who specializes in your field.
  3. Learn federal anti-discrimination law. Federal law prohibits employers from discriminating on the basis of race, gender, color, age, religion, national origin, or disability.[3]
    • It is not illegal under federal law to fire someone for sexual orientation (unless the person works for the federal government).[4] However, it is illegal to use sex stereotyping to fire employees. Accordingly, firing a gay male for being “too feminine” or “girly” would violate federal law.[5]
    • Be aware that “gender” encompasses pregnancy under federal law. Accordingly, an employer discriminates against a woman by firing her because she is pregnant.[6]
    • It is illegal to for an employer to discriminate against someone who is over 40 years old because of their age.[7]
    • An employee may also have a claim against an employer for wrongful discharge if the employee reported the employer's illegal discrimination and the employer retaliated against the employee. In a retaliation case, the employee does not have to belong to a protected category.
  4. Read state employment law. State laws may offer employees broader protection than federal law. For example, although federal law does not prohibit discrimination on sexual orientation, about half of all states do.[8]
    • The United States Department of Labor website also contains links to applicable state law. It is available here.
  5. Understand non-employment laws that apply to your business. Get a good understanding of environmental, zoning, and other laws that relate to your business. It is against public policy in most states to require an employee to violate the law in the course of her employment.
    • If, for some reason, you terminated an employee for refusal to break the law, then you could face a wrongful termination suit in most states. It is also against public policy to fire someone for exercising a right, such as the right to vote.[9]

Institute Proper Employment Procedures

  1. Tailor employee contracts. Before offering an employee a contract, you should carefully review your contract and tailor it to job requirements. Do not simply recycle an old employment contract. Also do not simply use a form or template contract.
    • You can always have a lawyer look at the contract and recommend changes.
  2. Review manuals and handbooks. Employers should carefully scrutinize any handbooks or manuals that they distribute to employees. If these materials create sufficiently definite promises (e.g., of vacation time, length of guaranteed employment, pay raises, etc.) then they can form the basis of a contract with the employee.
    • Remove anything from the manuals or handbooks that sounds like a promise or that deviates from your written contract. Oral promises can also form the basis of a breach of contract complaint.[10] You should avoid making verbal promises of pay raises, promotions, or increased vacation time until such a time that you can put them in writing.
    • Also, memorialize your company's commitment to adhere to anti-discrimination laws in your handbook and explain the process of lodging a complaint without fear of retaliation.[11] Including this information in a widely-distributed handbook or manual can decrease your chances of being held liable for discrimination or retaliation.[12]
  3. Train supervisors. You can minimize the likelihood of lawsuits if you train your supervisors in the basics of harassment, discrimination, retaliation, safety, and employee privacy.[13]
    • Employers have “vicarious liability” for any harassment done by supervisors. This means that the company itself will also be liable for harassment.[14] It is therefore important to take seriously complaints about harassment by supervisors.
  4. Establish termination protocols. One way to protect yourself from discrimination and retaliation claims is to create a standardized termination protocol, which will apply across the business. It should be published in your employee handbook and discussed with all supervisors. Elements of an effective termination protocol include:
    • Progressive discipline procedures. Outline what events should trigger a written warning and explain how those warnings should be preserved in the employee file.[15] Also explain any hierarchy of discipline. For example: verbal warning, written reprimand, discharge.
    • Internal grievance or dispute systems. Employees may follow up a reprimand by filing a grievance. Tell employees the proper procedure for filing a complaint, and explain how the complaint will be reviewed.
  5. Create a useful annual review form. The purpose of an annual review is to review the employee's performance and to suggest areas of improvement. At the same time, it is a critical means of documenting inferior performance, which may be useful should you need to support a termination decision at a later date. Remember, the burden will always be on the employer to justify a termination.[16] Accordingly, annual review forms should include spaces to judge the following (which are common reasons for termination):[17]
    • poor performance
    • refusal to follow directions
    • abusing sick leave
    • excessive absence and habitual tardiness
    • violation of company rules
    • dishonesty
    • endangering the health or safety of others or behaving violently at work
    • disclosing confidential information to outsiders
  6. Require employee acknowledgment of reviews. When you perform an annual review, or whenever you reprimand an employee, be sure that it is in writing and that the employee signs the reprimand. This signature serves as proof that you notified the employee of his subpar performance.[18]
    • Also consider an “annual written acknowledgement” in which the employee signs a letter stating that she has received an updated manual, that employment is “at will” (if it is), and that she has not been subjected to harassment or discrimination.[19] The acknowledgement can address any other issue, such as the employee's amount of accumulated overtime or leave.
    • An example can be found here.
    • You cannot force employees to sign it. However, you should state that if the employee disagrees with anything stated in the letter, then he should tell his employer.[20] This protects the employer in two ways. First, the employee may well sign it. Second, if he refuses to sign, he has to alert management of any possible discrimination or harassment claims he may have.
  7. Investigate internal complaints promptly. If you learn of misconduct by one employee against another, then you should investigate the misconduct. Doing so will protect you from legal liability.
    • Involve your attorney early as well.[21] Involving the attorney not only shows that you take the complaint seriously, but you also will receive sound legal advice for how to handle the investigation to minimize your liability.

Terminating Employment Legally

  1. Consider an independent review. Rather than allow a direct supervisor to immediately fire someone, an independent review affords management the opportunity to make sure the company has complied with the law. You should ensure:[22]
    • that the firing would not violate anti-discrimination laws or other statutes.
    • that the firing would not breach an employee's contract.
    • that the company has given the employee adequate and documented warnings (unless the conduct warrants immediate firing).
    • that the company has followed any stated company practices.
    • that the company has followed the same procedures in similar situations involving other employees.
  2. Gather documentation. Gather whatever documentation you can that supports the reason for termination and read it. Documentation can be annual evaluations, comments, or citations placed in an employee file, as well as written statements by other employees. Be prepared to discuss the quality of employees' work when you terminate them.
    • You need documentation that would be admissible in court. If you have had employee complaints, it is important to get those complaints reduced to writing before the termination decision. If you wait until after a wrongful termination suit is filed, then it looks as if you are manufacturing complaints against the employee simply to protect yourself.
  3. Consult with an attorney. An experienced employment attorney can help you at every stage of the employer-employee relationship. Ideally, you would have sought the assistance of an attorney when devising internal procedures and when drafting employment contracts. If not, an attorney can still help answer any questions you have about firing an employee.
    • Common situations in which employers seek out an attorney's advice include: the employee has a written contract, the employee recently filed a complaint with a government agency (like the EEOC), the employee has access to trade secrets, or when firing the employee would dramatically change your workplace's demographics.[23]
  4. Extend assistance to the employee. You can reduce the chances of being sued simply out of spite if you extend some assistance to an employee you are terminating.[24]
    • Offer the employee a chance to resign. This will allow an employee to save face and perhaps also mitigates any anger or bitterness. Nevertheless, be aware that an employee resigning does not preclude a wrongful termination suit.
    • Volunteer to provide a positive reference. Let an employee know that you would be willing to give a favorable a reference. While not always possible, this may be an option for an employee who simply wasn't a good fit for your company.
    • Provide job search assistance. If you must fire employees for a “fit” reason instead of for misconduct, then you may be able to help them find their next job. Notify them of any openings and provide leads.

Warnings

  • There is no way to insulate yourself 100% from a wrongful termination lawsuit. Nevertheless, establishing and following protocols provides you with evidence that you did not terminate someone for an improper reason.

Related Articles

References

  1. ↑ The Employer's Legal Handbook, Fred S. Steingold (Chapter 10).
  2. ↑ http://www.michiganemploymentlawadvisor.com/employment-contract/carefully-defining-for-cause-termination-in-employment-contract-critical-for-avoiding-payment-of-mis/
  3. ↑ http://www.eeoc.gov/laws/statutes/titlevii.cfm
  4. ↑ http://www.nolo.com/legal-encyclopedia/sexual-orientation-discrimination-rights-29541.html
  5. ↑ The Employer's Legal Handbook, Fred S. Steingold (Chapter 10).
  6. ↑ http://www.eeoc.gov/eeoc/publications/fs-preg.cfm
  7. ↑ http://www.eeoc.gov/laws/types/age.cfm
  8. ↑ http://www.nolo.com/legal-encyclopedia/sexual-orientation-discrimination-rights-29541.html
  9. ↑ http://www.legalmatch.com/law-library/article/wrongful-termination-that-violates-public-policy.html
  10. ↑ http://www.humanresources4u.com/cms_files/original/How_to_Terminate_an_Employee1.pdf
  11. ↑ http://www.hreonline.com/HRE/view/story.jhtml?id=534357841
  12. ↑ http://www.hreonline.com/HRE/view/story.jhtml?id=534357841
  13. ↑ http://topics.hrhero.com/supervisor-training-and-employment-law/#
  14. ↑ http://www.eeoc.gov/policy/docs/harassment.html
  15. ↑ http://www.humanresources4u.com/cms_files/original/How_to_Terminate_an_Employee1.pdf
  16. ↑ http://rapidlearninginstitute.com/hric/sufficient-documentation-for-employment-termination/
  17. ↑ The Employer's Legal Handbook, Fred S. Steingold (Chapter 10).
  18. ↑ http://corporate.findlaw.com/litigation-disputes/preventing-lawsuits-for-wrongful-termination.html
  19. ↑ http://www.dicarlolaw.com/NotSuedByEmpBusJournal.html#YourFriendTheAnnualAcknowledgment
  20. ↑ http://www.dicarlolaw.com/ProtectYourBusinessText.html#APPENDIX%201
  21. ↑ http://www.dicarlolaw.com/NotSuedByEmpBusJournal.html#YourFriendTheAnnualAcknowledgment
  22. ↑ The Employer's Legal Handbook, Fred S. Steingold (Chapter 10).
  23. ↑ http://www.nolo.com/legal-encyclopedia/employer-need-employment-lawyer-29890.html
  24. ↑ The Employer's Legal Handbook, Fred S. Steingold (Chapter 10).
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