How To Avoid Legal Liability for Wrongful Terminations

Unlawful terminations are a prevalent reality in many industries. It happens when you fire an employee for an illegal cause or when the dismissal doesn’t adhere to termination policies.

Other than Montana, all states in the US follow an at-will employment system. It’s the default employment arrangement where employees can leave their jobs anytime, and you can terminate them for any reason and at any point. Unless the employment contract specifies the termination causes, both parties can end it for any or no reason without incurring legal liability.

But not all terminations in at-will employment arrangements are legal. In certain situations, terminating an employee could violate a state or federal law. Lawsuits involving wrongful terminations can be costly, regardless of whether or not you win the case.

Alistair Vigier of Clearway says that “Terminating an employee is hard enough without the additional stress of dealing with wrongful termination lawsuits. Too often, many employers expose themselves to unnecessary liability. This article highlights some tips to help you avoid legal liability for wrongful terminations.”

What Constitutes a Wrongful Termination

Accusations of wrongful termination can be a significant liability for the company, exposing it to potential reputational and financial damage. For this reason, taking proactive steps to prevent it is essential.

To do that, you must understand what constitutes a wrongful termination. Legally, it refers to a terminated employee’s claim that their dismissal breached an employment contract or specific public laws.

The at-will employment system gives employers a lot of leeway in deciding who to retain. However, some exceptions to the at-will rule limit the circumstances under which employees can get fired. It’s crucial to be aware of the following before you decide to terminate an employee:

Breaches of contract

The law recognizes an employment contract as an agreement between the employer and the employee. If such a contract exists, wrongful termination can happen when you breach its terms. A typical example of a contract breach is not paying the wages specified in the agreement.

Specific conditions for termination may also be outlined in an employment contract. For instance, it may specify the required notice period or reasons for dismissal.

Suppose you violate the terms written in the contract. The fired employee can initiate a wrongful termination lawsuit against you for breaching the contract. But not all the terms of an employment contract are written down.

Some states recognize the existence of  implied contracts. In employment, these contracts can arise through the actions, conduct, or circumstances of the employer and employee. They can carry the legal weight of a contract even when not explicitly stated.

For instance, the employee may expect fixed employment because of verbal assurances or the company’s established practices.

Conflicts with public policy

The government implements policies to protect society and fundamental human rights. These may encompass protection against discrimination and other unlawful actions.

Firing an employee in a way that violates the state’s well-established public policies may constitute wrongful termination.

Numerous state and federal laws specify employment-related actions that violate public policy. Common examples of wrongful termination against public policy include firing an employee for the following reasons:

  • Notifying authorities about illegal activities
  • Refusing to participate in something unlawful
  • Exercising a legal right, such as taking time off work to vote

Employment law violations

States have many specific employment  laws that protect employees from being wrongfully terminated. In addition to public policy violations, you cannot use the following grounds as justifications to fire an employee, regardless of the company’s size:

Insisting on equal pay for equivalent work or filing complaints about pay discrimination under the Equal Pay Act (EPA).

How To Avoid Being Legally Liable for Wrongful Terminations


Image by pressfoto on Freepik

The way you handle an employee’s termination process will significantly influence whether or not they decide to file a wrongful termination claim.

Hence, you must be cautious when firing someone and ensure the dismissal is lawful. Proper guidance from legal professionals is also critical in this matter.

The following are some steps you can take to avoid bearing legal liability for wrongful terminations:

Establish well-defined employment policies

Defining hiring, disciplinary, and termination procedures through well-established employment policies is your first line of defense against wrongful termination claims.

For instance, incorporating probationary periods for new hires and corrective action plans for those underperforming can help mitigate the risk of wrongful termination. The company must consistently implement these policies to ensure fair practices when terminating an employee.

Ensure you adhere to all employment laws

Alistair Vigier of Clearway says “Ensuring your policies and procedures adhere to all employment laws applicable to your company is critical. A comprehensive understanding of federal and state employment laws is imperative.”

Seeking legal consultation and having your procedures and policies reviewed by an attorney annually is a good practice for the organization. Doing so can help ensure compliance with relevant employment laws, minimizing legal liability risk.

Be cautious about implied contracts

Implied contracts can arise without an express written or verbal agreement. Hence, you must be cautious about making statements that employees might misinterpret. These statements may include assurances about job security, as they may perceive it as a promise of permanent employment.

Moreover, your employee handbook can lock you into a specific course of action that may result in certain violations. One way to avoid creating implied contracts in your policies is by including a waiver emphasizing that all employment is at will.

Maintain comprehensive documentation

Comprehensive documentation is one of your weapons when a terminated employee files a wrongful termination lawsuit against you. Ensure you keep thorough records of disciplinary actions and job performance evaluations, especially in cases of poor employee performance.

Likewise, have the employees read and sign these documents, indicating that they understand the purpose of any disciplinary measure. Proper documentation of all incidents can serve as evidence if the employee is subsequently terminated.

Choose to utilize severance agreements

Severance agreements can be a great tool to prevent charges of wrong termination. These legal documents specify employers’ and employees’ rights and obligations during the termination process.

Through this, you can ensure that the terminated employee understands and accepts the terms of their termination. When employees sign this contract, they also agree to waive their rights to sue you regarding their employment or termination.

Consult a lawyer before executing a termination

The legal considerations and implications of termination can be challenging to navigate. It’s best practice to consult a lawyer before executing any termination. This way, you can ensure you don’t.

Featured image by Freepik

Employment Law Updates
Laws change in a moment. Sign up to stay informed.
Employment Law Updates
Laws change in a moment. Sign up to stay informed.

Have employees in more than one state? SUBSCRIBE HERE!

Have employees in more than one state? SUBSCRIBE HERE!