Although most employers are considered at-will, many laws are designed to protect employees from wrongful firing. As an employer, there will inevitably come a time when you need to let someone go, but it’s important to do so legally and for the right reasons.
Before terminating an employee, you must be aware of wrongful termination laws. Here’s what you should consider and how Mosey can help with state compliance.
What Is Wrongful Termination?
There are plenty of valid reasons to terminate an employee, even if the reason is simply that their services are no longer needed. However, in some situations, an employer doesn’t have complete freedom to fire their workers — particularly if an employee’s actions were rightful or a termination decision was discriminatory.
Wrongful termination refers to firing an employee for an illegal reason. If your reason for terminating an employee goes against labor laws, whistleblower laws, or discrimination laws, letting that employee go would likely be considered wrongful termination.
What Is At-Will Employment?
Every state in the U.S. besides Montana utilizes at-will employment. At-will employment gives an employer the legal right to terminate an employee at any time for any legal reason. This action is technically called “termination without cause.”
Still, there are a few exceptions to at-will employment. If an employer and an employee have a contract and the employer decides to terminate the contract without a valid reason, the employer may have to pay damages (like severance pay) to the employee for breaking the contract.
The most important exception to at-will employment is that “any reason” only refers to reasons that don’t violate existing fair workplace laws, workplace discrimination laws, or employee protections. If your reason for terminating an employee could be deemed illegal, you may be liable for wrongful termination.
What Types of Employees Are Protected From Wrongful Termination?
Employee protection laws are very thorough and designed to address a wide range of situations, most of which involve an employer acting in bad faith.
However, there may be situations where wrongful termination is not obvious. It’s important to understand how protection laws can impact your termination policy and how the optics of letting an employee go may lead to speculation of wrongful termination.
Discrimination Protections
There are many protections in place to prevent employers from discriminating against workers who are members of a protected class. Employers cannot fire an employee for discriminatory reasons.
Protected classes include:
- Race
- Color
- Ethnicity or national origin
- Age
- Gender or gender identity
- Sexual orientation
- Religion
- Disability
- Genetic information (like medical history)
The U.S. Equal Employment Opportunity Commission (EEOC) oversees workplace discrimination complaints and actively works to safeguard protected classes from acts of retaliation or wrongful discharge.
Exercising Employee Rights
Many employees are entitled to overtime pay. Workers can also collect workers’ compensation, use sick time from the Family and Medical Leave Act (FMLA), use maternity or paternity leave, and take paid vacation days.
Employees cannot be fired for exercising their legal right to utilize these options or for collecting benefits they’ve accumulated through a company.
Reporting Unsafe Working Conditions or Labor Law Violations
Employees must be fairly compensated for their work, pay taxes, and have a legal right to work in the United States. Employers must provide safe workplace conditions as specified by the Occupational Safety and Health Administration (OSHA) for their type of business.
If an employee reports that workplace safety standards don’t meet the necessary specifications or that an employer is violating labor laws, they’re legally protected from retaliatory firing.
Refusing To Participate in Harassment
Employers cannot ask employees to create a hostile work environment for others or interfere with their competitors’ operations.
For example, an employer cannot ask employees to post negative online reviews for a competing business or encourage someone to quit. Employees who refuse to participate in harassment are protected under the law.
Acting Ethically
The law protects whistleblowers, employees who report illegal workplace activity, and employees who refuse to lie in court or to law enforcement on behalf of their employers. Employers cannot pressure employees to act illegally or retaliate against them for ethically reporting violations or illegal activities conducted by a boss.
How Can an Employee Proceed With a Wrongful Termination Case?
Employees have legal recourse, and the penalties for wrongful termination will vary depending on the perceived type of wrongful termination. The law allows them to take legal action and seek punitive damages, compensation for emotional distress, and lost wages if their wrongful termination claim is found credible.
Employees who believe they’ve been wrongfully terminated are encouraged to report their termination to the government agency that enforces the specific law they allege their employer has violated.
Employees who allege they were fired for discrimination are encouraged to report their former employer to the EEOC. Employees whose employer fires them in retaliation for reporting unsafe working conditions should report to OSHA, while employees alleged to have been terminated for exercising their rights should report to the Department of Labor (DoL).
Employees are encouraged to seek legal advice from an employment attorney and file a formal wrongful termination lawsuit against their employers. Settlements in wrongful termination cases usually occur outside of court and can significantly vary in size. In some cases, settlements can exceed the million-dollar mark.
How To Avoid Wrongful Termination
It’s important to verify labor laws before you terminate an employee. In some cases, the appearance of wrongful termination can be accidental. But even if you’re terminating someone for a good reason, bad optics can have long-standing negative consequences.
There are many other factors to consider when creating a termination policy and deciding to fire an employee:
Create an Employee Handbook
Work with your HR team to create an employee handbook. Provide this handbook to employees upon hiring them and issue new copies each time you update your policies. Some employers ask employees to sign a document acknowledging they’ve received and reviewed their copy.
Your employee handbook should describe workplace expectations, including expectations for conduct. Providing a thorough list of fireable offenses and a detailed explanation of workplace disciplinary action will tell employees what to expect and keep your organization accountable for following the stated procedure.
If your reason for terminating an employee ever comes into question, you can refer to the employee handbook. Your handbook should support your basis for any lawful termination of an employee.
Because employees have access to your termination policy, they cannot claim to have been caught off guard by your decision to end the working relationship.
Utilize Employment Contracts
Employment contracts protect both the employer and the employee. If you no longer wish to employ someone, you can simply notify them that you opt out of renewal. If you want to terminate them before their contract expires, you must fulfill the stated penalty. You may also need to pay severance or give extended notice if you intend to break the contract.
With an employment contract, you’ll always have a clear reason for ending your professional relationship: the contract ended, and you are not obligated to offer a new one. Rather than terminating an employee, you’re releasing them from a professional relationship they previously understood may come with an end date.
Still, remain mindful of breach of contract. The existence of a contract does not allow you to violate employee rights, disregard labor laws, skirt safety violations, or retaliate against an employee for engaging in protected activities.
Contracts never entitle you to fire employees for unlawful reasons. Instead, they provide a safe exit strategy at the end of their duration.
Document Workplace Interventions
Employees sometimes feel as though they were wrongly terminated when they’re unaware of performance issues. Unless an employee does something egregiously wrong, like intentionally destroying company property or committing theft, they can easily fail to recognize the issue that led to their termination.
If you’re having an issue with an employee, organize a meeting with HR. Address the issue and create a plan for a resolution.
If the employee adheres to the proposed solution and the situation is resolved, termination is unnecessary. If the situation does not improve, you’ll have an accurate record of why you decided to terminate that worker.
Choose Appropriate Times To Terminate Employees
Timing may give the appearance that an employee was wrongfully terminated.
If you decide to let an employee go around the time they intend to collect worker’s compensation or when they begin fertility treatments to conceive a baby, it may appear as though the reason you’ve made that decision relates to the circumstances of their employment or personal life.
It may be best to wait to terminate an employee if your timing may give the appearance of impropriety. If you have a clear and unrelated reason to ask for an employee’s resignation, you can also request that an employee leave voluntarily. You cannot push them to quit if they don’t want to.
While you may spend more than you’d like to in payroll costs if you keep an employee for longer than you’d like, you’ll still be spending significantly less than legal fees or settlements. If you’re still unsure, speak to an employment lawyer to make the best decision for your business.
Operate According to the Law
The simplest way to avoid being reported by an employee is to operate under the law. You won’t have to contend with the aftermath of an employee filing a formal complaint against your workplace if you’re abiding by the proper safety standards, compensating your employees properly, and creating a positive work environment.
When you create a thriving workplace culture and nurture your employees, they may be more likely to perform at or above expectations. Productivity in thriving workplaces supports your bottom line, and you may be able to afford to retain more employees.
Stay Compliant With Termination Laws Using Mosey
Keeping track of state employment laws can be time-consuming, especially if you’re focused on building and growing your business.
Mosey’s compliance management system works in the background to help you keep track of employment and termination laws. Schedule a demo with Mosey to learn how we can help you maintain compliance.
