Employee Termination – Reducing Legal Liability

Wrongful termination is one of the most common reasons employees sue employers. It is based on a charge that the employer terminated the employee in violation of one of the employee's legal rights. It is not enough that the discharge was "unfair." In the United States, the employment-at-will doctrine states that employers have the right to discharge employees for any reason - with a limited number of exceptions. It is these exceptions that employers need to be aware of if they want to avoid a lawsuit, or at least prevail in one.



Following are the main exceptions to the employment-at-will doctrine:



Discrimination based on age, race, sex, disability, religion and/or national origin. Discrimination based on these protected categories is one of the strongest grounds for a wrongful termination lawsuit. Title VII of the Civil Rights Act of 1964 makes it illegal to do so, even when the discrimination is not deliberate. That is, if the end result is "disparate impact" on any of these categories, it may be considered discrimination.



Violations of Public Policy. This is where the termination of an employee violates the public interest. Examples include firing a whistle blower, or firing someone for filing a Worker's Compensation claim.



Breach of Contract. When an employee has a written contract that specifies the terms of employment and limits the grounds for discharge, the employer may be liable if they break those terms. This most often involves executives, professionals, or union contracts.



Breach of Implied Contract. An implied contract is usually based on verbal statements or implicit promises by the employer to the employee. Statements in company handbooks have been interpreted by courts as implied contracts. For this reason, companies often require employees to sign statements saying their employment is at will, and that no company documents constitute a contractual agreement.



Breach of Covenant of Good Faith and Fair Dealings. Some states recognize a covenant requiring that employers treat employees fairly, honestly, ethically and show at least "good cause" for termination. In other words, employers cannot invent excuses for firing an employee, or harass them into quitting. However, this is the weakest of the exceptions to employment-at-will, and it is not upheld in all states or courts.