The term “wrongful termination” can be confusing both to employers and employees alike. Often, employers think they can fire an employee for any reason, and employees are often under the impression that in order to be fired, there has to be “cause.”
While employers have broad latitude in firing an employee in most US jurisdictions, there are federal, state and local laws that do offer certain protections to employees.
Wrongful Termination: An overview
According to Gartner, wrongful termination “occurs when an employer ends an employee’s work contract, but the termination violates the terms of the employment agreement or some provision of employment law.”
However, the laws surrounding wrongful termination vary based on whether they are passed federally, by a state government or locally. Making matters more complicated is that each of these governing bodies views “wrongful” differently.
In “at will” states (which is most of the US), for example, an employer may fire an employee for any reason – except for an illegal one – if there was not a contract signed at the start of that employee’s work. Some of those illegal reasons may include discrimination based on protected classes (e.g. race, religion, sexuality, gender) , retaliation, taking protected leaves of absence and more. But exactly what constitutes wrongful termination depends on the law that applies – usually based on where the employee is located.
Protections in an at-will employment state
In simple terms, there are three different “exceptions” to “at-will” employment: 1) contractual exceptions; 2) statutory exceptions; and 3) public policy.
It’s important to note that each exception varies from state to state. For example, the public policy exception is the most widely accepted nationally, as 43 states recognize it – though what it means varies by state. California, Alaska and Nevada guarantee all three exceptions.
Contractual exceptions
The contractual exceptions are usually the easiest to understand. An employer and employee can enter into a contract that specifies an employment term. This overrides the at-will nature of employment. Outside of certain industries, however, contractual exceptions are relatively rare.
Sometimes an employer can unintentionally contractually bind themselves to exceptions to at-will employment. For instance, if your employee handbook specifies that the employer will follow a certain procedure before firing an employee, and you require a signature deeming they have read the employee handbook, that can be deemed a contract. That can give an employee the ability to sue if you fire them without following handbook procedure.
Statutory exceptions
Statutory bases are the most well-known types of wrongful termination. These may arise under local, state or federal law. For example, termination based on race, sexuality, religion, age or certain other criteria would give rise to wrongful termination claims.
Terminating an employee for taking protected leave, such as under the Family Medical Leave Act, would also be grounds for a wrongful termination claim.
But there are other less well-known statutory bases for wrongful termination actions. For example, employers often don’t like it when employees discuss their wages with each other. But, in California, it is unlawful to terminate an employee (or take any adverse action) for discussing wages.
Public policy exception
Lastly, there is a public policy exception for wrongful termination. It’s rooted in state law, statute or constitution. The public policy exception includes terminating employment for those who have been injured on the job and/or have filed for workers’ compensation. Other examples of the public policy exception include firing an employee for whistleblowing, for refusing to sign a non-compete, or for refusing to sign a release of claims in favor of the employer.
How Do You Ensure Rightful Termination?
The best way for employers to protect themselves from wrongful termination issues is to use a system of progressive discipline when dealing with an employee that is underperforming or engaging in misconduct. Keep well-documented files that include details about disciplinary measures taken against the employee; sit-downs and discussions about work performance; or needs for improvement. Any and all issues or circumstances that may lead to termination should be documented.
Once termination is decided, that decision should also be documented. If you have a Human Resources department or an executive team, they should be notified in writing about what has transpired.
You should also ensure that you do not inadvertently make promises to employees – orally or in writing – that restrict your ability to terminate employees beyond the requirements of law.
Severance agreements, contracts signed by both the employer and the terminated employee, may also be utilized. Therein, both parties agree to an exchange of severance for compliance with any confidentiality and disclosure measures, as well as an agreement to release any claims against the employer. However, it is important that any severance agreement be vetted by legal counsel to ensure protection of the employer.
The bottom line
“At-will” doesn’t give employers free reign to terminate employment without reason. There are laws and protections in place to safeguard employees from unjust terminations. Laws regarding wrongful termination vary from state to state, but having a basic understanding of these laws will put employers in a position to make sound decisions when it comes to terminating employees.
