Most employment contracts are considered at-will, which means that the employer can fire an employee for any legal reason or even no reason at all. However, while employers have great discretion when it comes to firing at-will employees, there are some illegal justifications for terminating an employee that can lead to a wrongful termination lawsuit.

What is an Illegal Reason for Termination?

Employers can fire employees for any reason except the following:

  • Discrimination: Employers cannot fire an employee based on race, nationality, color, religion, gender, age, or disability. Employers can lawfully terminate employees for other reasons, so long as it is applied equally to all employees.
  • Retaliation: An employer cannot terminate employees for reporting to federal or state agencies about employment law violations.
  • Illegal Acts: An employer cannot fire an employee if the employee refuses to perform an illegal act.
  • Family or Medical Leave: Employers cannot fire an employee who takes time off for reasons listed in the Family and Medical Leave Act.

In addition, employers are bound by the terms of their own employee firing policies, as well as the terms of any employment agreement between an employee and the employer. Breaching the terms of these policies or agreements may also lead to a wrongful termination lawsuit.

What Should an Employer Consider Before Firing an Employee?

An employer should be sure that the employee termination is approved by top level management and follows written company firing policies. You should also seek legal advice if there are any questions regarding the procedure and reasons for termination.

Unless an employee has specifically committed an act that leads to termination, the employee should usually be told the reasons for their termination. An exit interview with the employee and human resources should be carefully planned to anticipate responses and reactions.

If an employee is being laid off or having their work area closed, it is may be a good idea to provide notice of their termination in advance so the employee can seek alternate employment or prepare for unemployment. Keep in mind that too early notification could affect productivity or cause undesirable actions.

As a security precaution, be sure to change security codes and passwords to deny access to the employee once their employment has been terminated. This can be especially important for employees with access to confidential information, including trade secrets.

Do I Have to Offer a Severance Package to a Fired Employee?

You are not required to provide a severance package to employees you fire by law. However, if your employment contract with the employee has a clause that provides for severance pay, then you should honor the promise.

Do I Still Have to Offer Retirement Benefits If I Fire an Employee?

Generally, retirement benefits are not required unless company policy or the employment contract provides for them. It’s important to carefully look at the employment contract, as even if the employee would have retirement benefits they may only be entitled to them after working for a certain period of time.

What Should I Do If I Terminate an Employee with Access to Confidential Information?

An employer can change passwords and locks to confidential information. Employers can also have non-compete covenants with an employee, which would limit when and where former employees will work (e.g. working with a competitor or starting their own business).

An employer should have a general policy and waiver stating that all company property be returned upon termination. Defining “company property” will be based on each individual business. An employer can also have an employee sign a nondisclosure agreement if the confidential information is related to intellectual property.

Should I Tell My Other Employees about the Employee I Fired?

It is best to limit your discussion of why you fired an employee to avoid defamation or wrongful termination lawsuits. If employees are concerned about their work performance, you can tell them to review their employment contract.

What Should I Do If I Am Listed as a Reference for an Employee I Fired?

As an employer, you should do what you are most comfortable with doing. You can either provide a positive reference, or simply verify job responsibilities and dates of employment. Avoid negative comments about former employees because it may lead to a defamation lawsuit.

Should I Get an Attorney If I’m Thinking about Firing an Employee?

Yes. Firing employees without a well-written employment contract or termination procedure can lead to defamation or wrongful termination suits. An experienced employment attorney can help you with your firing practices, or represent you during a lawsuit.