Firing an employee can have a personal and emotional impact on an employee. In today's legal environment, a wrongful termination claim by a disgruntled former employee can end up costing your company significantly in legal costs.

In order to avoid a wrongful termination lawsuit, there are several steps you can take to help ensure that your business is protected from fired employees:

Firing an Employee: Know the Law

The first step in preventing lawsuits from former employees is to know what the law is on employee termination. All company managers with the power to fire need to have at least a basic understanding of state and federal laws. This will allow them to spot and respond to potential risks. Some of these areas include:

Firing an Employee: Document Everything

Effective managers and human resource personnel know the importance of keeping a detailed paper trail on all employees. This is especially important when dealing with fired employees. In many cases, a manager's documentation on an employee may be the only real evidence that you can use at trial. Without documentation, wrongful termination trials become a he said she said war of words, leaving the jury to decide who is more credible.

Examples of things to document include:

  • Written or verbal warnings given to employee;
  • Records of employee evaluations;
  • Number of times employee is absent or late without approval; and
  • Steps taken to solve problems with employee. 

Firing an Employee: Have Clear Termination Procedures in Place

One of the best ways to prevent claims of wrongful termination is to develop clear employee firing procedures and to follow them closely. Termination procedures should include:

  • Standard documentation forms;
  • Planned agendas for termination meetings at which witnesses will be present;
  • Policies on when and how an employee can collect personal belongings;
  • Exit interviews with human resources personnel;
  • Plans on how to immediately limit fired employee's access to company property and files; and
  • Procedure on how the employee will receive their final paycheck.

Additionally, as a future reference for the former employee, you should have a company policy on how to handle reference requests in order to avoid defamation claims.

Can an Employee be Fired for Any Reason?

The vast majority of states in the United States have a system of “at will” employment. This means that, in the absence of an employment contract, either party, for any reason or no reason, can terminate the employment at any time, at all.

However, the “at will” presumption may be defeated for several reasons in accordance with a court’s discretion. For example, courts may find an “implied-in-fact” contract between an employee and the employer.

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.

Can I Have the Employee to Waive their Right to Sue After Termination?

Yes. After an employee is fired or downsized, many companies have the employee sign a waiver giving up the right to sue for wrongful termination. Signing a waiver means that the employee no longer has any legal claim against the company and cannot recover in court. In exchange for the waiver, the employee receives some benefit in return, typically a severance package.

Do I Need a Lawyer When Terminating an Employee?

In order to avoid lawsuits and help protect your business, you should consult with an employment lawyer to review your termination procedures. This can help you avoid costly litigation in the first place.

If a former employee files a lawsuit against you for wrongful termination, you should contact an attorney immediately. Your attorney will be able to defend you at trial and ensure that your rights are protected.