The vast majority of states in the United States have a system of “at will” employment with certain exceptions. In the absence of an employment contract, a worker’s employment can be legally terminated at any time for any reason or without justification, unless the termination was
based on one of the reasons that can make termination of employment wrongful.
As a practical matter, however, the exceptions are so numerous that an employer might want to proceed with caution when deciding whether to terminate a worker’s employment.
Of course, if the employer and employee have a valid contract of employment, then the contract must be respected by the employer or they might face a complaint for breach of contract. Remember that a contract can be express or it can be implied from circumstances. If a valid, express contract contains a provision regarding the term of employment, then both parties are bound by that provision.
A valid contract of employment can also be implied from circumstances, e.g. a company’s policies, procedures and practices. These may establish an expectation of continued employment that would only be terminated for a just cause.
When Would a Termination of an Employee Be Unlawful?
Firing an employee might be unlawful if the employee can show that they were fired on the basis of race, gender, religion, national origin or other protected class status. Both federal and state laws protect employees from termination of their employment for reasons of discrimination on the basis of protected class status.
Some other reasons for terminating employment that are prohibited by law are as follows:
- Whistleblowing: There are extensive federal laws that protect whistleblowers and many states have laws that provide whistleblower protection as well. if an employee engages in an act of whistleblowing, such as reporting the employer’s illegal conduct to the appropriate authorities, the employee cannot be fired in retaliation;
- Complaints: If an employee complains about sexual harassment or other violation of their rights as an employee, it would be unacceptable to terminate their employment;
- Testifying: If an employee is called to testify in court or before an agency of government, even against the company or another employee, the employee cannot be fired in retaliation for appearing and testifying;
- Lawful Union Activities: If an employee is a member of a labor union that has a collective bargaining agreement in place, then the employee can be fired only according to the provisions of the agreement. Also, firing employees who are engaged in lawful union activities is prohibited by the National Labor Relations Act (NLRA).
- Worker’s Compensation: An employee who has cause to file a claim for worker’s compensation cannot be fired for making the claim;
- Breach of a Valid Contract of Employment: Again, if the employer and employee have a valid contract of employment with provisions regarding the length of the employment or how it can be terminated, then these provisions should be respected;
- Reporting OSHA Violations: The Occupational Safety and Health Administration (OSHA) has extensive regulations that protect employees who have reported OSHA violations in a number of covered industries, e.g. the airline and trucking industries. Retaliating against employees who report OSHA violations by terminating their employment or taking any other action that adversely affects their employment status is prohibited;
- Wage Garnishment: If an employer receives a court order to garnish an employee’s wages, then the proper course of action is to comply with the order and not retaliate in any way against the employee.
- Illegal Acts: A worker cannot be fired for refusing to do something that is illegal.
There may be other invalid reasons for terminating a person’s employment, but these categories capture the major ones. Terminating a person’s employment for the reasons stated above can lead to a lawsuit for wrongful termination or other penalties as provided for in state or federal regulations.
What Should an Employer Consider Before Firing an Employee?
An employer should be certain that the termination of a person’s employment follows written company policies and procedures for termination of employment. Or, again, if there is a written contract of employment, that the contract is honored. A person who wants to terminate an employee should probably seek the advice and assistance of their human resources personnel and, possibly, of corporate counsel, if there is one. If the company does not have a legal department, they may wish to consult with the company’s attorney, if there are any questions regarding the procedure and reasons for termination.
Rather than proceeding rashly with a termination, an employer should go about in a planned manner. If the employer is dissatisfied with an employee’s performance in some regard, they might first want to Investigate the situation by asking the employee what’s behind the deficient performance. The employer could ask whether the employee lacks necessary skills, or motivation, or whether supervision is an issue.
The employer would want to communicate the gap between the standard they expect and the current performance. It is good practice to document the communication of the standard to the employee and the deficiency in their current performance. Then the employer would want to communicate a time period within which the employee can correct the deficiency and offer resources to support them, if necessary. At the end of the time period, the employer would evaluate performance again. Only then would the employer make a decision to terminate the employment if the performance still has not met standard.
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 including the employee and human resources personnel should be carefully planned to anticipate the employee’s responses and reactions.
If an employee is being laid off or having their work area closed, it may be a good idea to provide notice of their termination in advance so the employee can seek alternative employment or prepare for unemployment. Keep in mind that notification that comes too soon could affect productivity or cause undesirable reactions.
As a security precaution, often employers change security codes and passwords to deny access to the employee once their employment has been terminated. This might be of special concern for employees with access to confidential information, including trade secrets.
Of course, if there is any possibility that the facts and circumstances of the termination could be viewed as establishing cause for a claim of wrongful termination, then one strategy would be to offer the employee severance pay along with a waiver of all claims. So, for example, if the employee is older and their termination might be viewed as resulting from age discrimination, even if it is not motivated by the employee’s age, the employer can seek the employee’s agreement not to sue in exchange for a payout.
If there is a valid contract of employment, express or implied, again the employer can always approach the employee and try to negotiate a termination of the employment, if it is not working out. Or, there might be a liquidated damages clause in the contract. This is a clause that specifies an amount of money that is to be paid in the event either party breaches the contract. If an employer has a liquidated damages clause in their contract, then they can offer the amount specified in the clause to the employee as a final settlement for termination of the employment relationship.
Do I Still Have to Offer Retirement or Severance Benefits If I Fire an Employee?
Generally, retirement benefits would only have to be paid when application of a company’s policy or the employment contract provides that the employee has earned them. It is important to look carefully at the employment contract. Generally, retirement benefits accrue to an employee after they have worked for an employer for a period of time specified in company policy. Again, if an employee has earned them, then they would need to be paid.
There are exceptions, of course. The policy of some companies or public employers may provide that certain kinds of misconduct on the part of an employee would result in forfeiting retirement benefits. If this exception is part of an employer’s policies and the employee has engaged in the kind of misconduct that leads to forfeiture of retirement benefits, then they would not have to be paid.
A person is not required by law to provide a severance package to employees whose employment is terminated. However, if your employment contract with the employee has a clause that provides for severance pay, then of course, the provision must be honored.
Should I Seek Attorney’s Advice?
Your major goal when firing an employee is avoiding a wrongful termination lawsuit. Firing employees in violation of a valid employment contract or company’s termination procedure can lead to a wrongful termination suit. Firing for unlawful reasons is another risk.
An experienced local wrongful termination lawyer can first help you formulate sound firing policies and practices, possibly negotiate resolutions of employment relationships that are not working out or, if necessary, represent you in a lawsuit. The time to contact an experienced employment lawyer is before firings become necessary.