Firing without proper cause can open your company up to a wrongful termination lawsuit. Here’s how to avoid it.
Sometimes an employee just has to go. But without a clear and lawful reason for termination, it’s possible to open up the company to wrongful termination lawsuits.
While it’s easier than you think to avoid potential pitfalls related to unlawful termination, many HR professionals and managers still have lingering anxiety when it comes to dismissing employees. And for good reason.
Not only is it expensive to replace an employee, with costs ranging from 16% to 213% of their annual salary, but a company lawsuit can easily cost more than $100,000. At the same time, if you consider that 78% of candidates lie during the hiring process, it’s easy to see how an organization can make the wrong hire.
For those who are considering letting go of an employee, here’s what you need to know about lawful and unlawful dismissal.
What is “without proper cause”?
In the United States, “At-Will” employment is the norm. This means that an employer can terminate any employee for any reason, with the exception that the cause cannot be illegal under U.S. Law. For example, you can’t fire an employee due to their race, religion, or sexuality. Therefore, it’s fair to assume that any termination linked to employment discrimination would be considered wrongful termination. Furthermore, if an employee has signed an “At-Will” agreement and acknowledged their status, it is not required for an organization to explain their decision.
However, many company contracts differentiate between with and without proper cause, especially in unionized workplaces. These are usually called “Cause” agreements, and this should be explained in the employee handbook.
Understanding wrongful termination
While it can be difficult to prove a wrongful termination claim, there are clear cases of wrongful firing. This is usually because the termination is discriminatory. For example, you cannot fire an employee for:
- Gender, under the Equal Pay Act of 1963
- Race, based on the Title VII of the Civil Rights Act of 1964
- Age, under the Age Discrimination in Employment Act of 1967
- Religion, under Title VII of the Civil Rights Act of 1964
- Disability, under the Americans with Disabilities Act of 1990
- Nationality, under the Title VII of the CivilRights Act of 1964
While it can be difficult to prove a wrongful termination claim, there are clear cases of wrongful firing. This is usually because the termination is discriminatory.
Furthermore, you cannot fire someone if they decide to take medical leave. Under the Family Medical Leave Act, an employer cannot terminate an employment relationship until after the employee has returned to their office, and the reason for firing cannot be linked to the medical leave. You also can’t fire a woman for becoming pregnant. Wrongful firing also covers termination due to a Worker’s Compensation claim, whistleblower activities, and opposing policy or wage violations.
When does a termination violate a law or public policy?
There are a few different exceptions, which differ from state to state. The three main exceptions are:
Public policy exception
In this case, it can be considered wrongful discharge if the firing would violate the state’s public policy doctrine, or if it would conflict with state or federal government statutes. Every state includes this policy, with the exception of Florida, Alabama, Georgia, Louisiana, Maine, Nebraska, New York, and Rhode Island.
Implied contract exceptions
In this case, an employee cannot be fired when an implied contract dictates the employment relationship. The proof in this case often stems from company policies and the employee handbook, which may indicate there are certain “proper” reasons for the firing. Currently, 36 states allow for this exception. Those that don’t are:
- North Carolina
- Rhode Island
“Implied-in-law” contract exceptions
A minority of states uphold this exception, which states that an employer’s motivation should be considered and that an employer should not breach the goodwill in the employment relationship. For example, an employer should not law-off workers to avoid paying their pensions.
States that include this exception include:
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What’s the difference between with and without cause
What are the common reasons for firing without proper cause? Unfortunately, we’ll never know, because it’s basically the right to fire an employee without one of the regular reasons.
But in most cases, managers aren’t making termination decisions on their own or at random. Usually, termination is due to a number of different factors that affect the employee’s team, performance, and the company at large.
Common reasons for “cause” termination include:
- Habitual insobriety
- Drug use
- Conviction of a crime
- Gross negligence
- Poor performance
- Misappropriation of funds
- Sexual harassment
- Conflict of interest
- Extensive absenteeism
- Releasing confidential information
- Insubordination or misconduct
- Violating company policies
When in doubt, consider including reasons for dismissal within the employee handbook. It can be easier to describe why you are terminating an employee in most cases rather than let them guess and jump to conclusions.
No one wants to deal with a wrongful termination lawsuit. That’s why it’s often best to be clear with employees about your expectations and company policies, and ensure that all interactions are documented.
The best way to avoid wrongful firing situations is to hire the right person in the beginning. That’s why you’ll want to check out our Hiring and HR Hacks guide before you make your next hire.