What Employers Need to Know About Wrongful Termination Claims

Navigating terminations can be tricky. Even when you think you have all bases covered, a former worker could file a wrongful termination claim.

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Was your firing illegal? Read this guide on how to navigate wrongful terminations.

Wrongful terminations (or wrongful dismissal) is a term used by lawyers and government agencies to designate when an employee has been fired illegally.

When a claim or lawsuit is filed against an employer for wrongful termination, they can expect to bear the full weight of the Equal Employment Opportunity Commission or the justice system. It’s critically important for employers to understand what constitutes as wrongful termination, and how to fire employees legally without violating their rights or putting the company at risk.

Wrongful termination claims can be costly to a business in more ways than financial. The damage to an organization’s reputation in the marketplace can be just as significant as any fines and penalties they have to pay.

The damage to an organization’s reputation in the marketplace can be just as significant as any fines and penalties they have to pay.

What is wrongful termination?

Wrongful termination is simply firing an employee in violation of any law that protects workers. Primarily, applicable regulations are anti-discrimination and anti-harassment laws. These include laws administered by the EEOC and the Department of Labor at the federal level, as well as state and local laws.

When an employee is wrongfully terminated, the regulatory agency’s position is that the staff member was fired because of their protected class or because of a protected activity.

In doing so, the employer has violated the staff member’s rights and may be held liable for back-pay, fines, and penalties, as well as remedial action. Remedial (as in “remedy”) action seeks to assure the behavior is not repeated going forward.

It could include providing training to staff members and management, being audited by the regulatory agency for several years to come or any other action the agency feels is appropriate.

What is a protected class?

Protected classes are groups of employees who are provided legal protection based on their characteristics or traits. As defined at the federal level, these include:

  • Race
  • Color
  • Religion
  • National origin
  • Gender
  • Age
  • Sexual orientation
  • Veteran status
  • Pregnancy
  • Physical or mental disability

Many states and municipalities have broadened the definition of protected class in their area to include a host of other characteristics.

Note: Employers should refer to their state or local departments of labor for a complete listing.

What is protected activity?

Less commonly understood than protected class, protected activity is another reason wrongful termination claims are filed against business.

These stem from 2 major types of activities employees engage in

  1. Retaliatory discharge
  2. Union activities and concerted activities

They are specifically covered under federal and state laws.

What is retaliatory discharge?

Retaliatory discharge occurs when an employee complains about or files a claim that they have been harassed or discriminated against on the basis of their protected class.

This activity – the complaint itself – is protected under the law. If the employee is fired after filing the claim, the inference is that they were retaliated against because of the claim. This could constitute wrongful discharge.

For example:

  • A worker complains she is given fewer shifts because she is pregnant
  • A person complains they are being bullied because of their sexual orientation
  • An employee suggests they’re being harassed because of a medical condition
  • Someone claims they were fired for filing a workers’ compensation claim

All of these (and many others) are protected activities.

Using their legal rights or filing a complaint with an employer or an outside agency are considered protected activities. The employee is using their protection under the law to seek a remedy for the situation.

If the employee is fired afterward, the inference is that the employee was let go because of the claim and in violation of their rights.

What union activities are protected under the law?

Another protected activity under the National Labor Relations Act is administered by the National Labor Relations Board.

The NLRA protects employees’ rights to discuss, assist, form or join unions in their workplace. An employer that interferes with employee’s rights — even to simply discuss the potential of a union in their organization — could be in violation of the NLRA. If an employee is terminated based on almost any type of union activity — even before a union is formed, it could constitute wrongful discharge.

What other activities does the NLRA protect?

Another right under the NLRA is protection for “concerted activities.” These include 2 or more employees discussing their workplace, bosses, management, colleagues, pay, or safety in an effort to improve working conditions.

While there are some exclusions to the protection (independent contractors are not covered), this definition includes a wide range of activities.

Employers who fire staff members for discussing (even disparagingly) their company, their pay, or other working conditions could be in violation of the NLRA if the staff members assert their discussion was meant to improve working conditions.

Even some public behaviors, like posting complaints about your boss or workplace on social media pages, have been deemed concerted activity by the NLRB.

If the employee’s social media circle includes other staff members, the discussion could be construed as an attempt to improve working conditions, thus protecting the employee.

Employees fired for participating in concerted activities – even those that embarrass a business publicly – could be wrongfully terminated if they assert their rights under the NLRA.

What are illegal reasons to fire an employee?

There are thousands of illegal reasons to fire employees. Wrongful terminations occur any time a worker is fired based on protected class or protected activity.

Too often employers look to justify their actions. Firing a pregnant worker who cannot do heavy lifting due to their condition is illegal. Even though the  business may feel justified because the work needs to be performed, her rights during the pregnancy must be protected. Rather than firing her, she must be provided with light or alternative duty during the course of her pregnancy.

When an employee is fired because they exercise their rights under federal, state or local laws – whether refusing to be harassed or discriminated against or because of their protected class or activity, wrongful termination will occur.

What are legal reasons to fire someone?

There are several legal reasons to fire an employee. Two include layoffs and downsizing, neither typically result in a claim of wrongful discharge unless there is disparate impact*.

Two others are termination for cause and termination at-will. Termination for cause means the employee was fired for a specific reason that makes their continued employment unsustainable.

Termination at-will is another legal reason to fire an employee. In most states workers are employed “at-will.” This means the business or the employee may sever the employment agreement at any time, without notice or reason. When an employee is fired at-will, no other reason has to be provided other than employment is being discontinued at-will.

*What is disparate impact? 

In some situations, business decisions create a disparate impact on employees. Disparate (or disproportionate) impact means one group (typically a protected class) is impacted more significantly than another. If an organization decides to fire an employee, whether for cause or at-will, and their protected class is more affected than those in a non-protected class, disparate impact can occur.

IBM is currently being taken to court in class action lawsuits in on the suspected basis of disparate impact. Approximately 100,000 workers were laid off over the course of several years as the company moved its business model to attract millennials and Gen Z employees. Workers over 50 allege they were targeted for layoffs based on their age. They may prove disparate treatment as the seek information on the ages and titles of all the workers laid off. If a majority were older workers (a protected class) they may have been wrongfully terminated.

While you may not be familiar with the term itself, disparate impact has been the motivation behind some newly enacted laws. Ban the box legislation, for example, prohibits employers from asking about criminal history early in the recruitment process. These laws were created because of disparate impact: some protected groups were more affected by the question– excluding them from potential employment – than others.

Rightful terminations

When business makes the decision to terminate employees, they must consider whether the separation is legal and based on business need.

Questions to ask while making the determination include:

  • Whether or not there is a legitimate business reason for the firing
  • Did the employee violate a company policy or perform in a manner that was unacceptable? If so, the organization should have documented proof of the behavior or infraction. While some violations are so significant – such as assaulting a fellow worker – they require only a single incident to warrant termination, business must show the behavior was so unacceptable and/or they had a company policy prohibiting the action that termination was the only option.
  • Is a protected class of employees being targeted?
  • Is an employee being singled out because of a protected activity?

For companies to avoid claims and lawsuits, they must assure any termination is based on a sound business decision and need that does not violate an employee’s rights or protections. With that in mind, wrongful termination should not be an issue.

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