To minimize the risk of legal disputes, employers should be mindful that the doctrine of at-will employment can have limits. At-will employment generally permits an employer or employee to end the employment relationship without advance notice or cause. The termination reason still has to be lawful, though, and the precise at-will rule and its exceptions can vary based on federal, state or local laws.
Depending on the circumstances, potential wrongful termination claims may arise under employment discrimination laws, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, or the Age Discrimination in Employment Act, leave of absence laws, wage and hour laws, whistleblower statutes, and other employment laws. In addition, contractual promises, collective bargaining agreements, public-policy exceptions, and other employee legal protections may further restrict termination decisions.
The central question in many cases is whether the employer’s stated reason was genuine and lawful. Even when an employer identifies a legitimate and lawful reason, however, inconsistencies in its documentation, procedures, or explanations can prompt legal disputes and present evidentiary challenges and risks.
Seven Circumstances That Commonly Lead to Claims
Some circumstances that can prompt legal disputes and create challenges for employers include:
- Inadequate documentation. An employer may have difficulty defending a performance-based termination when evaluations, warnings, and personnel records do not reflect the alleged deficiencies. While some egregious types of conduct might be good reason to skip documented progressive performance management or discipline, having contemporaneous documentation showing that an employee was on notice of and given a chance to correct poor performance helps avoid legal claims and can better position an employer to prevail. In addition, documentation created only after the employee engages in potentially protected activity may appear retaliatory so it is best to be timely in raising concerns with employees in a documented manner as soon as concerns arise.
- Shifting explanations. Different reasons offered during the termination meeting, in separation documents, to an administrative agency, and during litigation can undermine credibility. Employers should identify the actual termination reason or reasons, confirm that the evidence supports the decision, and communicate it accurately and consistently.
- Inconsistent policy enforcement. A terminated employee may try to support a legal claim, such as a discrimination or retaliation claim, by arguing that similarly situated employees received less severe discipline for comparable conduct. Although no two situations are identical, unexplained differences in treatment may become circumstantial evidence of alleged discrimination or retaliation.
- Failure to consider protected activity. Terminating an employee close in time to legally protected activity by the employee can prompt a retaliation claim. Before proceeding, employers should determine whether the employee recently complained about discrimination, harassment, wages, safety, or suspected unlawful conduct; requested a disability, religious or pregnacy-related accommodation or protected leave; or participated in an investigation. If so, it would be prudent to consult legal counsel about any proposed termination to ensure that there is a lawful reason for any termination and to try to mitigate against a retaliation claim.
- Overlooking accommodation and leave obligations. Attendance or performance issues may be connected to a medical condition, protected accommodation request, or protected absence. Employers should evaluate applicable accommodation and leave obligations before treating the conduct as grounds for termination.
- Conducting an incomplete investigation. When termination is based on misconduct, an investigation that is not unbiased, ignores relevant evidence, fails to involve interviews of key witnesses, or denies the employee an opportunity to respond may make the outcome appear predetermined or provide other avenues for a challenge to the outcome.
- Using careless termination language. Comments about an employee’s demographics, health, pregnancy, medical restrictions, leave, complaints, or perceived disloyalty may be used by an employee to try to claim a discriminatory or retaliatory motive. Termination communications should be accurate, professional, and consistent with the actual lawful reason for the decision.
Why This Matters for Employers
An unfair or poorly handled termination is not necessarily unlawful. An employee generally must connect the termination to a protected characteristic or activity, a contractual limitation, a recognized public policy, or another applicable legal protection.
Nevertheless, deficiencies in process can turn an otherwise defensible decision into a costly, fact-intensive legal dispute and create legal risk as to outcome. Contemporaneous documentation, consistent treatment of similarly situated employees, a fair investigation, and evidence that decision-makers relied in good faith on legitimate business reasons can place an employer in a stronger position to defend its decision. These measures may also help resolve a dispute at an early stage or discourage a claim from being pursued.
Next Steps
Before finalizing a termination, employers should:
- Confirm that the reason is lawful and supported by contemporaneous records.
- Review circumstances that might prompt a legal dispute, such as recent complaints, leave requests, accommodation issues, wage concerns, and whistleblower activity.
- Compare the proposed action with discipline imposed in similar situations.
- Investigate disputed facts in an unbiased and thorough manner and document the basis for factual findings.
- Coordinate the termination explanation among management, human resources, and legal counsel as appropriate and communicate it accurately and consistently.
- Confirm compliance with applicable final-pay, benefits, notice, layoff, and record-retention requirements.
- Review the laws of every relevant jurisdiction, particularly for remote or multistate employees.
- Consider legal review when protected activity is recent, decision-makers have made problematic comments, there is a perceived risk of a legal claim, or the material facts are disputed.
At-will employment can provide substantial discretion, but it is not a substitute for a careful and consistent termination process. The practical question is not only whether the employer had a legitimate and lawful reason for its decision, but whether the employer can prove that reason with credible evidence.
If you have questions about employee terminations or wrongful-termination risk, please contact the author of this post or your regular Lathrop GPM attorney.