Times are tough right now for several reasons, and it is perfectly understandable that, as a business owner, you may be considering trimming your staff. There are legal ways to terminate an employee, and there are also wrongful ways. This guide clarifies some of the more important procedures and mistakes regarding terminating an employee within the United States of America.
Legal Maneuvers
Clarifying the Definition of At-Will Employment
Every state within the Union, except for Montana, is an “at-will” employment state. This means that you can terminate someone for any reason, unless that reason runs afoul of any of the three categories that are covered in the “Illegal Maneuvers” section further down in this article. Furthermore, at-will employment does not apply in three general categories:
- Contractors (rather than employees).
- Union workers who abide by the terms reached through their union via collective bargaining.
- While this exception is also relevant to individuals who work within the public sector, the public sector is irrelevant to the employment interests of business owners. We only mention this leg of the exceptions for the sake of completeness.
Implied Contracts
41 states and the District of Columbia acknowledge implied employment contracts; these can manifest through either oral remarks like “I could use a capable person like you on my payroll!” or language in your company’s documents. Despite the lack of a physical contract, you may be on the hook for providing indefinite, but not lifetime, employment to someone based on anything that gives rise to the implied contract. Fortunately, it is easy to clarify things explicitly through precise language in your documentation and knowing if you operate within one of the nine excepting states.
Illegal Maneuvers
While at-will employment’s reasons for terminating a worker are broad, three major categories of wrongful termination exist.
- Discrimination. This could be due to race, sex, age (for individuals age 40+), national origin, disability, and/or genetic issues.
- Retaliation. You cannot terminate someone for being a whistleblower.
- Criminality. You cannot terminate someone for failing to engage in illegal actions for your business, nor exercising any of their statutory rights. Note that these illegal actions can be as simple as violating labor laws (such as exceeding work-hour limits for a minor employee), encouraging unsafe work activities, harassment (hazing coworkers), or failing to abide by the terms of workers’ compensation.
Failure to Abide by Your Policies
Any respectable business should have some sort of employee guidebook or document that gives full information on how that business does things, including policies regarding the termination of an employee. Ignoring these stated policies, either while terminating an individual or failing to establish your company’s termination policies in the first place, may give the individual a valid cause to sue for wrongful termination. While at-will employers are free to change the terms of their relationship with employees, such changes must be uniformly applied.
On the Topic of Implied Good Faith
Several states acknowledge an implicit, rather than explicit, covenant of good faith and fair dealing between employee and employer. Courts in such jurisdictions have issued judgments ranging from demanding that an employer show just cause for termination to invalidating terminations that were inspired by bad faith or malice. Instances of bad faith terminations would be firing an older employee in order to evade paying into their retirement package or pre-emptively terminating a salesperson prior to the payout on their commission for a large order. While there have been a few occasions where an employer was found liable for violating such covenants, the possibility exists.
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