Employment Law CYA

Ending relationships with employees can prove to be surprisingly expensive. If your business is in a position where it needs to cut the payroll in order to save overhead, be aware that without careful preparation and execution, terminations and layoffs can cost you more than they save you. Fighting a wrongful discharge claim can be pretty daunting, even when the claim is entirely false. Suppose an employer has done absolutely nothing wrong and has the documentation to prove it. Getting a simple termination-related lawsuit through a successful motion to dismiss could easily cost $100,000 or more and take more than a year—which is why most cases settle. Investing a little effort in the termination process can prevent expensive headaches.

In order to file a claim of wrongful termination with a federal or state agency or court, a former employee must allege that he or she was let go on either a discriminatory or a retaliatory basis. Under federal, state, and local laws, it is illegal to terminate an employee on the basis of age, race, creed, color, national origin, gender, disability, and a host of other “protected characteristics.” While most business owners are aware of these laws, many are unclear as to how to legally protect themselves against violating them. The same holds true for retaliation claims. One third of all federal claims of wrongful discharge now include an allegation that the termination was carried out in retaliation for exercising the right to complain or engage in protected activity. In retaliation cases, the time line is very important. For example, if an employee complains of on-the-job harassment, or publicly engages in union-organizing activity, and is fired within a matter of days, the employer will be hard-pressed to convince a judge or jury that the firing was not retaliatory. Most of these cases are “fee-shifting”, meaning that the burden of paying the complainant’s legal expenses may be moved to the employer if the complainant is successful, but the reverse is never true. Consider terminations for cause (individual terminations based on employee performance problems) and mass layoffs (group terminations based on the company’s economic issues) carefully before making them, no matter how much immediate financial pressure you face. Some strategies for planning and executing low-risk terminations and layoffs are discussed below.

What to Consider

Before making the final decision to terminate an employee, carefully consider all the possible outcomes and whether you have the ammunition you will need if you are forced to defend it.