How To Avoid Wrongful Termination Lawsuits

Bonisiwe Shabane

-Oct 30, 2025, 1:13 AM

how to avoid wrongful termination lawsuits

Unlawful terminations are a prevalent reality in many industries. It happens when you fire an employee for an illegal cause or when the dismissal doesn’t adhere to termination policies. Other than Montana, all states in the US follow an at-will employment system. It’s the default employment arrangement where employees can leave their jobs anytime, and you can terminate them for any reason and at any point. Unless the employment contract specifies the termination causes, both parties can end it for any or no reason without incurring legal liability. But not all terminations in at-will employment arrangements are legal.

In certain situations, terminating an employee could violate a state or federal law. Lawsuits involving wrongful terminations can be costly, regardless of whether or not you win the case. Alistair Vigier of Clearway says that “Terminating an employee is hard enough without the additional stress of dealing with wrongful termination lawsuits. Too often, many employers expose themselves to unnecessary liability. This article highlights some tips to help you avoid legal liability for wrongful terminations.” Accusations of wrongful termination can be a significant liability for the company, exposing it to potential reputational and financial damage.

For this reason, taking proactive steps to prevent it is essential. In a perfect world, employees perform optimally, enjoy high job satisfaction, and stay with one company until retirement. This type of perfection rarely exists. According to the U.S. Bureau of Labor Statistics, the median employee tenure with a single company is 3.9 years. While some staff members resign voluntarily, others are involuntarily terminated.

Improper or illegal terminations expose companies to consequential legal issues and financial risk. Employers must attempt to close all possible doors to post-termination litigation to avoid lengthy and expensive legal battles, adverse publicity, and any detrimental impact on employee morale. Make sure your employees understand their job responsibilities, the company’s policies and code of conduct, any performance issues, and ways to improve their performance. That said, the most important way to avoid litigation is by adhering to all applicable federal, state, and local laws concerning employment. Never fire an employee for an improper or illegal reason. Doing so leads to accusations of discrimination, retaliation, or breach of contract.

Emotions run high following an involuntary discharge and some ex-employees are just looking for a fight. While nothing can totally bar former workers from pursuing legal action, employers can take steps to take the wind out of these individuals’ litigious sails. Get a free trial of Practical Law, the how-to resource with termination best practices, protocols and practical tips for employers on legal risks. The best way to escape a lawsuit it to avoid its inception. Implementing and following proper termination practices minimizes the risk of encountering a wrongful termination claim. Before initiating a dismissal process, employers must understand all applicable federal and state employee termination laws and policy requirements.

To protect confidentiality, only include critical individuals in discussions. In today’s workplace environment, avoiding wrongful termination lawsuits is crucial for both employees and employers. Employers should prioritize clear documentation of performance-related issues and maintain open lines of communication with employees. This proactive approach not only safeguards against legal disputes but also fosters a positive workplace culture. Understanding the legal landscape surrounding termination is essential. Employers must be aware of local labor laws and ensure that their practices align with these regulations to minimize the risk of litigation.

By implementing fair and consistent policies, they can better protect their organizations from potential claims. Training managers and HR personnel on best practices can further reduce risks. Equipping them with the tools to handle employee grievances effectively can prevent misunderstandings that may lead to costly lawsuits. Taking these steps is vital for maintaining a healthy work environment and ensuring legal compliance. Wrongful termination covers various illegal employment practices. It can happen when an employee is let go for discriminatory reasons or in violation of established laws or regulations.

Recognizing what constitutes wrongful termination is crucial for both employees and employers. Wrongful termination occurs when an employee is fired in violation of federal or state laws, contractual agreements, or public policy. Examples include dismissals based on discrimination due to race, gender, age, or religion. Additionally, it can apply when an employee is terminated for exercising legal rights, such as reporting illegal activities or filing for workers’ compensation. Two words that no employee wants to hear and, frankly, no employer wants to say, especially after spending time and investing resources into the recruitment, onboarding, and training process. But the fact of the matter remains that, in the world of employment, termination is not avoidable.

Here at Combined, our HR experts have helped countless employers, just like you, develop a compliant approach to termination. We can help you put the proper procedures in place so that you are protected from disputes and damages following employee dismissal. In this article, we will discuss the proper process for parting ways with an employee. By reading it, you will learn 6 strategies to reduce your risk of wrongful termination claims. In the United States, though limitations apply, all 50 states recognize at-will employment. If an employee is successful at proving constructive discharge, your business may face a five- to six-figure lawsuit.

Other than preventing costly litigation, avoiding wrongful termination lawsuits is important because it’s the right thing to do. By preventing and investigating harassment and discrimination in your workplace, you create an environment that is safe for everyone. As a result of your efforts, you can also decrease the odds of having and losing a wrongful termination lawsuit. In a landmark case involving the National Labor Relations Board (NLRB), constructive discharge was first created as a legal doctrine. Back then, employers in the 1930s used harassment and intimidation to get employees to quit rather than having to fire them. In the 1938 Foods v.

NLRB case before the Supreme Court, this method of effectively firing workers was deemed illegal. In a Mission to Grow podcast on avoiding wrongful termination lawsuits, Brian J. Shenker, principal in the Long Island, New York, office of Jackson Lewis P.C., talked about constructive discharge in the United States today. According to Shenker, “The Supreme Court has defined this doctrine as an employee’s reasonable decision to resign because of unendurable working conditions so that it’s equated with a formal discharge by the employer.” The Equal Employment Opportunity Commission (EEOC) defines a constructive discharge to be any time when you’re effectively forcing an employee to leave by making work conditions so intolerable that they can’t stay. To fit the doctrine of constructive discharge, three key facts must be true.

This article was co-authored by Clinton M. Sandvick, JD, PhD. Clinton M. Sandvick worked as a civil litigator in California for over 7 years. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013. There are 16 references cited in this article, which can be found at the bottom of the page.

This article has been viewed 11,687 times. A wrongful termination lawsuit occurs when a former employee files suit against the former employer alleging that they were fired without cause or for an illegal purpose. A wrongful termination lawsuit can cost a business financially as well as suppress employee morale. By spending some time learning about employment laws and implementing company policies, an employer can prevent wrongful termination lawsuits from happening in the first place. Wrongful termination happens when your employer fires you for an illegal reason. Learn what qualifies as wrongful discharge and the actions you can take.

Your termination could be wrongful if your employer fired you: Termination could also be considered wrongful if your employer fired you but did not follow their termination policies. If you were fired because of discrimination, file a report with the Equal Employment Opportunity Commission (EEOC). If you were fired in retaliation for reporting unsafe or illegal work practices or products, you have whistleblower protections. Report your termination to the Occupational Safety and Health Administration (OSHA). Find instructions for filing a whistleblower complaint.

A wrongful termination claim can be devastating to an employer. Per a 2017 Thomson Reuters study, the average award for wrongful termination lawsuits was $797,000. Even if an organization can settle out of court, wrongful termination settlements are still very costly. Notably, a wrongful termination case has other non-monetary costs. Wrongful termination lawsuits and claims usually severely impact employee engagement and the work environment. They also damage an organization’s employer brand, making it harder to attract and hire top talent.

To prevent the headaches and costs of wrongful termination suits and punitive damages, MP’s HR experts share a two-part series outlining key steps to preventing wrongful termination lawsuits. Employers should work with an HR expert, like the ones at MP, to learn more about the labor laws surrounding how a company may or may not fire an employee. These laws will vary from state to state. Hence, employers with offices in various states, or employees who work remotely in multiple states, need to understand all relevant labor laws to ensure full compliance. Sometimes employees and former employees may file a lawsuit no matter how much organizations prepare. Employers will reduce the likelihood of a lawsuit or devastating compensatory damages if they’ve already procured liability insurance.

Similar to the step above, preparation is critical for prevention. An employment lawyer could help review discipline and termination policies to ensure compliance. Connecting with an employment law firm also reduces the impact of wrongful termination lawsuits (including steep compensatory damages) when they do occur. It’s critical to consult with a labor attorney before terminating anyone, no matter how unsatisfactory their performance, infringement on their employment contract, sexual harassment violation, etc. When consulting with an employment attorney, share any documents and evidence for possible termination. These items may include:

How To Avoid Wrongful Termination Lawsuits

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