How To Minimize Legal Risk When Terminating Employees

Bonisiwe Shabane

-Oct 28, 2025, 1:05 AM

how to minimize legal risk when terminating employees

How To Minimize Risk When Terminating Employees Firing an employee is never fun. It’s emotional, stressful, and, if done poorly, can open the door to lawsuits or government investigations. Still, terminations are an inevitable part of running a business. The key is knowing how to handle them in a way that is both humane and legally sound. In most of the US, the default employment relationship is ‘at-will.’ That means employers can terminate an employee for any lawful reason, or no reason at all, without notice.

But as Amit Bindra of the Prinz Law Firm explains, that promise of simplicity often comes with strings attached: “At-will employment is not a blank check. Anti-discrimination laws, retaliation protections, and public policy exceptions all limit when and how you can actually terminate someone.” Bindra’s point reflects the reality that ‘lawful reason’ has a narrower meaning than many employers assume. Decisions based even partly on protected characteristics, such as age, disability, or race, can invite costly discrimination claims. Retaliation claims, meanwhile, are among the most common issues employers face.

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.

This guide will help you minimize the risks involved in disciplining and terminating an employee. It'll give you a strong understanding of your rights and the employee's rights, helping you determine when you can and can't legally discipline or terminate an employee. We'll also go over how to approach all these steps. Let's get started! Protect your business with our complete legal subscription service, designed by top startup attorneys. There are different methods used for disciplining employees, but most of them are based on a progressive discipline system.

This is a step-by-step process from verbal warnings to termination. Regardless of what your company is implementing or will implement, it’s important that you know the possible legal liabilities that may arise and how you can avoid them. The first important step is to make employees aware of what conduct is expected and what activities are prohibited. For this purpose, you should have a discipline policy, which is a document covering all the disciplinary rules implemented in your company. Without such a document, employees will not know what conduct is prohibited, and you will lack the grounds to enforce disciplinary actions. It’s important to provide a copy of the discipline policy to employees before they begin work.

Ask for their signature, confirming that they have read, understood, and accepted the disciplinary rules of your company. Without their signature, employees may claim they were unaware of a particular disciplinary rule, and this could lead to liability for wrongful termination. Because most employment is at will, employers are usually free to fire an employee for any reason—so long as that reason is not illegal. However, sometimes even a legal termination can appear illegal depending on the circumstances. For example, if you fire an employee two days after he makes a complaint of discrimination, it's going to look like you are retaliating against him for making the complaint. You might have legitimate performance-based reasons for the firing, but unless you can prove it with documentation, you might have a hard time defending against a lawsuit.

Fortunately, employers can often minimize the risk of lawsuits by considering a few questions before making the decision to fire an employee, including: These questions (discussed in further detail below) are best suited for at-will employees; different considerations might apply if the employee is a member of a labor union or has an employment contract. One of the most important things you can do before firing an employee is to make sure that you have consistently and uniformly followed all of your personnel policies. That means that you haven't skipped any steps or procedures and you've applied your policies to all employees in the same manner. Terminating an employee is never easy, and if you're in this position, you're likely feeling a mix of concern and uncertainty. You want to do what’s right for your business, but you’re also worried about the legal risks of making the wrong move.

The last thing you need is to face a lawsuit because of a misstep. In this article, we’ll walk you through exactly how to navigate the termination process—ensuring it's handled professionally, fairly, and within the bounds of the law—so you can protect your business and your peace of... Let's get started. Whether you're an employer dealing with poor performance, misconduct, or simply downsizing, knowing the proper legal grounds for employee termination will help you handle the situation reasonably and protect your business. During the termination meeting, inform the employee of the reason for their termination and provide details about their final paycheck and any severance package they are entitled to. Handling the process carefully and using best practices will help reduce the risk of legal consequences.

Before you even begin the termination process, ensure you're putting yourself and your company in a safe spot to avoid unlawful termination. Here's how to do that. Terminating an employee is one of the toughest parts of running a business—and it’s also one of the riskiest. Even with the best intentions, the process can open the door to legal claims, reputational harm, or internal disruption. Whether you’re letting go of one person or managing a larger workforce reduction, knowing how to minimize legal risk when firing employees is essential. With the right strategy, you can ensure compliance, fairness, and clarity—while also preserving trust within your team.

This guide walks through the steps every employer and HR leader should take to protect their organization during a termination. Employee terminations can expose your company to a number of legal risks, including: According to EEOC data, retaliation continues to be the most common claim filed by employees, making up over half of all charges. That means the way you handle termination—not just the decision itself—plays a major role in risk exposure. In every organization, employee termination is often an inevitable part of the employment relationship. While it may seem like a straightforward process, there are legal guidelines that employers must adhere to in order to minimize risks and avoid potential legal disputes.

Understanding the complexities of employee termination is crucial for employers to ensure compliance with federal and state laws, as well as to protect the best interests of both the organization and the employees involved. Employee termination refers to the end of the employment relationship between an employer and an employee. It can occur for various reasons, whether due to poor performance, misconduct, layoffs, or even business restructuring. Regardless of the circumstances, employers must handle the termination process carefully to avoid legal repercussions and maintain a positive work environment. When an employee is terminated, it not only affects the individual but also has an impact on the entire team and company culture. The way in which terminations are handled can influence employee morale, productivity, and overall job satisfaction.

Therefore, it is crucial for employers to approach terminations with sensitivity and professionalism. Employee termination is the formal separation of an employee from their job position within a company or organization. It can occur through voluntary resignation or involuntary dismissal initiated by either the employer or the employee. In cases of voluntary termination, employees may choose to leave their job for personal reasons, career advancement opportunities, or to pursue other interests. On the other hand, involuntary termination typically involves the employer making the decision to end the employment relationship due to performance issues, policy violations, or other reasons. Effective July 1, 2025, additional protections are available for workers when employers use immigration-related threats to discourage or retaliate against the usage of certain workplace rights.

While Washington is an at-will employment state, employers cannot fire or retaliate against an employee who exercises a protected right or files a complaint under certain employment laws. State law gives employees protection in the following areas: Depending on the situation, L&I will investigate your complaint or refer you to the appropriate agency. You may have additional rights against termination or retaliation under a collective bargaining agreement, in your employer’s policies, or under federal law. However, L&I does not have enforcement authority in these areas. At-will employment means that employers do not need to establish cause or give notice before firing an employee.

That being said, it is against the law for an employer to fire or retaliate against an employee for discussing or filing a complaint about a violation of their protected rights.

How To Minimize Legal Risk When Terminating Employees

People Also Search

How To Minimize Risk When Terminating Employees Firing An Employee

But As Amit Bindra Of The Prinz Law Firm Explains,

In A Perfect World, Employees Perform Optimally, Enjoy High Job

Employers Must Attempt To Close All Possible Doors To Post-termination

While Nothing Can Totally Bar Former Workers From Pursuing Legal