University of Kwazulu-Natal

How To Prevent Employee Lawsuits Over Wrongful Termination

Bonisiwe Shabane
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how to prevent employee lawsuits over wrongful termination

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. 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. Wrongful termination lawsuits represent one of the most significant legal risks facing employers today. These claims arise when employees believe they were fired for illegal reasons, such as discrimination, retaliation, or violation of employment contracts.

The financial and reputational costs can be devastating for businesses of all sizes. I've found that employers can significantly reduce their exposure to wrongful termination claims by implementing clear documentation practices, following proper termination procedures, and ensuring compliance with federal and state employment laws. Most employment relationships operate under at-will principles, but numerous exceptions protect employees from illegal dismissal based on discrimination or retaliation. The key to protection lies in understanding what constitutes wrongful termination and taking proactive steps before problems arise. Proper termination procedures and adherence to employment laws form the foundation of any effective risk management strategy. I'll walk you through the essential strategies that can help safeguard your organization from costly litigation.

Wrongful termination occurs when an employer fires an employee in violation of federal or state laws, contractual agreements, or public policy. The legal requirements and frameworks vary significantly by jurisdiction and can result in costly litigation for businesses. Wrongful termination refers to dismissing an employee for illegal reasons or in violation of established legal protections. Most states follow at-will employment, meaning employers can terminate workers for any reason or no reason at all. In the USA, lawsuits are significantly more common than in many other countries. Unlike in some places where people might let minor issues slide, Americans tend to take legal action when they feel wronged.

Whether it’s a mental, physical, or financial loss, people are quick to pursue justice through the courts. This culture of accountability extends to the workplace, where employee litigation has become a growing concern for businesses. Employee litigation refers to lawsuits filed by employees against their employers, often over issues such as discrimination, wrongful termination, harassment, or wage disputes. For companies, the stakes are high. Facing a lawsuit not only disrupts operations but can also damage a business’s reputation and lead to significant financial losses. And while most companies don’t intentionally create environments that lead to legal trouble, misunderstandings, mismanagement, or a lack of proactive policies can still put them at risk.

The good news? Many of these lawsuits can be prevented by following the right practices. In this blog, we’ll discuss some of the best practices companies can use to minimize the risk of employee litigation and create a positive, legally safe work environment. If you’re part of the HR department and want to learn more about HR-related topics from experts, be sure to check out our webinar page. There, you’ll find a variety of human resource webinars designed to help you grow as an HR professional. These webinars also provide SHRM and HRCI credits, giving your career a valuable boost.

Here are some best practices you can follow to prevent or reduce the likelihood of employee litigation. 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. 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: Writing a comprehensive disciplinary policy is vital to preventing wrongful termination lawsuits. Employers should work with HR experts to develop a disciplinary policy that complies with all relevant state and federal laws. It must also meet the Equal Employment Opportunity Commission’s guidelines. Organizations should add the policy to their employee handbook and consider using talent management software, such as MP’s, to disseminate the policy (and handbook) and retrieve signed acknowledgment of receipt.

The policy should include these elements:

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