Wrongful termination claims can be costly, time-consuming, and damaging to a business’s reputation. Employers must take proactive steps to protect themselves from lawsuits while ensuring compliance with state and federal labor laws. Understanding what constitutes wrongful termination, implementing best practices, and preparing for potential claims can help businesses avoid legal risks and maintain a fair workplace environment.
1. What Is Wrongful Termination?
Wrongful termination occurs when an employee is fired in violation of federal, state, or contractual employment laws. While most states, including Michigan, follow the at-will employment doctrine—allowing employers to terminate employees for any legal reason—there are several exceptions that protect employees from unfair dismissals.
Common Grounds for Wrongful Termination Claims:
- Discrimination: Firing an employee based on race, gender, age, disability, religion, national origin, sexual orientation, or other protected characteristics.
- Retaliation: Terminating an employee for reporting discrimination, harassment, wage violations, or unsafe working conditions.
- Violation of Public Policy: Dismissing an employee for refusing to participate in illegal activities or for exercising legal rights, such as voting or whistleblowing.
- Breach of Contract: Terminating an employee in violation of an employment contract or an implied agreement.
- Failure to Follow Company Policies: If a company has a documented disciplinary process and fails to follow it before termination, it could be grounds for a wrongful termination claim.
2. How Employers Can Protect Themselves from Wrongful Termination Claims
a. Establish Clear Employment Policies
A well-drafted employee handbook outlining company policies, code of conduct, and disciplinary procedures can serve as a legal safeguard. The handbook should clearly state that employment is at-will, except where contractual agreements state otherwise.
b. Document Performance Issues and Warnings
One of the most effective ways to defend against a wrongful termination claim is to maintain thorough records. Employers should:
- Conduct regular performance evaluations.
- Issue written warnings for policy violations or performance concerns.
- Keep records of all employee complaints, misconduct, and disciplinary actions.
- Ensure all documentation is factual, objective, and free from discriminatory language.
c. Train Managers and HR Personnel
Many wrongful termination claims stem from improper actions taken by supervisors. Employers should:
- Train managers on anti-discrimination laws and proper termination procedures.
- Educate HR staff on how to document disciplinary actions correctly.
- Provide training on de-escalation techniques to address workplace disputes effectively.
d. Use Progressive Discipline
Rather than immediately terminating an employee for misconduct or poor performance, progressive discipline can help demonstrate fairness in the workplace. Steps may include:
- Verbal Warning
- Written Warning
- Suspension or Performance Improvement Plan (PIP)
- Termination (if no improvement is made)
Following a structured disciplinary process can show that the employer acted in good faith before making the final decision to terminate.
e. Conduct Legal and Compliance Reviews
Employers should review termination decisions to ensure compliance with employment laws. Before firing an employee, consider:
- Was the employee part of a protected class?
- Has there been any recent conflict or complaints that could be construed as retaliation?
- Did the termination decision follow company policies and documented procedures?
- Are there legitimate business reasons for the termination?
Consulting with an employment attorney before finalizing terminations involving high-risk employees can help avoid potential lawsuits.
3. Handling Termination Meetings Professionally
The way an employee is terminated can significantly impact whether they decide to pursue legal action. Employers should:
- Plan the Meeting: Choose a private setting and have HR present as a witness.
- Be Clear and Concise: Provide the reason for termination without unnecessary details.
- Remain Professional: Avoid hostile or defensive language.
- Provide Final Pay and Benefits Information: Clearly explain severance pay, benefits continuation, and final paycheck details.
- Offer Outplacement Services: Providing assistance for future employment can help mitigate negative reactions.
4. What to Do If Faced with a Wrongful Termination Claim
Even with preventative measures, wrongful termination claims may still arise. Employers should take the following steps if an employee files a claim:
a. Gather Documentation
- Collect all relevant employee records, including performance reviews, warnings, and termination notices.
- Retrieve emails, meeting notes, and any written correspondence related to the employee’s conduct or dismissal.
b. Consult an Employment Attorney
An experienced employment lawyer can assess the validity of the claim and guide the employer on the next steps, including settlement negotiations or litigation defense strategies.
c. Respond Promptly to Legal Notices
- If the employee files a complaint with the Equal Employment Opportunity Commission (EEOC) or a state labor agency, respond within the required timeframe.
- Provide requested documents and cooperate with investigations.
d. Consider Mediation or Settlement
Mediation can be a cost-effective way to resolve disputes without prolonged litigation. If evidence suggests that the termination may have been mishandled, negotiating a fair settlement may be in the employer’s best interest.
5. The Role of Employment Practices Liability Insurance (EPLI)
Employment Practices Liability Insurance (EPLI) can help cover legal fees, settlements, and judgments associated with wrongful termination claims. Employers should:
- Regularly review their EPLI policy to ensure adequate coverage.
- Work with legal professionals to assess risks and implement preventive measures.
6. Final Thoughts
Wrongful termination claims can be disruptive and costly, but businesses that follow legal best practices, document employment actions thoroughly, and conduct fair termination procedures can significantly reduce their risk. By investing in strong employment policies and proactive training, employers can foster a workplace that minimizes disputes and legal exposure. If your business is facing a wrongful termination claim or needs legal guidance, contact Tishkoff PLC for expert assistance.