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Terminating an Employee? Do It the Right Way

No employer enjoys terminating an employee. Even when termination is long overdue, it’s hard to tell someone you’ve known and worked with that they no longer have a job. What’s more, if you don’t handle the termination well, it can result in a legal challenge, such as a lawsuit for wrongful termination or a discrimination claim. In some cases, even an at-will employee may have the right to sue.

That’s why terminating an employee the right way is essential for you and your firm.

Is Employment At Will?

Before terminating an employee, learn about the employment laws in your state. Although all states recognize at-will employment, many states impose limits and exceptions beyond those included in federal law. For example, the “Implied Contract” exemption may apply if you or your hiring manager made statements to the employee that they would not be terminated without “just cause.” If any language to that effect exists in your employee handbook or policy manuals, they can be held against you as well.

Additionally, some states enforce an exemption to at-will employment knows as “Covenant of  Good Faith.” If you are an employer in a state that recognizes this exemption, you may need documentation to prove that you terminated the employee for good cause.

To avoid legal challenges, make sure all written and verbal statements made to employees about conditions of employment are consistent and clear. If you have established criteria for “automatic termination,” make these known. But include a statement that says employees can be dismissed for other reasons as well.

Has Discrimination Occurred?

Federal law prohibits discrimination against any employee who falls into a  “protected class.” This includes any adverse action, such as terminating an employee, for reasons related to the person’s race, gender, sexual orientation, religion, national origin, age, or disability. If you fire an employee and they later claim that their termination was — at least in part — the result of any of these factors, they may have the right to sue you in state and/or federal court.

To protect yourself in cases where a disgruntled employee may allege discrimination, be a stickler about following anti-discrimination laws. And document performance issues with any employee who may fall into a protected class. For example, the federal Age Discrimination in Employment Act specifically protects employees who are over 40 years of age. So, if you’re thinking about terminating someone who’s over 40, make sure you have your legal ducks in a row.

Can You Be Accused of Retaliation?

Federal law prohibits retaliation by an employer against employees who engage in certain legally protected acts. Some state laws protect employees as well. These protections typically apply to employees who have complained to an employer about job discrimination or filed a discrimination charge.

Additionally, the U.S. Department of Labor’s Whistleblower Protection Program prohibits retaliation against an employee who reports a workplace injury; concerns about workplace safety; or violations of workplace safety laws. Other federal whistleblower protections apply to employees who report suspected illegal acts, such as healthcare fraud.

Retaliation can take many forms, including failure to hire, demotion, termination, changes in work hours or a cut in pay. To protect yourself against legal challenges, document every instance in which an employee has made a workplace safety or similar claim. Additionally, if an employee files a retaliation charge, follow up on the complaint promptly and document what you find. In general, it’s a bad idea to terminate an employee who has lodged a retaliation claim.

Can You Be Accused of Defamation?

A terminated employee may also accuse you of defamation or privacy violations if you inappropriately discussed their work performance with other employees. Some examples of this kind of behavior include:

  • Making disparaging, untrue comments to co-workers or other parties
  • Disclosing the reason for termination to other employees or parties with no “need to know”
  • Treating the employee in a manner intended to cause emotional distress.


Obviously, terminating an employee with serious performance problems is sometimes unavoidable. Even so, you should always protect yourself by instituting clear, written employment policies and communicating these to your employees. Additionally, even if you live in a state where at-will employment is a well-protected right, document performance issues and what corrective action you took. You may also wish to talk to one of Carmoon’s small business insurance experts about Employment Practices Liability Insurance. This essential coverage  can help protect your assets if you’re sued by a disgruntled employee.

Just give us a call today to schedule an appointment. Or fill out our online form, and we’ll get back to you right away.

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Floyd Arthur

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