I’ve practiced employment law for more than 35 years, representing both employees and employers. I‘ve also been selected as an Arbitrator in more than 50 employment arbitrations. As a result of this experience, I have come to recognize common factors that often precipitate wrongful termination cases.  While there’s no way to guarantee a lawsuit won’t be filed, I do believe that certain “red flags” can often predict whether an employee will sue for wrongful termination. The purpose of this article is to highlight some of these red flags and discuss measures to either avoid them completely or mitigate their impact.

This article is not intended to provide the employer with a “how to” guide to avoid the consequences of discrimination, but rather to minimize the risk of getting sued when it has a legitimate business reason for its decision to terminate an employee. Under those circumstances, the key to avoiding litigation is to follow these cardinal principles:

  1. Treat the employee honestly;
  2. Treat the employee fairly;
  3. Treat the employee respectfully.

Some employees present a much higher risk of filing a lawsuit. Identifying those employees is essential, because how the employer handles the termination process may vary depending upon an assessment of that risk, and upon whether there are any grounds for such a claim.

The law prohibits discrimination against an employee based on, among other things, race, religion, sex, age, national origin, disability, sexual orientation, or marital status. It also prohibits retaliatory discharges for complaining about discriminatory practices or illegal activity.

If an employee falls within one of the above categories (i.e., a “protected class”) the employer runs a higher risk of being sued for wrongful termination than if the employee does not fall within a “protected class.” Under such circumstances, the employer must make certain that not only are the grounds for termination well documented and constitute a legitimate business reason, but other measures should also be considered to avoid a wrongful termination lawsuit.

It is not sufficient to rely on the “at will” status of the employee to provide a shield for the employee’s termination decision. Contrary to the belief of some employers (and the advice of their attorneys) I strongly recommend telling the employee why he is being fired. This comes under the heading of being honest with the employee. Most employees think they are doing a good job.  An employee who is not given a reason for his termination is more likely to believe it is based on an illegal reason and is more likely to sue. This is even more so for an employee in a protected class, since he or she may perceive discrimination as a result of class membership.

Backup the Employment Decision with Evidence:  If the termination of an employee in a “protected class” is because of generally poor performance, then it is crucial that the poor performance be documented. Also, one bad evaluation may not be sufficient to establish “poor performance” as the basis for the termination. This is especially true if the employee has recently received a raise or a bonus. In that situation it may look like the employer is simply building a paper trail. The employer should have documented evidence of poor performance, or a specific incident which is so serious that even a lay person on a jury (who is most likely to be an employee) will understand that the specific incident is sufficiently serious to justify the termination.  This documented evidence should be disclosed to the employee.  Otherwise, it may simply look like a pretext to mask a discriminatory reason.

Why Was This Employee Selected? If the reason for the termination is a layoff, overstaffing, or other legitimate business reason, the employer must be prepared to answer this question: “Why was this particular employee was selected for termination?”  The employer must have good documented reasons for the selection of the employee, such as, seniority, lack of work in the employee’s department, or objective performance criteria which establishes that other employees were doing a better job than the terminated employee. If the employee believes that the selection process was “fair,” the employee will be less likely to sue.

Avoid Disparate Treatment. This is part of the “fairness” rule. If the basis for termination is poor performance, and the employee is in a protected class, then it is extremely important to demonstrate that the employee was not treated any differently than those persons not in the protected class. Thus, an employee who is terminated for poor performance, or for a specific incident, or for a violation of company policy, and is in a protected class, should not be able to point to another employee who is not in the protected class, who did the same thing, whose performance was worse, or who committed a similar or more serious violation, and was not terminated.

Who is the Decision Maker?   If the person who made the decision to fire the employee also made the decision to hire the employee, it is an uphill battle for the employee show discrimination. It is less likely that he or she will sue or that an attorney will take the employee’s case.

The obvious inference is that a person who hired an employee in a protected class would not fire him or her because of membership in that class. Why hire him or her in the first place? Thus, it is unlikely that an employee would have a viable claim that a manager fired him because, for example, of his race or national origin if that was the same person who hired him. Conversely, an employer is more likely to face a suit if the person who hired the employee is different from the person who made the decision to fire him. Along the same lines, if the employee is in a protected class because of age, gender, race, religion, or national origin, it is less likely that the employee will believe his termination is based on a discriminatory motive (and less likely counsel will take the case), if the decision maker is of the same age, race, gender, religion, or national origin as the employee.

Do Not Embarrass the Employee.  This is part and parcel of treating the employee   with respect. There have been many instances when an employee has been motivated to sue his former employer because he has been publicly humiliated by having a security officer watch him as he cleans out his desk or escort him out of the building.  The employee feels like a criminal in front of his or her co-workers, and believes that he has to vindicate himself by filing a wrongful termination lawsuit.  Embarrassing an employee in this manner is a strong motivating reason for the employee to sue his employer. In order to avoid this, the employer must handle the termination process with more discretion and sensitivity.

Offer the Employee Something He Cannot Get by Suing. Employees are more often concerned about getting a good reference than about filing a lawsuit. It makes sense to offer the employee a positive reference (if possible) or, if that is not possible under the circumstances, at least offer the employee a neutral reference. Thus, during an exit interview, or at the time the person is actually terminated, tell him that you wish him the best of luck, you hope that he is successful in his future endeavors, that he can use the employer as a reference and that the employer will give him a positive reference, or, if that is not possible, that it will follow its policy by only confirming his employment, dates of employment, position held, and if he consents, his compensation. Do not give him a letter of reference because that will eliminate the need to refrain from suing the employer, as he will have his “good reference” in hand.

Severance Package. If the employee is in a protected class, then I often recommend that the employer swallow hard and offer a reasonable severance package in return for a release of all claims. Although the employer does not want to “reward” poor performance or, even worse, intentional misconduct, it is far more economical to offer reasonable severance and a neutral reference in return for a full and complete general release.

The employer can also offer some intangible benefits, such as outplacement, and perhaps a continuation of health insurance for a period of time. Although a severance package may not always be a feasible alternative for the employer, under most circumstances, it will be far preferable than defending a wrongful termination lawsuit.

Layoffs. If the employee is being laid off on the grounds of lack of business, he is much less likely to sue if several employees are also being laid off at the same time. An employee will not likely find a discriminatory motive for the termination, if his termination is simply part of a general layoff in which other employees who are not in a protected class are also laid off.

Show Non-Discriminatory Treatment of Similarly Situated Employees. If the basis of an employee’s potential wrongful termination claim is, for example, discrimination based on a disability or pregnancy, it may be helpful for the employer to explain to the employee at the time of termination the grounds for termination and why it is not related to the disability or pregnancy. If the employer can point out that many similarly-situated employees were not terminated or otherwise discriminated against with respect to their employment, it may very well persuade this particular employee that the termination decision was not based on pregnancy or disability if numerous other employees who fall within the same category were not terminated or discriminated against.

Seniority. An employee who has only been with the company for a short period of time is less likely to find a plaintiff’s attorney who is willing to sue the employer for wrongful termination. On the other hand, long term employees are much more sympathetic and are more likely to find an attorney willing to take their case. Therefore, in terminating a long term employee, it is even more important to attempt to obtain a release in return for a reasonable severance package.

Timing.   Ideally, an employee who recently filed for disability or recently came off a disability, or recently complained about some type of illegal activity, or recently complained about being sexually harassed, or recently testified or supported an employee against the employer in connection with another employee’s complaint, should not be terminated shortly after engaging in such “protected activity.”  It looks bad. Even if the termination is unrelated to the “protected activity,” the appearance of retaliation is inescapable. Therefore, it is much more likely that an employer is going to be sued if the timing is in temporal proximity to the protected activity, even when there is legitimate business reason for the termination.  Thus, as with seniority above, in terminating an employee who recently engaged in protected activity, it is strongly recommended that the employer offer a reasonable severance package and obtain a general release.

Conclusion

Employees sue when they feel they have been treated unfairly, when they have been publicly humiliated, and when they believe they are being treated differently than other employees similarly situated. The employer cannot avoid every lawsuit, but, an employer can substantially reduce its risk of being sued:

  • Explain to the employee why he is being terminated,
  • Have a documented basis for the termination decision,
  • Treat the employee fairy,
  • Do not publicly humiliate or embarrass the employee, and 
  • For high risk employees in a protected class, offer a reasonable severance package in return for a general release, including, if possible, a positive reference, or at the very least, a neutral reference. 

If you follow the above rules you are less likely to be sued and more likely to win if you are sued.

By Eric Epstein

An accomplished employment law and business litigation attorney, Eric Epstein has a 35-year plus career with more than 100 trials including approximately 70 jury trials.