What Is Wrongful Termination of Employment?

Discrimination for any reason is unlawful

fired businesswoman with a box of belongings
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An employee experiences wrongful termination if their employment is ended for reasons that are discriminatory and unlawful. Wrongful termination can also occur when an employer fails to follow their written procedures for employment termination. 

From an employer's perspective, avoid wrongful termination concerns by demonstrating that you treat all employees fairly and with dignity and respect, even in an employment termination situation. You want to demonstrate that you approached each termination using care, consideration, and giving the employee the opportunity to improve and change.

Maintain a consistent approach to employee performance improvement that allows you to use progressive disciplinary action as necessary. But, make certain that your employee handbook documentation about performance counseling and employment termination allows you to change course depending on the specific circumstances of the employee situation.

Do not lock yourself into language that requires a specific course of action that may not fit the current performance situation. You do not want to find yourself in a situation where you are setting a precedent for how you must treat each instance of termination in the future. So, the language presents what "may" happen, not what "will." To quote a handbook, "may lead to disciplinary action up to and including employment termination."

Interestingly, bringing a new CEO into your organization allows you to change termination approaches even when you have had precedents set in the past. The new CEO begins with a clean slate and can set new precedents going forward. This is useful as many new CEOs want to bring in their own team.

Narrow Circumstances for Wrongful Termination Claims

Circumstances that might warrant a wrongful termination claim include the following five areas of potential controversy.

  • Breach of contract: the employer has a legal obligation to uphold all components of an employment contract, union-negotiated or otherwise. Most employment contracts have employment termination clauses which the employer must honor. These may include the payment of a severance package, the causes for which employment may be terminated, and more depending on what was negotiated.
  • Breach of implied contract: the employer must take care that the company does not imply in writing or verbally that employment is protected or guaranteed or that any other non-contractual obligations exist. This is why most employers ask employees to sign off on an employee handbook statement that states that written company documents offer guidelines, not a contract. It is also why employment offers should come from the HR department and no other member of the interview team should discuss salary range or job offers with candidates.
  • Breach of covenant of good faith and fair dealings: the terminated employee can try to prove that their termination was unfair and that an employer did not fire him or her for good cause, in some states. This is extremely difficult to prove if an employer has kept even a modicum of documentation about an employee's performance problems, the time and meetings invested in managerial counseling, and progressive disciplinary action. Terminated employees will generally find that employment at will is the more significant deciding factor.
  • Unlawful discrimination: employment discrimination is illegal. Former employees must file suit with the Equal Employment Opportunity Commission (EEOC), and perhaps their state civil rights commission, before charging an employer in court. An employer protects their organization from such charges by practicing strict care to avoid employment discrimination or the appearance of employment discrimination, for any reason. 
  • Other potential claims of wrongful termination can arise from whistleblowing situations in which an employee reports illegal happenings such as tax evasion, employee use of a benefit such as filing a worker's compensation claim, or an employee's refusal to perform an illegal action requested by the employer.

Find out more about wrongful termination and how to avoid treating employees in such a way as to attract lawsuits or find your organized threatened with lawsuits.

Also Known As wrongful dismissal, unjust termination, unfair termination

Examples: Employers protect themselves from charges of wrongful termination by fairly and consistently treating all employees who are exhibiting performance problems prior to employment termination.