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Protect Your Business from Wrongful Discharge Lawsuits

"Wrongful Discharge" Can Cost You a Fortune!

manager angrily firing an employee
"You're fired!"
Photo © Vasko Miokovic/iStockphoto

Nowadays, if you fire someone you may wind up in court, defending an action you were sure none could question. A wrongful discharge lawsuit can cost you many thousands of dollars...and that's if you win! If you lose, the average jury award is well over a half-million dollars. The era of unrestricted hiring and firing "at will" is quickly passing.

"Wrongful discharge" is a generic term that covers a variety of legal precedents under which employees who have been terminated (or who have been demoted, had their pay cut, or were passed over for promotion), can sue their employers. It is also called wrongful dismissal and wrongful termination.

There are many grounds for wrongful discharge lawsuits. The most common are based on:

  • Racial, sexual, age or other illegal discrimination.
  • Conflicts with a reasonable or mandated dismissal process (verbal warnings, warning letters, etc.)
  • Inadequate grounds for dismissal.
  • Wrongful cause, for example where a cause is falsely attributed to an employee.
  • Illegal retaliation for an employee filing a workers' compensation claim or for "whistle blowing" (reporting illegal employer activity).
  • Violating an implied covenant (promise) of good faith and fair dealing.


When a wrongful discharge case goes to court, it's primarily the jury who decides whether the dismissal was justified. And that jury is usually composed of individuals who tend to see the fired worker as "victim" and the company as "oppressor."

Juries are asked to look at a number of criteria to determine if there really was ''just cause" for the termination:

Was the rule or order the employee violated reasonable?
If you fired an employee because he refused to wash your wife's car, don't expect much sympathy from the jury. Likewise, if he refused to do something because he regarded it as unsafe, the jury will not likely consider his refusal to be anything other than prudent.
Did you give the employee adequate warning?
For actions where you dismiss an employee on the first offense (drinking, theft, etc.), adequate warning could have been given in company policy statements and manuals ("drinking on the job will mean dismissal"). For other offenses you should have disciplinary reports or verbal warnings written up and placed in the employee's personnel file. It greatly strengthens your case in court if you can document separate instances of misbehavior where you have warned the employee that he may be dismissed if the behavior continues.
Was the incident investigated fairly?
The bottom line--did you make a reasonable effort to find out all pertinent facts, without bias?
Was there adequate proof of guilt?
One person's word against another's will not be considered adequate. The jury will decide whether the employee was guilty as charged.
Was there equal treatment?
If you fired one employee for being consistently late for work but did not fire others guilty of the same offense, a jury may consider the dismissal discriminatory or unjustified.
Was discharge the appropriate response?
If the offense and penalty were not specifically spelled out in policy statements or in company meetings...and sometimes even if they were...a jury will make a determination if discharge was the appropriate response to the offense.

Probably the best defense in a wrongful discharge case is good documentation. Have a written disciplinary action program (usually part of a company handbook) and document all instances of employee misbehavior.


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