By Kimberly D. Gray, Senior HR Services Partner
Small to medium-sized businesses in the United States face a 12 percent risk of being sued by an employee, according to a 2015 study by specialty insurer Hiscox. The cost of defending and settling those claims averaged approximately $125,000. Employers typically have Employment Practices Liability Insurance (EPLI) to cover such matters, which lessens out-of-pocket costs to the amount of the deductible. But even so, that still could mean tens of thousands of dollars in expense — plus the time, energy, and upset that comes with litigation.
By partnering with a Professional Employer Organization (PEO) like Resourcing Edge, your business is covered by an EPLI policy. Furthermore, the HR professionals at Resourcing Edge can help your business avoid and mitigate wrongful termination actions by advising you on employment best practices. If an employee does file a complaint, your PEO will help coordinate the defense with EPLI counsel.
Wrongful termination claims are generally filed by employees who feel they have been terminated for an illegal reason. Outside of a contractual issue, the three main categories for wrongful termination claims are: 1) whistleblowing; 2) exercise of lawful rights (such as provided by the Family Medical Leave Act); and 3) discrimination/retaliation.
To help mitigate your risk involved with terminations the HR professionals at Resourcing Edge have identified the 5 most common reasons employers face wrongful termination lawsuits and suggestions on how to avoid these costly mistakes.
- You discriminated against an employee.
Federal law makes it illegal for most employers to fire an employee because of the employee’s race, gender, national origin, disability, religion, genetic information, or age (if the person is at least 40 years old). Federal law also prohibits most employers from firing someone because that person is pregnant or has a medical condition related to pregnancy or childbirth.
Many state laws include additional prohibitions, including sexual orientation or marital status, and they cover a wider range of employers.
The HR professionals at Resourcing Edge offer on-site training courses that cover discrimination, harassment, and diversity in the workplace. We find training is crucial in helping to reduce claims of discrimination and harassment in the workplace.
- You retaliated against an employee.
It is illegal for employers to terminate employees for asserting their rights under the state and federal anti-discrimination laws described above. An employee can bring a retaliation claim even if the underlying discrimination claim doesn’t pan out. For example, if you fire an employee for complaining that you denied a promotion because of race, you could lose a retaliation lawsuit even if a judge or jury finds that your promotion decision was not discriminatory—but some action you took after the filing of the complaint met the definition of retaliation.
It is also illegal to terminate an employee for reporting wrongful activities they have witnessed. Employment laws are generally written to protect employees who report criminal activity or other illegal conduct. Employees who report wrongful activities they witness are called “whistle blowers.”
Per the www.whistleblowers.gov website, OSHA’s Whistleblower Protection Program enforces the whistleblower provisions of more than 20 whistleblower statutes protecting employees who report violations of various workplace safety and health laws. Rights afforded by these whistleblower protection laws include, but are not limited to, worker participation in safety and health activities, reporting a work-related injury, illness or fatality, or reporting a violation of the statutes.
- You terminated an employee due to their medical history or condition.
Even if employment is at-will and you terminate an employee for missing too much work, considering attendance to be an essential requirement of the job, those absences could be protected by various laws. It is very important to review all leaves that could be available to employees with your HR professionals at Resourcing Edge before making any termination decisions related to an employee’s attendance, while they are out on leave, or returning from leave.
In 2008, Congress passed the Genetic Information Nondiscrimination Act (“GINA”), which prohibits employers from using genetic information when making employment decisions. (Genetic information includes family medical history and tests that detect whether an individual has a higher risk of developing certain diseases.)
- You terminated an employee who was discussing workplace or labor issues with co-workers.
The National Labor Relations Act makes it illegal for employers to fire employees for engaging in “protected concerted activity,” meaning employees are permitted to discuss ways to improve wages or working conditions with each other without being retaliated against and fired for those discussions. It is important to note that employees do not have to be members of a union to be protected under this federal law.
- You terminated an employee who had an employment contract.
If you have a written employment agreement that limits your rights to fire an employee, including a term of employment, then your employees are no longer at-will and the “agreement” is likely a contract. For example, your contract might say that you can only fire an employee for good cause or only for certain types of misconduct (such as criminal activity or financial misdealing). Or, your contract may spell out procedural safeguards that must be observed before you can move to termination, such as progressive discipline or an internal dispute resolution process.
Keep in mind that not all employment contracts are written: You may have an oral or implied contract with your employee, too. An oral contract is simply an agreement that is stated aloud rather than put in writing. If you as the employer have promised the employee would not be fired if they performed well, for example, the employee may have a claim for breach of contract if you are fired for reasons unrelated to performance.
As an employer, you may think that you would never fire someone for a discriminatory reason. The real problem is if you can’t prove that you fired someone for a valid reason (sometimes referred to as “just cause”), it may look like you fired the person for a discriminatory reason. Therefore, it is imperative for employers to keep good records and documentation of any employee problems and consult with the HR professionals at Resourcing Edge before making these tough decisions.
If you are looking for ways to lessen your HR burdens and mitigate your risks in the area of terminations, contact Resourcing Edge for more information about how a PEO can help. Resourcing Edge can handle your HR, risk, benefits, and payroll so that you can concentrate on your bottom line. Contact us today.
Kimberly D. Gray is a Senior HR Services Partner at Resourcing Edge, who has 25 years of experience in employee relations, training, and compliance.