Wrongful Termination Lawsuits: 8 Steps for Prevention, Part 1 

A wrongful termination claim can be devastating to an employer.  Per a 2017 Thomson Reuters study, the average award for wrongful termination lawsuits was $797,000.  Even if an organization can settle out of court, wrongful termination settlements are still very costly.  Notably, a wrongful termination case has other non-monetary costs.  Wrongful termination lawsuits and claims usually severely impact employee engagement and the work environment.  They also damage an organization’s employer brand, making it harder to attract and hire top talent.  To prevent the headaches and costs of wrongful termination suits and punitive damages, MP’s HR experts share a two-part series outlining key steps to preventing wrongful termination lawsuits.   

4 Steps to Prevent Wrongful Termination Lawsuits 
 

1. Stay up to date with relevant laws, especially multi-state employers or remote employers.

Employers should work with an HR expert, like the ones at MP, to learn more about the labor laws surrounding how a company may or may not fire an employee.  These laws will vary from state to state.  Hence, employers with offices in various states, or employees who work remotely in multiple states, need to understand all relevant labor laws to ensure full compliance.   

2. Maintain liability insurance. 

Sometimes employees and former employees may file a lawsuit no matter how much organizations prepare.  Employers will reduce the likelihood of a lawsuit or devastating compensatory damages if they’ve already procured liability insurance.  

3. Establish a relationship with employment attorneys. 

Similar to the step above, preparation is critical for prevention.  An employment lawyer could help review discipline and termination policies to ensure compliance. Connecting with an employment law firm also reduces the impact of wrongful termination lawsuits (including steep compensatory damages) when they do occur.  It’s critical to consult with a labor attorney before terminating anyone, no matter how unsatisfactory their performance, infringement on their employment contract, sexual harassment violation, etc.  When consulting with an employment attorney, share any documents and evidence for possible termination.  These items may include: 

• Witness accounts of the employee in question’s behavior, performance issues, etc. 
• Documentation of discipline 
• Documentation of failure to meet performance standards 
• Any video or audio recordings of relevant employee misconduct 

4. Develop and share a disciplinary policy with all employees and managers. 

Writing a comprehensive disciplinary policy is vital to preventing wrongful termination lawsuits.  Employers should work with HR experts to develop a disciplinary policy that complies with all relevant state and federal laws.  It must also meet the Equal Employment Opportunity Commission’s guidelines.  Organizations should add the policy to their employee handbook and consider using talent management software, such as MP’s, to disseminate the policy (and handbook) and retrieve signed acknowledgment of receipt. The policy should include these elements: 

• An overview of steps taken when employee conduct or performance warrants discipline.  Include details on the forms of discipline that could be taken, especially what managers must do throughout the process. 
• A statement of at-will employment.  
• Language that allows employers to make the best decision for individual circumstances.  Overly prescriptive language may bind organizations from taking the best steps for a specific situation.  
• Information about how employees may appeal decisions.  State that employees who believe they weren’t fairly treated may appeal to HR (or any other designated party).  Outline the appeal process steps.  
• Statements that legally protect the company.  Include statements that prevent managers from inconsistent, abusive, or illegal disciplinary actions.  This policy should also contain statements to protect the employer’s rights to: 

1. Terminate employees at will 
2. Inform employees of misconduct 
3. Develop and share consistent, fair disciplinary guidelines 
4. Document and collect evidence of employee performance and behavioral violations 

Some employers may need to include language that indicates compliance with the: 

• Worker Adjustment and Retraining Notification Act (WARN): if the company has over 100 employees 
• National Labor Relations Act (NLRA): if employees are unionized