Key Takeaways

  • An employment contract can be wrongfully or unfairly terminated if it breaches express or implied terms, including promises made in employee handbooks or verbal assurances.
  • At-will employees may still sue for unfair termination if their dismissal violated discrimination laws, public policy, or retaliated against protected actions.
  • Implied contracts and covenant of good faith claims are recognized in some states, offering additional grounds for wrongful termination.
  • Damages in unfair termination cases can include lost wages, emotional distress, and punitive damages, depending on the circumstances and jurisdiction.
  • Employees should maintain documentation of communications and contracts, as these can be crucial in proving wrongful termination claims.

Dealing with the unfair termination of a contract can be very difficult for employees, depending on the nature of their employment. In some cases, you may be able to sue your employer for breach of contract, while in other circumstances, there may be no legal remedies available.

Suing for Unfair Termination

Wrongful termination, or unfair termination, occurs when someone is illegally fired. If you are an “at-will” employee, your employer can fire you at any time for virtually any reason with some exceptions. As an at-will employee, you can leave your job whenever you want, but your employer can end your employment whenever they want, even if they don't have a specific reason.

Just cause employment is different in that an employer is usually required to have a good reason for firing an employee. Although employee contracts can contain a just cause provision, it doesn't necessarily have to be in the contract to be enforceable. For instance, just cause employment may be a company-wide policy that's listed in your employment manual.

Understanding Implied Employment Contracts

While many employment relationships are “at-will,” an implied employment contract may override this default rule. An implied contract arises when an employer's words or conduct reasonably lead an employee to believe that their job is secure unless they commit serious misconduct.

Examples include:

  • Written policies in employee handbooks that specify progressive discipline procedures before termination.
  • Verbal assurances during hiring or performance reviews indicating long-term employment.
  • Lengthy tenure, consistent promotions, or lack of formal warnings before termination.

Courts in some states recognize implied contracts as enforceable, especially when there’s clear documentation or behavior from the employer supporting the belief in job security.

Exemptions that Protect At-Will Employees

Generally, employers can terminate at-will employees for little or no reason. Fortunately, there are some exceptions that protect at-will employees. If can prove you were fired for one of these reasons, you may be able to file a lawsuit against your former employer:

  • Discrimination: At-will employees cannot be fired for discriminatory reasons. If you were fired because of your race, age, religion, gender, nationality, or physical/mental disability, this would constitute wrongful termination.
  • Retaliation: Employers cannot fire at-will employees in retaliation for reporting a violation of employment law.
  • Illegal Orders: If an employer directs an employee to commit an illegal act, and the employee refuses, he cannot be fired for his refusal.
  • FMLA Leave: If an employee takes leave for a reason covered by the Family and Medical Leave Act (FMLA), their employer cannot terminate them for taking off work.

Public Policy and Good Faith Exceptions

In addition to statutory protections, courts may recognize public policy exceptions to at-will termination. This doctrine prohibits an employer from firing an employee for reasons that violate established public policies, such as:

  • Refusing to engage in illegal conduct.
  • Reporting workplace safety violations or corporate fraud.
  • Serving on a jury or fulfilling military duties.

Another key concept is the covenant of good faith and fair dealing, which implies that neither party will act in bad faith to deprive the other of contractual benefits. Though not recognized in every state, where applicable, this covenant can protect employees from terminations done out of malice or deceit, such as firing someone to avoid paying commissions or benefits.

Wrongful Termination Damages

If you have been wrongfully terminated and want to file a lawsuit against your employer, you may be eligible for several different types of damages if you win your suit. First, you could receive direct damages, which would make up for the direct economic loss you suffered because of your termination. Second, you could receive consequential damages, which make up for losses indirectly resulting from your termination. Finally, you can receive damages meant to put you in the position you were in before getting fired.

Depending on your contract, there may be specific damages available for a breach of contract. The contract may also outline a specific time frame when you may pursue damages. If this time limit expires and you have not filed a lawsuit, you likely won't be able to receive any damages. It's possible to increase the damages you receive under common law termination rules. With these rules, you must demonstrate that the breach of contract was material and significant.

If you are able to prove a material breach under common law termination rules, your damages should be at least enough to put you in the position you would have attained had the contract been fully executed. To recover full damages, however, you must be able to show your lost income and other financial damage caused by the breach of contract.

Both parties in a contract can cause a breach, and the damages can be based on which person breached the agreement. For example, if you hire a contractor to help you with a project, and the contractor does not fulfill their responsibilities, you can receive damages for:

  • The costs of finding a new contractor.
  • Money lost because of the delayed project.
  • Additional costs for administration and management of the project.

On the other hand, if you are a contractor and the person that hired you breaches the contract, you can pursue damages for:

  • The work you completed before the termination of the contract, as well as any overhead costs you have assumed.
  • Profits you have lost because of the termination.
  • The entire amount of the contract minus remaining costs, if the project is nearly complete.

The differences between at-will and just cause employment can greatly impact the outcome of these cases.

Steps to Take After an Unfair Termination

If you believe you have been subjected to an unfair termination of your employment contract, taking the following steps can strengthen your legal position:

  1. Document the Termination
    Record all communications, including termination letters, emails, and meeting notes. These can provide evidence of the employer’s intent or deviation from policy.
  2. Review Your Employment Agreement
    Look for any clauses on termination, notice periods, or dispute resolution. If you were promised job security, bonuses, or severance, these may be enforceable.
  3. Request a Written Reason for Termination
    In some states, employers are required (or can be persuaded) to provide a reason. This can be key in identifying discriminatory or retaliatory motives.
  4. File a Complaint with the EEOC or Relevant Agency
    If you suspect discrimination or retaliation, file a claim with the Equal Employment Opportunity Commission (EEOC) or your state labor agency.
  5. Consult an Employment Attorney
    An experienced employment lawyer can assess the strength of your claim, help you understand your rights, and guide you in seeking damages or reinstatement.

You can find a skilled employment attorney through UpCounsel’s marketplace.

Frequently Asked Questions

  1. What qualifies as unfair termination of an employment contract?
    Unfair termination occurs when an employee is fired in violation of contractual terms, anti-discrimination laws, public policy, or implied agreements about job security.
  2. Can at-will employees sue for unfair termination?
    Yes, if the termination was based on discriminatory motives, retaliation, or violated public policy, even at-will employees may have grounds to sue.
  3. What is an implied employment contract?
    An implied employment contract is an unwritten agreement based on an employer’s conduct or statements that reasonably suggest continued employment under certain conditions.
  4. What damages can I recover in an unfair termination lawsuit?
    You may be entitled to lost wages, benefits, emotional distress compensation, and possibly punitive damages depending on the nature of the violation.
  5. Is a termination for refusing illegal activity considered wrongful?
    Yes. Firing an employee for refusing to participate in illegal acts is a violation of public policy and may form the basis of a wrongful termination claim.

If you need help with an unfair termination of employment contract, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.