Wrongful Termination: Everything You Need to Know
A wrongful termination, also known as wrongful dismissal or wrongful discharge, occurs when an employee is fired for unlawful reasons.8 min read
2. What Is Wrongful Termination?
3. Understanding the Legal Process
4. Reasons for Wrongful Termination
5. Breach of Written Contracts and Implied Agreements
6. Violations of Public Policy
8. Employer Retaliation
9. Employer Fraud
10. Breach of Good Faith and Fair Dealing
12. Whistleblowing Violations
What Is Wrongful Termination?
A wrongful termination, also known as wrongful dismissal or wrongful discharge, occurs when an employee is fired for unlawful reasons. Most states, excluding Montana, consider individuals to be employed "at-will." This means that an employer can fire an employee without giving any notice and without providing a reason unless a contractual agreement such as an employment contract or a collective bargaining agreement has been breached or the law has been violated, in which case the discharge is considered a wrongful termination.
A terminated employee may not be eligible for unemployment compensation. To determine eligibility for compensation, a terminated employee should contact their state unemployment office. If the claim is denied, then they will be able to appeal the decision and explain the circumstances surrounding the wrongful discharge of their employment.
Understanding the Legal Process
The onus is on the employee to prove wrongful termination with factual information. It is strongly recommended that both the wrongfully terminated employee and the employer retain experienced legal counsel who can help sort through the issues and protect the rights and reputations of their client.
Wrongfully terminated employees do not have specific laws that protect them. However, wrongful termination may be covered by various federal or state laws. Furthermore, if an employee suspects that they have been forced out of a job because the employer was dishonest or made it intolerable, they can file a wrongful termination suit against their former employer for constructive discharge.
Note that it may not be possible to file a civil wrongful termination claim immediately, even if an employee has strong evidence that their discharge was illegal. Most federal complaints first must be filed as charges with the Equal Employment Opportunity Commission (EEOC). State laws will often have similar requirements.
Depending upon the circumstances of the wrongful termination, damages awarded to the employee upon winning a wrongful termination suit can include:
- Back pay
- Front pay
- Compensatory damages
- Reasonable required accommodations
- Injunctive relief
- Punitive damages
- Attorneys' fees
Reasons for Wrongful Termination
There are any number of reasons that an employer can give for firing an employee, many ways that an employer can wrongfully discharge an employee, and several ways that damages may be awarded. An experienced attorney can help show the various possible factors that can lead to a successful wrongful termination claim.
Breach of Written Contracts and Implied Agreements
Since most employment relationships are presumed to be at-will, an employer may discharge an employee at any time with or without reason, as long as there is no violation of federal or state laws. However, if a written agreement is in place, this creates an exception to the at-will employment relationship. For example:
- A contract that promises job security is a strong indication that an employee is not just an at-will employee.
- A contract may state that an employee cannot be fired without sufficient cause or for specific reasons.
- A written job offer may include promises about permanent employment under certain conditions or continued employment for a specified amount of time.
A signed contract or other documented statement containing such promises could be enforced in court and may help an employee keep their job or sue their former employer for wrongful termination.
An agreement based on what an employer has said or done is considered an implied employment contract which serves as an additional exception to the at-will employment relationship. However, most employers avoid promises regarding continued or permanent employment. This makes it difficult to identify and prove the existence of such an agreement in court.
Specific employment rules or typical employment practices as spelled out in an employee handbook are considered implied promises. In states with at-will employment laws, employers are bound to any written policy for disciplinary procedures and terminations. For example, employers must follow a written policy stating that employees get two warnings for tardiness before they are fired. An employee that is fired after being late just once may have a valid claim for wrongful discharge.
As noted, the existence of an implied employment contract can be difficult to prove. To determine whether an implied employment contract is in effect, courts review several factors including:
- the duration of employment,
- how often job promotions for the employee have occurred,
- the employee's positive performance review history,
- promises of continued employment,
- whether termination was a violation of a typical employment practice, such as denying an employee the required amount of disciplinary warnings, and
- whether the employer offered assurances of long-term employment at the time of hire.
Violations of Public Policy
If society recognizes a particular reason for termination as unconstitutional, then it is illegal to fire an employee based on such grounds. This is considered a violation of public policy. However, many courts require the existence of a specific law that lays out a particular policy before they will allow a wrongful termination claim.
Certain state and federal laws are in place to deal with company actions that violate public policy when it comes to employment. This may include terminating an employee for:
- disclosing an illegal company practice,
- attending jury duty during work hours,
- taking part in the electoral process during work hours,
- serving in the National Guard or the military, or
Some states recognize certain reasons for which employees should be protected from wrongful termination, such as volunteering as a firefighter or serving as an elections officer. Some courts have maintained that employees cannot be fired for exercising a legal right, which includes reporting an Occupational Safety and Health Act violation or taking advantage of a legal solution, such as filing for workers' compensation.
If an employee has been terminated for any of the following actions, they may have a claim for wrongful discharge based on the violation of public policy:
- refusing to break the law, such as falsifying legal paperwork or lying to government auditors,
- exercising a legal right, including voting, serving jury duty, filing for workers' compensation benefits, or taking advantage of the Family and Medical Leave Act, or
- reporting illegal employer conduct, such as testifying against the company in court.
Discrimination is an illegal act, and no employer may fire an employee—at-will or otherwise—because of the employee's race, religion, national origin, skin color, gender, age, physical ability, pregnancy, or genetic information. Most states have their own laws prohibiting discrimination, and some states even include more protected categories. In California, employees may not be terminated based on their sexual orientation. In Illinois, employers are prohibited from discriminating against employees based on their credit history.
If an employee feels they have been wrongfully terminated based on discrimination, it is imperative that they consult with a lawyer as soon as possible. There are rigid rules and time limits that are enforced in a discrimination claim. One such rule is the fact that a wrongfully terminated employee must file a complaint of discrimination with a state or federal agency before they are able to sue their employer in court.
Employer retaliation against employees who have participated in certain legally protected activities is strictly forbidden. For example, it is illegal for an employer to terminate an employee who has filed a complaint about harassment or discrimination of any kind. Furthermore, an employer may not retaliate against an employee who:
- makes an internal complaint,
- files a charge of discrimination with the Equal Employment Opportunity Commission or a state Fair Employment Practices Agency (FEPA), or
- files a lawsuit against their employer.
In order for an employee to prove that their termination was due to their employer's retaliation, they must show that:
- the employee was engaged in a legally protected activity,
- that activity prompted the employer to act by, for example, reprimanding the employee after the employer learned that a sexual harassment charge was filed, and
- the employer's action had negative consequences for the employee, such as termination, denial of a promotion or wage increase, or an unwarranted poor performance review.
When an employer's actions when terminating an employee are so deceitful and inappropriate that they can be considered fraud, an employee may have a strong claim for wrongful discharge. Such extreme cases are commonly found during the recruitment process, where promises that were made can easily be broken. Fraud may also occur at the end of employment where an employee is forced to resign, for example, through breaches in good faith and fair dealing.
An employee must prove that their job loss was caused by employer fraud by showing all of the following:
- The employer gave a fraudulent representation.
- Someone in a position of authority was aware of the fraudulent representation.
- The employer's intention was to deceive the employee, or they tried to deceive the employee into relying on the fraudulent representation that was provided.
- The employee was harmed by relying on the fraudulent representation.
Proving the employer's intention in an effort to act poorly and/or mislead the employee is the most difficult part of the process. This requires strong documentation that proves all of the above.
Breach of Good Faith and Fair Dealing
An employer may be considered in breach of a duty of good faith and fair dealing. Courts have found employers to have acted unfairly if they:
- transferred an employee to prevent the collection of sales commissions,
- misled employees about opportunities for promotions or wage increases,
- fabricated reasons for terminating employees in order to replace them with employees who will work for a lower wage,
- toned down the negative aspects of a particular position, such as unsafe travel requirements, or
- transferred employees to undesirable or even dangerous positions or assignments in an effort to get the employee to quit without collecting the benefits or severance pay that is due to them.
When it comes to at-will employment, some courts do not recognize the good faith and fair dealing exception to the rule. Some states require that a valid, written employment contract be produced before an employee can sue for a breach of good faith and fair dealing.
A defamation lawsuit is intended to protect a person's reputation. To prove defamation was part of an employee's wrongful termination, it must be shown that the employer made untrue and hateful statements about the employee during the termination process or in subsequently providing references to a potential future employer.
In order to make a claim of defamation, the employee must show that the employer:
- made an untrue statement about the employee,
- made the statement with malicious intent and with knowledge of or careless disregard of its inaccuracy,
- communicated that statement to one or more people, and
- harmed the employee by disclosing this statement of false information.
True defamation is the communication of seemingly factual information that is proven false and directly leads to the employee's termination or prevents them from being hired for a new job.
Whistleblowing laws are meant to protect employees who report illegal activities or activities that harm public interest. Certain states protect whistleblowers who file complaints about any employer who violates any law, regulation, or ordinance. Some states give employees whistleblower protection only in regard to certain laws, such as environmental regulations or labor laws. An employee may not be fired for:
- asserting their rights under the Family and Medical Leave Act,
- making a complaint about hazardous working conditions to the Occupational Safety and Health Administration,
- filing a wage claim for unpaid overtime, or
- filing for workers' compensation benefits.
While many employees may consider themselves the victim of wrongful dismissal, the legal definition of the term is very specific. Wrongful termination only occurs when an employee is fired for unlawful reasons, as per the examples provided. If you need help with a wrongful termination, you can post your legal need 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.