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Employers can avoid breach of contract and discrimination claims from fired employees if they enforce discipline fairly and honestly, attorneys agree.
However, “there’s no magic bullet and the idea of a risk-free termination is an oxymoron,” Jonathan A. Segal, a partner in management-side law firm Duane Morris LLP in Philadelphia, told Bloomberg BNA April 26. “Balancing risk” is the name of the game, he said.
For example, Segal said, if a male nurse who has complained about harassment goes to sleep in a hospital bed, he might well claim he was retaliated against if the hospital fires him because of it. On the other hand, if the hospital takes no action and a patient dies because the nurse was asleep, the hospital risks a malpractice claim, Segal said.
There is a presumption of at-will employment in the nonunionized private sector in 49 U.S. states (the exception is Montana), attorney Allen Kato said April 26. But this presumption is rebuttable, which means that “it can be changed by virtue of the interactions between the employee and the employer.” A written employment contract does that, but a verbal agreement is “more dangerous” for the employer, he said.
“Even more dangerous,” the law recognizes that an implied contract may arise out of the employer’s conduct, such as that implied by long-term employment, praise about the employee’s performance, promotions or bonuses, Kato said. To avoid such situations, have new employees sign a statement acknowledging their employment is at will, he said.
But discrimination lawsuits arising out of a termination “are more serious than your standard, garden-variety breach-of-contract claims, in which the employer is only liable for lost wages and benefits,” Kato said. In such wrongful termination claims, there can also be tort damages for emotional distress, punitive damages and attorney’s fees, he said. “That can quickly turn it into a six-, seven- or higher figure award” against the employer.
To avoid discrimination lawsuits arising from terminations, Kato said employers should establish a solid performance management system, even though that “is not necessarily legally required.” Avoid “sugar coating” employee reviews, he said, lest a future plaintiff’s attorney seize on that as evidence that the fired employee was actually performing well. He also suggested giving specific factual examples of any failings of the employee to support a general conclusion.
Kato was speaking April 26 during a webinar sponsored by Aurora Training Advantage.
Discrimination claims rest on an argument that someone was treated unfairly due to his or her protected characteristics. To avoid this, Daniel J. Green, an associate with Epstein Becker Green, suggested asking, “Have other employees who engaged in similar misconduct been terminated for cause?”
“If not, there may be concerns about disparate treatment,” he told Bloomberg BNA in an April 26 email. Moreover, he said, the fired employee in such a case “will have a good contractual argument that his/her conduct did not constitute cause.”
Employers should also ask if the employee has “recently engaged in whistle-blowing, alleged he/she was sexually harassed, taken a protected disability or other type of leave of absence, or engaged in other protected activity which could give rise to a retaliation claim,” Green said.
HR should watch out for managers’ explanations about why a subordinate needs to be fired that may be “code words” for discrimination, Segal said. While HR shouldn’t baldly accuse a manager of bias without proof, he said it’s important to “drill down” on an expression such as “he lacks energy,” which might be a coded way of trying to get rid of an employee who is old, or accusations that a female employee is “strident or abrasive,” which may be code for sex bias.
Patterns of discipline may also be significant, Segal said. For example, if three nonwhite employees in a row are let go for lacking “cultural fit,” the organization could have a problem, he said.
As to timing, conventional wisdom says to give an employee notice before termination, Segal said, but if the employer chooses to do that, it should give the employee “a reasonable opportunity to improve.”
If an employee is definitely going to be fired, “develop a plan for communicating the decision to the employee,” Green said. “Make sure that HR and line managers understand and follow the plan.”
Segal said the line manager has to take the lead so the employee doesn’t suspect his soon-to-be-ex supervisor is “afraid,” which could also raise the employer’s litigation risk.
“Limit your communication to the bare essentials,” Green said. “Do not invite discussion or debate.”
On the other hand, Segal suggested that being as courteous as possible can reduce the risk that an angry ex-employee will march straight into a plaintiffs’ attorney’s office. For example, while under certain circumstances it’s unavoidable to have security escort a fired employee out of the building, if that’s not essential, it might be better to avoid having the person feel that he or she was “treated like a criminal,” he said.
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