Wrongful Termination: How To Avoid Employee Litigation

Wrongful termination is one of those claims that small businesses dread.  Sooner or later, every business has to face the fact that an employee must be terminated.  Whether it’s due to downsizing or performance, there is always that concern that the employee will file a claim or attempt to sue to the employer.

How you handle employees during the termination process can have an impact on whether the employee decides to file a claim.  Sometimes, the person may just be litigious and there is nothing you can do to prevent a bad experience, however with most circumstances a termination that is handled appropriately will go a long way to avoiding lengthy and expensive litigation.

Here are some tips and best practices to avoid wrongful termination litigation:

1. Define work expectations.  If the time comes to terminate the employee, it should not be a huge surprise.  Documenting the process is important especially documenting progressive disciplinary measures.  Regardless of whether your company is large or small, keeping records of the situation goes a long way to avoiding litigation, and it also ensures that appropriate procedures are followed.  Having a system to identify performance objectives and advise the employee on whether they meet or don’t meet those criteria is helpful not just for termination, but also for training and motivating your staff.
2. Terminate thoughfully.  Even if the employee recognizes that they may be terminated the actual event may still come as a bit of a surprise. Keep in mind that it’s a form of rejection and not all people take rejection the same way.  Try to position the termination in a way that helps the employee to understand that although they are leaving your employment, they may be happier in a position or with a company where they are better suited.  That may not always work, but using compassion and empathy can go a long way.  Also helpful is offering a severance or some way to help the associate for a short period of time.   If you offer the severance, have the employee also sign a waiver or release in order to collect the package that is offered.
3. Consider liability insurance.  While liability insurance premiums can be expensive, they pale in comparison to the expense of defending a lawsuit.   Defending a termination is always an expensive downside for the employer.   If the suite cannot be avoided, it may make sense to consider negotiating a settlement versus going to court.   Doing a cost-benefit analysis and discussing the case with counsel may be helpful, but even more helpful is having liability insurance.   Understanding insurance options and what it covers is a prudent business decision.  Be aware when selecting this insurance that you should ask for the right to select the attorney and also be sure that the insurance company must get your consent before agreeing to a settlement.  You may also wish to have coverage that is per claim instead of per claimant.
4. Follow the law.  It’s not fun to be wrongfully accused and even if you know you have done everything right, you will still need to prove it.  Be sure that your books are kept in order, and also that you obey government guidelines.  Even things that seem simple, such as posting government required labor and employment materials  can be the downfall to your defense.
5. WRITE THE BOOK.  Having an employee handbook with human resources guidelines and policies can go a long way to providing a defense.  It’s hard to say something is the policy if there is nothing in writing.   Employees should be given an employee handbook when they start, and should sign a document that indicates their receipt and acceptance of the policy manual.  In creating the manual it’s good to work with an outside consultant or counsel with human resource knowledge and employment law experience.
6. Train your team.  Be sure that your employees understand how to communicate without the stigma of discrimination or harassment.  Knowing the responsibility of being an employer or a manager and using effective and efficient communication should be the subject of training your team.  If your associates are trained and they understand what their responsibilities are they will be happier in their job functions.