As a business owner, you have a duty to be fair when hiring and firing. Although every business hopes that each hire turns out to be a positive one, there will inevitably come a time when you have to let an employee go. It’s important that this is handled and communicated carefully, as one wrong move and your business could be threatened with a wrongful termination suit. These can be expensive claims, which can be time-consuming and costly. Here’s what you need to know about wrongful termination and how to avoid it.
What is considered wrongful termination?
Generally, in the eyes of the law, wrongful termination is firing for an illegal reason according to an employment contract, federal law, or state law. For example, it would be considered wrongful termination if you fire an employee for any of the following reasons:
- Sexual orientation – You cannot decide you don’t approve of an employee’s sexual orientation and fire them.
- Sexual harassment – If you fire an employee because they were sexually harassed, you could face a lawsuit.
- Age – You cannot fire someone because of their age.
- Race – You cannot discriminate based on the color of one’s skin.
- Religion – The law protects all religions, and you cannot force employees to participate in yours.
- Disability – Employees who are able to complete the essential functions of the job with or without reasonable accommodation are protected.
How to avoid wrongful termination lawsuits
Avoiding a wrongful termination lawsuit starts before an employee is even hired. Here are some top practices to take into consideration.
- Communicate what is expected from each employee. This starts with the job description. It should outline the key duties that the employee will be expected to handle. Include information on how employees will be reviewed, such as what performance metrics they will be evaluated on.
- Let employees go with empathy. If you must fire an employee, do so compassionately. When they are a difficult employee, it can be hard to muster empathy towards them, but doing so is in your best interest. He or she may be surprised, hurt, and overwhelmed when you let them go, which may cause them to act out. Consider offering a severance package and having the employee sign off on it.
- Protect your company with liability insurance. Business liability insurance, also called employment practices liability insurance, is a policy that helps to protect your business if you get hit with wrongful termination, discrimination, and harassment lawsuits. Even small businesses need this coverage.
- Train your team. Some employees may not know where the line begins and ends. Ensure that all employees undergo training on what is and is not acceptable behavior in the workplace, even if it sounds obvious. Sexual harassment and racial discrimination training should be the top priorities in your training program.
For more guidance on growing your own business, contact the Economic Development Collaborative. Conveniently located in Camarillo, California, we’re here to help and have a free resource guide on how your business can handle the COVID-19 pandemic.