Avoiding a wrongful termination lawsuit
Fausto Chacon says his employer, JF & MB Home Improvement & Landscaping owes him money. So he’s filed suit against the company and Jorge A. Matute, officially a Florida corporation, “citing alleged breach of lease agreement, retaliation and unpaid wages.”
No Cause At All
Every state has its own separate employment laws, and all differ. Still, you’ve probably heard that the terms of labor law in your state go by the doctrine of “employment at will.” If you think that means you can terminate anyone you want at any time, you’re not far wrong. Mostly that’s true. Economist Charles J. Muhl explains it this way:
“In legal terms…since the last half of the 19th century, employment in each of the United States has been ‘at will,’ or terminable by either the employer or employee for any reason whatsoever. The employment-at-will doctrine avows that, when an employee does not have a written employment contract and the term of employment is of indefinite duration, the employer can terminate the employee for good cause, bad cause, or no cause at all.”
“No cause at all” means that that you, the employer, are legally permitted—in every state except Montana—to fire someone at any time without providing any reason. (The exceptions, valid in most states, are situations where there is an employment contract or the employee is a member of a labor union.) “While public employees may be entitled to a due process hearing before they are terminated, at-will private employees can generally be fired without a period of notice, a formal hearing, or a chance to defend themselves to their employers,” according to the blog Law & Daily Life. Theoretically, the right of an employee to leave your employ at any time, without notice or reason, counterbalances this power. But how many employees do you know who have actually done that?
Exceptions To The Rule
Be aware, however, that “at will” is not a magic wand for employers. Federal law offers employees recourse if they have reason to believe they were terminated for certain specific reasons. If you as an employer aren’t aware of those reasons, you could find yourself blindsided by an employee lawsuit or by an Equal Employment Opportunity Commission (or similar state agency) investigation. An article by Lisa Guerin at lawyers.com lists various circumstances in which a fired employee would be able to file suit. Essentially these come down to two reasons: discrimination and retaliation (or whistleblowing). “Under federal law, employers may not fire employees because of their race, color, national origin, religion, sex, age, disability, or genetic information.” Some states include additional categories; in California, for instance, employees can’t be fired for their sexual orientation.
If you run an ethical business, it might never occur to you to terminate someone for belonging to any of these categories. But a suit will be proved not by your intentions but of your actions. And those actions can be broadly interpreted by an arbitrator or a jury.
Say for instance an employee injured in a roof fall files for worker’s compensation. He’s still on your payroll, but after two months, you know that he’s up and about and you call asking that he report to the office to help with paperwork. He refuses and you fire him. You call it insubordination. He calls it retaliation for his having filed for worker’s comp and his belief that his filing will cause the company’s insurance rates to go up, which it will.
Knock Knock, Registered Letter
A recently terminated employee who’s thinking about suing will contact an attorney. The attorney who takes the case will then likely send you a "demand letter," informing you (or implying that) a suit is being readied. “For most employers, getting a demand letter from a law firm is about as welcome as a sharp stick in the eye,” according to a Sacramento Business Journal article by attorney Steve Holden of The Holden Law Group. “Demand letters come in all shapes and sizes, and most commonly ‘demand’ money, documents or both.” That is, the letter may ask for the employee’s records, personnel file, etc. or the right to inspect same. He suggests that above all you not ignore this. “Failure to comply with the Labor Code provisions could result in a misdemeanor conviction, monetary penalties and sanctions, including the payment of the requesting attorney’s fees,” Holden notes.
And speaking of money, the demand letter “may include an actual ‘demand,’ in the form of a requested dollar amount, or it may simply invite you to start negotiating,” points out legal resources website. Many lawyers who specialize in handling such claims figure that employers with any chance of losing a court case or arbitration will simply pay some percentage of the claim to settle. If a suit is filed, but settled out of court, the average amount “is around $40,000,” according to coverwallet.com.
Really Thorough File
Receiving the “demand letter” might not make your day, but here is where it may come down to the frequency of your records and the level of detail therein. In a wrongful termination suit, the burden of proof is on the plaintiff. If you keep few or no records, then the employee will need to prove they were qualified for the job, performing the job without incident or complaint, and that once terminated they were either not replaced or replaced by someone less qualified but younger, of a different race or ethnicity, etc. Litigating a suit like that is expensive and the odds of winning are a role of the dice.
That’s why “in general, employers will do almost anything to avoid taking an employment discrimination case to trial, not only to avoid the time and money that it costs, but also to avoid the negative publicity, and to take the factor of unpredictable jury awards out of the equation,” says law blog Legal Match. An American Bar Foundation study of federal employment discrimination filings from 1987 to 2003 found only 6 percent of cases ever actually went to trial.
If you terminated someone for a specific reason—say persistent lateness or an inability to interact in a positive way with homeowners—and can show a documented series of conversations and meetings you had with the employee to address and correct the issue, then the claim of retaliation, of sexual harassment, of discrimination based on age, race, ethnicity, etc., will be difficult for the plaintiff’s attorney to prove.
What will make you far less vulnerable are not only those documents, but detailed employment records, beginning with job descriptions and the results of regular performance appraisals. “The bottom line,” says Marilyn Macfarlane, an HR expert who consults with Certified Contractors Network (contractors.net) and has many home improvement companies for clients, “is that if you have an employee file, and a really thorough file, the lawyer who subpoenas that file will quickly walk away because you’ve proven you take good notes and with those notes you can and will defend yourself.”