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While many employers focus on searching for talented employees as unemployment figures continue to fall, firing workers remains a regular but risky task for many organizations.
Employers who are not careful when terminating an employee run the risk of lawsuits and substantial legal bills. Documentation is key to defending their reasons to end a worker’s employment, employment attorneys say.
“We clearly are in a litigious world, and some states and jurisdictions are particularly litigious, and that makes terminations high risk for legal costs,” said Ben Mathis, a labor and employment law attorney and managing partner of Freeman Mathis & Gary L.L.P. in Atlanta. “I tell people that when you’re making a termination, particularly one you deem to be high risk, it’s almost like making a capital expenditure decision. You have to take the time to make sure what you’re doing makes sense and can be defensible.”
Mr. Mathis added that “employment cases are about motivation, and that’s something that can be always challenged no matter how clear-cut something appears to be.”
“Just the expense of the defense is an issue, regardless if the claim has any merits at all,” he said.
A West Virginia city recently agreed to pay a former police officer $175,000 to settle a wrongful termination lawsuit after he was fired for not shooting a suspect who was holding a gun. The lawsuit said the Weirton Police Department wrongfully terminated Stephen Mader after he chose not to shoot a man while responding to a domestic disturbance in 2016.
The 2017 Hiscox Guide to Employee Lawsuits said that “any worker who feels they have been discriminated against, or who feels they have been retaliated against for supporting a discriminated worker, can bring a charge against their employer.”
The report said that a representative study of 1,214 closed claims reported by small to medium-sized enterprises with fewer than 500 employees showed that 24% of employment charges resulted in defense and settlement costs averaging a total of $160,000.
Shanna Wall, compliance attorney with Pompano Beach, Florida-based ComplyRight Inc., which makes human resources products such as forms and software, said a termination lawsuit can be particularly serious for small business owners.
“For a small business, a lawsuit can bankrupt you depending upon the nature of the lawsuit and how expensive it gets,” she said. “There are trials and appeals, and all that takes time and money. And if you’re a small business owner, that’s two things you may not have a lot of.”
Ms. Wall encouraged employers to have thorough documentation when handling a termination.
“A lot of employers will use what they call progressive discipline,” she said. “They’ll start off with a verbal warning to a written warning. If you do it that, then you’re going to have levels of documentation, so for each event you’re going to have exactly what led you to that discipline.”
And stick to the facts, Ms. Wall said, noting that “you want to pretend that every time you write something down, a jury could potentially see it.”
“One way you could avoid a lawsuit entirely is to handle the termination with professionalism and respect,” she said. “A disgruntled employee is more likely to file a lawsuit than one that accepts responsibility for their own actions. Treat them respect, treat them professionally and they’re less likely to be disgruntled.”
Mr. Mathis said he’s conducted focus groups with potential jurors where the majority of people expect the basis for termination will be reflected in written documentation, and if there’s no documentation, “that suggests there may be something else at play.”
“If the file is clear,” he said, “then you have probably done as reasonably thorough a job as you can to put the case in the best possible light. But when you have to explain all of it and the documentation is lacking, then obviously you can see a problem right there.”
The former chief financial officer of a failed Missouri insurer reached a settlement in a lawsuit that charged the firm fired him for complaining it violated the law by hiring a disbarred lawyer who had been jailed for his role in a prepaid funeral company Ponzi scheme.