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In the absence of an existing law, employment contract, or collective bargaining agreement to the contrary, employment relationships are generally considered to be at will. This means that both the employer and employee are free to terminate the employment relationship at any time, without notice, and for good reason, bad reason, or no reason at all. This legal theory is commonly referred to as the employment-at-will doctrine and is the standard in a vast majority of the states.
While employment at will is the law in most states, there are a number of exceptions to this general rule that have been created both by statute and by the courts. Through these exceptions, and contrary to an almost common belief, employers cannot necessarily terminate employees for any reason.
Federal antidiscrimination laws protect employees from losing their jobs on the basis of their race, color, national origin, sex, religion, disability, pregnancy, age, or genetic information. Employees can sue their former employers under a variety of antidiscrimination laws, including Title VII of the Civil Rights Act of 1964 (42 USC Sec. 2000e et seq.), the Americans with Disabilities Act (ADA) (42 USC Sec. 12101 et seq.), the Pregnancy Discrimination Act (PDA), the Equal Pay Act(29 USC Sec. 206d), the Age Discrimination in Employment Act (ADEA) (29 USC Sec. 621 et seq.), and the Genetic Information Nondiscrimination Act (GINA) (42 USC Sec. 2000ff).
In addition, most states have enacted their own laws prohibiting discrimination in employment, some of which include additional protected classes such as sexual orientation, marital status, and military membership.
Please see the state Civil Rights section.
An employer may not terminate or otherwise discriminate against an employee in retaliation for engaging in an otherwise protected activity—for instance, making a discrimination complaint or participating in the investigation of a discrimination complaint.
An employer may be found liable for retaliatory discharge if the employee can prove that:
• He or she engaged in a protected activity;
• The employer was aware of the protected activity; and
• The employer subjected the employee to an adverse employment action because of the protected activity (e.g., termination).
What is retaliation? The U.S. Supreme Court has ruled that retaliation includes any action taken by an employer—whether job-related or not—that is "materially adverse" and could dissuade a reasonable employee or job applicant from exercising protected rights (Burlington Northern and Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006)).
Under the Court's decision, retaliatory actions are not limited to actions that are employment-related (i.e., that affect the terms and conditions of employment or that occur in the workplace), but include any action by an employer that has a materially adverse effect and could reasonably deter a person from engaging in activity protected by Title VII.
Who is protected from retaliation? Title VII prohibits two types of retaliation: (1) the "opposition" clause protects employees from retaliation when they oppose any practice that is unlawful under Title VII; and (2) the "participation" clause protects employees from retaliation when they make a charge, testify, assist, or participate in an investigation, proceeding, or hearing brought under Title VII.
The U.S. Supreme Court has held that the opposition clause protects an employee from retaliation when he or she answers questions during an employer's internal investigation of another employee's improper conduct. The employee participating in the internal investigation is deemed to have opposed unlawful conduct even if he or she did not initiate the discrimination complaint (Crawford v. Metro. Gov't of Nashville and Davidson County, 129 S.Ct. 846 (2009)).
The U.S. Supreme Court has also ruled that an "aggrieved person" under Title VII is anyone with an interest intended to be protected under the statute, including employees who have a relationship with another employee who has brought a Title VII discrimination charge against the employer (Thompson v. N. Am. Stainless, LP, 131 S.Ct. 863 (U.S. 2011)).
In this case, the plaintiff and his fiancée worked for the same employer. Shortly after the employer learned that his fiancée had filed a discrimination charge with the EEOC, the employer fired the plaintiff. The plaintiff brought a lawsuit under Title VII claiming unlawful retaliation, but the 6th Circuit Court of Appeals ruled that the plaintiff could not pursue his claim because he had not engaged in protected activity himself.
The Supreme Court reversed and ruled that the firing could constitute unlawful retaliation against the fiancée and that the plaintiff, by virtue of his relationship with her, was an aggrieved person under Title VII who fell within the zone of interests protected under the law. The Court concluded that the plaintiff was entitled to bring his lawsuit claiming unlawful retaliation against him by the employer. The Court declined to specify a "fixed class of relationships" that would qualify an individual for third-party protection, other than to state that firing a close family member would almost always meet the standard and inflicting a milder reprisal on a mere acquaintance probably would not.
Retaliation claims on the rise. The Crawford and Thompson decisions have significantly increased retaliation litigation. The number of retaliation claims filed with the Equal Employment Opportunity Commission (EEOC) has been climbing steadily since those rulings, with retaliation claims marking the most frequently filed type of workplace discrimination claim for several years. These claims reinforce the importance of employers carefully documenting the legitimate, nondiscriminatory reasons for terminating employees.
Employers should be especially concerned about retaliation claims because they can survive even when the underlying discrimination claim is dismissed.
Retaliation against former employees. The U.S. Supreme Court has ruled that an employer may be held liable for retaliation under Title VII if an unfounded and negative employment reference is given for a former employee. In Robinson v. Shell Oil Co., 519 U.S. 337 (1997)), the Court allowed a worker to sue a former employer for providing an unfavorable job recommendation to another employer in retaliation for the worker's filing a discrimination complaint. Accordingly, the term “employer,” within the context of Title VII, may encompass former employers.
Statutes addressing retaliation.The principal federal civil rights law, Title VII, prohibits employers from retaliating against employees who oppose any unlawful employment practice or who make a charge, testify, assist, or participate in any investigation, proceeding, or hearing under the law. Illegal retaliation includes termination as well as other employment actions, such as suspension, demotion, altered work schedules or assignments, and negative performance evaluations. Similar protections are also extended to employees under the ADEA, the ADA, the Equal Pay Act, and the Family and Medical Leave Act.
Section 1981 (Civil Rights Act of 1866). Even though the statute is silent on the issue of retaliation, the U.S. Supreme Court held that 42 USC Sec. 1981, a federal civil rights statute, also encompasses retaliation claims (CBOCS West, Inc. v. Humphries, 553 U.S. 442 (2008)).
Section 1981 is a post-Civil-War-era statute that gives "all persons ... the same right ... to make and enforce contracts ... as is enjoyed by white citizens." In this case, the employee claimed that his employer violated Section 1981 when it discharged him because of his race and because he had complained to managers that a coworker had also been discharged for race-based reasons.
Best practices. Terminating an employee who has engaged in a protected activity is a matter that should be approached with extreme caution. However, the mere fact that a worker has filed a complaint should not alone prevent an employer from terminating an otherwise undesirable employment relationship. As long as the termination is warranted, is not imposed on a pretext, and is consistent with past practice, the employer is theoretically secure from liability.
The best possible protection against a claim of retaliation is a written disciplinary record demonstrating that there was a legitimate and nondiscriminatory reason supporting the action. An employer should be able to show that clear, understandable work rules and disciplinary policies were communicated to the employee and that the company personnel policies were applied consistently in the case at hand.
More information on retaliation is available. Please see the national Civil Rights section.
There are also a number of federal laws that specifically protect employees from retaliation for engaging in whistleblowing activity.
Affordable Care Act (ACA). The ACA amends the FLSA to prohibit employers from terminating or otherwise discriminating against an employee who:
• Received a credit or subsidy under the ACA;
• Provided or is about to provide to the employer or the federal or state government information the employee reasonably believes relates to a violation of Title I of the ACA;
• Testified or is about to testify in a proceeding regarding a violation of Title I of the ACA;
• Assisted or participated in such a proceeding; or
• Objected to or refused to participate in any activity, policy, practice, or assignment that the employee reasonably believed was a violation of Title I of the ACA (29 USC Sec. 218C).
These whistleblower protections are limited to Title I of the ACA. Title I of the ACA contains a wide range of provisions, including: the prohibition against denying health coverage based on preexisting conditions; the prohibition against discrimination based on the fact that an individual receives health insurance subsidies; financial reporting requirements; automatic enrollment requirements; requirements that an insurer receives rebate portions of excess premiums; small business tax credits; and health insurance exchanges. Please see the national Health Care Insurance section.
Consumer Product Safety Improvement Act of 2008 (CPSIA). The CPSIA provides employees of manufacturers, private labelers, distributors, and retailers of defective consumer products with whistleblower protection (15 USC Sec. 2087). The law was enacted in response to numerous recalls of defective consumer products, especially children's toys. It toughens the standards for manufacturers, distributors, private labelers, and retailers of these products and bans the use of lead in children's products. It also prohibits the resale of recalled products. Under the CPSIA, employers may not discriminate against or discharge employees who:
• Report violations of the Act or any other law enforced by the Consumer Product Safety Commission (CPSC);
• Testify, assist, or participate in proceedings regarding such violations; or
• Object to or refuse to participate in any activity, policy, practice, or task that they reasonably believe to be a violation of the Act or any other law enforced by the CPSC.
The Department of Labor (DOL) is authorized to investigate employee complaints under the CPSIA. If a violation is found, the DOL may, among other things, order the employer to reinstate the employee and award compensatory damages. If the DOL does not issue a final decision within stipulated time limits, the employee may file a complaint in civil court.
Fair Labor Standards Act (FLSA). Federal wage and hour law (FLSA) prohibits employers from, among other things, discharging an employee "because such employee has filed any complaint” alleging a violation of the FLSA (29 USC Sec. 215(a)(3). This includes claims for minimum wage, overtime, misidentifying employees as exempt or nonexempt, and unpaid wages of any kind (29 USC Sec. 201).
The U.S. Supreme Court has held that this provision protects oral as well as written complaints of an FLSA violation (Kasten v. Saint-Gobain Performance Plastics Corp., 131 S.Ct. 1325 (U.S. 2011)). This means that an employer may be liable for retaliation if it discharges an employee because he or she complained about an FLSA violation, even if the employee does not make a formal, written complaint.
The Supreme Court did not resolve the issue of whether an oral internal complaint is sufficient under the FLSA's antiretaliation provision or if the complaint must be made to a government agency. However, most lower courts have ruled that internal complaints are also protected; therefore, employers should proceed cautiously before terminating an employee who has made any complaint of wage and hour violations.
Please see the Fair Labor Standards Act (FLSA) section.
Misuse of economic stimulus funds. The American Recovery and Reinvestment Act of 2009 (ARRA), an economic stimulus bill, prohibits nonfederal employers from discharging, demoting, or discriminating against an employee for disclosing to a covered entity that stimulus funds have been misused (H.R. 1-183, Sec. 1553). Specifically, the employee must reasonably believe that the information disclosed is evidence of gross mismanagement of an agency contract or grant relating to agency funds; a gross waste of agency funds; a substantial and specific danger to public health or safety related to the implementation or use of stimulus funds; an abuse of authority related to the implementation or use of stimulus funds; or a violation of a law, rule, or regulation related to an agency contract or grant related to stimulus funds.
After exhausting all administrative remedies through the appropriate agency, the employee may bring a civil action in federal court against his or her employer. Employers may not attempt to have employees waive their rights and remedies under ARRA's whistleblower provisions by an agreement, policy, form, or condition of employment, including any predispute arbitration agreement (other than one in a collective bargaining agreement).
Occupational Safety and Health Act (OSH Act). Under the OSH Act, employers may not retaliate against employees on the basis of the filing of a complaint concerning work safety (29 USC Sec. 651 et seq.). Please see the national OSHA section.
Public employees, protected speech, and testimony in court. In the context of public employment, issues can arise when an employee's individual First Amendment right to engage in protected speech (including whistleblower activity) is balanced with a government employer's interest in managing, controlling, and issuing discipline related to statements made by a public employee that could be seen as representing, disparaging, or otherwise compromising the employer.
Citizens do not automatically surrender First Amendment rights by accepting public employment. However, the Supreme Court has held that when public employees make statements pursuant to their official duties, these individuals are no longer speaking as citizens for First Amendment purposes, but are operating in the employment context. Therefore, when disciplining a public employee for speech, it is critical to determine whether the speech was "employee speech" or "citizen speech," the latter of which is protected by the First Amendment (Garcetti v. Ceballos, 547 U.S. 410 (2006)).
This distinction can be fact-specific depending on the speech and the employee's duties. For example, in a recent decision, the Supreme Court unanimously held that a public employee who provided subpoenaed testimony in court was afforded First Amendment protection—even though the testimony was related to the employee's official duties—because providing testimony was not part of the employee's ordinary job responsibility. The court held that the employee's act of testifying in court was outside the scope of his employment and was entitled to First Amendment protection as a matter of public concern (Lane v. Franks, 573 U.S. ___ (2014)).
Sarbanes-Oxley Act of 2002 (SOX). SOX prohibits retaliation against employees of publicly traded companies who report acts of mail, wire, bank, or securities fraud; fraud against shareholders; or violations of any rule or regulation of the U.S. Securities and Exchange Commission (SEC) to their supervisors or other appropriate officials within their companies or federal officials with the authority to remedy the wrongdoing. The law also prohibits retaliation against employees who assist in any investigation of such violations or participate in any proceeding related to an alleged violation of these laws (18 USC Sec. 1514A).
Employees claiming retaliation under SOX must exhaust administrative remedies before bringing an action in court. Complaints are handled by the DOL. If the DOL does not issue a ruling within 180 days, the employee may seek a trial in federal court.
Tax fraud. The Tax Relief and Health Care Act of 2006 created the IRS Whistleblower Office, which is responsible for overseeing the law's whistleblower program. Under the Act, individuals who believe that they have evidence of tax fraud can make an anonymous complaint to the IRS about anyone, including coworkers and employers. If the IRS investigates the claim and collects money as a result of the complaint, the whistleblower will receive a portion of the recovery.
Whistleblower Protection Act of 1989. The Whistleblower Protection Act of 1989, codified in various sections of federal law, prohibits discrimination against federal employees for reporting certain unlawful activities (e.g., gross mismanagement) (5 USC Sec. 1213 et seq.).
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) created several new whistleblower protections, while also expanding those in existing law and providing significant financial incentives for employees to disclose to government officials what they believe may be illegal conduct by their employers. Below is a summary of the laws affected by Dodd-Frank's whistleblower provisions.
SOX. As noted above, SOX prohibits retaliation against employees of publicly traded companies who report or assist in an investigation of acts of mail, wire, bank, or securities fraud (18 USC Sec. 1514A).
Dodd-Frank clarified some unsettled SOX issues. For example, courts were split on whether SOX grants whistleblowers a right to a jury trial. Dodd-Frank makes clear that jury trials are available under the law. In addition, it amended SOX by adding the following provisions:
• Non-publicly-traded subsidiaries of publicly traded companies are now covered by SOX.
• Nationally recognized statistical ratings organizations are now covered by SOX.
• The statute of limitations is extended from 90 days to 180 days.
• Predispute arbitration agreements are prohibited under SOX.
• Individuals cannot waive their rights or remedies under SOX (18 USC Sec. 1514A).
SEC. Dodd-Frank also created new whistleblower protections under the SEC. Employees who provide information regarding securities law violations are entitled to between 10 percent and 30 percent of monetary sanctions recovered that exceed $1 million (15 USC Sec. 78u-6).
Employers may not retaliate against employees who provide information regarding securities law violations to the SEC, assist in the SEC's judicial or administrative investigations, or make required or protected disclosures under SOX or other laws subject to SEC jurisdiction. Employees claiming retaliation may bring a claim in federal court, and if they prevail, they may be awarded double back pay, attorneys' fees, and other costs. Employees must bring their claim within 6 years of the retaliation, or within 3 years after the employer knew or should have known of the retaliatory conduct; a claim cannot be made more than 10 years after the retaliation.
Note: Practically speaking, this provision gives SOX plaintiffs the opportunity to bring a claim in federal court without first following the administrative procedures required by SOX.
Commodity Futures Trading Commission (CFTC). Dodd-Frank also created a whistleblower program to protect employees who provide information related to violations of the Commodity Exchange Act or assist in an investigation or judicial or administrative action based on such information (7 USC Sec. 26). CFTC whistleblowers are eligible to receive 10 percent to 30 percent of any fines recovered by CFTC that exceed $1 million. Also, individuals may bring retaliation claims in federal court. Predispute arbitration agreements are prohibited, as are waivers of rights under the Act. However, unlike the SEC Act, complaints under CFTC whistleblower provisions must be brought within 2 years of the violation.
Consumer Financial Protection Act of 2010 (CFPA). Dodd-Frank also included the CFPA, which created the Bureau of Consumer Financial Protection and provides whistleblower protections for employees who work in the consumer financial services sector. These employers may not retaliate against an employee "performing tasks related to the offering or provision of a consumer financial product or service" who has:
• Provided information to his or her employer, the Bureau, or any local, state, or federal authority relating what the employee reasonably believes to be a violation of one of the consumer financial services laws protected by the Bureau or other Bureau rules;
• Testified in any proceeding related to enforcement or administration of the CFPA, any of the other laws protected by the Bureau, or Bureau rules;
• Filed or instituted any proceeding under federal consumer financial law; or
• Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee reasonably believed to be in violation of any law subject to the jurisdiction of or enforced by the Bureau.
Employees who believe they have been retaliated against for taking any of the actions set forth above may file a complaint with the DOL. If, after an investigation, the DOL finds in favor of the employee, it will order the employer to take affirmative action to abate the violation. In addition, the employee will be awarded back pay, reinstatement, compensatory damages, and upon request, attorneys' fees up to $1,000. If the DOL does not issue a final order within 210 days after the employee filed the complaint, or within 90 days after it has issued a written determination on the claim, the employee may file suit in federal court.
As with other whistleblower provisions under Dodd-Frank, employees may not waive their rights under this provision of the law. Also, predispute arbitration agreements are prohibited.
False Claims Act. Under the False Claims Act, an individual may bring a court action, known as a qui tam action, against any person who knowingly makes a false claim for payment from the government (31 USC Sec. 3729 et seq.) Employers are prohibited from retaliating against employees who participate in a qui tam action. Employees who prevail on a retaliation claim may be entitled to reinstatement, as well as double back pay, special damages, costs, and attorney's fees.
Dodd-Frank expanded covered individuals to include not only the whistleblower but also "associated others." It also provides that employees have 3 years from the time of the retaliation to bring a claim.
Practice tip: To avoid liability under whistleblower laws, employers should make sure that adverse actions against employees are well documented and based on legitimate, nondiscriminatory, and nonretaliatory reasons. Also, employers should encourage employees to report suspected improprieties internally so that they can be investigated and resolved by the employer.
Though an employment contract is generally understood to be a written agreement entered into by the employer and the employee, an unwitting employer may ultimately find itself bound to a promise made by a personnel manager during an interview, in the course of the worker's employment, or in a memo posted on a bulletin board. A promise, or “contract,” may also be implied in an employee handbook. Most often, the promise boils down to this: no discharge except for good cause.
Although the enforcement of such promises varies considerably from state to state, employers should be extremely careful about the promises and representations that are made to employees before and during employment. Employers should train their managers not to make any statements or promises regarding terms or conditions of employment to job applicants or employees. Some careless promises can place an employer in an unexpected and undesirable contractual relationship and effectively remove any right it may have had to terminate an employee without cause.
Disciplinary policies. Many companies have specific disciplinary procedures set forth in a policy manual or employee handbook. If the employer has failed to follow such established procedures or the policies limit the employer's discretion to terminate its employees, the employee may have a state law cause of action for breach of implied employment contract or wrongful discharge.
Federal law makes it illegal to discharge an employee for performing jury service in any U.S. court (28 USC Sec. 1875).
Although the concept of “concerted activity” is usually associated with union organizing efforts, it often extends beyond union activity. Under federal labor laws, employers are forbidden from terminating employees that work together, even if not in a union, to bargain with the employer, challenge the employer's policies or practices, or advocate for better pay, benefits, or working conditions. As a result, “concerted action” is defined broadly and may include just about any lawful act undertaken by two or more employees, whether the employer has a unionized workforce or not. Please see the national Unions, National Labor Relations Act sections.
The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) (38 USC Sec. 4301 et seq.) provides protection for employees who are returning home from active military service and protects them from discharge without just cause.
Cat's paw liability. The U.S. Supreme Court has ruled that an employer may be held liable under USERRA for an adverse employment action taken by an unbiased human resources (HR) manager when the action is based on the recommendation of a supervisor who had discriminatory intent (Staub v. Proctor Hosp.,131 S.Ct. 1186 (U.S. 2011)).
In this case, the vice president of HR fired an employee following a report by the employee's supervisor that the employee had violated the terms of a disciplinary warning and a review of the disciplinary documents in the employee's personnel file. However, the disciplinary documents were put in the file by the employee's supervisors, both of whom were hostile to the employee's military obligations that were protected under USERRA. The vice president of HR did not investigate the supervisor's report nor investigate whether the disciplinary documents were based on legitimate, nondiscriminatory factors. The fired employee subsequently brought a lawsuit under USERRA.
Even though the vice president of HR had no discriminatory motive, the Court ruled that the employer could be liable. Under the standards established by the Court, an employer may be liable if all the following are established:
• A supervisor performs an act motivated by unlawful bias;
• The act is intended to cause an adverse employment action; and
• The act is the proximate cause of the ultimate employment action.
Caution: This case illustrates the importance of having a process in place to effectively review disciplinary actions. Additionally, although this case was brought under USERRA, the Court noted that USERRA's language regarding a "motivating factor" is very similar to Title VII. Thus, "cat's paw liability" maybe applied by courts in cases brought under Title VII. Please see the national Military Service, national Civil Rights sections.
In addition to federal law, most states have enacted a number of laws that affect an employer's ability to terminate its employees.
Please see the state Termination (with Discharge) section.
Terminating an employee is one of the most difficult and important steps an employer or supervisor can take; it should not be taken lightly, because its repercussions go beyond the employee and the employer. Coworkers can be unnerved by the firing of another employee, even if they felt the person was a poor worker, exhibited a poor attitude, etc. A firing may engender feelings of uncertainty and vulnerability in others. Also, a firing may result in a wrongful discharge claim, which, even if not legitimate, is costly, unsettling, and a distraction to the workplace.
For practical reasons, it might be prudent to terminate an employee only for substantial business reasons, such as demonstrating a continued inability to meet performance standards; consistently violating company policy; exhibiting violent behavior against another in the workplace; or engaging in criminal activity, such as embezzlement.
The actual termination is never a pleasant experience. Therefore, every termination meeting should be planned carefully and executed quickly and competently. To achieve this, an employer may want to incorporate the following practices as part of its overall termination policy:
• Conduct the meeting as privately as possible, at either the start or end of the workday. By doing so, an employee's potential embarrassment when later retrieving personal belongings from the work area may be reduced (e.g., fewer employees may be in the work area).
• At least one other member of management should attend the meeting as a witness.
• Keep the meeting brief. Discourage any further or potentially volatile discussion regarding the reason for the termination. The purpose of the meeting is to communicate the message, not to discuss the reasons, or rights and wrongs, behind the decision. Stay focused.
• Remain compassionate, but do not compromise the company's position by "siding with" the employee.
• Arrange for security if an employee has a history of violence or could react violently.
• Prepare a final paycheck, including all outstanding vacation, sick time, etc., when applicable. Full payment for the day of the termination meeting should be made, regardless of the time of day that it occurs. Provide information and forms regarding the continuation of group health insurance, unemployment insurance, etc., in order to reduce the need for a former employee to return to the workplace and possibly cause disruption.
• At the conclusion of the meeting, have the employee retrieve his or her personal belongings and immediately leave the premises. In some cases, it may be wise to physically escort the employee to and from the work area.
When terminating an employee, the employment relationship should end at the conclusion of the termination meeting. There is no legal requirement for an employer to provide an employee with a notice period following the termination; in fact, it is not recommended. If the employer has promised a notice period, the employer may be bound to it, but most employers offer pay covering the period and dismiss the employee from further work.
There is little to gain by allowing an otherwise deficient employee to continue working for an extended period after the termination meeting. In almost every case, the employee's emotional connection to the employer is effectively severed, and the more important issues of employee morale, productivity, and risk to company property should take precedence. If you believe the former employee might damage company property or cause some other disruption in the workplace, have someone escort the former employee to his or her desk to pack up and then escort him or her out. But do this only under extraordinary circumstances.
If an employee is being terminated as part of a layoff, reduction in force, or plant closing, under the federal Worker Adjustment and Retraining Notification Act (WARN Act) (29 USC Sec. 2101 et seq.), an employer must give 60 days' notice of any plant closing and/or mass layoff. The law applies to employers that employ 100 or more full-time workers and employers that employ 100 or more workers that work at least a combined total of 4,000 hours per week (excluding overtime hours).
At least 60 days before a closing or layoff, an employer must provide written notice to (1) the union representing the affected employees or to the employees themselves if there is no union, (2) the state dislocated-worker unit, and (3) the chief elected official of the local government unit in which the closing or layoff is to occur. Some states have additional “mini-WARN” laws that cover smaller employers. Please see the Layoff section.
Employees may voluntarily terminate their employment at any time, with or without notice. Some employers require an employee to give notice, however, in exchange for certain benefits or payments (such as vacation pay). Therefore, an employer may want to adopt a formal policy regarding notice.
Some advance notice of a resignation allows coworkers an easier transition, gives the company time to find a replacement, provides the company with time to discuss a counteroffer with the employee, and gives the employer time to process the necessary paperwork for separation.
In cases when employees give advance notice that they are accepting a job with a competitor, an employer may be concerned about protecting trade secrets. Many employers will suspend the employee with pay for the remainder of the notice period, whereas other employers will assign the employee to less sensitive work. Such measures are prudent and generally will be considered reasonable by the departing employee. The employer's policies on these matters should be clearly stated and made known to employees (e.g., through employee handbooks) before the issue of termination arises.
When an employee gives notice or resigns, management should consider whether to retain the employee by matching or bettering the offer made by the prospective employer. Managers also should get the employee's resignation in writing. A written resignation may serve as evidence if the employee applies for unemployment benefits or sues for wrongful or constructive discharge.
An exit interview should be conducted with every employee who leaves the company voluntarily. Because many employees feel more comfortable providing honest feedback once the employment relationship has ended, an exit interview can often yield important and perhaps new information regarding an employee's overall employment experience and overview of the company.
Although it is always best to conduct an exit interview immediately prior to an employee's final departure date, in certain cases, this may be impossible. Post-employment exit interviews, however, can be conducted in a variety of ways including direct mail, phone, e-mail, online survey, or using a third-party service. To increase the rate of return for mailed exit interview forms, enclose a self-addressed, stamped envelope.
Although the content of an exit interview may vary from employer to employer, all interviews should include the following questions:
• Why are you leaving the company?
• How did you feel about working here?
• Were your job duties clearly explained to you?
• Do you think the company benefits and compensation programs are adequate? Do you have any suggestions for improving the programs?
• Would you recommend future employment with the company to a friend or relative?
Keep questions open-ended. Employers should try to incorporate as many open-ended questions as possible during an exit interview. If too many close-ended ("yes" or "no") questions are asked, an employer will neither be able to obtain the degree nor the depth of information necessary for making the interview a worthwhile exercise.
Troubling information during interview. If an employee shares particularly troubling information during an exit interview, such as an allegation of sexual harassment, the shared information, as well as the employee, should be handled with extreme care. Gather as much detailed information as possible from the employee and document the facts thoroughly. Convey a sincere appreciation for the information given and assure the employee that the allegation(s) will be investigated and resolved immediately. Please see the national Exit Interviews section.
Employers may ask an employee who is resigning, being terminated, or laid off, to release any claims the employee may have against the employer (e.g., for alleged employment discrimination) in exchange for additional compensation. Some state and federal laws prohibit the release of claims under those acts—for example, the FLSA, NLRA, and USERRA prohibit employees from waiving certain rights under those laws. For this reason, any general waiver of claims must be written carefully.
If the employee is aged 40 or over, the Older Workers Benefit Protection Act (OWBPA) (29 USC Sec. 621 et seq.) contains specific requirements for such a waiver and release of claims that must be followed to ensure that the release is enforceable. Please see the national Age Discrimination section.
If the format is not followed, the employee may ignore the release and sue the employer. Regardless of the age of the employee signing the release, the employer should consult with an attorney when drafting the legally binding document in order to guarantee that all legal requirements are fulfilled.
No federal law requires an employer pay severance pay upon terminating an employee. Please see the national Severance Pay section.
There are no federal laws regulating the payment of final wages, although many states have such laws.
Please see the state Paychecks section.
Many employers give a departing employee a final check immediately in the event of a termination or on the next regular payday in the event of any other separation, including layoff. Final payment is also often made by mail.
Questions regarding vacation pay, severance pay, or debts or obligations owed to the company should be addressed well in advance of the termination date. Postponing any of these actions until after the employee has left can lead to serious misunderstandings and possible legal problems.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) and many state laws require that employees be offered the option to continue group health insurance coverage after the employment relationship has ended.
Please see the Health Insurance Continuation/COBRA section.
An employer should assign responsibility for seeing that the employee does not leave his or her employment with any company property, such as a uniform, keys, or credit card. In the case of employees with access to trade secret information, software, or product development plans (e.g., computer programmers), and particularly in the case of telecommuting arrangements, it may be necessary to take additional measures to protect company property (e.g., terminating the employment relationship immediately upon receipt of a resignation letter and escorting the employee from the premises, making arrangements to retrieve company computers, software, etc., from the employee's home office).
Sometimes there is minor accounting between employer and employee to be settled at termination, such as reimbursement for lost property, repayment of a loan, or settlement of moving and other expense accounts. If the amount is sizable, the employee should settle the sums separately. Please see the national Deductions from Pay section.
The W-2 form may be issued at any time after termination, but no later than January 31 of the following year. If an employee requests issuance of the W-2 either verbally or in writing, however, and if there is no prospect that the employee will be rehired by the company, the W-2 must be issued within 30 days of the request or within 30 days of the last payment of wages, whichever is later.
Although an employer may generally be subject to liability for giving a deliberately inaccurate or misleading job reference, an increasing number of states have enacted job reference immunity laws that exempt employers from liability when accurate job reference information is given.
Please see the state References/Reference Checks section.
All documentation associated with a termination should be filed in the employee's personnel file. If departmental personnel files are also maintained, they should be kept in a confidential and secure place. Some states have laws that specifically govern the maintenance and retention of all employee personnel files.
Please see the state Records section.
Last reviewed on February 18, 2016.
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In the absence of an existing law, employment contract, or collective bargaining agreement to the contrary, employment relationships are generally considered to be at will. This means that both the employer and employee are free to terminate the employment relationship at any time, without notice, and for good reason, bad reason, or no reason at all. This legal theory is commonly referred to as the employment-at-will doctrine and is the standard in a vast majority of the states.
While employment at will is the law in most states, there are a number of exceptions to this general rule that have been created both by statute and by the courts. Through these exceptions, and contrary to an almost common belief, employers cannot necessarily terminate employees for any reason.
Federal antidiscrimination laws protect employees from losing their jobs on the basis of their race, color, national origin, sex, religion, disability, pregnancy, age, or genetic information. Employees can sue their former employers under a variety of antidiscrimination laws, including Title VII of the Civil Rights Act of 1964 (42 USC Sec. 2000e et seq.), the Americans with Disabilities Act (ADA) (42 USC Sec. 12101 et seq.), the Pregnancy Discrimination Act (PDA), the Equal Pay Act(29 USC Sec. 206d), the Age Discrimination in Employment Act (ADEA) (29 USC Sec. 621 et seq.), and the Genetic Information Nondiscrimination Act (GINA) (42 USC Sec. 2000ff).
In addition, most states have enacted their own laws prohibiting discrimination in employment, some of which include additional protected classes such as sexual orientation, marital status, and military membership.
Please see the state Civil Rights section.
An employer may not terminate or otherwise discriminate against an employee in retaliation for engaging in an otherwise protected activity—for instance, making a discrimination complaint or participating in the investigation of a discrimination complaint.
An employer may be found liable for retaliatory discharge if the employee can prove that:
• He or she engaged in a protected activity;
• The employer was aware of the protected activity; and
• The employer subjected the employee to an adverse employment action because of the protected activity (e.g., termination).
What is retaliation? The U.S. Supreme Court has ruled that retaliation includes any action taken by an employer—whether job-related or not—that is "materially adverse" and could dissuade a reasonable employee or job applicant from exercising protected rights (Burlington Northern and Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006)).
Under the Court's decision, retaliatory actions are not limited to actions that are employment-related (i.e., that affect the terms and conditions of employment or that occur in the workplace), but include any action by an employer that has a materially adverse effect and could reasonably deter a person from engaging in activity protected by Title VII.
Who is protected from retaliation? Title VII prohibits two types of retaliation: (1) the "opposition" clause protects employees from retaliation when they oppose any practice that is unlawful under Title VII; and (2) the "participation" clause protects employees from retaliation when they make a charge, testify, assist, or participate in an investigation, proceeding, or hearing brought under Title VII.
The U.S. Supreme Court has held that the opposition clause protects an employee from retaliation when he or she answers questions during an employer's internal investigation of another employee's improper conduct. The employee participating in the internal investigation is deemed to have opposed unlawful conduct even if he or she did not initiate the discrimination complaint (Crawford v. Metro. Gov't of Nashville and Davidson County, 129 S.Ct. 846 (2009)).
The U.S. Supreme Court has also ruled that an "aggrieved person" under Title VII is anyone with an interest intended to be protected under the statute, including employees who have a relationship with another employee who has brought a Title VII discrimination charge against the employer (Thompson v. N. Am. Stainless, LP, 131 S.Ct. 863 (U.S. 2011)).
In this case, the plaintiff and his fiancée worked for the same employer. Shortly after the employer learned that his fiancée had filed a discrimination charge with the EEOC, the employer fired the plaintiff. The plaintiff brought a lawsuit under Title VII claiming unlawful retaliation, but the 6th Circuit Court of Appeals ruled that the plaintiff could not pursue his claim because he had not engaged in protected activity himself.
The Supreme Court reversed and ruled that the firing could constitute unlawful retaliation against the fiancée and that the plaintiff, by virtue of his relationship with her, was an aggrieved person under Title VII who fell within the zone of interests protected under the law. The Court concluded that the plaintiff was entitled to bring his lawsuit claiming unlawful retaliation against him by the employer. The Court declined to specify a "fixed class of relationships" that would qualify an individual for third-party protection, other than to state that firing a close family member would almost always meet the standard and inflicting a milder reprisal on a mere acquaintance probably would not.
Retaliation claims on the rise. The Crawford and Thompson decisions have significantly increased retaliation litigation. The number of retaliation claims filed with the Equal Employment Opportunity Commission (EEOC) has been climbing steadily since those rulings, with retaliation claims marking the most frequently filed type of workplace discrimination claim for several years. These claims reinforce the importance of employers carefully documenting the legitimate, nondiscriminatory reasons for terminating employees.
Employers should be especially concerned about retaliation claims because they can survive even when the underlying discrimination claim is dismissed.
Retaliation against former employees. The U.S. Supreme Court has ruled that an employer may be held liable for retaliation under Title VII if an unfounded and negative employment reference is given for a former employee. In Robinson v. Shell Oil Co., 519 U.S. 337 (1997)), the Court allowed a worker to sue a former employer for providing an unfavorable job recommendation to another employer in retaliation for the worker's filing a discrimination complaint. Accordingly, the term “employer,” within the context of Title VII, may encompass former employers.
Statutes addressing retaliation.The principal federal civil rights law, Title VII, prohibits employers from retaliating against employees who oppose any unlawful employment practice or who make a charge, testify, assist, or participate in any investigation, proceeding, or hearing under the law. Illegal retaliation includes termination as well as other employment actions, such as suspension, demotion, altered work schedules or assignments, and negative performance evaluations. Similar protections are also extended to employees under the ADEA, the ADA, the Equal Pay Act, and the Family and Medical Leave Act.
Section 1981 (Civil Rights Act of 1866). Even though the statute is silent on the issue of retaliation, the U.S. Supreme Court held that 42 USC Sec. 1981, a federal civil rights statute, also encompasses retaliation claims (CBOCS West, Inc. v. Humphries, 553 U.S. 442 (2008)).
Section 1981 is a post-Civil-War-era statute that gives "all persons ... the same right ... to make and enforce contracts ... as is enjoyed by white citizens." In this case, the employee claimed that his employer violated Section 1981 when it discharged him because of his race and because he had complained to managers that a coworker had also been discharged for race-based reasons.
Best practices. Terminating an employee who has engaged in a protected activity is a matter that should be approached with extreme caution. However, the mere fact that a worker has filed a complaint should not alone prevent an employer from terminating an otherwise undesirable employment relationship. As long as the termination is warranted, is not imposed on a pretext, and is consistent with past practice, the employer is theoretically secure from liability.
The best possible protection against a claim of retaliation is a written disciplinary record demonstrating that there was a legitimate and nondiscriminatory reason supporting the action. An employer should be able to show that clear, understandable work rules and disciplinary policies were communicated to the employee and that the company personnel policies were applied consistently in the case at hand.
More information on retaliation is available. Please see the national Civil Rights section.
There are also a number of federal laws that specifically protect employees from retaliation for engaging in whistleblowing activity.
Affordable Care Act (ACA). The ACA amends the FLSA to prohibit employers from terminating or otherwise discriminating against an employee who:
• Received a credit or subsidy under the ACA;
• Provided or is about to provide to the employer or the federal or state government information the employee reasonably believes relates to a violation of Title I of the ACA;
• Testified or is about to testify in a proceeding regarding a violation of Title I of the ACA;
• Assisted or participated in such a proceeding; or
• Objected to or refused to participate in any activity, policy, practice, or assignment that the employee reasonably believed was a violation of Title I of the ACA (29 USC Sec. 218C).
These whistleblower protections are limited to Title I of the ACA. Title I of the ACA contains a wide range of provisions, including: the prohibition against denying health coverage based on preexisting conditions; the prohibition against discrimination based on the fact that an individual receives health insurance subsidies; financial reporting requirements; automatic enrollment requirements; requirements that an insurer receives rebate portions of excess premiums; small business tax credits; and health insurance exchanges. Please see the national Health Care Insurance section.
Consumer Product Safety Improvement Act of 2008 (CPSIA). The CPSIA provides employees of manufacturers, private labelers, distributors, and retailers of defective consumer products with whistleblower protection (15 USC Sec. 2087). The law was enacted in response to numerous recalls of defective consumer products, especially children's toys. It toughens the standards for manufacturers, distributors, private labelers, and retailers of these products and bans the use of lead in children's products. It also prohibits the resale of recalled products. Under the CPSIA, employers may not discriminate against or discharge employees who:
• Report violations of the Act or any other law enforced by the Consumer Product Safety Commission (CPSC);
• Testify, assist, or participate in proceedings regarding such violations; or
• Object to or refuse to participate in any activity, policy, practice, or task that they reasonably believe to be a violation of the Act or any other law enforced by the CPSC.
The Department of Labor (DOL) is authorized to investigate employee complaints under the CPSIA. If a violation is found, the DOL may, among other things, order the employer to reinstate the employee and award compensatory damages. If the DOL does not issue a final decision within stipulated time limits, the employee may file a complaint in civil court.
Fair Labor Standards Act (FLSA). Federal wage and hour law (FLSA) prohibits employers from, among other things, discharging an employee "because such employee has filed any complaint” alleging a violation of the FLSA (29 USC Sec. 215(a)(3). This includes claims for minimum wage, overtime, misidentifying employees as exempt or nonexempt, and unpaid wages of any kind (29 USC Sec. 201).
The U.S. Supreme Court has held that this provision protects oral as well as written complaints of an FLSA violation (Kasten v. Saint-Gobain Performance Plastics Corp., 131 S.Ct. 1325 (U.S. 2011)). This means that an employer may be liable for retaliation if it discharges an employee because he or she complained about an FLSA violation, even if the employee does not make a formal, written complaint.
The Supreme Court did not resolve the issue of whether an oral internal complaint is sufficient under the FLSA's antiretaliation provision or if the complaint must be made to a government agency. However, most lower courts have ruled that internal complaints are also protected; therefore, employers should proceed cautiously before terminating an employee who has made any complaint of wage and hour violations.
Please see the Fair Labor Standards Act (FLSA) section.
Misuse of economic stimulus funds. The American Recovery and Reinvestment Act of 2009 (ARRA), an economic stimulus bill, prohibits nonfederal employers from discharging, demoting, or discriminating against an employee for disclosing to a covered entity that stimulus funds have been misused (H.R. 1-183, Sec. 1553). Specifically, the employee must reasonably believe that the information disclosed is evidence of gross mismanagement of an agency contract or grant relating to agency funds; a gross waste of agency funds; a substantial and specific danger to public health or safety related to the implementation or use of stimulus funds; an abuse of authority related to the implementation or use of stimulus funds; or a violation of a law, rule, or regulation related to an agency contract or grant related to stimulus funds.
After exhausting all administrative remedies through the appropriate agency, the employee may bring a civil action in federal court against his or her employer. Employers may not attempt to have employees waive their rights and remedies under ARRA's whistleblower provisions by an agreement, policy, form, or condition of employment, including any predispute arbitration agreement (other than one in a collective bargaining agreement).
Occupational Safety and Health Act (OSH Act). Under the OSH Act, employers may not retaliate against employees on the basis of the filing of a complaint concerning work safety (29 USC Sec. 651 et seq.). Please see the national OSHA section.
Public employees, protected speech, and testimony in court. In the context of public employment, issues can arise when an employee's individual First Amendment right to engage in protected speech (including whistleblower activity) is balanced with a government employer's interest in managing, controlling, and issuing discipline related to statements made by a public employee that could be seen as representing, disparaging, or otherwise compromising the employer.
Citizens do not automatically surrender First Amendment rights by accepting public employment. However, the Supreme Court has held that when public employees make statements pursuant to their official duties, these individuals are no longer speaking as citizens for First Amendment purposes, but are operating in the employment context. Therefore, when disciplining a public employee for speech, it is critical to determine whether the speech was "employee speech" or "citizen speech," the latter of which is protected by the First Amendment (Garcetti v. Ceballos, 547 U.S. 410 (2006)).
This distinction can be fact-specific depending on the speech and the employee's duties. For example, in a recent decision, the Supreme Court unanimously held that a public employee who provided subpoenaed testimony in court was afforded First Amendment protection—even though the testimony was related to the employee's official duties—because providing testimony was not part of the employee's ordinary job responsibility. The court held that the employee's act of testifying in court was outside the scope of his employment and was entitled to First Amendment protection as a matter of public concern (Lane v. Franks, 573 U.S. ___ (2014)).
Sarbanes-Oxley Act of 2002 (SOX). SOX prohibits retaliation against employees of publicly traded companies who report acts of mail, wire, bank, or securities fraud; fraud against shareholders; or violations of any rule or regulation of the U.S. Securities and Exchange Commission (SEC) to their supervisors or other appropriate officials within their companies or federal officials with the authority to remedy the wrongdoing. The law also prohibits retaliation against employees who assist in any investigation of such violations or participate in any proceeding related to an alleged violation of these laws (18 USC Sec. 1514A).
Employees claiming retaliation under SOX must exhaust administrative remedies before bringing an action in court. Complaints are handled by the DOL. If the DOL does not issue a ruling within 180 days, the employee may seek a trial in federal court.
Tax fraud. The Tax Relief and Health Care Act of 2006 created the IRS Whistleblower Office, which is responsible for overseeing the law's whistleblower program. Under the Act, individuals who believe that they have evidence of tax fraud can make an anonymous complaint to the IRS about anyone, including coworkers and employers. If the IRS investigates the claim and collects money as a result of the complaint, the whistleblower will receive a portion of the recovery.
Whistleblower Protection Act of 1989. The Whistleblower Protection Act of 1989, codified in various sections of federal law, prohibits discrimination against federal employees for reporting certain unlawful activities (e.g., gross mismanagement) (5 USC Sec. 1213 et seq.).
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) created several new whistleblower protections, while also expanding those in existing law and providing significant financial incentives for employees to disclose to government officials what they believe may be illegal conduct by their employers. Below is a summary of the laws affected by Dodd-Frank's whistleblower provisions.
SOX. As noted above, SOX prohibits retaliation against employees of publicly traded companies who report or assist in an investigation of acts of mail, wire, bank, or securities fraud (18 USC Sec. 1514A).
Dodd-Frank clarified some unsettled SOX issues. For example, courts were split on whether SOX grants whistleblowers a right to a jury trial. Dodd-Frank makes clear that jury trials are available under the law. In addition, it amended SOX by adding the following provisions:
• Non-publicly-traded subsidiaries of publicly traded companies are now covered by SOX.
• Nationally recognized statistical ratings organizations are now covered by SOX.
• The statute of limitations is extended from 90 days to 180 days.
• Predispute arbitration agreements are prohibited under SOX.
• Individuals cannot waive their rights or remedies under SOX (18 USC Sec. 1514A).
SEC. Dodd-Frank also created new whistleblower protections under the SEC. Employees who provide information regarding securities law violations are entitled to between 10 percent and 30 percent of monetary sanctions recovered that exceed $1 million (15 USC Sec. 78u-6).
Employers may not retaliate against employees who provide information regarding securities law violations to the SEC, assist in the SEC's judicial or administrative investigations, or make required or protected disclosures under SOX or other laws subject to SEC jurisdiction. Employees claiming retaliation may bring a claim in federal court, and if they prevail, they may be awarded double back pay, attorneys' fees, and other costs. Employees must bring their claim within 6 years of the retaliation, or within 3 years after the employer knew or should have known of the retaliatory conduct; a claim cannot be made more than 10 years after the retaliation.
Note: Practically speaking, this provision gives SOX plaintiffs the opportunity to bring a claim in federal court without first following the administrative procedures required by SOX.
Commodity Futures Trading Commission (CFTC). Dodd-Frank also created a whistleblower program to protect employees who provide information related to violations of the Commodity Exchange Act or assist in an investigation or judicial or administrative action based on such information (7 USC Sec. 26). CFTC whistleblowers are eligible to receive 10 percent to 30 percent of any fines recovered by CFTC that exceed $1 million. Also, individuals may bring retaliation claims in federal court. Predispute arbitration agreements are prohibited, as are waivers of rights under the Act. However, unlike the SEC Act, complaints under CFTC whistleblower provisions must be brought within 2 years of the violation.
Consumer Financial Protection Act of 2010 (CFPA). Dodd-Frank also included the CFPA, which created the Bureau of Consumer Financial Protection and provides whistleblower protections for employees who work in the consumer financial services sector. These employers may not retaliate against an employee "performing tasks related to the offering or provision of a consumer financial product or service" who has:
• Provided information to his or her employer, the Bureau, or any local, state, or federal authority relating what the employee reasonably believes to be a violation of one of the consumer financial services laws protected by the Bureau or other Bureau rules;
• Testified in any proceeding related to enforcement or administration of the CFPA, any of the other laws protected by the Bureau, or Bureau rules;
• Filed or instituted any proceeding under federal consumer financial law; or
• Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee reasonably believed to be in violation of any law subject to the jurisdiction of or enforced by the Bureau.
Employees who believe they have been retaliated against for taking any of the actions set forth above may file a complaint with the DOL. If, after an investigation, the DOL finds in favor of the employee, it will order the employer to take affirmative action to abate the violation. In addition, the employee will be awarded back pay, reinstatement, compensatory damages, and upon request, attorneys' fees up to $1,000. If the DOL does not issue a final order within 210 days after the employee filed the complaint, or within 90 days after it has issued a written determination on the claim, the employee may file suit in federal court.
As with other whistleblower provisions under Dodd-Frank, employees may not waive their rights under this provision of the law. Also, predispute arbitration agreements are prohibited.
False Claims Act. Under the False Claims Act, an individual may bring a court action, known as a qui tam action, against any person who knowingly makes a false claim for payment from the government (31 USC Sec. 3729 et seq.) Employers are prohibited from retaliating against employees who participate in a qui tam action. Employees who prevail on a retaliation claim may be entitled to reinstatement, as well as double back pay, special damages, costs, and attorney's fees.
Dodd-Frank expanded covered individuals to include not only the whistleblower but also "associated others." It also provides that employees have 3 years from the time of the retaliation to bring a claim.
Practice tip: To avoid liability under whistleblower laws, employers should make sure that adverse actions against employees are well documented and based on legitimate, nondiscriminatory, and nonretaliatory reasons. Also, employers should encourage employees to report suspected improprieties internally so that they can be investigated and resolved by the employer.
Though an employment contract is generally understood to be a written agreement entered into by the employer and the employee, an unwitting employer may ultimately find itself bound to a promise made by a personnel manager during an interview, in the course of the worker's employment, or in a memo posted on a bulletin board. A promise, or “contract,” may also be implied in an employee handbook. Most often, the promise boils down to this: no discharge except for good cause.
Although the enforcement of such promises varies considerably from state to state, employers should be extremely careful about the promises and representations that are made to employees before and during employment. Employers should train their managers not to make any statements or promises regarding terms or conditions of employment to job applicants or employees. Some careless promises can place an employer in an unexpected and undesirable contractual relationship and effectively remove any right it may have had to terminate an employee without cause.
Disciplinary policies. Many companies have specific disciplinary procedures set forth in a policy manual or employee handbook. If the employer has failed to follow such established procedures or the policies limit the employer's discretion to terminate its employees, the employee may have a state law cause of action for breach of implied employment contract or wrongful discharge.
Federal law makes it illegal to discharge an employee for performing jury service in any U.S. court (28 USC Sec. 1875).
Although the concept of “concerted activity” is usually associated with union organizing efforts, it often extends beyond union activity. Under federal labor laws, employers are forbidden from terminating employees that work together, even if not in a union, to bargain with the employer, challenge the employer's policies or practices, or advocate for better pay, benefits, or working conditions. As a result, “concerted action” is defined broadly and may include just about any lawful act undertaken by two or more employees, whether the employer has a unionized workforce or not. Please see the national Unions, National Labor Relations Act sections.
The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) (38 USC Sec. 4301 et seq.) provides protection for employees who are returning home from active military service and protects them from discharge without just cause.
Cat's paw liability. The U.S. Supreme Court has ruled that an employer may be held liable under USERRA for an adverse employment action taken by an unbiased human resources (HR) manager when the action is based on the recommendation of a supervisor who had discriminatory intent (Staub v. Proctor Hosp.,131 S.Ct. 1186 (U.S. 2011)).
In this case, the vice president of HR fired an employee following a report by the employee's supervisor that the employee had violated the terms of a disciplinary warning and a review of the disciplinary documents in the employee's personnel file. However, the disciplinary documents were put in the file by the employee's supervisors, both of whom were hostile to the employee's military obligations that were protected under USERRA. The vice president of HR did not investigate the supervisor's report nor investigate whether the disciplinary documents were based on legitimate, nondiscriminatory factors. The fired employee subsequently brought a lawsuit under USERRA.
Even though the vice president of HR had no discriminatory motive, the Court ruled that the employer could be liable. Under the standards established by the Court, an employer may be liable if all the following are established:
• A supervisor performs an act motivated by unlawful bias;
• The act is intended to cause an adverse employment action; and
• The act is the proximate cause of the ultimate employment action.
Caution: This case illustrates the importance of having a process in place to effectively review disciplinary actions. Additionally, although this case was brought under USERRA, the Court noted that USERRA's language regarding a "motivating factor" is very similar to Title VII. Thus, "cat's paw liability" maybe applied by courts in cases brought under Title VII. Please see the national Military Service, national Civil Rights sections.
In addition to federal law, most states have enacted a number of laws that affect an employer's ability to terminate its employees.
Please see the state Termination (with Discharge) section.
Terminating an employee is one of the most difficult and important steps an employer or supervisor can take; it should not be taken lightly, because its repercussions go beyond the employee and the employer. Coworkers can be unnerved by the firing of another employee, even if they felt the person was a poor worker, exhibited a poor attitude, etc. A firing may engender feelings of uncertainty and vulnerability in others. Also, a firing may result in a wrongful discharge claim, which, even if not legitimate, is costly, unsettling, and a distraction to the workplace.
For practical reasons, it might be prudent to terminate an employee only for substantial business reasons, such as demonstrating a continued inability to meet performance standards; consistently violating company policy; exhibiting violent behavior against another in the workplace; or engaging in criminal activity, such as embezzlement.
The actual termination is never a pleasant experience. Therefore, every termination meeting should be planned carefully and executed quickly and competently. To achieve this, an employer may want to incorporate the following practices as part of its overall termination policy:
• Conduct the meeting as privately as possible, at either the start or end of the workday. By doing so, an employee's potential embarrassment when later retrieving personal belongings from the work area may be reduced (e.g., fewer employees may be in the work area).
• At least one other member of management should attend the meeting as a witness.
• Keep the meeting brief. Discourage any further or potentially volatile discussion regarding the reason for the termination. The purpose of the meeting is to communicate the message, not to discuss the reasons, or rights and wrongs, behind the decision. Stay focused.
• Remain compassionate, but do not compromise the company's position by "siding with" the employee.
• Arrange for security if an employee has a history of violence or could react violently.
• Prepare a final paycheck, including all outstanding vacation, sick time, etc., when applicable. Full payment for the day of the termination meeting should be made, regardless of the time of day that it occurs. Provide information and forms regarding the continuation of group health insurance, unemployment insurance, etc., in order to reduce the need for a former employee to return to the workplace and possibly cause disruption.
• At the conclusion of the meeting, have the employee retrieve his or her personal belongings and immediately leave the premises. In some cases, it may be wise to physically escort the employee to and from the work area.
When terminating an employee, the employment relationship should end at the conclusion of the termination meeting. There is no legal requirement for an employer to provide an employee with a notice period following the termination; in fact, it is not recommended. If the employer has promised a notice period, the employer may be bound to it, but most employers offer pay covering the period and dismiss the employee from further work.
There is little to gain by allowing an otherwise deficient employee to continue working for an extended period after the termination meeting. In almost every case, the employee's emotional connection to the employer is effectively severed, and the more important issues of employee morale, productivity, and risk to company property should take precedence. If you believe the former employee might damage company property or cause some other disruption in the workplace, have someone escort the former employee to his or her desk to pack up and then escort him or her out. But do this only under extraordinary circumstances.
If an employee is being terminated as part of a layoff, reduction in force, or plant closing, under the federal Worker Adjustment and Retraining Notification Act (WARN Act) (29 USC Sec. 2101 et seq.), an employer must give 60 days' notice of any plant closing and/or mass layoff. The law applies to employers that employ 100 or more full-time workers and employers that employ 100 or more workers that work at least a combined total of 4,000 hours per week (excluding overtime hours).
At least 60 days before a closing or layoff, an employer must provide written notice to (1) the union representing the affected employees or to the employees themselves if there is no union, (2) the state dislocated-worker unit, and (3) the chief elected official of the local government unit in which the closing or layoff is to occur. Some states have additional “mini-WARN” laws that cover smaller employers. Please see the Layoff section.
Employees may voluntarily terminate their employment at any time, with or without notice. Some employers require an employee to give notice, however, in exchange for certain benefits or payments (such as vacation pay). Therefore, an employer may want to adopt a formal policy regarding notice.
Some advance notice of a resignation allows coworkers an easier transition, gives the company time to find a replacement, provides the company with time to discuss a counteroffer with the employee, and gives the employer time to process the necessary paperwork for separation.
In cases when employees give advance notice that they are accepting a job with a competitor, an employer may be concerned about protecting trade secrets. Many employers will suspend the employee with pay for the remainder of the notice period, whereas other employers will assign the employee to less sensitive work. Such measures are prudent and generally will be considered reasonable by the departing employee. The employer's policies on these matters should be clearly stated and made known to employees (e.g., through employee handbooks) before the issue of termination arises.
When an employee gives notice or resigns, management should consider whether to retain the employee by matching or bettering the offer made by the prospective employer. Managers also should get the employee's resignation in writing. A written resignation may serve as evidence if the employee applies for unemployment benefits or sues for wrongful or constructive discharge.
An exit interview should be conducted with every employee who leaves the company voluntarily. Because many employees feel more comfortable providing honest feedback once the employment relationship has ended, an exit interview can often yield important and perhaps new information regarding an employee's overall employment experience and overview of the company.
Although it is always best to conduct an exit interview immediately prior to an employee's final departure date, in certain cases, this may be impossible. Post-employment exit interviews, however, can be conducted in a variety of ways including direct mail, phone, e-mail, online survey, or using a third-party service. To increase the rate of return for mailed exit interview forms, enclose a self-addressed, stamped envelope.
Although the content of an exit interview may vary from employer to employer, all interviews should include the following questions:
• Why are you leaving the company?
• How did you feel about working here?
• Were your job duties clearly explained to you?
• Do you think the company benefits and compensation programs are adequate? Do you have any suggestions for improving the programs?
• Would you recommend future employment with the company to a friend or relative?
Keep questions open-ended. Employers should try to incorporate as many open-ended questions as possible during an exit interview. If too many close-ended ("yes" or "no") questions are asked, an employer will neither be able to obtain the degree nor the depth of information necessary for making the interview a worthwhile exercise.
Troubling information during interview. If an employee shares particularly troubling information during an exit interview, such as an allegation of sexual harassment, the shared information, as well as the employee, should be handled with extreme care. Gather as much detailed information as possible from the employee and document the facts thoroughly. Convey a sincere appreciation for the information given and assure the employee that the allegation(s) will be investigated and resolved immediately. Please see the national Exit Interviews section.
Employers may ask an employee who is resigning, being terminated, or laid off, to release any claims the employee may have against the employer (e.g., for alleged employment discrimination) in exchange for additional compensation. Some state and federal laws prohibit the release of claims under those acts—for example, the FLSA, NLRA, and USERRA prohibit employees from waiving certain rights under those laws. For this reason, any general waiver of claims must be written carefully.
If the employee is aged 40 or over, the Older Workers Benefit Protection Act (OWBPA) (29 USC Sec. 621 et seq.) contains specific requirements for such a waiver and release of claims that must be followed to ensure that the release is enforceable. Please see the national Age Discrimination section.
If the format is not followed, the employee may ignore the release and sue the employer. Regardless of the age of the employee signing the release, the employer should consult with an attorney when drafting the legally binding document in order to guarantee that all legal requirements are fulfilled.
No federal law requires an employer pay severance pay upon terminating an employee. Please see the national Severance Pay section.
There are no federal laws regulating the payment of final wages, although many states have such laws.
Please see the state Paychecks section.
Many employers give a departing employee a final check immediately in the event of a termination or on the next regular payday in the event of any other separation, including layoff. Final payment is also often made by mail.
Questions regarding vacation pay, severance pay, or debts or obligations owed to the company should be addressed well in advance of the termination date. Postponing any of these actions until after the employee has left can lead to serious misunderstandings and possible legal problems.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) and many state laws require that employees be offered the option to continue group health insurance coverage after the employment relationship has ended.
Please see the Health Insurance Continuation/COBRA section.
An employer should assign responsibility for seeing that the employee does not leave his or her employment with any company property, such as a uniform, keys, or credit card. In the case of employees with access to trade secret information, software, or product development plans (e.g., computer programmers), and particularly in the case of telecommuting arrangements, it may be necessary to take additional measures to protect company property (e.g., terminating the employment relationship immediately upon receipt of a resignation letter and escorting the employee from the premises, making arrangements to retrieve company computers, software, etc., from the employee's home office).
Sometimes there is minor accounting between employer and employee to be settled at termination, such as reimbursement for lost property, repayment of a loan, or settlement of moving and other expense accounts. If the amount is sizable, the employee should settle the sums separately. Please see the national Deductions from Pay section.
The W-2 form may be issued at any time after termination, but no later than January 31 of the following year. If an employee requests issuance of the W-2 either verbally or in writing, however, and if there is no prospect that the employee will be rehired by the company, the W-2 must be issued within 30 days of the request or within 30 days of the last payment of wages, whichever is later.
Although an employer may generally be subject to liability for giving a deliberately inaccurate or misleading job reference, an increasing number of states have enacted job reference immunity laws that exempt employers from liability when accurate job reference information is given.
Please see the state References/Reference Checks section.
All documentation associated with a termination should be filed in the employee's personnel file. If departmental personnel files are also maintained, they should be kept in a confidential and secure place. Some states have laws that specifically govern the maintenance and retention of all employee personnel files.
Please see the state Records section.
Last reviewed on February 18, 2016.
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