Although owning your own business has many advantages, it also has its disadvantages. Probably one of the least satisfying tasks small business owners face is having to fire employees, particularly when it comes to a contradictory process. Firing or firing an employee can be stressful enough, but there are several laws that a small business owner must follow in order to be protected from potential lawsuit.
This article discusses basic information about firing employees, including what “at-will” employment means, legal justifications for firing an employee, and special protections related to firing. See more in the section on Job Termination or Employment.
Employment at will vs. Contract employment
In general, there are two types of employment that have very different legal implications: the employment by will and the contract employment. Under the employment-at-will doctrine, either the employee or the employer can terminate the employment relationship at any time, for any reason (or no reason at all). Most states recognize the legal framework for at-will employment. The exception to this rule is that a termination cannot be based on an illegal reason, such as discrimination or retaliation.
For example, a small business may fire an employee for poor performance, or even as a cost-cutting measure. However, the business cannot fire someone because of being pregnant or because of an employee’s race or religion. Even if a round of layoffs is legitimate, employers can face wrongful termination charges if they only target certain types of employees for layoffs. And if an employee is ostensibly fired for performance reasons, for example, the employer must be able to prove it through reviews or prior communication records.
Employees who have a specific employment contract, on the other hand, are not considered employees at will. Contract employees generally cannot be fired for any reason or at any time (although they can be fired for just cause, including a violation of contractual terms). In general, the termination conditions are detailed in the employment contract. Failure to comply with the terms of the employment contract may lead to a claim for unfair dismissal against the employer or a claim for breach of contract (against either party, depending on the circumstances).
Justification of dismissals
If job security has been promised for a period of time, either implicitly or explicitly, an employee can only be fired if there is adequate justification. This is true even for at-will employees, as long as the employer violated a promise given orally or in writing (or even implied). But employees can always be fired for good cause. For example, if an employee steals or misuses trade secrets, the employee can be fired even if there is a promise of job security. Other examples of just cause for termination of employment are negligence of duty, dishonesty, or infidelity. In the event that the employer terminates the employee without just cause, the employer leaves a lawsuit open.
Employees who believe they were inappropriately fired can decide to file a wrongful termination lawsuit, whether they are okay or hire employees. Employees prevailing in such actions typically receive back pay and other damages.
The federal government and many states have enacted various laws that protect workers under certain circumstances. These laws are in addition to laws that protect employees from employment discrimination. A couple of circumstances that allow employees special protections against termination include serving as jurors or military service. For example, an employee cannot be fired just for being called to jury duty. It is also illegal to fire someone for reporting misconduct by an employer or supervisor, also known as whistleblower retaliation.