Beware of a Worker's 'Right' to a Job

Let's say you are tightening operations at a clothing store. You decide to close the footwear department and lay off Bob and other salespeople who work there. A few weeks later, you are served papers. Bob has filed suit against you for "wrongful discharge."

Wrongful discharge? It's the belief the termination of an employee without cause is an unjust act. The word didn't exist years ago. Now it's the buzzword of the employer community -- all employers from Mom and Pop's Grocery to Fortune 500 companies.

The storm of wrongful discharge suits, which threaten employers, is as frightening as the malpractice suits which have ravaged the medical community. In wrongful discharge cases, the settlements that juries award often exceed $500,000.

A little history: For more than a century, courts protected the employer's right to employ at-will. This employment at-will doctrine asserts that in the absence of a written contract either an employer or an employee may terminate employment at any time -- with or without cause.

For example, 50 years ago, Sally could be terminated without cause by her employer, for whom she had worked for 20 years. And she had no recourse to legal action.

With the passage of the equal employment opportunity laws in the 1960s and 1970s, Congress began chipping away at this age-old principle. For instance, because of these laws, Sally can file complaints with her union, and with federal and state agencies, charging her employer with age, sex or racial discrimination.But now, employees sometimes abandon appeals to unions and governmental agencies and instead file wrongful discharge suits against former employers.

The belief is that a person has a right to a job as long as he or she performs satisfactorily. Already, some European countries prohibit the "unfair dismissal" of workers who have satisfactorily completed probationary periods. When termination does occur, workers receive substantial severance pay or redundancy payments (payments assigned to workers when, through no fault of their own, their positions become unnecessary).

The idea of job property rights is in the wind in the United States. Gradually, the legislatures and courts in the United States have limited your right to employment at-will.

15 Ways to Help Stay Out of Court

1. Examine job applications, employee handbooks, work rules and other documents that might come to light in a trial. Judges are finding employee handbooks and verbal statements by company officials often constitute implied contracts. Therefore, remove phrases or words that might be misinterpreted. For example: "We want young, aggressive leaders..." suggests age discrimination. Phrases such as "a secure job, permanent employment, or non-probationary employee suggest a guaranteed, lifetime position.

2. Include a statement on your job application which spells out, in no uncertain terms, your right to employ at-will. Example: "I understand employment at XYZ company is not for a fixed period. XYZ company may at any time, for any reason, terminate this employment. The terms of this employment relationship cannot be altered except in writing by an authorized company officer." Have the applicant sign this statement.

3. Write an employee handbook. Include protective language as suggested above. Also include a set of work rules. Require new employees to sign a statement verifying they have read the handbook. In the future, this can help if workers deny they understand what constitutes satisfactory performance or legitimate grounds for dismissal.

4. Include in your employee handbook standardized discipline and grievance procedures. At some stage in these procedures, you may want to allow for arbitration. Consult with your attorney about whether this is a prudent step to take. The use of unbiased third parties to settle these matters can signal to workers you are serious about settling disputes and problems in an impartial manner.

5. Encourage workers to approach you about problems. Do your best to resolve these problems.

6. Avoid employing over-qualified workers. If you don't quickly advance them into positions which match their skills, their dissatisfaction may breed lawsuits.

7. Frequently review an employee's work performance. Put these findings on paper and put them in the worker's file. Be honest about critical performance. Don't automatically hand out "good" and "excellent" marks because you don't want to offend an employee. Share this review with the employee.

8. Document an employee's problems. Include this documentation in the worker's personnel file. Example: "Smith arrived late for work on three separate occasions: 8:15 on Monday; 8:20 on Tuesday; and 8:15 on Friday."

9. When hot disputes flare up (for example, an argument between a manager and worker) put out the fire first, then act on possible discipline or termination. Separate feuding parties. Take down the names of all involved. Ask all parties to prepare statements -- written and signed -- in front of an unbiased third party. Review evidence before taking any disciplinary action.

10. Examine an employee's personnel file before disciplining or firing the person. Both the good and the bad in this file should influence your decision.

11. Consider the protected legal status (such as age, sex and race) of those you plan to terminate or layoff. If you lay off 25 workers -- most of whom are females or minorities, or over age 40 -- you open yourself to discrimination suits. Be certain you can prove nondiscriminatory reasons for terminating or laying off each employee.

12. Treat employees with consideration and respect. One executive helps protect himself from wrongful discharge suits by making certain terminated employees locate new jobs before they leave his employ.

13. Consider buying out a possible wrongful discharge claim if you anticipate future legal difficulties. In some cases, companies offer this severance pay "buy out" on the condition the employee waives his or her rights to future legal action against you and your business. This gets into treacherous legal ground, so be absolutely certain to involve your attorney if you contemplate this kind of strategy.

14. Don't interfere with a terminated employee's chances at future employment.Bad references can goad former employees to press charges against you of libel and intentional infliction of emotional distress. (In references, make only truthful, factual job-related comments.)

15. Contact your lawyer when concerned about the legal repercussions of an action. This contact will cost you a few dollars. But "preventive" legal expenses are a drop in the bucket compared against the big-dollar costs of future legal expenses and awards resulting from wrongful discharge suits.