Academic journal article Journal of Accountancy

How to Avoid Wrongful Discharge Litigation

Academic journal article Journal of Accountancy

How to Avoid Wrongful Discharge Litigation

Article excerpt


Simple guidelines can help employers prevent or prevail in employee lawsuits.

Your office manager has worked for you for 12 years. She is now 59 years old and is no longer carrying her share of the work load. She doesn't have her work completed when you need it. She isn't willing to learn how to use the new computer. And she can't seem to get along with your new employees. She is holding back your business--and costing you money. Can you discharge her? After all, you like her and couldn't bring yourself to hurt her feelings. Over the years, you have given her nothing but outstanding evaluations and she has never received any sort of counseling or warning. So what are your rights--and what are the office manager's?

New laws and recent court decisions have radically altered why and how someone may be discharged. An employer, even one with only a few employees, who is unaware of these new legal standards and isn't careful to uphold them may well face costly litigation or judgments. This article details the legal framework behind the increasing number of employee lawsuits and suggests simple measures for avoiding litigation.


Historically, the law in most states said an employer could discharge an employee at any time, for any reason or for no reason at all, with or without prior notice. However, in recent years, both the legislatures and the courts in many jurisdictions have established a number of exceptions to this "at will" employment rule.

Statutory prohibitions. Here are some key federal statutes:

* Title VII of the Civil Rights Act of 1964 prohibits discrimination, including discharge, on the basis of race, creed, color, religion, sex or national origin.

* The Immigration Reform and Control Act of 1986 forbids discrimination as a result of citizenship status.

* The Age Discrimination in Employment Act governs employment decisions based on age. In addition, the Employee Retirement Income Security Act, which regulates retirement plans adopted or administered by employers, precludes discharge to deny an employee's vested pension rights or the opportunity to become vested.

Many states protect other categories of employees from discrimination. For example, the California Fair Employment and Housing Act includes marital status, pregnancy, medical condition and physical handicap as prohibited grounds for employment decisions. New York's Civil Rights Law covers blind or deaf employees and Florida protects employees who carry the sickle-cell trait. Some local ordinances preclude discharge for various other reasons, such as having AIDS in Austin, Texas, or sexual orientation and preference in San Francisco.

Public policy. Recent court decisions have further eroded the at will employment doctrine. In most states, an employee may sue for wrongful discharge if he or she is fired in violation of public policy. The employee can claim the discharge was in retaliation for the assertion of a statutory right, such as voicing a safety complaint or serving on a jury. Or he might claim he was discharged for refusing to perform an illegal act or for reporting one to appropriate authorities.

Breach of contract. Many courts also have allowed employees to recover wrongful discharge damages based on a contractual commitment that overrides at will employment. The document need not be in writing. Rather, the commitment may be implied by something the employer did or said that merely indicated discharge would occur only under certain conditions.

An employee also may claim he was discharged in violation of policies in an employee handbook or manual or in work rules. He may allege a promise, either written or oral, of "permanent employment," "employment as long as he did a good job" or "discharge only for good cause." In 1987, the Illinois Supreme Court followed Minnesota precedent and found that language in a handbook created an enforceable contract right limiting the at will employment relationship. …

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