As a business owner, you do your best to ensure that your employees are treated fairly and in accordance with local, state, and federal laws. However, when it comes to firing an employee the line between just and unjust can sometimes blur. In certain circumstances, firing an employee can constitute as wrongful termination. To be deemed as wrongful termination in the eyes of the law, the firing must violate certain laws, cancel the terms of an employment agreement, or go against public policy. Learn more about wrongful termination and how employment practices liability insurance can help keep your business protected from potential claims.
Defining Wrongful Termination
Wrongful termination occurs when an employee is fired for unlawful reasons. Proving wrongful termination can be tough as most employees are hired “at-will,” which means that an employer can terminate employment at any time and for any reason. Unless the employment agreement states otherwise, an employee is considered to be at-will. There are several ways to determine if employment was at-will. In some instances, the employee handbook will define how employee terminations will be handled. Other times, a company will introduce an employee termination policy that must be followed.
Although at-will employees can be fired for nearly any reason, there are certain circumstances in which at-will employees can be wrongfully terminated. This includes when a firing happens for a reason that violates the law. For example, an employee cannot be fired due to race, religion, color, sex, or national origin. Employee terminations relating due to this type of discrimination violate Title VII of the Civil Rights Act of 1964. An employer can also not fire an employee as a form of retaliation. For example, if an employee files a complaint with the state labor commission due to being forced to work overtime without pay, the worker cannot be fired as retribution.
Legal Ramifications of Wrongful Termination
If an employee makes a wrongful termination claim against your company, you could be looking at some serious legal consequences. Any employee who has been fired and believes that the reasoning was unlawful has the right to claim wrongful termination against their former employer. The ramifications of such a lawsuit will depend on the unique circumstances behind the case. For example, if an employee wins a breach of contract suit, the employer may have to pay entitled wages for a set period of time according to the employment contract.
An employee who wins a discrimination lawsuit may be entitled to a variety of damages, such as back pay for any lost wages and front pay for lost wages dating back to the lawsuit filing date. The employer may also be forced to pay the cost of health insurance and other benefits that the employee was entitled to during employment, and the cost of court and attorneys’ fees. Other common damages include punitive damages, compensatory damages for any out-of-pocket expenses like job search costs, and injunctive relief.
How to Protect Your Company
No company can ever anticipate a wrongful termination lawsuit, but you can ensure that your investment is protected against certain liabilities. Employment practices liability insurance (EPLI) provides employers with the coverage they need to remain protected against claims made by terminated employees. EPLI covers lawsuits associated with a wide range of damages, such as wrongful termination, harassment, discrimination, and other employment claims, such as failure to promote. While larger corporations often have substantial EPLI coverage, small businesses can also benefit from this protection.
It is important to realize that you put your company at risk the very moment that you sit down for an interview with a potential employee. Even if you choose not to employ the individual, he or she could still file a lawsuit relating to discrimination. Employees can also choose to sue for other reasons, such as wrongful discipline, sexual harassment, mismanagement of benefit plans, wrongful infliction of emotional distress, or deprivation of career opportunity. As the number of lawsuits filed by terminated employees continues to rise, there is no better time than now to protect your company with employment practices liability insurance.
Contact a Business Insurance Broker
The cost of insuring your business with employment practices liability insurance can range depending on a variety of factors, such as the number of people you employ, the percentage of employee turnover, and whether you have previous suits filed against you. The insurance company will also consider what rules and practices you currently have established at your business. EPLI is typically written on a claims-made-basis, meaning that the incident must have occurred during the coverage period to be eligible for reimbursement. As wrongful termination claims can be filed months or even years later, it is important to maintain coverage long-term. For more information about EPLI or how to get it, contact a business insurance broker.