What is wrongful termination and how can I prove it?

Generally speaking, your employer can up and fire you and his action may not be wrong—at least from a legal perspective. It may often be morally or ethically wrong, but the courts do not enforce morality or ethics: they enforce the law and contracts. The sad truth—but a truth it is important to recognize, so as to have a realistic appreciation of your situation—is that the vast majority of terminations are legal.

Why?—because the law in most of this country considers your job as “employment at will.” In an at-will relationship, an employer may terminate an employee at any time, for any reason (legitimate or not), without prior notice, unless there is a contract to the contrary. If there is a written contract in place —either a personal one (between the employer and a specific employee), or a union or collective bargaining agreement covering many workers—and if the employer violates a contract, the employee’s recourse is straightforward: file a breach of contract lawsuit in court to enforce the terms of the contract. For example:  say that your employer hired you for a project expected to take six months, and you received a contract guarantying you employment from January 1 through June 30. If you were terminated prior to June 30, you would be able to sue, either for reinstatement or for the pay you would have earned from the date you let go through the end of your contract (June 30^th).

Most people do not have written contracts with their employer. But that does not mean that an employee may not have rights or some recourse against the firing. For example, the firing may violate the federal/state anti-discrimination rules, or be associated with sexual harassment, or be in retaliation for reporting dangerous working conditions or fraudulent accounting practices (whistleblowing). Or when an employer does not follow its own policy and procedures for dismissing an employee, the employee may sometimes be able to enforce those policies or procedures against his or her employer. This is otherwise known as an employer breaching an implied contract between the employer and employee.

Implied Contracts

An implied contract is a contract in which the terms have not been specifically agreed upon between the employer and employee. However, the terms are still understood because the company policies and procedures regarding the company’s termination process are spelled out in an employee handbook.  If the company does not follow its own termination protocols, the employee could potentially sue for wrongful termination.

Likewise, oral and/or verbal statements made by the employer—during the hiring phase or after – may give rise to an implied contract. These statements may relate to promotions, terms for termination, or how to treat other employees. A company’s policy could even be reflected by a company’s employee manual or defined by how a company has treated other employees in the past, also known as a company’s “custom and practice.”

As a matter of law, implied contracts are still enforceable even when there is nothing in writing (e.g,. not even a helpful employee handbook) IF their terms and conditions (and the agreement of both sides, employer and employee, to them) can be shown. As a practical matter, however, it may be very difficult to prove that existence and terms of the implied contract without something in writing to back it up, but this can be overcome with sufficient credible witnesses, such as coworkers who will testify as to what they heard the employer say or how they were treated.

At the end of the day, a contract is nothing more than a mutual agreement between two parties (such as an employer or an employee), where both parties have the same understanding and where each gives or promises something of value to the other side—such as the employee exchanging his or her labor for pay. If there is a mutual understanding, accepted by both sides, and an exchange of consideration (work for pay), there can be a contract even when there is no single, signed, written document labeled “contract.” An implied contract is where the things the parties have said and the things they have provably done show that there is in fact a contract—just without the paper.

Employer’s protection – the Employee Handbook

Understandably, employers want to protect themselves from potential breach of implied contract lawsuits. The way they can do this is by showing that there was no mutual agreement as to the alleged contract’s terms. This is typically done in the employee handbook: well-written handbooks (or at least ones which are well-written from the employer’s perspective) or personnel policies will contain prominent language to the effect that no contract of employment is formed and/or that all employees work at will. If the employer can show that the employee received a handbook putting them on notice that there is no contract or guaranty of employment, it may be impossible for the employee to establish the existence of the implied contract.

In a case like this—where the employee is trying to establish that there is an implied contract and the employer is denying that there was—much will depend on how clear and obvious the handbook language opposing the formation of a contract was, and if the employer can credibly show that the employee received the handbook (such as if the employee had signed an acknowledgement form confirming receipt). If the court believes that the employee received a handbook saying there is no employment contract and that the language to that effect was clear, the court will be unable to find that an implied contract existed.

An employer can strengthen its hand by having its employees sign a document that specifically states that any company documents, such as the employee manual or handbook, do not constitute a formal agreement between the employer and employee. If the employee signs this type of document, then the employee most likely will not have the opportunity to bring a wrongful termination action against the employer for a breach of implied contract—it will be very difficult to overcome his or her own signed statement that there is no employment contract.

Probationary Period

Some jobs have probationary periods—either for all new hires, or for existing employees who are having some performance issue(s). Does a probationary period make it easier to terminate an employee? No—remember, unless there is a contract, the employee can be terminated for any reason at any time.

So what do probationary periods do? Legally, not much at all, unless you had a written employment contract laying out different treatment for you if you are properly placed on probation. Otherwise, being on probation doesn’t add anything to the employer’s existing rights under “employment at will.” A probationary period may focus the employee on his or her job or on improving job performance, so in that way it may be helpful, but it really does not have any legal effect.

Faced with a Wrongful Termination Action? What to do?

Considerations: If the employee believes s/he has a wrongful termination action for breach of implied contract, the employer would have had to violate an implied contract term when firing the employee. For instance, when a company has a policy dictating an employee give proper notice before resigning (generally, two weeks), an implied agreement may also be found to exist for the employer to give proper notice to the employee before terminating employment. If the employer fails to give the proper implied notice without providing any type of severance as compensation, the employee could have a wrongful termination action against their employer.

The idea generally is to show that the company violated one of the obligations contained in the employment contract (whether an express or implied one.). If there was a contract but the employer did everything it was required to under the contract, then termination was not wrongful.

Getting Legal Help: You may want to see an experienced employment law attorney to see if you might have a shot at winning anything. It could prove to be a costly fight given that it is very rare for an employee at will to win a wrongful termination claim. So unless you can show substantial damages, it may not be worthwhile pursing even if your attorney thinks there might be a cause of action. Again, a wise approach is to document the circumstances leading to your terminations, locate any witnesses to any interactions with the employer, obtain copies of your employee handbook or personal policy as well as your personnel file.

Case Studies: Utilizing Insurance in Wrongful Termination Cases

Case Study 1: Employment Practices Liability Insurance (EPLI)

John, an employee at a technology company, believes he was wrongfully terminated due to age discrimination. He decides to pursue legal action against his employer. Fortunately, the company had an Employment Practices Liability Insurance (EPLI) policy in place. The EPLI coverage protects the company against claims of wrongful termination, discrimination, and other employment-related issues.

The insurance policy covers the legal expenses and potential damages associated with John’s case. This allows the company to navigate the legal process without significant financial strain and ensures that John has a fair opportunity to prove his case.

Case Study 2: Directors and Officers (D&O) Insurance

Samantha, a high-level executive, is terminated from her position after blowing the whistle on unethical practices within her organization. She believes that her termination was in retaliation for her whistleblowing activities. Samantha decides to file a wrongful termination lawsuit against the company and its directors and officers.

Luckily, the company had Directors and Officers (D&O) insurance, which provides coverage for legal defense costs and potential damages in claims against company executives. The D&O insurance helps protect the personal assets of the directors and officers involved in the case and ensures that Samantha’s claims can be thoroughly evaluated and addressed.

Case Study 3: Legal Expense Insurance

Michael, an employee at a small business, believes he was wrongfully terminated without cause. However, he is hesitant to pursue legal action due to concerns about the associated legal costs. Fortunately, Michael had purchased a Legal Expense Insurance policy, which provides coverage for legal fees in employment-related disputes.

With the insurance coverage in place, Michael can consult with an attorney and proceed with his wrongful termination case without the fear of significant financial burden. The Legal Expense Insurance ensures that employees like Michael have access to legal representation and can effectively pursue their rights in cases of alleged wrongful termination.