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In all likelihood, you and your employee don't have a written contract of employment. Instead, your relationship with your employees will be based on the principle of employment-at-will.
"Employment-at-will" means that there's a presumption that the employee is employed at your will for an indefinite period rather than for a fixed term. Under traditional employment-at-will rules, both the employer and the employee have had the ability to end the employment relationship at any time and for any reason.
That freedom, however, to fire at-will employees at any time has been eroded in recent years by the federal and state governments and by the courts. The exceptions that have been carved into the employment-at-will doctrine form the foundation for most wrongful discharge claims, in which employees can sue you for lost wages, punitive damages, and, occasionally, reinstatement to their job.
In the first of this two-part look at restrictions on your right to fire an employee, we'll focus on the limitations placed on you by the relevant federal and state laws. In part two, we'll concentrate on the limitations placed on you by the courts.
Federal law and state laws that potentially restrict an employer's ability to fire at-will employees fall into two general categories. First, there are laws that make it illegal for employers to discriminate against certain individuals. Second, there are laws that make it illegal for an employer to retaliate against employees who exercise rights conferred by the laws or who take steps to see that the laws are enforced.
Anti-discrimination laws. Federal fair employment laws protect employees against various forms of discrimination in the workplace. Some examples are Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act.
Normally, the effect of these laws starts with the hiring process and continues through the termination of the employment relationship. Thus, you could run afoul of federal law if you fire an employee solely on the basis of the employee's race, color, religious preferences, gender, national origin, disabilities, or age.
For example, if an employee's alcohol or drug use caused an accident, endangered another employee, or resulted in excessive absence, you may be tempted to eliminate the "problem" by firing the employee. Federal and state laws that protect disabled employees from discrimination, however, may apply to alcoholics or drug users. It may be unlawful to fire an employee for substance abuse unless you take steps to reasonably accommodate the employee's problem and give him or her a reasonable chance for rehabilitation.
In addition, every state has laws that make it unlawful for an employer to fire an employee under certain circumstances. Many states have discrimination laws that give employees protection similar to, but sometimes greater than, corresponding federal laws. For example, some states protect employees from discrimination based on sexual orientation or personal appearance or because they smoke tobacco products.
And don't ignore your state's anti-discrimination law just because it may be similar to the federal law. In many cases, depending upon the number of employees you have, you may be exempt from the federal law but not from the state law. The state civil rights laws that are similar to the federal laws often apply to even the smallest employers.
While state laws governing the hiring process also apply to firing and termination, many states also have laws that specifically address firing and that may be different or more extensive than the federal laws. Make sure that you know what limitations your state places on you as an employer before you decide to fire an employee.
Anti-retaliation laws. Apart from antidiscrimination laws, a number of other federal laws make it unlawful for an employer to fire an employee merely for asserting rights under those laws. For example, employees who start legal proceedings or who take other actions to have the law enforced are protected from discharge by the Fair Labor Standards Act.
Similar restrictions on so-called "retaliatory" discharges are provided under the Occupational Safety and Health Act, the Vietnam Era Veterans Reemployment Act, the Employee Polygraph Protection Act, various environmental protection laws, and other federal laws.
As with the anti-discrimination laws, some states and localities have anti-retaliatory laws that extend beyond the federal laws. For example, some states bar employee firing in response to filing claims for workers' compensation benefits, reporting an employer's illegal activity, or serving on a jury. Again, you need to make sure that you fully understand the limitations that your state places on you as an employer before you decide to fire an employee.