Understanding Wrongful Termination
Wrongful termination occurs when an employer fires an employee in violation of federal or state law, public policy, or a contractual agreement. Despite the at-will employment doctrine, there are many situations where termination is unlawful. Wrongful termination claims are among the most common and costly employment lawsuits.
For HR professionals preparing for the SHRM-CP or SHRM-SCP exam, understanding wrongful termination theories, risk factors, and prevention strategies is critical. The exam tests both your legal knowledge and your ability to apply it in practical HR scenarios.
Wrongful termination is not a single cause of action but rather an umbrella term covering multiple legal theories. An employee may bring a wrongful termination claim under one or more of these theories simultaneously.
Common Theories of Wrongful Termination
Several legal theories support wrongful termination claims:
- Discrimination: Termination based on a protected characteristic (race, sex, age, disability, religion, national origin, etc.) violates federal laws such as Title VII, the ADA, and the ADEA, as well as state anti-discrimination statutes.
- Retaliation: Termination in response to an employee engaging in protected activity, such as filing a discrimination complaint, reporting safety violations, requesting FMLA leave, or participating in an investigation. Retaliation claims are the most frequently filed charge type with the EEOC.
- Public policy violation: Termination for reasons that violate a clear public policy, such as firing an employee for refusing to break the law, for serving on a jury, or for filing a workers' compensation claim.
- Breach of contract: Termination that violates an express or implied employment contract, including promises made in employee handbooks, offer letters, or verbal assurances.
- Constructive discharge: While not a direct termination, constructive discharge occurs when an employer makes working conditions so intolerable that a reasonable person would feel compelled to resign. Courts treat this as an involuntary termination.
Warning Signs and Risk Assessment
HR professionals should evaluate termination decisions carefully before acting. Red flags that increase wrongful termination risk include:
- The employee recently filed a complaint, participated in an investigation, or engaged in other protected activity.
- The employee recently requested FMLA leave, ADA accommodation, or other statutory protections.
- The employee is a member of a protected class, and similarly situated employees outside that class were treated differently.
- The stated reason for termination lacks supporting documentation.
- There is a pattern of inconsistent discipline for similar infractions.
- The termination decision was made quickly after a triggering event, suggesting a connection between the two.
Before proceeding with any termination, HR should conduct a thorough review that considers these risk factors. This review is sometimes called a "termination checklist" or "discharge analysis," and it is a best practice that demonstrates organizational due diligence.
Reducing Wrongful Termination Risk
HR professionals can significantly reduce wrongful termination risk through proactive measures:
- Document performance issues consistently: Maintain contemporaneous records of performance problems, coaching conversations, and disciplinary actions. Documentation is the employer's best defense against wrongful termination claims.
- Follow established procedures: If your organization has a progressive discipline policy, follow it consistently. Deviations from established procedures can be used as evidence of pretext.
- Involve multiple decision-makers: Having more than one person involved in the termination decision reduces the risk of individual bias influencing the outcome.
- Offer clear, honest explanations: When communicating the termination to the employee, be direct and honest about the reason. Changing the stated reason later undermines credibility.
- Conduct exit interviews: Exit interviews can reveal potential issues and provide early warning of potential claims.
- Consider separation agreements: In appropriate cases, a separation agreement with a release of claims (compliant with OWBPA requirements for employees over 40) can protect the organization from future litigation.
Start Practicing Today
Wrongful termination is a high-stakes topic on the SHRM exam, which features 134 questions over 4 hours at Prometric or OnVUE. Scenario-based questions may ask you to evaluate whether a particular termination is lawful and what steps HR should take to reduce risk.
SHRMpractice.com offers practice questions on wrongful termination, retaliation, and constructive discharge. Take our diagnostic to assess your readiness, then sign up for comprehensive SHRM exam preparation.