New Developments in Wrongful Discharge

The purpose of this paper is to inform managers about the recent increase in wrongful termination suits and the high price employers can be forced to pay if their company is found guilty of wrongful termination. Although the focus is on common termination errors made in the 1980s and 1990s, some steps are suggested to help prevent and defend against wrongful termination suits. Finally, a new method being considered to deal with wrongful termination is presented, The Model Employment Termination Act. Businesses are now more likely than ever to be sued for wrongful discharge. The increase in wrongful discharge cases is a result of recent changes in employment law, court interpretations of employment law, and the highly litigious climate which now exists. Today, the deck seems to be stacked in favor of the terminated employee. In fact, a recent survey in California revealed that plaintiffs who get jury trials win about 75% of the time, the average award being approximately $300,000. In addition, legal expenses to defend wrongful discharge cases averaged $80,000. If that is not bad enough, the situation is expected to get worse before the pendulum begins to swing back towards the employers. The purpose of this paper is not to go over all the employment laws nor is it to analyze all possible situations. The objective is to highlight common errors committed by managers, recent developments in wrongful termination, and point out steps to reduce the chance of losing a wrongful discharge suit. Most wrongful termination cases involve one or more of the following categories: breach of contract, breach of common law duty by the employer, discrimination, fraud, infliction of emotional distress, defamation, violation of public policy, or violation of personnel policy. They all carry unlimited compensatory and punitive damages. Moreover, because charges can be brought against both company and individuals, managers have their own assets at stake. According to Phillip Perry, employers commonly commit seven errors. (1) Use of implied promises in employee handbooks. (2) Making oral promises. (3) Terminating an employee just before the employee is to be vested. (4) Discharging an employee for failing to take a polygraph test. (5) Creating intolerable working conditions to force an employee to resign. (6) Discharging an employee for refusing to violate public policy. (7) Failure to evaluate employees honestly and put the evaluations in writing.