Monday, September 22, 2008

Layoffs Can Lead to Unlawful Termination Claims

Down Economy: Layoffs Can Lead to Unlawful Termination Claims
What Businesses Need to Know to Protect Against These Lawsuits

By Jessica Hawthorne, Special to California Business Law Blog

By any measure, it’s a pretty rough economy out there and inevitably, there have been and will continue to be layoffs – a process that’s an emotional and complicated procedure, and no less so than during tough economic times.

So what do employers need to know to protect themselves from wrongful termination lawsuits before they are forced to lay off members of their workforce?

The truth is that no one procedure guarantees businesses freedom from exposure to wrongful discharge liability or, even in the absence of liability, prevention of the filing of a wrongful termination action by an employee. But there are a number of things that can be done to mitigate potential issues:

• Businesses should have all new employees sign agreements at the very beginning of employment that protects their status as an at-will employee.
• Standardize termination procedures in a way that maximizes company protection from wrongful termination suits, and ensures that the procedures are consistently applied.
• Train supervisors thoroughly in the area of protecting the at-will nature of employment and to follow all company policies especially related to terminations and layoffs.
• If your company is considering a layoff, be sure to establish objective, nondiscriminatory criteria for selecting the employees to layoff.
• If termination of an employee becomes necessary: do not make the employee's situation so miserable that he or she resigns just to get away.

If an employee feels singled out during a layoff or was unaware of performance issues before being terminated, they may also file a suit for wrongful discharge in violation of an express state or federal government public policy.

Further, be careful and consult with legal counsel before laying off employees with actual or perceived disabilities, those who have just returned from a protective leave of absence, and even those who have reported inappropriate activity such as harassment or safety violations. These employees may have or believe they have more rights than other employees. And angry employees or ones who feel wronged are more likely to sue.

In addition, the federal Worker Adjustment and Retraining Notification (WARN) Act and comparable state law require businesses to provide written notice to employees before laying off a significant portion of their workforce.

Unfortunately, there are literally layers of laws that deal with layoffs and terminations, which can make navigating this area of employment law a potential minefield. But if employers act in good faith, make their policies clear and offer ample notification of pending action, the likelihood of a wrongful termination lawsuit succeeding is minimal.

Jessica Hawthorne is an employment attorney the California Chamber of Commerce. More information on terminating employment and many other workplace issues can be found at