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Updated Nov 03, 2023

What Is Considered Wrongful Termination?

Learn what wrongful termination is and what laws protect employees from illegal termination.

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Skye Schooley, Senior Lead Analyst & Expert on Business Operations
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As an employer, you may find yourself in the uncomfortable position of terminating an employee. Although most states allow at-will employment — which means that technically, you can fire an employee at any time regardless of the cause — employers must be diligent about their process and reason for termination. Even at-will employers can’t fire employees in certain situations, because some reasons for termination are illegal. 

If an employee feels they have been a victim of wrongful termination, they may attempt to file a lawsuit against you. To prevent this from happening, employers should understand the illegal reasons to fire someone.

What is wrongful termination?

Wrongful termination happens when an employer fires an employee for an illegal reason. Although most terminated employees probably feel as though they were wrongfully let go, federal and state laws determine which reasons are unlawful. For example, it may be legal to terminate an employee for poor performance in a state that allows at-will termination, whereas anti-discrimination laws make it illegal to terminate an employee based on their disability.

To reduce the potential for wrongful termination, always follow your organization’s internal procedures and policies for termination. Adhering to established protocols can help ensure consistency and fairness in the termination process.

FYIDid you know
Some legal reasons to terminate an employee include incompetence, insubordination, poor attendance, criminal behavior, harassment and physical violence. Always document employee infractions and provide a termination of employment letter when firing a staff member.

What are 7 illegal reasons to fire an employee?

Several actions can lead to wrongful termination, most of which involve violating the employment laws and regulations set forth by federal and state governments. If you are considering terminating an employee, ensure it is not for any of the following reasons:

1. Discrimination

Many wrongful-discharge claims happen when an employee is (or believes they have been) fired for an illegal, discriminatory reason. Several federal and state laws make it illegal to discriminate against and terminate an employee based on a protected category, such as race, religion, color, sex, gender, national origin, age or disability.

2. Retaliation

Andrew Russell, partner at McGuireWoods, said another common basis for wrongful-termination claims occurs when an employer illegally retaliates against an employee for a protected activity that an employee might take.

“For example, an employee may report a potential safety violation, file a complaint about an underpayment of wages, or report that they have been illegally harassed by a supervisor,” Russell told us. “This is all protected activity, and an employer may not fire an employee in retaliation for engaging in such activity.”

3. Whistleblowing

Another illegal reason to terminate an employee is for whistleblowing. If your workplace is responsible for violating a health or safety regulation as mandated by the Occupational Safety and Health Administration (OSHA), you can’t terminate an employee for reporting you. Employees have a right to a safe work environment and can’t be fired for reporting hazardous workspaces.

4. Law violations

In most states, it is illegal to fire an employee because of your criminal activity. For example, it would be unlawful to terminate an employee for refusing to be complicit in breaking a law or reporting you for breaking a law.

5. Employment contract violations

It is illegal to fire an employee for any reason contrary to what is dictated in their contract. For example, written contracts may list why or how the employee may be terminated. Employees with implied contracts may be fired only for “good cause.” That’s why it’s essential to review employment contracts with a lawyer before terminating an employee.

6. Refusal to take a lie detector test

You cannot require an employee to take a lie detector test as a condition of keeping their job. The exceptions to this rule pertain to specific roles and scenarios. Government employers are allowed to use polygraph tests to screen hires. Similarly, pharmaceutical manufacturing and security service employers can get exceptions that allow them to require polygraph tests. The final exception applies to circumstances that result in “specific economic loss or injury to the employer,” according to the Employee Polygraph Protection Act.

7. Citizenship

It is illegal to fire a person based on their citizenship or place of birth. This is classified as a form of discrimination barred by federal law, and it is a violation of several anti-discrimination statutes.

Did You Know?Did you know
Bias and discrimination can occur at any point during the employee life cycle, from recruitment to termination. Educate your workforce on what constitutes illegal practices.

What laws apply to firing an employee?

Federal agencies, like the U.S. Department of Labor (DOL) and the U.S. Equal Employment Opportunity Commission (EEOC), create and enforce laws to improve workplace conditions and protect employees. Although you and your HR department should be familiar with all of the laws that govern your business and employees, here are the primary federal laws you should pay special attention to when handling an employee termination:

  • Title VII of the Civil Rights Act of 1964. This act prohibits employment discrimination based on “race, color, religion, sex or national origin.” It is illegal to terminate an employee based on any of these characteristics.
  • The Americans with Disabilities Act. The ADA protects individuals with disabilities against discrimination in all areas of public life, including employment and termination. It is illegal to terminate an employee due to a disability rather than provide reasonable accommodation.
  • The Age Discrimination in Employment Act of 1967. This act protects individuals 40 years and older from age discrimination in the workplace. It is illegal to terminate an employee because of their age.
  • The Family and Medical Leave Act. This act allows certain employees to take up to 12 weeks of unpaid leave for medical or family reasons, given that both the employer and the employee meet certain requirements. Although this act doesn’t apply to everyone, it is illegal to terminate a qualified employee for taking qualified medical leave.
  • The Occupational Safety and Health Act of 1970. This act protects private-sector and federal government employees from health and safety risks resulting from business activities. For example, it is illegal to retaliate against an employee for reporting a workplace health hazard to the OSHA.

“Should an employer’s decision to fire an employee be motivated by the protected class of that employee as set forth in any of the above-referenced statutes or others, a court would likely find the termination to be discriminatory and illegal,” said Andrew Zelmanowitz, partner and employment law expert at Berger Singerman.

Many of the federal laws listed above dictate why you can or cannot terminate an employee, but some laws, like the Worker Adjustment and Retraining Notification Act of 1988 (WARN Act), dictate how you must terminate certain employees.

“When an employer institutes a mass layoff or closes a division of its operations, it may be required to provide advance notice to employees of the impending layoff in compliance with the WARN Act,” Zelmanowitz said. “In jurisdictions where employees have additional rights by statute, compliance is required by the employer, including notice periods.”

In addition to abiding by federal laws, employers must pay special attention to local and state laws, since local and state laws are often stricter than federal law. For example, Zelmanowitz said, the Florida Civil Rights Act expands upon Title VII to include additional protected classes, including prohibiting discrimination based on a disability or marital status. 

What happens if an employer illegally terminates someone?

If an employee believes they have been wrongfully terminated, they may be able to file a lawsuit against you. If this is the case, the first thing to do is to seek legal guidance from your attorney.

According to Zelmanowitz, an employer that terminates an employee in violation of federal, state or local laws — or in breach of an agreement with the employee — exposes itself to liability in the form of civil lawsuits, statutory penalties, and potentially equitable or injunctive relief that enjoins the employer from continuing to violate the laws.

“In many cases, an employee will file an administrative claim and an employer may be subject to an administrative investigation or potential administrative hearing,” Russell said. “However, in many cases, an employee may be able to pursue his or her claims by filing a lawsuit against their employer in court.”

If the wrongfully terminated employee seeks litigation, it can cost you legal fees, back-pay damages, future wages, liquidated damages, emotional distress and/or punitive damages.

“Federal and state-level agencies may also seek to enforce the respective workplace laws, including criminal penalties and possibly imprisonment,” Zelmanowitz said.

To reduce the possibility of unlawful termination, seek guidance from your employment attorney before you fire an employee. Additionally, if you have made the error of wrongfully terminating an employee and are facing a wrongful-termination lawsuit, contact your attorney as soon as possible.

Source interviews were conducted for a previous version of this article.

author image
Skye Schooley, Senior Lead Analyst & Expert on Business Operations
Skye Schooley is a dedicated business professional who is especially passionate about human resources and digital marketing. For more than a decade, she has helped clients navigate the employee recruitment and customer acquisition processes, ensuring small business owners have the knowledge they need to succeed and grow their companies. In recent years, Schooley has enjoyed evaluating and comparing HR software and other human resources solutions to help businesses find the tools and services that best suit their needs. With a degree in business communications, she excels at simplifying complicated subjects and interviewing business vendors and entrepreneurs to gain new insights. Her guidance spans various formats, including newsletters, long-form videos and YouTube Shorts, reflecting her commitment to providing valuable expertise in accessible ways.
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