What Is Wrongful Termination?

If you're a business owner, you've probably heard the term wrongful termination. But what does it actually mean?

Simply put, wrongful termination occurs when an employee is fired for a reason that violates federal, state, or local employment laws.

It's important to understand that not every termination is wrongful. In most states, employment is considered at-will, meaning employers can generally end employment at any time, with or without cause, as long as the reason is not illegal.

Common Examples of Wrongful Termination

A termination may be considered wrongful if an employee is fired because they:

• Belong to a protected class, such as race, religion, age, sex, disability, or national origin.

• Are pregnant or taking protected medical leave.

• Reported workplace harassment or discrimination.

• Reported illegal activity or unsafe working conditions.

• Filed a workers' compensation claim.

• Exercised another legally protected right.

Every situation is different, and whether a termination is considered wrongful depends on the specific facts and applicable laws.

Examples of Lawful Termination

Many employment decisions are completely legal and do not qualify as wrongful termination.

Examples include:

• Poor job performance

• Repeated policy violations

• Excessive absenteeism or tardiness

• Company restructuring or layoffs

• Employee misconduct

As long as the decision complies with applicable employment laws, these situations are generally considered lawful.

Why This Matters for Business Owners

Even when a business owner believes they made the right decision, a former employee may still file a claim.

Employment-related lawsuits can be expensive and time-consuming. Legal defense costs alone can place significant financial pressure on a business, even if the employer ultimately prevails.

Understanding your responsibilities as an employer - and having the right insurance coverage - can help reduce that risk.

How EPLI Can Help

Employment Practices Liability Insurance (EPLI) helps protect businesses against many employment-related claims, including allegations of wrongful termination.

Depending on your policy, EPLI may help cover:

• Legal defense costs

• Settlements

• Court judgments

• Other covered employment-related expenses

Coverage varies by policy, so it's important to review the details with your insurance professional.

Frequently Asked Questions

Is every termination considered wrongful termination?

No. Employers may legally terminate employees for many reasons as long as the decision does not violate employment laws.

Can an employee sue for wrongful termination?

Yes. Employees may file a claim if they believe their rights were violated. Whether the claim succeeds depends on the facts and applicable law.

Does EPLI cover wrongful termination claims?

Many EPLI policies provide coverage for wrongful termination claims, subject to the policy's terms, conditions, and exclusions.

Can I terminate an employee without giving a reason?

In many at-will employment states, employers may terminate employment without stating a reason, provided the decision does not violate employment laws.

Should I document employee performance before termination?

Yes. Keeping accurate documentation can help demonstrate that employment decisions were based on legitimate business reasons.