Unacceptable Reasons for Layoffs
All employment decisions, big and small, are governed by a group of statutes that are enforced by the Equal Employment Opportunity Commission (EEOC). Firing is clearly the most controversial decision employers have to make, evidenced by the fact that more than 50% of the discrimination charges filed are associated with claims of wrongful termination.
Here is a list of the statutes, which are largely self-explanatory.
- The Civil Rights Act of 1964. Title VII of this act states that it is illegal to discriminate on the basis of race, color, religion, sex, or national origin. Note that the EEOC explicitly states that the claims of lesbian, gay, bisexual, and transgender individuals are considered discrimination because of sex and therefore are covered under Title VII.
- The Age Discrimination in Employment Act of 1967 (ADEA). Employees 40 years old and older enjoy the protection provided by ADEA.
- The Americans with Disabilities Act of 1990 (ADA). ADA applies to businesses with 15 or more employees (fewer in some states), and covers disabled individuals who are qualified for their position.
- Retaliation. All of the statutes above include language to protect employees from being fired for complaining about discrimination. It’s also illegal to fire an employee for acting as a whistleblower reporting on violations they’ve observed at your company.
These statutes trump any right to fire that you, as an employer, may think you possess under at-will employment policies. For example, suppose you decide to fire your sales manager, Felix, who has not been performing well. Overall sales numbers have been disappointing, and you’ve lost a couple of good producers who’ve indicated that they’re not happy with the management style in the group. You’re an at-will employer so you let Felix go. A few weeks later you get a big surprise: The EEOC is contacting you about charges filed against you under ADEA. Age discrimination? Felix is an energetic guy in his early forties. What did age have to do with it?
It turns out, Felix had been documenting a number of incidents that upset him: You commented on his graying sideburns. You made jokes about “middle-age spread.” (You felt the jokes were more about you than him). And you teased him when he had to get bifocals. Then you fired him. Felix claims there was a pattern of harassment based on age-related issues; thus the basis of his termination was illegal.
The same logic applies to all of the traits that are protected from discrimination: race, color, religion, sex, national origin, age, and disability. On the aggregate level, you can’t have a pattern of disproportionate firing of individuals with any of these traits. And on the individual level, you need to consistently avoid behaviors (such as harassment) that can become the basis of a discrimination charge.
Breach of contract
Having a contract with an employee doesn’t necessarily make ending the employment relationship more difficult. If the contract spells out specific reasons for separation and what severance benefits will be paid, then a contract can work in an employer’s favor. However, if the reasons for firing are not specified in the contract, the employee may feel there are grounds for a lawsuit based on breach of contract. To make things more complicated, some jurisdictions recognized “implied contracts” based on verbal promises. Of course, these claims are far more difficult to prove than those based on written contracts. Nevertheless, experts advise that at-will employers carefully review their records for evidence of any possibility of implied contracts before laying off employees.