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What Small Businesses Need to Know About Wrongful Termination

Man with head in hands over termination letter

Having a job is essential for many people. It is beneficial for our health and well-being and contributes to our happiness. It also helps us build our confidence and self-esteem. Work also offers financial gains and benefits for employees, including medical coverage and retirement benefits.

Today, the modern workplace is very different from past work landscapes. In today’s modern world, employees can work anywhere and anytime with the help of the internet and a computer or smartphone. Employees also don’t have to work a 9-to-5 job inside a cubicle all day long.

The modern workplace now has an open layout office concept. Instead of cubicles, today’s offices are more into diverse working spaces, such as huddle rooms, for a more informal and collaborative environment. Also, a worker can have more than one job, which is common among many millennials and Gen Zs who are participating in the “gig economy.”

Another thing that characterizes the modern workplace is company culture and employee morale. Companies such as Google have placed these two attributes at the forefront of the employee experience, acknowledging that happiness and work-life balance equate to happy workers and, therefore, a productive workplace.

Then again, any office has its share of workplace issues, including employees who receive a termination notice, sometimes without cause. On the other hand, in some cases, employers do have just grounds for terminating an employee but are being sued for it.

Terminating or firing an employee for an inappropriate or illegal reason is called wrongful termination. As an employer, you should know the labor laws in your area to avoid getting your startup into a legal battle with a dismissed employee.

Here are some examples of wrongful termination.

Violation of employment contract

Before working for a company, a hired employee signs a contract. This contract is a signed document that legally binds both the employer and the employee. If the agreement states that the employee will be on a probationary period for six months, the employer cannot terminate the staff within that timeframe. Many employment contracts state that the company can terminate an employee for “good cause,” which can be open to interpretation. As an employer, you need to expound on the meaning of “good cause,” which can include poor job performance, excessive tardiness or absences from work, refusal to follow instructions, threatening or causing harm to other employees, and the like. 


Defamation is the act of damaging the reputation of a person. A defamation lawsuit protects that person’s reputation and standing in the community. To prevent such a suit, do not make false and malicious statements about the former employee that may harm their chances of finding or keeping a new job. 


Many forms of discrimination exist in the workplace, including racial discrimination and unconscious bias. An employer may be giving preferential treatment to employees of a certain race but does not provide the same opportunity to employees of other racial groups. Age discrimination has become apparent in many companies, too. They terminate employees over the age of 40 to bring in younger staff. Dismissing an employee for old age is only valid if the said employee does not meet work standards or performance goals.

Another example of discrimination is terminating female employees who are pregnant. Some companies see pregnancy as a hindrance to productivity since the expectant mother will be on maternity leave for up to 12 weeks. Wrongful termination is when the employee is fired shortly after announcing her pregnancy in the workplace.

Some companies also do not want to hire people with disabilities. In some countries, people with disabilities are in a protected class and cannot be terminated by employers based on their disability.

Other forms of discrimination are related to sexual orientation or identity, citizenship status, medical condition, marital status, religion, and national origin. Whatever the case may be, employers cannot fire an employee based on any of these, nor can they mistreat them. Instead, employers have to provide a safe working environment that promotes equal opportunities.


Some companies terminate employees who have filed a complaint against their employer for harassment or discrimination. The termination is illegal if the employer is committing an act of revenge against the employee. The law prohibits employers from firing an employee who reports an unlawful activity in the workplace, also known as whistleblowing. No employer should threaten or terminate employees for reporting illegal activities in the workplace since every employee has the right to report it to the appropriate authorities. 

Final Thoughts

As business owners, facing a lawsuit for wrongful termination can be a dreadful scenario for your startup. It is then your responsibility to document everything thoroughly and be open and frank with your employees about how the company measures their performance. It would help if you also had a human resources leader or manager to help you make the right decisions or provide a warning to employees in question before terminating them. Being clear and transparent with employees who are up for dismissal can save you a lot of trouble. Firing an employee is never easy, so it would be best to have your employees understand company policies at all times.

Viridiana ValdesAuthor’s Bio: Viridiana Valdes is an experienced Marketing Specialist at Shegerian & Associates with a demonstrated history of working in the law practice industry. Skilled in Business Process, Negotiation, Customer Relationship Management (CRM), Management, and Business Process Outsourcing (BPO). Strong marketing professional with a Strategic Marketing focused in Marketing from Panamerican Consulting Group and Universidad Rafael Landivar.

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