US Termination Laws

US termination laws establish standards for fair and lawful dismissals, aiming to protect employee rights and ensure ethical employment practices, such as continued healthcare coverage or unemployment compensation.

If you want to understand whether you have legal grounds to terminate an employee, or to check if your own dismissal was fair, it’s essential to familiarize yourself with applicable laws, employee rights, and the concept of at-will employment.

This Article Covers:

At-Will Employment in the US

What is At-Will Employment?

At-will employment in the US means that either the employer or the employee can terminate the working relationship at any time without giving prior notice or explanation.

Most US states adhere to at-will employment by default. The exception to this is the state of Montana, which follows the ‘just cause’ doctrine, which mandates employers to provide a valid reason for terminating an employee after the probationary period.

It’s important to note that at-will employment can have exceptions and may not be applicable to workers in the public sector, full-time employees under a signed contract, or workers whose employment is affected by a union’s collective bargaining agreement.

What are the Exceptions to At-Will Employment in the US?

There are a few exceptions to at-will employment, they include:

Federal Exceptions:

  • Discrimination: Employers cannot fire someone at will based on personal traits like race, color, religion, sex, national origin, age (if over 40), disability, or genetic information.
  • Retaliation: Employers cannot terminate an employee at will as a form of retaliation for refusing to take part in illegal activities or exercising their legally protected activities like reporting unsafe working conditions.

State-Level Exceptions:

  • Implied Contract: If an implied contract is formed between the employer and the employee, at-will employment will be limited, and the terms of the contract will apply. Implied contracts could include statements implying continued employment and job security suggestions in employee handbooks or conversations.
  • Public Policy: Certain states do not allow employers to fire employees at will for reasons that violate public policy. This means an employee cannot be dismissed for refusing illegal activities, serving on a jury, voting, or filing for workers’ compensation.
  • Covenant of Good Faith and Fair Dealing: Some states require employers to act in good faith when terminating employees. This means an employer cannot fire someone at will with malicious intent, such as avoiding financial bonuses or sabotaging an employee’s performance.

Note: These exceptions to at-will employment are not recognized in every state, and protections may vary. For example, Florida, Georgia, Louisiana, and Rhode Island do not have any exceptions for at-will employees, while Pennsylvania, Missouri, North Carolina, Virginia, Texas, and Indiana recognize only the public policy exception.

Employment Under Contract in the US

Employment contracts in the US include various elements related to the work relationship. The US Department of State‘s Model Contract of Employment includes, among others, some of the following elements:

  • Start and Length of Employment;
  • Job Title and Duties;
  • Place of Work;
  • Working Hours;
  • Pay;
  • Work Conditions;
  • Food and Accommodation;
  • Medical Care;
  • Holidays;
  • Sick Pay and Absence;
  • Termination;
  • Change of Employment Terms

Read our in-depth guide to firing employees in the US for further information.

Legal Considerations for Termination in the US

When terminating employees, US employers must consider several factors to stay compliant with the law. These include:

  • Laws Governing Employment Termination: Termination in the US is regulated by both federal and state laws, and employers must understand the relevant jurisdictions and applicable regulations.
  • Notice Requirements: Most at-will jobs in the US don’t require a termination notice. However, some cases, like mass layoffs or plant closures, demand advance notice under the Worker Adjustment and Retraining Notification Act (WARN). Additionally, some states have overruled federal law and introduced mandatory notices.
  • Severance Agreements: Federal law does not require severance pay upon termination of employment. Offering such pay may be done in good faith or under contract agreement or state requirements.
  • Payment of Final Wages: While federal law doesn’t mandate the immediate payment of final paychecks upon termination, it is expected by the regular payday for the last pay period an employee worked. State laws may mandate additional provisions.
  • Record-Keeping: Employers are obligated to maintain the personnel records of terminated employees for one year after the date of termination, while payroll records must be kept for three years. Additional documents may apply, and requirements may vary based on state laws.
  • Company Policies: Employers should follow their own termination policies consistently to avoid discrimination claims. For example, a valid termination would be if an employee repeatedly failed to meet deadlines despite verbal and written warnings.

Legal Grounds for Termination in the US

Employers in the US can generally legally terminate employees at will if no exceptions apply. Some common reasons include:

  • Misconduct: A valid ground for dismissal at will can be employee misconduct which includes any willful or manageable violation of duties and responsibilities. This also includes conflict of interest, receiving or giving gifts and favors, and violating federal and state laws. Absence without leave is also considered misconduct by the US Office of Personnel Management (OPM).
  • Performance Issues: Employees who fail to meet performance standards, despite documented feedback and opportunities for improvement, may be rightfully terminated at will.
  • Redundancy: Employee termination at will due to shortage of funds, lack of work, reorganization, or insufficient personnel ceiling is justified, with proper notice for mass layoffs.
  • Attendance Issues: Chronic absenteeism or tardiness affecting job performance can lead to at-will termination.
  • Violation of Company Policy: Breaching company rules, like confidentiality or professional conduct policies, is a valid reason for employee termination at will.

Layoffs in the US

Layoffs in the US refer to terminations caused by non-disciplinary reasons, such as lack of funds or reduced amount of work.

Laying off employees is generally acceptable under US laws, however, in cases of mass layoffs, certain conditions for notice provision may apply, as per the Worker Adjustment and Retraining Notification Act (WARN).

WARN defines a mass layoff as termination occurring within a 30-day period involving:

  • A termination of at least 33% of the workforce, with at least 50 employees terminated, or
  • A termination of at least 500 employees.

According to WARN, employers with 100 or more workers are required to provide 60 days’ notice for plant closures or mass layoffs affecting 50 or more employees. This allows workers to prepare and seek new opportunities.

Employers violating notice requirements are liable for back pay and benefits for each affected employee for the duration of the violation, up to 60 days, although courts may differ on the manner of calculating back pay.

Workers or unions can file lawsuits in federal court to assert their WARN rights, as the U.S. Department of Labor has no authority to investigate or enforce the Act.

Employers who fail to provide the required notice to a local government unit may face a civil penalty of up to $500 for each day of violation, with certain exceptions that depend on circumstances.

Employee Rights During Termination in the US

Legal Protections During Termination in the US

During termination, US employees are protected by several federal laws that ensure fair treatment and prohibit discriminatory practices. These include:

  • Title VII of the Civil Rights Act of 1964:  The main federal law protecting employees from discrimination is Title VII of the Civil Rights Act of 1964. It prohibits employers from terminating an employee based on race, color, religion, sex, or national origin.
  • Age Discrimination in Employment Act (ADEA): The Age Discrimination in Employment Act prohibits employers from terminating employees aged 40 or older on the basis of age.
  • Americans with Disabilities Act (ADA): The Americans with Disabilities Act prohibits termination based on an employee’s disability if they can perform essential job functions with reasonable accommodations. It is also unlawful to terminate employment due to the employer’s failure to provide reasonable accommodations.
  • Family and Medical Leave Act (FMLA): The Family and Medical Leave Act protects employees from termination for taking family or medical leave that they are eligible for. Employers cannot retaliate against employees for using their right to take leave and must reinstate employees to the same or an equivalent position upon their return.
  • Occupational Safety and Health Act: The OSH Act of 1970 protects employees from termination if they report unsafe or unhealthy working conditions or participate in safety investigations.
  • Worker Adjustment and Retraining Notification Act (WARN): The Worker Adjustment and Retraining Notification Act requires employers with 100+ employees to provide a 60-day notice of plant closings or mass layoffs.

How to File a Wrongful Termination Claim in the US?

Employees who believe they have been wrongfully terminated have several options for seeking recourse, depending on the nature of the firing.

If the termination occurred as retaliation for whistleblowing on unsafe or illegal practices, the issue should be reported to the Occupational Safety and Health Administration (OSHA) under whistleblower protections.

In cases of discrimination, employees must first file a report with the Equal Employment Opportunity Commission (EEOC) before filing a lawsuit. The filing deadline is within 180 to 300 days of the discrimination incident, depending on local or state laws.

Terminated Employee Benefits in the US

Post-termination, employees in the US are entitled to several types of benefits under the law:

  • Unemployment Insurance: Unemployment insurance offers temporary income to eligible workers who lose their job through no fault of their own. Terminated employees will need to meet work, wage, and individual state requirements to be eligible for cash benefits offered. Separate unemployment insurance programs are administrated  by each state, yet the same federally established guidelines apply.
  • Health Coverage: The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits for limited periods under certain circumstances.
  • Severance Pay: While not mandated by federal law, severance pay may be offered by employers as part of the agreement between the two parties. While most states follow federal law, Maine entitles eligible employees to severance pay if a mass layoff occurs.

Resignation in the US

Resignation is a termination of employment initiated by the employee. Resignations in the US can be as follows:

  • Voluntary Resignation: Occurs when employees leave by choice. Generally, such cases disqualify employees for unemployment benefits.
  • Involuntary Resignation, or Constructive Discharge: Occurs when an employee feels pressured to quit due to intolerable working conditions and unlawful employment practices. If such cases occur, the EEOC evaluates whether the employee’s working conditions were intolerable.

Legal Cases Related to Wrongful Termination in the US

1. Massachusetts Hospital Settles $1.2M for Discriminatory Wrongful Termination

In the case of Walsh v. Carney Hospital Corp., the Carney Hospital Behavioral Health in Massachusetts was found guilty of the wrongful termination of an employee on the basis of sexual orientation discrimination.

During the trial, evidence showed that discriminatory remarks and actions were conducted by the hospital management towards a former employee, Jack Walsh.

These actions, shown to be driven by bias and harassment over Walsh’s perceived sexuality, led to his dismissal.

The hospital and several individuals were found guilty of discrimination, assisting in discriminatory actions, and interfering with Walsh’s professional relationships.

As a result, Walsh was awarded a total of $1.2 million, comprising $625,000 in compensatory damages and $650,000 in punitive damages.

Key Lessons from the Case:
  • Wrongful termination due to all kinds of discrimination can result in substantial financial consequences for employers.
  • Employers must ensure that personal biases and discriminatory remarks do not influence employment decisions to avoid wrongful termination claims.
  • In cases filed by wronged employees, it is not only the entity that may be charged and found guilty but also the employees who were involved in or condoned the entity’s actions.

2. Seafood Company Ordered to Pay $85,000 for Wrongful Termination

In the case of EEOC v. Pacific Seafood Co., the U.S. Equal Employment Opportunity Commission (EEOC) filed a lawsuit against Pacific Seafood Co. for retaliatory termination.

A warehouse worker, Jesus Perez, raised his suspicions that he received a smaller raise than his non-Hispanic coworker because of his race.

The complaint was dismissed, and the company decided to terminate Perez in a retaliatory action, which violates Title VII of the Civil Rights Act of 1964.

Following an EEOC investigation and failed pre-litigation settlement attempts, Pacific Seafood agreed to settle the lawsuit by paying Perez $85,000.

As part of the settlement, Pacific Seafood also agreed to revise its policies on discrimination and retaliation, provide training on anti-discrimination laws, and report to the EEOC on its discrimination complaint procedures for the next five years.

Key Lessons from the Case:
  • Wrongful termination for reporting discrimination concerns is a violation of federal law and can lead to significant legal penalties.
  • Employers should take employee complaints seriously, fostering an environment where discrimination can be reported without fear of wrongful termination.
  • Anti-discrimination training and clear policies help ensure fair treatment and prevent wrongful termination lawsuits.

Learn more about US Labor Laws through our detailed guide.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.