A How-To Guide to Avoiding Legal Liability When Firing an Employee

Running a successful business comes with a myriad of challenges, both known and unknown. Considerations such as inventory, time management, marketing strategy, budget, cash flow, and more are always on the mind of a responsible entrepreneur. One way to better handle time management & operational issues for owners is by hiring employees and delegating responsibilities. This, of course, comes with its own set of potential problems and stressors for the business owner. Finding good employees can be very difficult, and at some point, the entrepreneur is most likely facing the troubling reality of having to let an employee go. In 2018, a reported 21.9 employees were laid off. This post intends to provide guidance on how to release an employee without triggering the potential for legal liability in Pennsylvania.

At-Will vs. Contract Employees

In Pennsylvania, any employee who is working without a contract is considered an "at-will" employee. If an employee has an employment contract, employers must abide by the terms and conditions set forth regarding termination in the contract itself. The contract will often contain details such as how and why terminations can take place. Keep in mind that an employment contract can also be made verbally, without formal writing, so it is essential to be transparent with new employees about their status as "at-will" employees. Verbal employment contracts can arise through the simple act of informing employees the business has a policy of not firing employees unless it is for good cause. Owners and managers must have procedures in place that make the terms of employment clear for all parties.

The vast majority of employees in Pennsylvania do not have employment contracts. When dealing with "at-will" employees, there are still some important legal considerations to keep in mind. While the employee can generally be fired at any time, for any reason, there are some restrictions on this power that can cause significant problems for business-owners should they violate any such provision. There are both federal and state laws in place addressing issues of wrongful termination. Wrongful termination occurs when the employee is fired for one of a myriad of legally protected reasons.

Discrimination

For example, under Title VII of the Civil Rights Act of 1964, it is unlawful for any employer to refuse to hire or to discharge employment due to an individual's race, color, religion, sex, or national origin, even if other legitimate factors were also considered. This federal law applies to any business that employs 15 or more people. However, the Pennsylvania state law, which applies to businesses with four or more employees, also grants many of the same protections while expanding on others. If any of these protected reasons can be proven to have been a secondary motivating-factor to the decision, the owner can be found liable for the practice. These claims are easily countered by owners and managers who keep thorough records of employee conduct and any warnings the employee may have received before their firing.

Retaliation

Other factors, outside of civil rights concerns, can also create wrongful termination liability if found to be motivations in the firing process. It is unlawful to discharge an employee as a means of retaliation for some protected act the employee has taken while employed. In Pennsylvania, employers must keep in mind that they cannot punish employees for "whistleblower" activities that shine a light on illegal activity taking place at the business or any investigation that may arise from such activity. Any retaliation against employees for exercising their rights is also strictly prohibited by law. This includes attending jury duty after receiving a summons or refusing to participate in an illegal act requested of the employee by their supervisor, among others. Again, it is essential to note that the mandate prohibiting retaliation for attending jury duty has different requirements at the state and federal levels. In Pennsylvania, it applies to any business in the retail service industry with fewer than 15 employees or employers in manufacturing with fewer than 40 employees.

In one Pennsylvania case from 2015, the Superior Court of Pennsylvania upheld a decision to hold an employer liable for wrongfully terminating an employee who refused to participate in "mandatory overtime" in her job as a healthcare worker. The employer had a policy of dismissing employees who refused mandatory overtime on four occasions. This court decided the worker's employment termination for these reasons represented a statutory violation of public policy under 43 Pa. Stat. Ann. § 932.3(a)(1), which states that no direct care worker in healthcare facilities may be penalized for refusing to work in excess of an agreed-to daily work shift.

Wrapping Up

Hopefully, it has become clear that even when firing an at-will employee there are still multiple legal considerations to consider before proceeding with the firing. Business owners must understand what is and is not permitted by state and federal law. Having policies in place for owners and managers to document firable offenses as they occur can alleviate many of these problems. Best practices also recommend fully explaining to the employee why they are being let go so they understand the reason for their dismissal. Doing so can significantly lower the risk of litigation. Leaving an employee to wonder why they have been suddenly fired may lead to them seeking out an attorney to look for claims.

Please note that this guide intends to provide only a basic understanding of some of the legal issues that come with firing an employee. It is not an exhaustive list for Pennsylvania or any other state. More laws exist to protect workers from wrongful terminations than we were able to cover here. For example, there are also federal and state laws in place to protect pregnant employees. The best practice is to consult with an attorney with sufficient experience to determine which laws and requirements will apply to your particular business.

Sources

At-will Employment – Entrepreneurship Law: Company Creation (unizin.org)

43 P.S. § 953 (lexis.com)

Wrongful Termination: What Is It? (thebalancecareers.com)

Title VII of the Civil Rights Act of 1964 | U.S. Equal Employment Opportunity Commission (eeoc.gov)

43 P.S. § 955 (lexis.com)

Whistleblower Law (pa.gov)

Pennsylvania Termination (with Discharge) laws & HR compliance analysis (blr.com)

43 P.S. § 932.3 (lexis.com)