Firing an employee is one of the most difficult decisions an employer has to make. While there may be valid reasons for letting someone go, such as poor performance, misconduct, downsizing, or other business needs, terminating employment inherently carries risks from both legal and human resources perspectives.
Employers must navigate a complex web of laws and best practices to avoid potential lawsuits or other fallout when firing staff members.
The most obvious legal risk involves discrimination claims. Federal and state laws prohibit terminating or taking other adverse action against employees for discriminatory reasons based on protected characteristics like age, gender, race, religion, disability status, or other factors.
Even if the employer believes they had a valid, non-discriminatory reason for the termination, the fired employee can still file a lawsuit accusing the company of illegal discrimination.
In preparing for one of the most challenging responsibilities of leadership, an employer might seek legal advice on “what to say when firing someone,” aiming to handle the conversation with empathy, clarity, and respect for the individual’s dignity.
Defending against such claims is expensive even if the employer ultimately prevails. The former employee may also file complaints with the Equal Employment Opportunity Commission or their state civil rights agency, triggering an investigation.
This can mean months or years of legal wrangling, attorney fees, and demands on management’s time.
Beyond discrimination, fired employees might sue for wrongful termination based on other employer violations or on implied or written employment contracts that the termination allegedly breached. An employment defense attorney represents employers in legal disputes related to workplace issues such as wrongful termination.
Lawsuits may allege the firing was retaliation for whistleblowing, taking leave covered by the Family Medical Leave Act, reporting sexual harassment, or attempting to organize a union.
Even employees at-will have grounds to sue if they can prove their termination violated public policy or an implied good faith term in their work agreement. Defending such cases remains costly for employers even with favorable outcomes.
Additionally, employers must carefully document performance, disciplinary, and policy issues leading up to a termination to build the factual record in case of a lawsuit.
Lack of documentation makes defending terminations more challenging—if managers cannot clearly show legitimate reasons supported by evidence, it invites legal action from disgruntled ex-employees claiming unlawful motives.
Given most managers’ limited training and expertise in lawful firing procedures, terminations often have less documentation than ideal. This makes defending them trickier.
Beyond legal risks, firing employees causes significant human resources and morale consequences within an organization. Losing people involuntarily disrupts workloads and strains remaining staff’s goodwill, especially if terminations seem arbitrary or unfair.
It can generate fear over “who’s next,” hurting engagement and trust in leadership. Employees may speculate over reasons for terminations, causing distraction and eroding productivity. This worsens if communication about the reasons is limited for confidentiality reasons.
Involuntary turnover also loses institutional knowledge if long-tenured staff get fired. Training new hires to replace them temporarily reduces output in their areas too. Both effects disrupt business operations.
Employees with key internal or external relationships may damage those connections when fired as well. Moreover, if reputation gets around that a company frequently fires people, top talent may avoid working there, harming recruitment.
Managing fired employees’ reactions also falls on HR teams. Support must get offered for handling transitions around benefits, references, personal belongings, and notifications.
Severance negotiations frequently ensue. Some terminated staff make threats or turn hostile without good off-boarding, risking workplace safety incidents or external PR crises.
Firing employees profoundly impacts work environments, opening various legal, cultural, productivity, safety, knowledge management, and labor market risks.
While sound documentation, policy, security, and communications practices help mitigate risks, involuntarily removing staff always proves inherently challenging for both managers directly involved and organizations as a whole.
Doing so both legally and humanely requires immense care, resources, diligence, and strategy. The decision should never get made lightly, even with problem employees. But when necessary for business or culture, proper planning remains essential for minimizing inherently high risks around terminating any employee.
How Does The Termination Of The Employer Employee Relationship Create Risk And Legal Issues?
The termination of the employment relationship, whether initiated by the employer or employee, can lead to several risks and potential legal issues if not handled properly.
From the employer’s perspective, there are risks around potential discrimination lawsuits if the termination decision can be linked to the employee’s protected class status under laws like Title VII of the Civil Rights Act.
Employers also risk claims of wrongful termination if the employee feels the termination breached an employment contract or violated public policy exceptions to at-will employment.
When initiating terminations, employers must ensure there is proper documentation demonstrating legitimate, non-discriminatory reasons for letting the employee go, such as poor performance. Lack of documentation makes defending against potential lawsuits more difficult.
Employers also must follow termination protocols outlined in employee handbooks as well as local, state and federal employment laws governing advance notice, final paycheck timing, the handling of benefits after termination, and restrictions around severance agreements. Deviation from these protocols raises compliance risks.
On the employee side, risks include loss of income and benefits, uncertainly finding new employment, and in cases of ambiguous or hostile terminations, reduced mental health or self-esteem. Some terminated employees experience “survivor’s guilt” if former co-workers remain employed.
In all, terminations bring uncertainty and can trigger legal issues for both employers and employees if either side fails to satisfy their responsibilities under the law when initiating the termination or taking employment actions post-termination. Careful management of terminations on both sides is essential for mitigating risks.
 