How to Avoid a Wrongful Termination Claim

by | Aug 3, 2022 | HR Consulting

Avoid a Wrongful Termination Lawsuit with a fractional HR

As a small business owner, you may not have a human resource department that can guide you thru the do and don’ts of terminating an employee. Letting go of an employee can be a scary process that can result in a wrongful termination lawsuit. Termination can happen for many reasons; perhaps the employee was just not a culture fit, or the employee was insubordinate or did not perform to the company’s standards. No matter the reason, you have done the most challenging part: deciding you need to part ways. In this blog we will discuss steps to avoid a wrongful termination lawsuit. Of course, treating the person you’re terminating with compassion is essential. But it is also important to set up a defensible termination to avoid a wrongful termination claim.

Step 1: Verbal and Written Warnings

How does one navigate this? We’re taking the guesswork out of the termination process by offering these tips to ensure a smooth transition for everyone.

  1. Verbal Warning (s) all along the way make communication clear but also respectful. No one wants to get something in writing, especially if it is unclear. A verbal warning makes the exchange more of a conversation, bi-directional, and open to discussion and clarification. In a remote organization, ensure this meeting is planned and held via video conference – with cameras on! Allow time to discuss what went wrong and what to do next time instead. Above all – be kind.
  2. Written Warning (s) all along the way make communication clearer between the employee and the company. Additionally, accurately written warnings cover you against a future wrongful termination claim. Make sure to be very factual and specific. Include dates, times, and quotes if you have them. You can cite policies/ procedures/ handbooks/ contracts the employee has signed. Each written Warning could even have a line for the employee to sign at the bottom.
  3. Review the personnel file to look at the overall picture. Ensure that the warnings were clear to the employee and sufficient. Include emails that show the employee has been warned. Additionally, make sure that the trend is such that the employee is warned of a rule and then breaks that rule again. It is not fair for an employee to have a warning, improve, and get fired.  

Step 2: The Termination Process

  1. When a termination decision is made, document it. This may include sending an email to human resources. This is helpful to show the timing, as the process of terminating the employee could take days or even weeks. Timing is essential, especially if the employee wants to retaliate somehow. Timing would show, for example, that a termination decision came before a workers’ compensation claim.
  2. A termination letter or a meeting will be the next step, depending on how receptive and accountable the employee has been in the previous actions. A termination letter is best sent as a word document on letterhead. Again, this letter could have a line for the employee to sign at the bottom. Avoid imprecise language, such as calling a performance-driven firing a “layoff.” That is a “termination.”
  3. When possible, include human resources as a witness for all steps. They can only help if present for meetings and involved with written warnings and the termination letter, as they can assess for compliance with labor laws, employment laws, and state codes.
  4. Be clear, short, and professional. Don’t keep engaging with the employee after termination by answering too many questions. Less is more when it comes to avoiding a future wrongful termination claim. 
  5. Make sure logistics are all taken care of on the day of termination. Figure out what belongs to whom and when they’ll get it. Make sure to check with your state laws as to when the employee can get their last check, as they vary. Take all access to servers and applications away after they save company property/information to the company server/applications. If they have a work ID/badge or physical work tools such as a laptop or cell phone, it should be made clear when and how those need to be returned.

Looking Ahead

  1. Tell your team the news. A call to a quick video conference meeting for an announcement is the best way to accomplish this. If this is impossible, the next choice would be to send a simple email (“Employee A is no longer with the company”). In the next one-on-one meetings with employees and HR or their direct report, get feedback about the employee who is now gone. Always check in with their thoughts/feelings and answer any questions they may have. 
  2. Prepare for the future. This includes assigning coverage of tasks and maybe even changing roles/responsibilities and strategies. In the next team meeting, address coverage, changing roles and responsibilities, and strategy again so everyone is on the same page regarding the company’s direction. Talk about the next steps to build trust and hope.

The Termination Letter

A) Name of Employee and employer contact information

B) Dates include the date the letter is written, issued, and most importantly – the termination date. Ideally, these are all on the same date.

C) Reason For Termination. Some examples include incompetence (the lack of productivity or poor work quality), insubordination and related issues such as dishonesty, disrespectful behavior and going against company policies), absences /tardiness, and criminal behavior, including theft (revealing trade secrets, plagiarism, etc.)

D) Explanation of Company Property to be retrieved. In this remote work era, this may include deleting files from a personal computer and placing work done on company time to an appropriate work application such as Dropbox. 

E) Severance, Benefits, and Other Compensation Information. This includes information on when benefits will expire and how to continue coverage (COBRA), severance amount of applicable, unpaid reimbursements, etc.

F) Legal Agreements. This typically will focus on what is company property, including trade secrets and work completed on company time.

G) Details About Their Final Paycheck. This includes information on when the check will arrive, how (direct deposit or paper check), the dates worked, and the check issued. 

How Startup Tandem HR can help to avoid a wrongful termination claim?

If you follow these ten simple steps, you can ensure a rightful termination. Remember, this is an opportunity for a fresh start. Startup Tandem provides human resources consulting services to help you navigate issues like this.

You can also add insurance such as Employment Practices Liability Insurance to protect your business in a case of a lawsuit.

Additionally, there are best practices to take next time you hire an employee to minimize your need to go thru this process. Our next blog will share a few steps you should take to hire employees aligned with your company culture and values. Hiring best practices is the first step to avoiding termination.

Following with hiring the best people for your company comes retaining your employees. Everyone has a different way to feel appreciated by their boss. Our blog Unique Ways to Optimize Retention, Engagement, Productivity – Startup Tandem will give you some insight on how to increase retention. More on this topic soon! Sign up for our newsletter to receive blogs directly to your email.


McDonald Jr., James. (2018, April 4). How to Ensure Rightful Terminations in California.


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