Employees and Employers often are confused by the term “Wrongful Termination”. The EEOC – Equal Employment Opportunity Commission, noted over 62,000 wrongful termination cases in 2021 – that number does NOT include charges filed with state or local Fair Employment Practices Agencies. It’s not an insignificant number so it’s best to be prepared.  This is especially true in states that are deemed “At Will” where companies can fire employees without reason and at any time.  

However, even “At Will” employees are protected if they are terminated for being part of a “protected class” or in violation of a federal protective statute.  Lawyers will look at a case and immediately try to uncover whether the termination was for unlawful reasons such as discrimination of a protected class (sex, religion, age and sexual orientation), sexual harassment, violation of FMLA – the Family and Medical Leave Act or a hostile work environment.  If so, the “At Will” status of an employee does not prevent your employee from pursuing a lawsuit against you. (You can see Federal Law information HERE)*

Employment contracts create a second set of issues.  We usually see such contracts with upper management in larger corporations, but they do show up in the restaurant industry with chefs, front house managers and presidents of larger groups. Contracts are put in place for a purpose – to avoid grey areas based on hearsay and to protect all parties involved from “backing out” of said contract without consequences.

As a business owner, what can you do to protect yourself from future lawsuits?

  • Understand your state’s laws – employer and employee rights
  • The 3 Ps – Policies, Processes and Procedures.  The more you have in writing the better off you will be.
  • Employee Training – Ensure EVERYONE on your team knows the rules, what is tolerated and what isn’t.  
  • Create a zero-tolerance culture when it comes to sexual harassment & hostile work environment.  This includes harassment and hostility caused by fellow employees AND your customers.
  • Understand that everything starts at the top – your employees are watching you, so the zero tolerance needs to start with leadership.
  • Have ample EPLI – Employment Practices Liability Insurance. Work with your Risk Management team to determine what you need based on your risk tolerance.

What happens if you or your business are sued?

Employees who have been wrongfully terminated MAY not only be able to get their job back but may also be eligible for back pay, compensatory damages, punitive damages and recovery of their attorney fees.  In other words, it can get expensive very fast.   Prevention is the best medicine.  But what if the unthinkable happens?

  • This is NOT something you want to handle pro se – you should consult with an attorney to ensure your bases are covered.
  • Understand what your insurance policies will and will not cover. Most employment practices liability policies cover the following: Coverage for defense costs and damages related to various employment related claims including wrongful termination, discrimination, workplace harassment and retaliation.  However, coverage varies widely from carrier to carrier.  Also, in some instances, an employee-based claim may be covered by your commercial general liability policy and not your employment practices liability coverage.  For example, some Illinois state and federal courts have recently construed some carrier commercial general liability policies to potentially provide coverage for employee claims brought under the Illinois Biometric Privacy Information Act.  If you are sued, please contact your Risk Manager and attorney before placing a claim**
  • Understand that this will probably be a long process involving you and your team -with depositions, meetings and possibly a jury trial if you and/or our insurance carrier do not come to a settlement agreement. Most cases do not reach the court room and are settled because it’s in the best interest of both parties. In the addition to the uncertainty of trials and the expense, the public relations damage to the company can be fatal.
  • Learn from your mistakes – find out what went wrong, why it happened and put measures in place to ensure it doesn’t happen again. 

The best defense is being proactive. 

Annually, review all policies, processes and procedures, review and update employee handbooks, watch for red flags and address them immediately, consult with professionals if you have any concerns (Risk Management & Legal), and above all create a zero-tolerance culture!

At Power Risk Management we offer free consultations to review your current coverages.  Give us a call at one of our convenient locations:

Chicago Office: 5343 W. Devon Avenue, Chicago, Illinois 60646 | 773-273-8777
Bourbonnais Office: 1410 Argyle Ln N, Bourbonnais, IL 60914 | 815-922-4754
Denver Office: 1400 16th Street, Suite 400, Denver, Colorado 80202 | 720-779-1190

*The information within this document should not be construed as legal advice. 

** EPLI coverage varies by state and insurance carrier – the information above is informational only and does NOT depict what your policy coverage entails