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The Small Business Guide to Avoiding Discrimination Charges when Firing Employees

13. June 2014 08:35

Black-and-white photo of a businessman firing another businessman

For most small-business owners, terminating an employee is never easy. After all, we can’t all be Donald Trump (nor would we all want to be). Small businesses don’t have that many employees, and it’s easy for members of the team to start feeling like family. They might even be actual family!

That’s why firing employees can be such tricky business. But in addition to the standard hurt feelings, damaged egos, and spirals into existential darkness, some fired employees may believe they’ve been wrongfully terminated.

“Wrongfully terminated” is legal term that means an employer unfairly (and illegally) dismissed an employee. For example, employers cannot violate work contracts or falsely justify a dismissal when they really just wanted to hire someone for a lower wage. You can learn more about those situations by reading’s helpful article “Wrongful Termination: Was Your Firing Illegal?

But this post explores wrongful termination based on workplace discrimination – dismissals that violate an employee’s civil rights. To learn more about workplace discrimination in general, check out “The Small Business Guide to Avoiding Discrimination and Harassment in the Workplace.”

What Workplace Discrimination Has to Do with Wrongful Termination

Most employers don’t need to provide reasoning when they fire an employee – but they still can’t do anything illegal. Discrimination in the workplace is illegal thanks to federal Equal Employment Opportunity laws. (For more information on these laws, read “Employee Rights: What Small-Business Owners Need to Know.”)

In terms of wrongful termination, this includes dismissals that are based on an employee’s…

Most of the federal laws only apply to businesses with 15 or more employees. However, many states have laws that implicate smaller businesses. These laws might also expand their definition of discrimination to include unfair termination based on…

It’s important to note that even if your business too small for the Equal Employment Opportunity Commission to take on your employee’s case, that worker can still sue you on their own.

These cases can be particularly expensive because the losses involve an employee’s entire income. Additionally, there is no limit to the amount of back pay a wrongfully termination employee can collect.

For protection against these costs, small-business owners can purchase Employment Practices Liability Insurance (EPLI), a type of Professional Liability Insurance that pays for workplace discrimination and harassment lawsuits.

However, the best employment practices liability lawsuit is the one that doesn’t exist. That’s why we’ve put together a list of ways to prevent termination-related discrimination charges below.

Best Firing Practices: 4 Ways to Avoid Wrongful Termination Lawsuits when Dismissing Employees

As a small-business owner, it’s likely that you are familiar with the types of things you can and cannot say during a job interview in order to avoid discrimination. (If not, see: “Recruiting & Hiring Tips for Small Businesses: Avoid Discrimination while Hiring.”) But the same care must be taken when you let employees go. Here are some tips:

As always, if you have legal concerns, you should seek counsel from an attorney. And to learn more about the insurance coverage that can back up your discrimination risk management plan, read “What Is Employment Practices Liability Insurance (EPLI)?

This post is part of an ongoing series on Employment Practices Liability Insurance, the high cost of employment discrimination lawsuits, and EEOC laws. Stay tuned for more on what can go wrong when hiring (and firing) employees.

know your business risks


EPLI | Errors & Omissions | Errors and Omissions Insurance | Professional Liability Insurance | Risk Management | Small Business | Small Business Risk Management | Tips for All Small Businesses

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