Was Your Termination Illegal?

Being terminated from your job is a hard enough to deal with, but what if the termination was illegal? Wrongful termination happens when an employee is discharged from employment for illegal reasons or if company policy was violated when the employee is terminated. If you feel as though you were a victim of a wrongful termination, you may have the right to file a claim against your former employer.


An employer may not terminate or demote their employees based on discrimination. Discrimination can come in many forms. Title VII of the Civil Rights Act of 1964 (Title VII) prohibits employment discrimination. Even though most states are employment at will states, it is illegal for employers to terminate their employees on the basis of discrimination. Discrimination can be based on your race, color, national origin, gender, religion, age, disability, religion, or if you are pregnant. If this does occur, the terminated employee has the option to file a claim with the EEOC.


An employer may not terminate, harass or otherwise retaliate against their employee for filing a claim of discrimination, participating in a discrimination proceeding, or otherwise opposing discrimination. Retaliation is prohibited by law when it involves any type of the employment aspect including hiring, termination, wages, promotions, layoffs, fringe benefits, or any other condition of employment. Employees may find themselves being retaliated against after they file a claim or participate in an investigation against their employer. Under these circumstances, the employer cannot terminate or otherwise demote employment of their employees. This may happen after an employee makes a claim of sexual harassment, is a Whistleblower or complains about any other form of discrimination or wrongdoing within the company.

Written Contract Employee Agreements 

Contract employees are hired by a business to complete an assignment or project, and may have expertise related to the subject matter. Their contracts are typically negotiated and can be paid hourly or by the project. If a written contract or other statement that promises job security for a specific length of time chances are, you may not be classified as an at-will employee. Employment contracts change the “at will” relationship, restricting the ability to terminate employees who aren’t working out. Typically the agreement allows for a “for cause” termination unless the contract term has ended. If cause is not shown for early termination of a contract, the employee may have grounds for a lawsuit against the employer.

Business often times use independent contractors rather than employees, due to the flexibility in hiring as well as the cost savings. Misclassifying workers can cause employers to be subject to penalties from the IRS. An employer can be penalized to reimburse wages and pay retroactive taxes and penalties for workers who were misclassified. See Employers- Are You Accurately Classifying Your Employees for more information



Employers- Are You Accurately Classifying Your “Employees”

Running and maintaining a business is a critical task. Although business owners attempt to do everything correctly with running their business, shortfalls may occur. One of the main tasks that business owners want to get correctly is the way that they classify their employees. There are a two ways that individuals can be classified. They can either be classified as independent contractors or employees. Independent contracts and employees are not the same. Knowing the distinction between the two will assist you in determining what your hiring strategy should be. It will also affect how you withhold several taxes.

It is imperative that you correctly determine whether the people providing services to your business are classified as employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on the earnings that are paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. Also, the amount of responsibility that you give a person and whether or not you control their duties is a factor as well.

How To Determine If Individuals Providing Services To You Are Employees Or Independent Contractors

Before you can determine how to pay for the services that are provided to you, you must first know the business relationship that exists between you and the person performing the services. The classifications are listed below:


Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

Independent Contractors

The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.

Statutory Non-Employee

There are three categories of statutory non-employees: direct sellers, licensed real estate agents and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all Federal tax purposes, including income and employment taxes. Read more

Statutory Employee

If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes. Read more

The IRS uses three characteristics to determine the relationship between businesses and workers:

  • Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means.
  • Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker’s job.
  • Type of Relationship factor relates to how the workers and the business owner perceive their relationship.

In determining whether the individual providing services to your company is an employee or an independent contractor, consider all of the information that provides evidence of the degree of control and independence that the person has. This will better assist you in making the determination. If your company is not ready to hire someone on full time, or you may just need a person for a short amount of time, consider hiring someone on a temporary basis.

Many small businesses relay on independent contractors for their staffing needs. There are several benefits to outsourcing individuals’ vs hiring employees. These benefits include:

  • Savings on labor costs
  • Flexibility to determine when you will hire or terminate someone without having them on your payroll
  • Elimination of the taxes associated with having an employee

Regardless of your hiring needs, it is crucial that you correctly determine whether the people providing services to your business are classified as employees or independent contractors.

Employers – Are You At Risk For A Wrongful Termination Lawsuit?

The decision to terminate an employee is almost never an easy one. Once the decision is made, there are steps that can be taken to reduce the risk of an employee filing a wrongful termination lawsuit against you. As the majority of states are “Employment at Will” states, that does not restrict a former employee from filing a wrongful termination lawsuit against you. Under that law in most states, if there is no employment contract, workers are employed on an “at-will” basis. This essentially means that employers have the right to terminate employees at any time for any reason other than discrimination, and rightly so, employees have the right to leave the organization at any time.

The decision to terminate an employee should not come without prior warnings. The steps leading up to the termination should be documented in the personnel file of the employee. This should include the employee’s signed statement that they received a copy of the employee handbook detailing the company’s policies and procedures, verbal and written warnings, performance evaluations, and any other materials that the company deemed necessary to show disapproval of the performance, actions, or behavior of the employee.

Having this information can become very useful to establish a pattern that the employer has tried to counsel the employee for the better. The EEOC requires that employers keep all personnel or employment records for one year. If an employee is involuntarily terminated, his/her personnel records must be retained for one year from the date of termination.

Regardless of the decision and the documentation that has been made for the employee, they may feel that they were unjustly targeted and still try to find other ways to justify a wrongful termination. Once the decision to terminate has been made, there are several factors that employers should consider before executing the decision.

The employer should consider whether or not the employee:

  • Has filed a workers compensation claim?
  • Are they pregnant or have recently given birth?
  • Are they over the age of 40?
  • Have they taken any type of leave in the past year?
  • Their racial or ethnic background?
  • Have they recently filed a grievance or made a complaint about something?

Considering these factors could put employers in a better position to defend themselves against a wrongful termination lawsuit. Be sure to have all documentation in place to prove the termination was not based on one of the above factors. After the matter is finalized, be sure to protect the interest of the company by securing all equipment and codes given to the employee. You can read more about ways to protect yourself against Employee Sabotage.