Grounds for Termination
Generally, workers employed on an “at-will” basis may be terminated, with or without cause or grounds, provided it is not for an illegal reason; notably discrimination on grounds of a category protected by law or protected “whistleblowing” activity (reporting certain activity where the employee reasonably believes that the information he or she provided relates to potential violations of specific laws by the employer). The employment contracts of executives and other highly-skilled individual often incorporate a “just cause termination” clause, mandating that the employee may only be terminated for “cause” and lists the permissible grounds.
There are no restrictions on an employer’s ability to collectively dismiss its employees. However, the WARN Act requires covered employers to provide 60 days’ notice in advance of covered plant closings and mass layoffs to: 1) the affected workers or their representatives (e.g., a labour union); 2) the dislocated worker unit in the state where the layoff or plant closing will occur; and 3) to the local government. Even if a single mass layoff or plant closing does not trigger the WARN Act’s collective dismissal requirements, an employer also must give the 60-day WARN Act notice if the number of employment losses for two or more groups of workers, each of which is fewer than the minimum number needed to trigger notice, reaches the threshold level, during any 90-day period, of either a plant closing or mass layoff. Many states have implemented their own collective dismissal notification statutes that mirror the federal statute, but with some variations, such as lower minimum thresholds for providing notice.
In April 2019, the U.S. Supreme Court weighed in on class action arbitration. Class action arbitration is such a departure from ordinary, bilateral arbitration of individual disputes that courts may compel class action arbitration only where the parties expressly declare their intention to be bound by such actions in their arbitration agreement. Following the Supreme Court’s decision, arbitration agreements must clearly and unmistakably state that the parties agree to resolve class and collective actions through arbitration. Without such a clear agreement, a party cannot be compelled to class arbitration.
Except as otherwise provided in an employment contract or collective bargaining agreement, no law requires employers to follow a formal procedure when discharging individual employees. However, employees are protected from unfair dismissal in violation of federal, state and local discrimination or anti-retaliation laws.
Is Severance Pay Required?
Except as otherwise provided in an employment contract or collective bargaining agreement, employers need not make severance payments to terminated employees. However, employers often offer severance payments to bind an agreement made between the employer and employee at the time of termination to waive any potential claims arising out of the employment relationship.
Separation agreements are not required under U.S. law. In certain situations, the employee may agree to a contractual waiver of statutory rights, such as those under federal and state anti-bias laws.
Remedies for Employee Seeking to Challenge Wrongful Termination
Employees found to have been unfairly terminated in violation of the civil rights statutes or anti-retaliation provisions can resort to the various administrative agencies and the court systems. If an employee is found to have been terminated in violation of any applicable statute, the employee may be entitled to some or all of the following remedies: 1) reinstatement to former position (rarely granted); 2) monetary damages for wages and benefits lost as a result of the termination; 3) monetary damages for any emotional or physical distress suffered as a result of the employer’s actions; 4) punitive damages intended to punish an employer for egregious violations of the law; and 5) attorneys’ fees.
Sarbanes-Oxley’s whistleblower provisions create broad protection for employees of publicly held companies (and their contractors, subcontractors, and agents) who have a reasonable belief that fraud or other wrongdoing has occurred in violation of U.S. securities laws. The Dodd-Frank Act allows for the award of monetary incentives to individuals who voluntarily provide original information relating to a violation of the securities laws, which results in the collection of monetary sanctions exceeding $1 million dollars. Some states have their own whistleblower laws, prohibiting termination or other adverse employment actions, in retaliation for good-faith reports made by employees about company activities that allegedly violate laws or regulations, or are fraudulent or criminal.