Grounds for Termination
Generally, employees 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 employer activity where the employee reasonably believes that the information he or she provided relates to potential violations of specific laws). 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. In such cases, the grounds for a “just cause” termination are negotiated by the parties on a case-by-case basis.
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 labor 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.
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.
Is a Separation Agreement required or considered best practice?
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
Although individuals employed on an “at-will” basis can be dismissed with or without cause, they are protected from discriminatory adverse employment. In addition, employees are protected from dismissal in retaliation for engaging in various “protected activities,” including: 1) making reports or complaints regarding potential violations of federal securities law; 2) making reports or complaints of dangers to the public health or safety; and 3) reporting conduct that is against the public welfare or public policy.
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; 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.
Two major whistleblower laws in the U.S. are the Sarbanes-Oxley Act of 2002 (SOX) and the Dodd-Frank Act of 2010. There are also a number of OSHA whistleblower statutes that prohibit retaliation, or “adverse action,” against workers who report injuries, safety concerns, or other protected activity. Further, there are a number of whistleblower laws at the state and local levels which generally prohibit retaliation against employees who report misconduct. In some states (e.g. New Jersey under the very broad Conscientious Employee Protection Act), it is very important for the employer to consider potential whistleblowing exposure whenever disciplining or terminating an employee.
The Sarbanes-Oxley Act includes provisions prohibiting discrimination against corporate whistleblowers who have revealed financial and other wrongdoing within a publicly traded company. SOX includes a broad range of corporate accountability and transparency measures, including a requirement that corporate boards establish internal independent audit committees. These audit committees must establish complaint procedures and accept anonymous complaints. SOX also includes provisions for enhanced financial disclosures, as well as provisions addressing auditor independence and certification of financial statements by corporate officers. 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. The bounty can range from 10 to 30 percent of the aggregate amount of sanctions collected, to be set at the discretion of the Commission (a number of factors are considered). The anti-retaliation provision prohibits an employer from retaliating against a whistleblower who makes one of three types of disclosures: i) those required by the Sarbanes-Oxley Act of 2002 (SOX); ii) those required by the Securities Exchange Act of 1934; and iii) those required by any other law, rule, or regulation subject to the SEC’s jurisdiction.