Most employers have a good sense of whether the termination of an employment relationship will result in some type of claim or litigation. It may be too late to avoid a claim or lawsuit from a disgruntled (and terminated) employee. Sometimes; however, the actions of the employer makes the difference in whether they find themselves in an EEOC investigation or lawsuit. The questions and responses below identify procedures useful in attempting to prevent termination from becoming litigation.

What is at will employment?
“At will” employment refers to an employment relationship in which either the employer or employee may terminate the employment relationship without notice for any nondiscriminatory reason. Technically, an employer needs no reason at all, but obviously will subject itself to potential claims of discrimination if it does not provide the employee with a legitimate, nondiscriminatory reason. The word “nondiscriminatory” is included in the definition to make clear that termination of an “at will” relationship cannot be based upon all the statutes (both state and federal) related to the protection of employees from being discriminated against for reasons other than their performance.

All employment in North Carolina is considered “at will” unless the employer and employee enter into a contract for employment for a definite period of time. If the employee and employer enter into an employment contract, the parties may not terminate the employment relationship for the specified time period for any reason except those identified in the contract. This means that if an employer decides to end a contractual relationship with a contracted employee, then they may expect a lawsuit unless they have a clear explanation and proof that the termination was justified and for a reason identified in the contract.

Does North Carolina recognize a state law claim for wrongful termination?
Yes. North Carolina courts have recognized an exception to at will employment. A discharged employee may obtain damages against an employer if they can show that they were terminated because they (1) participated in conduct protected by law; (2) refused to participate in unlawful conduct requested by the employer; or (3) refused to participate in conduct which would violate public policy that was requested by the employer.

The employee must only show that the conduct protected by law, the refusal to participate in unlawful conduct, or the refusal to participate in conduct which violated public policy was a substantial fact in the employer’s decision to terminate the employee.

Here are three examples where the court found the employee had stated a claim for wrongful discharge in violation of public policy:

  1. A nurse successfully stated a claim for wrongful termination when she alleged that she was fired because she refused to testify falsely in a medical malpractice case as urged by her employer. See Sides v. Duke University, 74 N.C.App. 331, 328 S.E.2d 818.
  2. A Plaintiff alleged he was discharged by Defendant for his refusal to violate the United States Department of Transportation regulations by operating his vehicle excessive hours and due to his refusal to falsify the records of his driving. See Comen v. Thomas Manufacturing Company, 325 N.C. 172, 381 S.E.2d 445 (1981).
  3. A Plaintiff alleged that her employer discharged her for refusing less than the statutory minimum wage in violation of North Carolina Public Policy as stated in N.C.G.S. § 95-25.3. See Amos v. Oakdale Knitting Company, 331 N.C. 348, 416 S.E.2d 166 (1992).
What is the purpose of a progressive discipline policy?
A progressive discipline policy is extremely useful in defending discrimination and retaliation claims. If an employer has documented the reasons for discipline and, if applicable, termination, at the time of the actions of the employee, the employer has preserved for itself defenses of a nondiscriminatory reason for the discipline. However, if an employer has a progressive discipline policy, but does not follow it, such failure provides evidence of discrimination or retaliation based upon the employer’s violation of its own policy. The bottom line is that a progressive discipline policy is extremely useful, but only if it is adhered to consistently and in a timely fashion.
Why should an employer offer a severance package to an employee?
A severance package is an excellent tool for lawfully terminating an employment relationship and eliminating any future litigation. If an employer believes that a former employee will likely sue, it may be in the employer’s best interest to attempt to eliminate the possibility of a potential suit. Also, severance packages are used when downsizing and showing appreciation for years of service with a longstanding employee. Employers should always obtain a release of all claims in exchange for the severance payment.
What should a company consider when creating a severance release package?
Regardless of the reason, if you decide to move forward with a severance package, following are some helpful tips regarding provisions to include in a release:

  1. A general release of claims. Remember that you may not negotiate the release of waiver of vested retirement benefits, worker’s compensation benefits, or unemployment benefits. You may also not prohibit the filing of a charge or participation in investigational proceeding conducted by the U.S. Equal Employment Opportunity Commission or other governmental agency with jurisdiction concerning the terms, conditions, privileges of employment. However, the employee may and should waive their right to seek or accept monetary or other relief of any nature in connection with charges, investigations or proceedings.
  2. Reemployment. It is generally a good idea to indicate that the employee acknowledges that he or she has contractually agreed not to apply for employment with the employer.
  3. Acknowledgement that the individual is entering into an agreement of their own free will and has had the opportunity to reconsider and discuss the agreement with her attorney.
  4. Confidentiality related to the resolution and company information and property.
  5. The agreement that the employee has resigned their employment.
  6. If the person is forty years old or older, the Age Discrimination Act requires the employer to give the employee twenty-one calendar days to consider the agreement and consult with an attorney prior to executing the agreement and that the employee has seven days after executing the agreement upon which to give written notice that the agreement is revoked. An employer should spell out these requirements in the agreement and indicate that payment of severance or other consideration will not be made until the time periods expire making the agreement enforceable.
  7. Finally, it is important to note that severance is not taxable under North Carolina state tax laws if the severance payment is less than $35,000. Otherwise payments of settlement could be considered payment of wages and may be subject to withholding.
What actions should an employer consider when preparing to terminate an employee?
While there is no really “good” way to inform an employee of their termination, there are a few general rules that will make it less likely for the individual to file suit. An employer should consider the following:

  1. Be respectful, concerned and professional during the meeting;
  2. Make sure that you have a witness in the meeting who is taking notes of the information provided to the employee;
  3. Be organized and have all the information upon which you based your decision so that it may be conveyed to the employee. It is likely the employee will not be listening, but it is important that you give the employee nondiscriminatory legitimate business reasons for the termination. Presumably, you have such information and should give it to the employee. Further, you should consider drafting a letter to the employee regarding the reasons and you may read it if you are concerned about not being able to effectively communicate the reasons. This letter will help you to make sure that you stick to the issues during the meeting.
  4. Do not lose your temper and do not respond if the employee does so.
    Have a person in charge of security available and ready to escort the employee/former employee to their desk and/or office to retrieve their materials. Make sure you obtain all computers, keys and other company property. Should the employee not have some of this property with them on the day of termination, set up a time to meet with them, along with your security personnel at a public place other than your place of business.
  5. Provide the former employee with COBRA and insurance information.
  6. Set up the meeting for the end of the day, preferably a Friday, to minimize the time which employees will discuss the termination.
  7. Do everything within your power not to embarrass or demean the employee/former employee. While this will not be a pleasant experience, they will later appreciate your professionalism.
  8. Have a member of human resources and the direct supervisor who made the decision present at the meeting. If you have implemented a progressive discipline policy, you will likely be glad you did as the steps leading to the termination will be documented.
  9. Once you have given the employee the information and informed them of their termination, offer to assist them in leaving and attempt to make the process as easy as possible.