The termination of an employee almost always carries some risk of potential liability for an employer. In order to reduce that risk as much as possible, employers should implement procedures that require employee terminations be handled in a consistent, objective, fair, and professional manner. Avoidance of a lawsuit is not the only factor, however. Almost everyone understands that involuntary employment terminations are necessary, but in the absence of fair procedures, terminations can lead to lowered morale, reduced productivity, and an increased potential for union organizing.
As a general rule, Minnesota follows the employment-at-will doctrine, which means that either the employer or employee may terminate the employment relationship at any time, with or without notice, and with or without cause. There are, however, some circumstances in which the employment-at-will doctrine may be superseded by federal or state law, employment contracts, or collective bargaining agreements. Therefore, it is important for an employer to keep these exceptions in mind and maintain prior, consistent documentation to support the termination should a former employee later challenge the determination.
Throughout the United States, there are several exceptions to the employment-at-will doctrine, many of which are discussed in detail in this manual. The traditional example is that of an employee working under an express, individual employment contract stating the exclusive grounds upon which that employee may be terminated. Employees covered by a union contract almost universally have protection from discharge for reasons other than just cause as determined by a labor arbitrator.
Over the last half century, hundreds of federal, state, and local laws have been passed to provide employees with explicit protection against being discharged based on some specific protected status. For example, various state and federal anti-discrimination statutes protect employees from being discharged on the basis of:
In addition, many jurisdictions, including Minnesota, have created common-law exceptions to the employment-at-will doctrine to provide employees with workplace protection if some clear mandate of public policy would be threatened. The result is a patchwork quilt of coverage. Employees who meet the statutory requirements have significant job protections while others may be totally without legal options, even if they are terminated without notice. The generally recognized state and federal law-based exceptions to the employment-at-will doctrine are discussed in this chapter.
A variety of federal statutes protect employees from being terminated on the basis of race, color, religion, sex, national origin, age, disability, pregnancy, military status, and union activity. Most federal anti-discrimination and employment laws also prohibit retaliation against employees by their employers for exercising their rights to seek protection under these laws.
Minnesota has long followed the general rule that in the absence of a contract (express or implied) between an employee and employer covering the duration of employment, the employment is terminable at the will of either party and the employee has no cause of action for breach of contract alleging wrongful discharge from employment. The Minnesota legislature and courts have, however, carved out a number of exceptions to the employment-at-will doctrine. The significant exceptions are discussed here.
Title VII of the Civil Rights Act of 1964, amended by the Civil Rights Act of 1991 (Title VII) applies to both private and public employers with 15 or more employees, labor organizations, and employment agencies, but not to certain bona fide private membership clubs. Title VII does not apply to an employer with respect to the employment of aliens outside any State, or to a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.
Among other protections, Title VII prohibits an employer from discharging an employee on the basis of:
See Discrimination for a more detailed discussion of Title VII.
The Pregnancy Discrimination Act (PDA) applies to both private and public employers with 15 or more employees, labor organizations, and employment agencies. The PDA prohibits employers from discharging or otherwise discriminating against employees on the basis of pregnancy. The law requires pregnant women to be treated the same as men or nonpregnant women whose ability or inability to work is due to a nonpregnancy related illness or disability. The PDA does not, however, require better treatment for pregnant women. See Discrimination for a more detailed discussion of the PDA and state and local laws on pregnancy accommodation.
Employer coverage under the Age Discrimination in Employment Act (ADEA) is similar to that under Title VII, except the ADEA only applies to employers with 20 or more employees. The ADEA prohibits an employer from discriminating against an individual with respect to discharge and other terms, conditions, and privileges of employment on the basis of the individual’s age, provided that the individual is age 40 or older. See Discrimination for a detailed discussion of the ADEA.
The Americans with Disabilities Act (ADA) applies to employers who have 15 or more employees. The ADA generally prohibits discrimination and harassment in any aspect of employment, including discharge, applications, testing, hiring, assignments, evaluations, disciplinary actions, compensation, promotions, leave, and benefits. See Disabilities and reasonable accommodation for a detailed discussion of the ADA.
The Family and Medical Leave Act (FMLA) applies to employers that have 50 or more employees. Under the FMLA, the employee is entitled to up to 12 weeks of unpaid leave for the birth or adoption of a child, the employee’s own serious health condition, or to care for a spouse, parent, or child with a “serious health condition.” Certain family members of those in the armed services or National Guard may also be entitled to a leave under exigent circumstances. An employer may not discharge an employee for exercising their rights to leave under the FMLA. See Family and medical leave for a detailed discussion of the FMLA.
The National Labor Relations Act (NLRA) prohibits discrimination, including discriminatory discharge, based on the employee’s exercise of protected concerted activity (including, but not limited to forming, joining or assisting a labor organization). The NLRA applies to most private sector employers, including manufacturers, retailers, private universities, and health care facilities. The NLRA does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act (interstate railroads and airlines).
The Employee Retirement Income Security Act (ERISA) governs all employee benefit plans unless specifically exempted. ERISA prohibits discrimination against employees (benefit plan participants), including discriminatory termination, who exercise rights under ERISA. See Benefits for a detailed discussion of ERISA.
The Uniformed Services Employment and Reemployment Rights Act (USERRA) prohibits discrimination against persons because of their service in the Armed Forces Reserve, the National Guard, or other uniformed services.
Employers generally may not require or request any employee or job applicant to take a lie detector test, or discharge, discipline, or discriminate against an employee or job applicant for refusing to take a test or for exercising other rights under the Employee Polygraph Protection Act (EPPA). See Recruiting and hiring.
Federal laws also preclude employers from terminating or taking adverse actions against certain employees who report fraud and/or illegal acts. Historically, federal laws covering whistleblowing activities focused on safety-sensitive industries. As a result, the Occupational Safety and Health Administration (OSHA) has been assigned responsibility for investigating and adjudicating most of these types of claims. OSHA administers the whistleblowing provisions of numerous federal statutes protecting employees who report violations of various laws, including the following:
More information on federal whistleblower programs from OSHA’s Office of Whistleblower Protection Program is available at:
The Consumer Product Safety Improvement Act provides a process by which employees of manufacturers, private labelers, distributors, or retailers can seek relief for discrimination or retaliation. Employees are protected in reporting violations, testifying, assisting in proceedings, or objecting to performing tasks that they reasonably believe violate the law. Although such claims are initially filed with OSHA, if OSHA does not issue a final order within 210 days, the employee can file a civil lawsuit in federal court.
Most recently, whistleblower protection has been extended to a broad range of employees in financial services industry according to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by former President Obama on July 21, 2010. This law allows covered employees to sue in court if their employer retaliates against them for reporting fraud or unlawful conduct related to consumer financial products, and also creates a private right of action for employees who are retaliated against for activities such as providing information to assist the Securities and Exchange Commission (SEC) in its administrative or judicial investigations and/or for making required disclosures according to the Sarbanes-Oxley Act. Employees who provide “original information” to the SEC that results in a successful enforcement action that exceeds $1 million can also receive a bounty of up to 30% of the government’s recovery. Regulations issued by the SEC to implement these procedures took effect on August 12, 2011 and are available at:
The healthcare overhaul legislation passed in 2010 also contains significant whistleblower protections. The legislation protects workers who report or help government authorities to investigate possible violations of the Patient Protection and Affordable Care Act. Crafted as an amendment to the FLSA, this provision allows employees to obtain a jury trial. Employees also are protected from any form of discrimination or retaliation if they decline to perform tasks that they “reasonably believe” violate the law. This provision is not limited to the healthcare or insurance industries and appears to apply to all employers.
There are more than 30 federal and state statutes that provide similar protections for activities ranging from serving as a whistleblower to incurring a wage garnishment for one indebtedness or refusing to drive an arguably unsafe truck to suffering from Black Lung disease. The range of statutory protection is so broad that every discharge should be evaluated to ensure that an inadvertent violation does not occur.
An employee who has entered into a written employment agreement or an express oral agreement that specifically limits the circumstances under which the employment may be terminated may bring a claim for breach of contract if the reasons for termination do not fall within those permitted by the contract. In these situations, the employees commonly assert that the employer did not have good cause (as defined by the contract) to terminate their employment.
Even if an employer has not entered into a written or oral contract of employment for a specified length of time with an employee, Minnesota courts may still find that an implied contract of employment for a specified length of time has been established. This may occur if written material published by the employer evidences an intention to create employment other than at-will. An implied contract of employment for a reasonable period of time can, in some limited circumstances, also be established by oral statements or in circumstances when the employee gives up extraordinary compensation, such as by giving up a business or forcing a spouse to do so to accept employment. Statements such as “You can expect to work here until you retire,” or “You will have a job here as long as you do a good job,” have been held by courts to be legally insufficient to modify the at-will relationship.
As outlined in more detail in Discrimination, the Minnesota Human Rights Act (MHRA) prohibits discrimination on the basis of race, color, national origin, sex, disability, or sexual orientation. Accordingly, every Minnesota employer must take care not to consider these prohibited categories when making termination decisions.
An employer may not discharge, discipline, or otherwise penalize an employee who is absent from employment for the purpose of attending a judicial proceeding in response to a subpoena, summons for jury duty, or other court order or process that requires the attendance of the employee at the judicial proceeding.
Minnesota employers are required by law to give employees paid time off work to vote in the following types of elections:
In addition to providing the paid time off work to allow employees to vote in these types of elections, Minnesota employers cannot require employees to use their personal leave or vacation time for the time necessary to vote. Employers also cannot instruct employees as to when during work hours the employees may be excused to vote; the employees get to determine when they vote in these elections. However, employers can request that the employees provide notification as to when they will be gone to vote and further request (but not require) that employees coordinate their absences in order to minimize the adverse impact that voting absences will have on the workplace. A violation of any provision of these requirements is a misdemeanor under Minnesota law.
Employers can choose to provide paid time off to allow employees to vote in other types of elections as well, but that decision is left to the employer’s discretion.
An employer may not discharge, discipline, or otherwise penalize an employee who is absent from employment for the purpose of attending a judicial proceeding as a victim of or as a witness to a crime or as a member of a crime victim’s family.
Minnesota law prohibits firing an employee for filing a workers’ compensation claim. See Workers’ compensation.
Although under the employment-at-will doctrine an employer may legally terminate an employee for good reason, bad reason, or no reason at all (so long as that reason is not unlawful or in breach of a contract), the employer will be in a much better position to defend any challenged termination decision if it takes certain precautions prior to the decision to discharge.
Should a termination decision be challenged, it is important that an employer has established written work policies and/or rules that support the basis for the decision to terminate. Rules and policies that are both clearly communicated and consistently applied are critical to the defense of an employment claim. See Policies and procedure manuals for a discussion about workplace rules.
Any decision that is based on incomplete or inaccurate facts will be suspect, not only by the employee but also by a jury. Therefore, it is important for management, preferably an outside, objective party such as human resources, to conduct a fair and prompt investigation, interview people with knowledge of the facts, meet with the employee and hear the employee’s version of events, and make a written record of the investigation. See Workplace investigations for a detailed discussion of how to plan and conduct an investigation.
As stated previously, wherever possible, it is important to involve human resources personnel (or, if none, senior management) at all stages of discipline and/or termination. Supervisors should contact human resources whenever a problem with an employee arises. Meetings to discuss the employee’s disciplinary problems or to terminate the employee should always include at least one representative from human resources (or, if none, senior management) to act as a witness and consultant in the process to serve as a witness in the meeting and to prepare or review a factual record of the meeting.
It is vital for employers to be consistent in their treatment of employees. Management should determine what the employer’s past practice has been in situations similar to the one at hand and consider whether the employee is being treated the same as other employees in similar situations. If not, can the different treatment be adequately justified? Some things to consider are the employee’s length of employment, position held, performance and disciplinary history, and other special circumstances that might distinguish the current situation.
The decision to terminate the employee should be evaluated and confirmed by any higher level executive charged with responsibility of terminating the employee upon the recommendation of lower-line management, as well as a human resources employee (or, if not, senior management). Senior management should be cautious that they are not being used to provide a neutral face on what might be discrimination or retaliation by a lower level supervisor.
Before making any decision to terminate, the employer should consider the state and federal laws prohibiting discrimination and evaluate whether the decision could trigger a potential employment discrimination claim or some other legal proceedings. The employer should take into account – at minimum – the following issues:
Accurate documentation of employee performance issues and/or discipline leading up to an employee’s discharge is also essential to the defense of any discharge decision. Written documentation generally is perceived as being true and accurate compared to recollections of witnesses. As such, all significant employer actions, including performance evaluations, disciplinary warnings, probationary periods, and performance improvement plans should be documented and retained in the employee’s personnel file.
An employer has a greater chance of prevailing when a termination decision is challenged if the documentation of the employee’s performance and/or conduct supports the decision to terminate.
Terminating an employee is a delicate undertaking in the best circumstances. It is important that the employee understand the reasons for the discharge. Ideally, a representative of human resources (or, if none, senior management) should be present at the meeting in which the employee’s manager communicates the discharge decision. Someone who attends the discharge meeting should document carefully the reason provided to the employee for the discharge and any response by the employee.
The termination meeting should be short and to the point, and the decision to terminate should be conveyed unemotionally and candidly. The employer should not try to soften the blow by complimenting the employee on other areas of performance, because this sends mixed messages to the employee. The employee should be treated with dignity and respect at all times, particularly because employees who feel they were treated unfairly in the termination process are more likely to file a claim for wrongful discharge.
Employers should keep in mind the following points when conducting a termination meeting:
Most companies with union contracts have provisions limiting their ability to terminate an employee to situations in which “just cause” exists. Over the years, labor arbitrators have interpreted this vague concept by identifying what employers must show to have their decisions upheld. The most famous of these has been the seven tests of just cause articulated by Professor Carroll Daugherty back in 1966. Although they are not legally binding, in the interest of promoting healthy workplace morale, even nonunion employers may want to consider whether a proposed termination meets the following tests:
Not all labor arbitrators accept these tests and there are certainly numerous times when discharge decisions have been upheld in a unionized context when all seven tests have not been met. But because every discharge decision might wind up in front of a jury some day, these are important principles to keep in mind to judge whether a particular termination will pass a fairness test.
If the employer believes the employee may file a claim following the termination or if there is an ongoing dispute between the employer and employee at the time of termination, it may be in the employer’s best interest to enter into a separation agreement that contains a release of liability from the employee.
In a separation and release agreement, the employer agrees to provide some additional consideration (usually in the form of monetary compensation) in exchange for the employee’s agreement to release the employer from any claims the employee might have that arose during employment with the employer. A release must be knowingly and voluntarily entered into to be enforceable. This means that the employee must understand that the employee is releasing certain specific causes of action that they may have after termination and they are signing the release without coercion or duress.
Although Minnesota does not have such a statute, some states, such as California, have laws requiring that specific language be included in a release to make it effective for certain types of claims. Therefore, it is important to include language in any release that will meet the legal requirements of the jurisdiction whose law will govern. Additionally, the Older Workers’ Benefit Protection Act requires the ADEA to be specifically mentioned and also requires, among other things, that the employee be given a period of time to consider the release, consult an attorney, and revoke the release after execution. See Discrimination for a more thorough discussion of the ADEA.
Separation and release agreements should always be prepared by the employer’s attorneys. If these documents are not carefully drafted, they can prove to be ineffective to protect the company and may have disastrous tax consequences for the affected employees. Under the deferred compensation rules pursuant to Section 409A of the Internal Revenue Code, if a severance agreement is not properly written, taxpayers can be forced to pay a 20% excise tax, recognize taxable income early (even if it is never paid to them), and have to pay interest from the time that the deferred compensation vested.
In the wake of the #MeToo movement, there have been a number of developments that impact the settlement of termination claims where allegations of sexual harassment may be at issue.
On the federal level, the Tax Cut and Jobs Act prevents an employer from claiming a tax deduction for any settlement related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement. The law also prohibits a tax deduction for attorneys' fees related to such a settlement or payment. As a result, when crafting a separation agreement for a terminated employee, care must be taken to either by dropping any nondisclosure provision or by taking steps to avoid any language that suggests or implies that any payment is linked to a sexual harassment allegation. Moreover, because the IRS has yet to clarify whether the restriction applies to general releases and waivers, such as those commonly entered into as part of routine severance agreements, employers should seek specific legal counsel before including confidentiality provisions in their separation agreements.
A number of states have also acted to ban nondisclosure provisions in settlements involving claims of sexual assault, harassment or discrimination based on sex. The California statute, the first of a raft of #MeToo-inspired laws, took effect on January 1, 2019. While Minnesota has not yet adopted such a law, employers operating across multiple states need to make sure that they comply with the evolving laws applicable to their situations.