Wrongful Termination: When Should You Talk to a Lawyer?

Find out what wrongful termination is, what kinds of damages you can receive, and when you should consider consulting with an employment lawyer.

Updated by , J.D. · University of Missouri School of Law

If you've recently been fired or laid off, you may be wondering whether you have any legal claims against your employer. Many fired employees don't: Because employees are generally presumed to work "at will," they can quit at any time, and they can be fired at any time, for any reason that isn't illegal.

So, for example, an employee who is fired for poor performance, attendance problems, or misconduct -- or even for just being a poor fit or "not working out" -- generally won't have any recourse against their employers.

This doesn't mean that every firing is legal, however. Even at-will employees can't be fired for discriminatory reasons, in retaliation for reporting harassment or other wrongdoing, or because they exercised a legal right, for example. In this situation, an employee should consider consulting with an employment attorney.

What Is Wrongful Termination?

Wrongful termination is a catchall category that refers to any illegal reason for firing an employee, such as:

  • Discrimination. It's illegal to fire an employee because of race, color, national origin, religion, sex, disability, genetic information, or age (if the employee is at least 40 years old); state and local laws often protect additional characteristics, such as marital status, sexual orientation, and gender identity.
  • Retaliation. An employer may not fire an employee because the employee complained of illegal behavior, such as harassment, discrimination, workplace safety concerns, wage and hour violations, and so on.
  • Violation of public policy. In many states, it's illegal to fire an employee for reasons that most people would find morally wrong. For example, an employee who is fired for exercising a legal right (such as the right to vote), refusing to commit an illegal act (such as lying to government auditors or mislabeling company products), or reporting wrongdoing (such as accounting fraud) may have this type of legal claim.

In addition, an employee may have a claim for breach of contract. Not all employees work at will. If an employee has a contract agreeing that the employee may be fired only for certain reasons (such as committing financial malfeasance or gross misconduct), the employer may fire the employee only for those reasons. Otherwise, the employee may have a claim for breach of employment contract.

Damages for Wrongful Termination

When an employee sues for wrongful termination, the damages available depend on the employee's legal claims.

Breach of Contract

If an employee has a contract limiting the employer's right to end the relationship, the employee can sue for breach of contract if the employer fires the employee in violation of the agreement.

Example. John has a two-year contract with his employer stating that he can be fired only for committing a crime or gross misconduct. His employer fires him after only one year for poor performance. John has a claim for breach of contract.

When an employer loses a breach of contract lawsuit, it can be ordered to pay what the employee was entitled to under the contract. If, for example, an employee is fired after the first year of a two-year contract, the employee is entitled to the remaining year of pay, as well as any benefits the employee would have received during that time.

However, an employee who sues for breach of contract has an obligation to minimize ("mitigate," in legal terms) these damages by looking for other work. The employee can't simply sit out the year on the sofa, collecting a paycheck.

The employee's ultimate measure of damages will be what the employer owed under the contract less what the employee actually earned (or should have earned) from other work.

Example. Bob has a one-year employment contract, and is paid a monthly salary of $10,000. Bob is fired, in breach of the contract, after nine months.

He spends a couple of months looking for a new job, and finally has to accept a position that pays only $6,000 per month. Bob's damages are $24,000: two months of full pay while he looked for work, and one month of pay for the difference between his old salary and his new salary.

If Bob did nothing to find a new job, the judge or jury would have to decide whether he could have found other work. If so, his damages will be reduced by the amount he should have earned by taking another job.

Employment Discrimination

An employee who wins a discrimination lawsuit is entitled to these damages, for most types of discrimination:

  • back pay (for the wages the employee has already lost by the time of a lawsuit judgment)
  • front pay (for wages lost from the date of the lawsuit judgment until the date the employee is reinstated to his or her former position; if the employee can't be reinstated, these damages might continue until the employee finds new work)
  • the cost of health insurance and other benefits the employee would have received if still employed
  • court costs and attorneys' fees
  • injunctive relief (a court order requiring the employer to take or stop taking certain actions, such as an order to reinstate the employee or stop using discriminatory criteria for deciding whom to lay off)
  • compensatory damages (for out-of-pocket expenses caused by the discrimination, such as job search costs or medical bills, as well as pain and suffering), and
  • punitive damages (to punish the employer for wrongdoing).

Legal Limits on Compensatory and Punitive Damages

Federal law caps these last two categories of damages. Together, they cannot exceed an amount from $50,000 to $300,000, depending on the size of the employer. Some states also cap these damages; others don't.

If an employee sues under a state law that doesn't impose a cap, these damages are unlimited, which can result in multi-million-dollar awards.

Federal Limits on Age Discrimination Damages

Under federal law, the damages available for age discrimination are different. Compensatory and punitive damages are not available to employees who win age discrimination claims.

However, employers may be subject to a penalty (called "liquidated damages") equal to the back pay award, if the employer knew its conduct was illegal or recklessly disregarded that possibility. Again, state laws may allow for different damages.

Violations of Other Statutes

Some laws prohibit employers from firing employees for exercising certain rights under the labor laws. For example, the Family and Medical Leave Act (FMLA) doesn't just give employees the right to take time off work; it also prohibits employers from firing employees who take advantage of this right.

Similarly, employees may not be fired for reporting an OSHA violation, making an overtime claim, or filing for workers' compensation.

In these situations, the employee's damages for wrongful termination are set out in the statute.

When to Consider Talking to a Lawyer

If the circumstances of your firing suggest that it might have been illegal, you may want to consult with an employment lawyer. A lawyer can help you think through what you want to do (if anything) to assert your rights. For example, you might want to try to negotiate a severance package, demand a settlement, or file administrative charges or a lawsuit against the employer.

On the other hand, you may decide it makes more sense just to move on. But the only way to know for sure how strong your claims are and what options you have is to talk to a lawyer.

Here are some situations that should prompt you to consider getting legal help:

  • Statements or actions suggest that you were fired for discriminatory reasons.
  • You recently revealed that you have a protected characteristic (for example, that you have a disability or are pregnant).
  • You recently filed a complaint of discrimination or harassment.
  • You recently complained of other workplace wrongdoing, such as workplace hazards or shoddy accounting practices.
  • You recently exercised a legal right, such as voting or taking Family and Medical Leave.
  • Your firing changed the demographics of your workplace (for example, because you are the only woman in your department or the only manager who isn't white).
  • You are just shy of vesting or receiving certain benefits, such as vesting stock options or collecting retirement money.
  • You have an employment contract limiting the employer's right to fire you.

In any of these situations, your firing may have been illegal -- or it may not. An attorney can help you sift the facts, sort out your claims, and decide how to proceed.

Waiver or Release of Claims

It's especially important to consider a legal consultation if you are asked to sign a waiver or release of claims, in which you give up your right to sue the employer. Many employers require employees to sign this type of agreement as a condition of getting severance (or getting a better severance package).

Once you sign a release, it's very difficult to undo -- even if you later discover that you have valuable legal claims against the company. Before you sign, you'll want to know what claims you're giving up and what they might be worth.

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