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When Does Termination Become Wrongful?

Written By: John Poole on December 10, 2009 166 Comments

The “Great Recession” has been a godsend for some companies that were looking for a rfiredeason to get rid of people they just didn’t like, but didn’t have a good enough reason to fire.  They could just lay them off due to lack of work and blame it on the economy.  It’s like a get out of jail free card for companies that feel they made a bad hiring choice or aren’t getting what they think they deserve out of a particular employee.  It’s so much easier than confronting the employee and collectively working toward improvement.  The question is if this should be allowed, or if there should be something stopping companies from discarding employees even though they have plenty of work. 

I was one of the unlucky folks laid off during this little dip in the economic cycle.  But surprisingly, the hardest part of it was not getting canned, but rather the fact that I didn’t have a network of contacts built up in the area to call upon when I was looking for work.  I moved about two thirds of the way across the country to take the job and was then discarded after 11 months.  This didn’t leave me much time to build my professional network, as they like to say.  Without knowing anyone in the area, I was like the bastard child at the family reunion when I went out looking for work.  If you are one of those legitimate kids in the family, trust me, it’s not a good feeling.  

I didn’t think it was fair to lure someone to your company with a high salary, promise them economic downturn mitigation, kick their butt for 11 months, make a ton of profit, and then dump them on the sidewalk.  But really, who’s stopping them?  If that is the strategy that makes them the most profit, why would they not do it?  It certainly won’t be morals, ethics, or genuine concern for the well-being of others.  

I decided to get a fresh, but sometimes cynical, perspective on this at the chat forum Contractor Talk.  The responses ranged from, “Times are Tough” to, “Stop playing the virgin that got felt up on prom night” and “Wow, talk about entitlement”.  Nobody was overly sympathetic, however, I wasn’t expecting a strong does of sympathy.  Rather, I was trying to get an outsider’s perspective of the situation. 

My biggest issue was that even though they said I was laid off due to lack of work, I was actually fired for reasons that I am unaware.  I had a six month performance review written into my offer letter that was never given to me even after following up at the six month mark.  If there were performance issues, they definitely should have communicated the issue and given me the opportunity to make corrections. 

My biggest mistake in the whole deal was not getting a severance package written into the contract.  This would have kept them from hiring me if they thought I wasn’t going to make it anyway, and it would have also kept them from firing me just to save a buck in the short term.  Of course you couldn’t get that now, but back in the go-go days of early 2008, you probably could. 

I think that there should be some kind of monetary punishment for companies that lay off a lot of people.  The small incremental increase in unemployment insurance premiums just isn’t enough.  So what they do is hire a bunch of people and then fire, ahem, lay-off those they don’t like.  It’s like they’re trying to build an army of gladiators or something.  I think there should be a tax for laying off employees which is proportional to how much profit a company makes that year.  I’d love to see that one get pushed through Congress.

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Tags: Construction blog, Construction Economics, John Poole, termination, wrongful

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166 Responses to “When Does Termination Become Wrongful?”

  1. Janet Palma says on: 11 December 2009 at 11:00 am

    John,
    You sound just like me and just like me a similar “lay-off” occurred, then to add insult to injury, the company hired someone to take my place about 3 months later. Now that person wants to connect to me on LinkedIn. Hmmm…call me grumpy, but I don’t think so. I agree that there should be some penalty, but in the consulting world, who would enforce that?

    Janet

  2. Michael says on: 11 December 2009 at 11:48 am

    Why is the answer to everything more taxes?????

  3. David Hronek says on: 11 December 2009 at 12:56 pm

    I too had a similar experience as you. I was hired by the Atlanta architectural firm that laid me off as a strategic hire in July 2008. Lay-offs began about three weeks after my start which should have been the first red flag. The second red flag occured right after Thanksgiving 2008 when 90 people were let go. I was lucky to have survived that and a pay cut in February 2009. But my luck ran out March 31, 2009 after a lot of work and long hours on two projects that I helped wim for the firm in that time. My disappointment was in the fact that had they been more honest about their work load (and we all know firms forcast backlog months in advance), I may not have accepted the offer as in 2008 I still had other possibilities. Now I have been out of work of the past 8 months in an environment where about 60% of architects are out of work. I like the idea of a severence clause in any letter agreement should I be hired again. Just not sure how enforceable it would be should a firm agree to it. Many firms are “at will” employers meaning they terminate anyone at will.

  4. John Poole says on: 11 December 2009 at 1:28 pm

    Janet, the only one that could enforce it are the lawyers threatening lawsuits and/or the taxman.

    Michael, it’s because people are too greedy and have no moral or ethical boundary. If there isn’t financial incentive to do something, they won’t do it.

    David, I think if the severence clause was clearly written in the offer letter to pertain to any termination for any reason, it should be enforceable.

  5. not telling says on: 11 December 2009 at 1:50 pm

    I don’t get what any of this has to do with taxes.

    Most of the world has far far more restrictions on employers, and somehow those companies manage to stay in business, make a profit, and even go toe-to-toe with American competitors. So obviously the burdens their employment laws place on employers is not hurting them too much.

    For most of Europe, when an employer decides to let someone go, whether that be for performance reasons or for economic reasons, they have to first go through months of performance improvement attempts first, and have measurable lack of improvement to continue on with terminating employment.

    If the reasons are purely economic, employers have to give months of notice to a worker before that person can be let go (‘made redundant’ they call it, and it sounds so much nicer) and usually provide a much healthier severance package that aid the worker’s transition to a new job. Usually if an employer is making someone redundant they must make a concerted effort to find that person a new job–interview them for other openings in the company, provide a positive written reference for outside jobs, give them time to attend interviews, etc.

    None of this prevents an employer from letting a person go when they need to nor does it increase taxes. What it does do is make the while job market more stable. Instead of swinging wildly from hiring sprees to mass layoffs as American employers do, European employers must be careful and considered in their decision making. They must plan for the future and think about more than just today’s stock market closing.

    Their employment laws recognize that it is not business that runs their economy or their modern society, but their workforce. And if they want a stable economy and a stable society, they need a stable workforce.

  6. Perry says on: 11 December 2009 at 6:18 pm

    Severance: unfortunately when the small development firm I worked for downsized I did not receive a severance. I worked there close to two years and was doing an outstanding job. My lesson learned is that, although awkward, prior to accepting an offer of employment all terms of the employment contract need to be negotiated and documented.

    “Unlucky” – if you were terminated I wouldn’t necessarily view yourself as “unlucky”. Construction, development, and closely related industries are highly cyclical. It’s no surprise that there is added risk in a cyclical business and that when the cycle slows layoffs and decreased earning potential is expected.

  7. Mark Buckshon says on: 12 December 2009 at 11:34 am

    John, well perhaps in your early days of self-employment you are experiencing things from the other side of the fence: Starting (and staying in) business can be a challenge and sometimes you need to be tough as nails to do it.
    Everything, of course, has its trade offs. Jurisdictions which mandate workers’ protection, severance notice and the like, often also provide a degree of security for the new self-employed person and ironically, in higher-tax jurisdictions like Canada, it is actually easier to start a business than in the U.S. (We can still claim many business expense tax deductions which are of greater value here, and public health insurance certainly lowers the risk and cost).
    Nevertheless, I would argue that the employee has a responsibility to negotiate the best and most reasonable contract, and to know the rules of the jursidiction where he or she is working.
    Employers have a responsibility — obligation to be fair — but I can tell you of horror stories where bad and incompetent employees have held businesses up for ransom because the employer didn’t understand the severance rules and provisions (which can be very generous in Canada, if you don’t set a proper contract.)
    Is there a fair place in the middle? I suppose so. I’ve learned to study the rules of the jursidictions where I have business and check with qualified counsel before going anywhere. So, yes, I fired a Virginia employee without notice — though she should have “known” that she was on the way out. And in Canada, I insist employees sign contracts which give them the bare legal minimum of severance — but they know this before they start.

  8. John Poole says on: 13 December 2009 at 5:21 pm

    Mark,

    I think you’re correct. There is a happy medium and I think that medium can be reached with the regulations the US has in place however, the owners/execs must be descent people that aren’t going to screw you over just to make a quick buck. Do those people still exist? I’m not so sure anymore.

  9. CTYankee says on: 15 December 2009 at 10:19 am

    John Poole,

    What are you whining about? You were offered a well paying position, you took it, and you’ve got the nerve to complain?

    If you’re good I can assure you that you would not have been let go!!!

    I’ve contracted for 2/3rds of my professional life. Never been let go for cause, always the last guy out the door when lots of *employees* have been given the axe. But I usually wrap when the contract is ***done*** finito, complete, delivered on time and under budget! That’s about 9 months on average (median) 11 months means the employer has sloppy controls in place.

    As an employer, a strong contractor is worth his weight in *GOLD* — I’ll do whatever it takes to keep a strong contractor busy, and I’ll lay-off or *fire* a weak one with little hesitation.

    No matter the economic conditions it makes little sense to pay workers for low quality or low productivity. If that hits close to home the only advice I can offer is: Step up your game!

    Support the FairTax!

  10. John Poole says on: 15 December 2009 at 10:50 am

    CTYankee,

    If I was a contractor with the expectation of being let go when the work ran out, I would not be complaining at all. But full-time employees are expected to stay with their employers. Are employers not expected to reciprocate.

    I think you have to think about your definition of strong and weak employees and realize that there is not an absolute definition for either, regardless of how nice it would be, if there was.

  11. Ryan H. says on: 18 December 2009 at 7:33 am

    This comment is for employers…

    Cases like John’s where the employee feels they have been wrongfully terminated happen all the time. Employees are rarely able to rationalize why they were let go. Instead they complain, find a lawyer, and sue.

    It is in cases such as these that as an employer you have Employment Practices Liability. Standard General Liability does not cover such a lawsuit frivilous or not. For more information on Employment Practices check this out: http://www.ryanhanley.com/2009/09/04/small-business-respect-employment-practices-liability/

    Thanks,

    Ryan H.

  12. patrick says on: 25 May 2012 at 10:04 am

    Taxing companies that lay off employees would not work out. For big business everything is about the bottom dollar. It is sad. The manager that hired and fired you is more concerned about the business making a few extra dollars than the livelihood of you and your family.

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