The Cost of a Wrongful Termination

When an employee is terminated from a job against their wishes, they are likely to be upset about it, even if the employer has justifiable reasons for letting them go. The employee may feel like they have been treated unfairly, or blamed for something that they couldn’t have prevented. Employees are capable of suing their former employer for wrongful termination if they believe that they were fired for an illegitimate reason such as age, religion, gender, race, sexual orientation, sexual harassment or retaliation.

In one example of a costly wrongful termination claim, after an employee reported multiple incidents of repeated sexual harassment by a supervisor, they alleged that the supervisor then began a “campaign” to force the employee to resign from the company. The jury agreed with the allegations and awarded the plaintiff $210,000 for mental anguish, $330,600 in lost income and $1,956,240 in attorneys’ fees, for a total judgement of nearly two and a half million dollars.

In another scenario, a jury awarded damages of $1,000,000 to a terminated employee after they sued a privately-owned service company for wrongful termination and breach of employment contract, as well as an implied covenant of good faith and fair dealing. Attorneys’ fees for the case totaled $65,000.

Regardless of who wins a wrongful termination lawsuit, the cost of defending against an employee’s claims can be damaging to a business, while typically costing the employee little to nothing. Once a claim is filed with the Equal Employment Opportunity Commission (EEOC) by the employee, the employer immediately has to retain an attorney to assist them in preparing their response to the claim.

Wrongful termination lawsuits are among the most damaging and difficult employment lawsuits to defend and can set a company back anywhere from a few thousand dollars to millions of dollars in attorney fees, judgments and settlement costs. Judgments can include compensating the employee for; lost pay, loss of benefits, emotional distress or mental anguish, punitive damages and of course, attorney fees and court costs.

One way employers can relieve some of the cost of a wrongful termination is by securing a comprehensive employment practices liability insurance policy with an adequate coverage limit. The cost of a liability insurance policy can be dependent on a number of factors, such as the amount employees and past legal actions taken against the business, but even a more expensive policy is better than the risk of having to defend a wrongful termination case without any coverage at all.

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