A recent Wall Street Journal survey on how small business owners are coping with the new healthcare law found that almost a third of those surveyed (29%) have been forced to make staff cuts.

Unstable market conditions and economic pressures can force a business to dismiss or lay off employees, and employers should be aware of what constitutes wrongful termination so they don’t find themselves facing unnecessary litigation.

Here are some situations where a wrongful termination suit could be on the horizon if an employee:

Has a written contract.  Every state recognizes “at-will” employment — meaning that employers can terminate employment without cause – but some states place limitations on it.  In addition, employees that have a written contract do not fall under the “at-will” classification.

Has an implied contract.  If an employer says or does anything that implies that a contract exists between the company and an employee, this can nullify the “at-will” status of the employee.

Is treated unfairly.  If an employer can be found to have acted unfairly in the treatment of an employee, a claim could be brought for breach of good faith.

Can claim retaliation.  If an employee is dismissed in retaliation for any action he or she takes against the company, this can result in litigation.

Qualifies as a whistleblower.  There are federal and state laws that protect employees who report employers for breaking any laws that could cause public harm.

Has a defamation claim.  If an employer is found to have taken actions or made comments that damage an employee’s reputation, the employee can sue on defamation grounds.

Is a victim of fraud.  An employee who can prove that an employer has purposely acted in a deceptive manner can claim fraud.

We help business owners avoid costly legal disputes by crafting employment agreements and procedures to ensure you comply with state and federal law.  To learn more about our personal approach to business planning, contact a Family Business Lawyer™ today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.