Legal Pitfalls in Employee Termination

10/27/2025

Employee terminations can go from routine to risky fast. Whether it’s an ADA-protected employee, an FMLA leave situation, or a policy enforcement issue, the smallest mistake can lead to wrongful termination claims or EEOC investigations. HR professionals need to know the legal steps, documentation standards, and timing rules that keep a termination compliant and defensible. This guide breaks down the most common legal pitfalls in employee termination — and how to prevent them.

Why Employee Termination Carries High Legal Risk

Terminations are consistently one of the most litigated areas of employment law. A wrongful termination lawsuit can arise from a seemingly straightforward decision if proper procedures are not followed. The primary sources of risk often boil down to poor documentation that fails to support the business reason for the termination or inconsistent policy application that suggests discriminatory motives.

The complexity is magnified by the web of overlapping laws. Protections under the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and state Workers’ Compensation laws can shield an employee from termination under certain circumstances. A decision that appears valid on its face could be illegal if it interferes with an employee's protected rights. Furthermore, navigating the differences between federal and state termination laws—from final pay requirements to protected classes—adds another layer of compliance complexity that can easily trip up even seasoned HR professionals.

Common Legal Triggers That Lead to Wrongful Termination Claims

While every termination case is unique, most wrongful termination claims originate from a few common fact patterns. Understanding these triggers is the first step toward mitigating risk.

Retaliation and Discrimination Risks

Timing is everything. A termination that occurs shortly after an employee engages in a protected activity will almost always be viewed with suspicion by regulatory agencies and courts. Protected activities include filing a complaint about harassment, requesting FMLA leave, asking for reasonable accommodation under the ADA, or reporting a safety violation. Even if the termination is for a legitimate reason, the proximity in time can create an inference of retaliation that is difficult to overcome without airtight documentation.

ADA and FMLA Missteps

A significant portion of wrongful termination claims stem from failures to comply with the ADA and FMLA. A common error is terminating an employee at the end of their FMLA leave without first considering if additional unpaid leave could be a reasonable accommodation under the ADA. Similarly, firing an employee for performance issues without exploring whether an underlying disability is contributing to the problem can lead to a failure-to-accommodate claim. These laws require a thoughtful, interactive approach, not a rigid, one-size-fits-all termination policy.

Inconsistent Policy Enforcement

Applying company policies unevenly is a direct path to a discrimination claim. If an employer fires one employee for an infraction but only issues a warning to another employee for the same offense, it invites the question of why the two were treated differently. If the disciplined employee is in a protected class (based on race, gender, age, disability, etc.) and the other is not, it can be used as powerful evidence of discriminatory intent. Consistency is the bedrock of a legally defensible termination process.

Step-by-Step Legal Review Before Any Termination Decision

A termination decision should never be made in a vacuum. A thorough, multi-step review process is essential to ensure the decision is legally sound, fair, and defensible.

Step 1 — Review the Employee’s History

Pull the employee’s complete file. Review all performance evaluations, attendance records, prior disciplinary actions, and signed policy acknowledgments. Does the documentation paint a clear and consistent picture that aligns with the stated reason for termination? A termination for "poor performance" will be difficult to defend if the employee’s last two performance reviews were positive. The paper trail must support the narrative.

Step 2 — Confirm Compliance With Federal and State Laws

Cross-reference the employee’s situation against key federal and state laws. Has the employee recently taken FMLA leave or requested an accommodation? Have they filed a Workers’ Compensation claim? Are they part of an ongoing HR investigation? Answering these questions helps identify potential legal protections that may be in play. This step is critical for spotting retaliation risks before they materialize.

Step 3 — Conduct a Legal Risk Assessment

Before making a final decision, work with senior HR leadership or legal counsel to conduct a risk assessment. Present the facts, the supporting documentation, and any identified red flags. This collaborative review provides a crucial second opinion and helps ensure that all legal angles have been considered. This is particularly important for any termination involving an employee in a protected class or one who has recently engaged in protected activity.

Documentation: Your Strongest Legal Defense

In a wrongful termination lawsuit, the employer's documentation is often its most important witness. Clear, consistent, and objective records are the best way to prove that a termination was for a legitimate, non-discriminatory reason.

Your documentation should show a history of addressing the issue with the employee. This includes records of verbal coaching, written warnings, and performance improvement plans. Where possible, include the employee’s signature acknowledging that the conversation took place (even if they disagree with the content).

When writing documentation, stick to the facts. Avoid using subjective, emotional, or conclusory language. Instead of writing "John has a lazy attitude," describe the behavior: "John missed the project deadline on three occasions (October 15, October 22, and October 28) after being given multiple reminders." Factual language is credible; personal judgments are not.

Managing the Termination Meeting Professionally

The termination meeting itself is a high-stakes interaction that must be handled with care and professionalism to minimize legal risk.

Prepare Talking Points and Evidence

Plan the meeting in advance. Prepare a concise, factual script that states the reason for the decision and references previous warnings or discussions. The decision should not be a surprise to the employee. Stick to the script and avoid being drawn into a debate or lengthy argument. The decision is final, and the purpose of the meeting is to communicate it, not to negotiate it.

Include a Witness or HR Representative

Whenever possible, a second company representative, typically from HR, should be present during the termination meeting. This person serves as a witness to what was said and how the meeting was conducted. Their presence can help refute any later claims that the meeting was handled improperly or that inappropriate statements were made.

Keep Emotions Neutral

A termination meeting is difficult for everyone involved. It is essential for the manager and HR representative to remain calm, professional, and composed. An emotional or hostile tone can be used later as evidence of personal animus or retaliatory intent. Expressing empathy is appropriate, but the delivery of the news must remain professional and direct.

Post-Termination Considerations That Affect Compliance

The compliance obligations do not end when the employee walks out the door. Several post-termination steps must be handled correctly to avoid further legal trouble.

First, ensure that the employee’s final paycheck is issued in accordance with state law. Some states require final pay to be provided on the day of termination. Confirm the correct payout of any accrued but unused vacation or paid time off, as this is also governed by state law.

Next, provide the required notices for benefits continuation under COBRA. Review your company policies regarding references to ensure a consistent and neutral approach. Finally, document the secure return of all company property (laptops, keys, ID badges) and the immediate termination of the employee's access to all company systems and accounts.

ADA and FMLA Overlap in Termination Decisions

The intersection of the ADA, FMLA, and termination is one of the highest-risk areas for employers. A decision to terminate an employee for attendance issues or inability to perform their job is extremely dangerous if medical leave or accommodation issues are in play.

Terminating an employee while they are on approved FMLA leave or while an ADA accommodation request is pending is a significant red flag for retaliation. Before terminating any employee for medical-related reasons, you must evaluate whether additional unpaid leave or a reassignment to a vacant position could be a reasonable accommodation under the ADA. Because of the complexity and high stakes, it is always a best practice to consult with legal counsel before finalizing a termination decision involving medical absences or restrictions.

How to Reduce Future Legal Exposure in Terminations

The best way to defend against a wrongful termination claim is to prevent it from happening in the first place. This requires a proactive, systemic approach to risk management.

Start by training all supervisors on how to recognize legally protected situations and when to escalate issues to HR. Managers are your first line of defense, but they can also be your biggest liability if they are not trained to spot FMLA or ADA triggers.

Standardize your termination process with checklists and formal sign-off procedures. This ensures that every termination goes through the same legal review process, promoting consistency and reducing the chance of error. Finally, schedule periodic audits of your termination practices and documentation with your HR compliance team or outside counsel to identify and correct any systemic risks.

Real-World Examples of Costly Termination Mistakes

• Example 1: ADA Violation. An employer terminated an employee whose performance declined, without ever discussing the employee's known disability. The EEOC found that the employer failed to engage in the interactive process to see if an accommodation could have helped, resulting in a six-figure settlement.
• Example 2: Retaliation Claim. An employee was fired for "restructuring" two weeks after filing a formal harassment complaint against their supervisor. The timing created a strong inference of retaliation, and the company was forced to settle the claim for a substantial sum.
• Example 3: FMLA Timing Error. A company terminated an employee on their 13th week of leave, assuming their FMLA protection was exhausted. However, due to a miscalculation, the employee still had two days of protected leave remaining. The court ordered reinstatement and awarded back pay and damages for FMLA interference.

Key Takeaways for HR Professionals

Every termination decision is a potential legal risk. A defensible termination process is built on a foundation of legal review, consistent documentation, and fair application of policy. Before any termination, HR professionals must confirm compliance with all applicable laws, with special attention paid to ADA, FMLA, and retaliation protections. Ultimately, prevention through robust training, standardized processes, and proactive audits is the most effective way to protect your organization from costly and damaging wrongful termination claims.

Avoid costly termination mistakes — learn key legal steps to protect your organization and reduce risk.