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How Much Can a Wrongful Termination Suit Cost an Employer?

Unlawful termination can be among the most costly mistakes an employer makes

Posted by Joe Gerard on October 31st, 2011

Employment lawsuits are expensive and wrongful termination lawsuits can be among the most damaging and difficult to defend. A wrongful termination lawsuit can cost a company anywhere from $1,000 to millions and can include compensation for:

  • lost pay
  • lost benefits
  • emotional distress
  • punitive damages
  • legal fees

Workplace investigation mistakes can be costly. Learn to avoid them. Download the free Investigation Mistakes cheat sheet.

Cost of Wrongful Termination

An article by Meridith Levinson for CIO reports on some of the costs employers can expect to pay for wrongfully terminating an employee. Levinson writes:

Rebecca Heyman, a human capital consultant with HR outsourcing company TriNet, notes that filing a discrimination claim with a local EEOC agency as part of a wrongful termination claim costs nothing for an employee, but causes significant disruption to the employer’s business. “The employer has to respond to the employee’s allegations. They often have to work with an attorney to prepare a response to the claim. That can be costly,” she says.

How costly? Mimi Moore, a partner in the labor and employment practice with Bryan Cave LLP, says that each legal claim an employee brings against an employer in court could cost the company between $50,000 and $250,000 in legal fees and potential settlement payouts.

Read more: How to Fire Someone Without Getting Sued.

Termination Mistakes

Some of the most common mistakes managers make when firing employees are:

  • not planning the termination meeting properly
  • beginning the termination conversation with compliments to soften the blow
  • being dishonest about the real reason for the termination
  • not treating the terminated employee with respect and dignity
  • not keeping the termination details confidential

These mistakes can result in lawsuits that affect the bottom line in more ways than the accompanying fines and settlements. A blow to a company’s reputation is sometimes more expensive than the cost of a lawsuit. Bad publicity can affect revenue directly through decreased sales, make it harder to find good employees, and can cause a publicly traded company to lose share value.

Read More: How to Fire People the Right Way

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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