Bad Faith Limitations on Firing

Let's assume an employer fires an employee who is about to close a sale that will entitle her to a substantial commission. Assume also that the firing violates no federal or state statute, public policy, or provision of an express or implied employment contract. Can the fired employee successfully sue for wrongful discharge if the employer's sole reason for firing her was to avoid having to pay the commission? In many states, the answer probably is no. Courts have generally been hesitant to expand the public policy or implied contract theory in wrongful discharge cases to reach every instance when an employer may have acted in bad faith in firing an employee.

States weigh in on bad faith firing. However, courts in several states (Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah and Wyoming) have ruled that employers are generally obligated to deal fairly and in good faith with their employees. In theory, this obligation may cause legal problems not only employers who fire employees for improper reasons, but also those who fire employees for no reason at all. So far, however, the courts that have acknowledged a bad faith limitation on firings have primarily applied the limitation to prevent employers from using discharges to deprive employees of compensation or benefits that have already been earned.

What can you do to protect yourself? If you fire an employee in an attempt to retain commissions, bonuses, or other compensation the employee has rightfully earned, you're probably asking for a lawsuit. Beyond that, the best advice for avoiding trouble is to try to be fair and to treat your employees as you yourself would want to be treated.