Wrongful Dismissal and the Vital Importance of Hiring the Right People

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Wrongful Dismissal and the Vital Importance of Hiring the Right People

For a disgruntled or dishonest employee, filing a lawsuit for being wrongfully fired is a cheap and easy gamble with better prospects than Las Vegas offers. In one survey by the Rand Corporation, employees won 66 percent of such suits, with an average award being $650,000.

According to Inc.com, fired employees in California won more than three-fourths of their lawsuits and received an average of more than $300,000. And, according to a recent article in BusinessWeek,1 it even happens at General Electric, where an employee recently received an $11 million judgment.

In the GE case, the employee disparaged co-workers, refused assignments as being beneath him, took unplanned days off, came late to work, and generally made a nuisance of himself until he was fired. Then he filed the suit.

One reason this is so easy is that the number of categories of workers who have legal protection from being fired has gradually increased for four decades. Everything from age to sexual orientation is considered a badge of job security — or a winning ticket in the jurisprudence lottery. In fact, just being employed is often enough to qualify you to file a lawsuit when you’re fired.

Moreover, even if the company has a good case, it often costs a company more to litigate than to settle. It can cost $100,000 to get a lawsuit dropped. And if it happens to go to trial, the costs start at $300,000 and go up from there. This has numerous debilitating effects on businesses. The most obvious is that they try to settle for costs less than those of litigation.

However, a more subtle and serious effect is the pervasive fear of firing that has gripped corporate America. Today, the legal and human resources departments at most companies have no incentive to fire someone who might sue, because it reflects badly on them.

As a result, companies allow unproductive employees to stay on, often poisoning the working atmosphere for those around them. In some instances, they may be harboring people who are incompetent or even criminal. This is a big deal when you consider that having just one overtly lazy employee in a department can undermine the motivation of many others.

What went wrong? And, how did we get here?

The popular conception of hiring and firing relies on the idea of what’s known in the legal profession as “at will” employment. It’s a 19th century idea that means an employer can hire and fire you for any reason whatsoever. At GE and most other firms, the employment contracts still use the term “at will...

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