Bad Faith Employment Practices

Do employers have a legal duty to deal fairly and in good faith with their employees?

Example

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.

However, you should be aware that courts in the following states have ruled that employers are generally obligated to deal fairly and in good faith with their employees:

Alaska
Arizona
California
Connecticut
Delaware
Idaho
Kansas
Massachusetts
Nevada
Utah
Wyoming

In theory, this obligation may cause legal problems not only for 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 firing to deprive employees of compensation or benefits that have already been earned. The courts generally have not disturbed an employer’s right to fire without cause.

Currently, courts in a majority of the states have yet to decide whether a fired employee’s argument that the firing was done in bad faith will be sufficient to support a wrongful discharge claim. Accordingly, it’s difficult to say what steps, if any, you should take to limit your potential exposure to bad faith claims. Obviously, 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 would want to be treated.