I swear this story is true. 

Once upon a time, in the summer of 1993, I ran into a woman that my wife and I knew outside of church one Sunday morning. She and her husband were expecting their first child. Attempting to make polite conversation, I asked her, “Esmerelda, when are you going to have that baby?”

“Last Tuesday,” came her icy reply.

So, I quit my job in D.C, sold our house, and moved our family to Florida. I mean, I couldn’t stay.

Lesson learned: there are some questions you should never, ever ask. Like if a woman is pregnant. Especially in the employment context, which is the topic of what follows.

We all know that terminating an employee may lead to a charge of discrimination. But it can happen at the other end of the employment lifecycle, too – the hiring process. 

Discrimination in hiring is as illegal as discrimination in firing. People don’t sue you for hiring them, but those whom you don’t hire might. So how do you reduce the odds?

First, do not discriminate. That should be obvious. What’s less obvious is that you shouldn’t even create an appearance that you might be discriminating. As you recall, under federal law, protected classes include the following: age, disability, national origin, color, race, religion, and sex, including pregnancy discrimination. That’s under federal law. Individual states and localities may include additional protected classes, so always check with local counsel for the lay of the land.

If you can’t fire someone for falling within a protected class, you can’t refuse to hire someone for falling within a protected class. And here’s the real point of this episode: you shouldn’t ask questions in an interview, or mention in an employment ad, anything that touches upon a protected class status.

For example, it is illegal to discriminate against women who are pregnant or may become pregnant. So, if you ask a female applicant if she intends to have children, that’s a no-no. That’s obvious. But what if the applicant sees a picture of your seven kids in your office and asks you about them? You might want to continue that line of conversation and ask about her kids. It’s just normal, polite conversation. Don’t do it. If she says she hopes to have a family and you don’t hire her, you’ve created the appearance that you discriminated, even if she’s unqualified for the job. People have been sued for less.

Here's a partial list of questions you should never ask a job applicant. What they have in common is that they touch upon protected class status. This list is not exhaustive, but should give you the idea:

• “When did you graduate?” Age can be estimated from graduation years, and it is against the law to discriminate against people over 40. 

• “I love your accent. Where are you from?” Or, “are you an American citizen?” Or, “what language do you speak at home?” National origin is a protected class.

• “Do you have any disabilities?” If an applicant comes in with a seeing-eye dog, this is self-evident. But not all disabilities are obvious – think epilepsy or Lyme Disease – and many disabilities are protected under the Americans With Disabilities Act. 

• “Do you need health insurance?” This is closely related to the last question. This topic will come up when discussing benefits anyway. If you offer health insurance, it’s a non-factor. If you don’t it’s not because this particular candidate has that particular need. So don’t ask!

• “What church do you attend?” Unless your business is a church, don’t go there. Religion is a protected class.  

• “What are your preferred pronouns?” Gender is a protected class. In some localities, gender identification is also a protected class. Don’t go there.

• “Are you married?” Marital status is a protected class in some jurisdictions.

• “Are you living with your significant other?” Family status is a protected class in some jurisdictions.

So yes, you may hire employees without getting sued – provided you don’t discriminate or create the appearance of discrimination. Every. Single. Time. 

This naturally leads to a related question: can you terminate an employee while minimizing the odds of getting sued for doing so?

Yes, you are allowed to fire employees and no, it is not a crime. Forty-nine states are what we call “at-will employment” states. The one exception is Montana, which codifies certain protections that generally exist under the common law of the other forty-nine, but that’s beyond the scope of this article.

“At-will” employment means you may fire an employee at any time, and the employee is entitled to quit at any time. Severance pay from an employer, or two weeks’ notice from an employee is nice, but not required by law.

When I say an employer may fire an employee at any time, that doesn’t mean there are no limits to this otherwise broad right. In a nutshell, an employer may terminate an employee for a good reason or for no reason, but not for a bad reason.

What constitutes a bad reason? Under federal law, bad reasons include the following: age, disability, national origin, color, race, religion, and sex. That’s under federal law. Individual states and localities may include additional protected classes, so always check with local counsel if you have any local questions.

There are three exceptions to the at-will employment doctrine. The first is called the public policy exception. This means that an employer may not terminate a worker for taking advantage of services or rights to which they are entitled. For example, you may not fire an employee for filing a workers’ compensation claim.

The second exception to the at-will employment doctrine is implied contract. If your dealership has an employee handbook that sets forth steps to be taken before an employee may be fired, those steps must be followed. If they aren’t, you may have a lawsuit on your hands for breach of an implied contract. It is “implied” that the terms of the employee handbook are the terms of the employer/employee contract. Failure to follow the terms of a contract equals breach of that contract, whether it is written or oral.

The third exception is called “covenant of good faith and fair dealing.” This is not common and is recognized in only 11 states. But if you’re in one of those states, your right to fire an employee for no reason may be somewhat limited. And since you asked, here are the states that recognize the covenant of good faith and fair dealing in the employment context:

1. Alabama

2. Alaska

3. Arizona

4. California

5. Delaware

6. Idaho

7. Massachusetts

8. Montana

9. Nebraska

10. Utah

11. Wyoming

And here’s where it gets tricky. The employer may terminate an employee for substandard work or excessive absenteeism, but the employee may allege the real reason was actually one of the bad reasons. What’s an employer to do?

The first thing to do is make sure you have a written employee handbook that makes clear employment is at-will (assuming you’re not in Montana). If you have a progressive discipline process in place, state that it may not apply in all cases. I have personally fired two employees for embezzlement. If you steal money from my firm, no amount of counseling and probation will save your job.

And document everything. If an employee is not performing up to standards, document that fact and the steps taken to help the employee improve. If termination becomes necessary, document the reason every single time. Establish a protocol for terminating employees and follow it. 

If the terminated employee is over 40 and you ask for a release – generally offered in connection with a severance payment – that older employee must be given additional time to review the document, have the ability to revoke the agreement for a specific period of time after signing, and be told to consult an attorney before signing.

If the employee you fired has health insurance through the dealership, you need to provide a COBRA continuation notice. If this all seems complicated, well, that’s why we have HR professionals. If your business doesn’t have a full-time HR director, there are part-time, on-demand professionals that can pinch hit as the need arises. Just type “HR professionals” into your favorite search engine, scroll past all the recruitment sites that will clutter the first page of results, and you’ll see innumerable good options.

So yes, you may terminate employees without getting sued – provided you are fair, consistent, and document your reasons. Every. Single. Time. 

James S. Ganther is president of Mosaic Compliance Services and co-founder of Automotive Compliance Education (ACE).

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