Wrongful Termination in New York: A Practical Playbook for SMBs

For small and mid-sized businesses (SMBs), one of the most sensitive and risky employment issues is termination. Firing an employee may be necessary for performance, restructuring, or misconduct. But when the employee believes they were fired for an unlawful reason, it can quickly lead to a wrongful termination claim. These lawsuits are not only costly—they can also damage reputation and employee morale.

Here’s what New York employers and employees need to understand about wrongful termination, and a practical checklist SMBs can use to minimize risk when making termination decisions.

1. What Is Wrongful Termination?

New York is an at-will employment state. This means that, in general, an employer can terminate an employee at any time, for any reason—or no reason at all—so long as it’s not an illegal reason.

Wrongful termination occurs when an employee is fired in violation of law or public policy. 

Examples include:

• Termination based on a protected characteristic (race, gender, age, disability, religion, sexual orientation, etc.).

• Firing an employee for reporting discrimination, harassment, or safety violations (retaliation).

• Termination that violates an employment contract or collective bargaining agreement.

• Termination in violation of specific labor laws (e.g., whistleblower protections).

2. Federal, State, and Local Protections

• Federal law: Title VII of the Civil Rights Act, the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), and other statutes protect against discriminatory firings.

• New York State Human Rights Law (NYSHRL): Applies to all employers and expands protections beyond federal law.

• New York City Human Rights Law (NYCHRL): One of the most employee-friendly laws in the country, requiring courts to interpret protections broadly.

Even though at-will employment gives broad flexibility, these laws carve out significant exceptions.

3. Common Triggers for Wrongful Termination Claims

• Discrimination: An employee believes they were fired because of race, gender, age, disability, religion, or other protected categories.

• Retaliation: A worker is terminated after filing a complaint about harassment, discrimination, wage violations, or unsafe working conditions.

• Whistleblowing: Employees who report fraud, safety violations, or other misconduct may be protected under New York’s expanded whistleblower law.

• Breach of contract: Termination that violates the terms of an individual contract, offer letter, or union agreement.

• Constructive discharge: When an employer creates intolerable working conditions that effectively force the employee to resign.

4. Why Wrongful Termination Claims Are So Costly

• Damages: Employees may recover back pay, front pay, compensatory damages, and sometimes punitive damages.

• Attorney’s fees: Many laws allow employees to recover legal fees, incentivizing claims.

• Reputation: Public lawsuits can hurt recruiting, customer trust, and employee morale.

• Regulatory investigations: A complaint filed with the EEOC, NY State Division of Human Rights, or NYC Commission on Human Rights can lead to broader scrutiny of workplace practices.

5. The Termination Playbook: A Checklist for SMBs

Before terminating an employee, SMBs should follow this checklist:

Document Performance Issues

• Keep detailed records of performance reviews, warnings, and disciplinary actions.

• Use performance improvement plans (PIPs) where appropriate.

Apply Policies Consistently

• Ensure rules are enforced evenly across employees.

• Avoid making exceptions for some but not others.

Check Protected Status

• Has the employee recently filed a complaint, requested an accommodation, or engaged in protected activity? If so, termination could appear retaliatory.

Review Employment Agreements

• Confirm whether offer letters, contracts, or handbooks contain promises that limit termination rights.

Conduct a Neutral Review

• Have HR or another manager review the termination decision to ensure fairness and reduce bias.

Consider Alternatives

• Explore whether reassignment, mediation, or additional training could resolve the issue short of termination.

Plan the Exit Meeting

• Be respectful, brief, and professional.

• Consider offering severance in exchange for a release of claims.

Prepare Documentation

• Provide a termination letter summarizing the reason.

• Maintain records to defend the decision if challenged.

6. Responding to a Wrongful Termination Claim

If faced with a claim:

• Do not retaliate: Avoid further action that could worsen the claim.

• Preserve evidence: Collect performance reviews, emails, and records supporting the termination decision.

• Engage counsel early: Early response can prevent escalation or help resolve claims through negotiation or mediation.

• Evaluate systemic issues: A claim may reveal gaps in policies or training that need to be addressed.

Final Thought

Wrongful termination suits remind SMBs that firing decisions must be handled carefully. At-will employment provides flexibility, but it is not a shield against claims of discrimination, retaliation, or other unlawful motives.

By following a termination checklist, documenting performance, training managers, and consulting counsel, businesses can minimize risk while maintaining a fair and respectful workplace.

This blog is for informational purposes only and not legal advice. If your business is facing a wrongful termination issue, consult experienced employment counsel to protect your company’s interests.