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Never fire to avoid paying expensive benefits

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in Compensation and Benefits,Firing,HR Management,Human Resources

Here’s advice if you’re ever tempted to fire an at-will employee because she is about to start racking up expensive claims using your employer-provided benefits: Don’t do it!

That at-will disclaimer in your employee handbook will not save you from liability if you act to deprive an employee of benefits to which she is entitled. Plus, most employers are subject to a “covenant of good faith and fair dealing” that prohibits terminating an employee to keep him or her from using benefits.

Recent case: When Stephanie was hired in August as an executive personal assistant, she learned about company benefits, including limited maternity disability benefits. In November, she announced plans to get pregnant in January. That meant that, with a waiting period from the date of hire until benefit eligibility, she would be able to claim disability benefits if she gave birth in September or later.

She succeeded in conceiving in January and told her employer. Within just a few weeks, Stephanie was terminated.

She sued, alleging she had been fired to avoid having to provide her with a partially paid maternity leave.

She argued that the handbook created an enforceable contract for the benefit and that she had an implied covenant of good faith and fair dealing even if such a contract was not spelled out.

The court said Stephanie had no contract for benefits based on the handbook. In fact, she had signed an acknowledgement that she understood the handbook was not a contract.

But that didn’t sink her case. The court also said that there may have been a covenant of good faith and fair dealing and that firing her to avoid providing benefits could amount to a breach of that covenant. Stephanie’s case will move forward. (Rozenzweig v. ClaimFox, ED NY, 2017)

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