COLUMBUS, Ohio -- How employees are treated when they are fired or laid off can play a major role in determining whether they sue their former employers, new research has found.
A study of 996 terminated Ohio workers found that those given no explanation of why they were dismissed were 10 times more likely to report suing their former company than employees given a complete explanation.
Moreover, results showed that perceived bad treatment at termination was the factor that best predicted whether an employee considered filing a wrongful termination suit.
These results suggest companies could significantly reduce their legal risks simply by treating employees better when they are dismissed, said Jerald Greenberg, professor of management and human resources at Ohio State University’s Fisher College of Business.
“Many wrongful termination suits could be avoided if companies only used effective human relations practices when they dismiss workers,” Greenberg said. “Managers need to stop adding the insult of undignified treatment to the injury of job loss.”
Based on this study and statistics on the legal costs of wrongful termination cases, Greenberg estimates that companies could save at least $13,200 per termination by being honest with employees who are being fired.
Greenberg conducted the study with E. Allan Lind, a professor at Duke University, and Kimberly Scott and Thomas Welchans, former doctoral students at Ohio State. The results will be presented this summer in San Diego at the annual meeting of the Academy of Management. The research was given the Best Paper Award by the Organizational Behavior Division of the Academy of Management.
The researchers recruited the 996 study participants as they left offices of the Bureau of Employment Services (state employment offices) in central Ohio. All participants were unemployed and had been fired or laid off from their last job. They had been unemployed an average of three months.
All participants were interviewed immediately after agreeing to participate. They were asked a series of questions concerning topics such as how they were treated at their last job, how they were treated when they were terminated, whether they had thought about filing suit against their former employers, and whether they had actually filed suit. Of those participating, 163 were re-interviewed about four months later to get more information.
In general, Greenberg said results showed that employees had two basic motives for filing suit: economic and psychological. Workers were more likely to report filing suit if their job loss caused them financial problems, or if they believed they could successfully win a large award from the company.
But there was also a revenge factor among workers who believed they were treated in an unfair or undignified manner at their firing, Greenberg said.
“Nobody likes to lose their job, but just being fired or laid off isn’t enough to get most ex-workers to file a claim,” he said. “The way the termination is handled is key. A worker has to feel aggrieved enough to want to lash back at the company.”
The results showed:
- Of those participants who felt they were treated with “very much” dignity and respect at the time of their dismissal, only 0.4 percent reported filing claims against their ex-employer. However, of those who said they had “not at all” received respectful and dignified treatment, 14.9 percent reported filing claims.
- Only 1.7 percent of those who said they received a complete explanation of why they were being dismissed reported filing suit. In contrast, 20.3 percent of those who said they received no explanation at all reported filing a claim.
While many lawyers and management consultants recommend companies don’t give any information to employees when they are dismissed, Greenberg said this advice may backfire. “If you don’t give reasons for the dismissal, you’re allowing the employee to assume the worst about the company and develop reasons in his or her mind to file suit,” he said.
Participants in the study were not asked what kinds of unfair or undignified treatment they received from employers, so Greenberg said he can’t recommend exactly which actions for managers to avoid.
However, Greenberg said there are many ways employers can enhance the dignity of workers who are being let go. First, employers should do the basic things that help ease the transition: give several weeks advance warning of termination, provide help in finding a new job, continue benefits such as health coverage, and give severance pay to help lessen the financial hardship.
But companies also need to deal with the psychological hardships of losing a job. “Managers need to show genuine concern and be honest with the employee about the reasons for termination,” Greenberg said. “It’s important for managers to help ex-workers maintain a positive self-identity when they’re let go from their job.”
The study was supported by grants from the National Science Foundation and the American Bar Foundation.