More and more fired workers are suing their former employers. And when the ex-workers win (as they often do) the verdicts can be financially disastrous, especially for a small business.

One jury recently awarded $525,000 to a salesman who’d been fired after 14 years on the job. The jury bought the ex-worker’s argument that the employer’s oral promises of job security amounted to a contract.

In another case, a jury awarded $2.8 million to a longtime employee who was fired because “the chemistry was wrong.” The jury felt this was insufficient cause for the discharge.

Even where the employer wins a lawsuit, the cost of defending the case can be ruinous. It’s not unusual for a company to pay $50,000 or more in defense costs. So it’s important to understand what wrongful discharge cases are all about — and what you can do to reduce the risks.

For many years, the basic rule of employment law has been the “at will” doctrine, which boils down to this: If there’s no contract covering termination, you’re free to fire an employee at any time — for any reason or for no reason at all.

That’s still the law today, but the at will rule is subject to many limitations For example, despite the at will rule, a fired employee may claim one or more of the following grounds in a wrongful discharge case:

  • “My firing violated anti-discrimination laws.” Federal and state statutes have long prohibited firings based on a employee’s race, color, religion, sex or national origin. In addition, anti-discrimination statutes now protect people 40 years old and older, as well as qualified people with disabilities.
  • “My firing violated an implied contract that I’d only be fired for good cause.” Many courts will enforce explicit promises of job security made by an employer, even if they’re not contained in a written employment agreement. Statements made by an employer at the time of hiring can amount to such a promise.
  • “My employer created a legitimate expectation of job security, and then fired me without a good reason.” Courts look at whether an employer’s policies and procedures instill a “legitimate expectation” of job security. If so, the employer must show a just cause for any firing. Ex-employees often point to statements in an employee handbook to show that the employer created an expectation of job security.
  • “My firing violated public policy.” An employer can’t fire an employee in retaliation for whistle-blowing, refusing to participate in an illegal act, or enforcing a legal right such as filing a worker’s compensation claim.
  • A discharged worker who can’t show that his or her firing was wrongful can still sue the employer for related conduct: defamation, invasion of privacy, or intentional infliction of emotional distress, for example.

All in all, it’s not a pretty picture for an employer. Still, there are many common sense steps you can take to ward off wrongful discharge cases — or to minimize the impact if one is started against you. Here are 10 suggestions:

1. Print a disclaimer. Have pro-spective employees acknowledge in the job application form that employment can be terminated with or without cause, and with or without notice, at any time, at the option of the company or the employee. Put a similar statement in your employee handbook.

2. Have a good reason for any firing. Even with a disclaimer, it’s best to fire people only when there’s good cause. Disclaimers aren’t infallible. Some cases go to a jury — and jurors inherently dislike the at will doctrine. It seems unfair and arbitrary to them. Rely on it only if you have no other choice.

3. Adopt a program of pro-gressive discipline. State your procedures in an employee handbook. List examples of behavior that can lead to discipline or firing — but make it clear that your list is not exhaustive. And be evenhanded in administering discipline. If you treat people differently for the same infraction — tardiness, for example — the jury will hold it against you.

4. Evaluate performance periodically. Workers need to know where they stand so they can try to improve. Let them know the consequences of not improving. A firing should never come as a surprise. Put evaluations in writing and save a copy. Written records can help you establish in court that you had a good reason to fire an employee and didn’t violate anti-discrimination or anti-retaliation laws.

5. Put each firing to the fairness test. Ask yourself: How would you feel if your spouse, your child, or your parent were fired under the same circumstances?

6. Tell the employee the real reason for the firing. If you fudge to save the employee’s feelings, it can come back to haunt you. Your credibility will be compromised if the employee sues you and you then have to disclose the real reason for the firing.

7. Get a release. If possible, have the terminated employee sign a release of any claims against you. To be valid, a release can’t be coerced and it must be supported by adequate consideration — some benefit to the employee such as severance pay, a continuation of health insurance coverage or the waiver of a non-compete agreement. Special rules apply to releases signed by older workers.

8. Be helpful. Consider extending benefits even if you don’t get a release in return. Or perhaps offer out-placement services. Such steps may reduce the employee’s anger at being let go. You want ex-employees to feel good about your company, if possible, but at least feel neutral.

9. Use discretion. When firing an employee, try to preserve the employee’s dignity. Because termination sessions can be stormy, try to terminate at the end of the day when other people aren’t around. The fired worker will appreciate the privacy.

10. Be cautious in discussing the discharge. Within your company, give details only to those who need to know the facts. And before giving information to a prospective employer, make sure everything you say has a solid basis in fact — especially if you are stating that the ex-employee was incompetent or dishonest. Otherwise, you may be sued for libel or slander.