Regardless of the size of the company or the job title, people count on their employment to keep the lights on and food on the table. Moreover, since most jobs are “at will” and not tied to specific contracts, getting fired can be devastating, financially, psychologically, and professionally.

This is especially true when wrongful dismissal occurs, which can have long-lasting effects on the victim. A wrongful firing can cost thousands of dollars or more in lost income, legal fees, and damages to the victim’s reputation. However, understanding why wrongful termination lawsuits are so costly can help HR professionals prevent such claims from occurring in their organizations.

While companies can fire employees for a variety of reasons, the law prohibits firing an employee in retaliation for participating in a protected activity. Participating in a jury duty, taking leave under the Family and Medical Leave Act, serving in the military, refusing to ignore safety procedures, or reporting illegal conduct are some examples of activities that can constitute a retaliatory termination and therefore be illegal.

In addition to lost wages and benefits, wrongful termination victims can claim other economic damages such as pain and suffering, emotional distress, loss of consortium, punitive damages, and any additional court costs that may be incurred in the case. Additionally, some plaintiffs can receive compensation for the costs associated with finding a new job and mitigating their losses.

It is important to note that plaintiffs are expected to mitigate their losses, meaning they must make every effort to find a new job at the same pay rate as their previous position. If they fail to do so, a sum of money known as the mitigation award is subtracted from their final settlement or judgment.

For this reason, it is imperative that workers seeking a wrongful termination settlement consult with a lawyer who specializes in employment cases. A seasoned lawyer can use their experience to sift through the details of a situation and craft a legal strategy that will put pressure on an insurance company to offer a fair settlement. In our survey, readers who had lawyers on their side received a settlement or judgment of $48,800, compared to just over $19,200 for those without attorneys.

When a business is facing the prospect of a wrongful termination lawsuit, they should take steps to avoid such claims by reviewing their current policies and training their employees on the law. They can also bolster their protections by purchasing an employment practices liability insurance policy. The cost of this coverage depends on the business’s industry and past employment litigation, but it is much less expensive than defending a wrongful termination lawsuit out of pocket.