Almost all business owners eventually must make the difficult decision to terminate an employee.
Whether that decision arises from failure on the employee’s part or economic turbulence, one thing is clear: How a business handles this delicate situation can either increase or decrease the risk of negative consequences like lawsuits and unfavorable public attention. Here are the best practices to keep in mind if you are considering terminating an employee.
1. Involve your Human Resources department from the beginning. The Human Resources (HR) department of your company can be especially helpful during the termination of an employee for a number of reasons. First, HR is likely familiar with (or has access to records regarding) the employee’s hiring process. Second, HR staff are likely trained to understand the implementation of applicable laws and to handle delicate situations with personnel. Third, HR can ensure that the final payments and health benefits issued to the terminated employee comply with legal requirements. Finally, your HR team can provide at least one witness to any termination meetings or communications that occur. With this training and experience, they are uniquely equipped to advise you regarding the proper steps to take.
2. Examine the contractual relationship between the employee and the employer. All lawful terminations of employees should align with any contractual obligations that exist between the parties. To ensure that this occurs, review documentation pertaining to the employee’s hiring. During this review, remember to determine whether the employment in question is “at-will,” meaning an employee can generally be dismissed by an employer for any lawful reason. Generally (although certainly dependent on the law of the applicable state), employment is presumed to be at-will unless there is a written agreement providing otherwise. If the employment agreement is not at-will, there may be additional stipulations that must be satisfied before a lawful termination can take place. An examination of the complete contractual arrangement will assist in determining what steps need to be taken.
3. Familiarize yourself with local and federal laws to ensure that termination is lawful. Employment relationships are also governed by local and federal regulations to some degree. As a result, an employer must consider the broader laws that apply. For example, contrary to popular belief, at-will employment does not enable an employer to fire an employee for any reason or by any means. In instances that involve mass layoffs or plant closures, the Worker Adjustment and Retraining Notification (WARN) Act provides for specific notice requirements and actions by employers. Unionized employees may also be granted greater rights during terminations. Finally, other federal laws prohibit the termination of an employee on the basis of race, ethnicity, national origin, age, gender, or disability.
4. Use fair and consistent criteria supported by documentation when making termination decisions. In addition to complying with governing laws, an employer should apply the same criteria across the board when deciding whether or not to fire an employee. A lack of
consistency provides ample ammunition for a disgruntled employee to present in wrongful termination litigation. From an internal perspective, inconsistency may also discourage your remaining workforce. Appropriate documentation in such instances includes, but is not limited to, the terminated employee’s application and offer letter outlining the expectations of employment, employee handbooks and manuals, performance reviews, performance improvement plans, and disciplinary records. By keeping adequate evidence of the expectations of employment and the employee’s performance, you create a more objective view of the employee.
5. Keep interactions with the terminated employee limited and fact-based. During a termination, emotions can run very high. It is therefore critical for the employer to keep any conversation rooted in facts rather than emotion. By proactively seeking to focus such conversations on the facts involved, the employer is less likely to make a mistake that could result in wrongful termination or retaliation litigation. For the same reason, keep meetings and communications with terminated employees brief.
6. Determine what, if any, severance pay you intend to offer the terminated employee. In some companies, employers provide additional severance pay when terminating an employment relationship. If you choose to provide a severance package, check with HR and your insurance providers to understand the limitations you may face. Additionally, a severance offer may include an agreement in which the employee waives rights to future litigation, and should be documented.
7. Remember to exercise compassion. Regardless of the reason for the termination, it is important to keep in mind the effect a termination of employment can have on an individual’s life. The mere act of respecting a person's dignity during this time may make all the difference to the terminated employee.
The steps outlined above are not exhaustive; each termination will have unique factors to weigh and consider. However, these steps provide a starting point. Terminating an employment arrangement should not be done rashly.
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We are here to help you. If you are reducing your workforce by terminating an employee, there are a number of potential risks. We can help you mitigate those risks. Contact our firm today to connect with an experienced attorney ready to assist you.
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This article is a service of Sky Unlimited Legal Advisory PC, Personal Family Lawyer® . We're not your traditional law firm, we stand apart from the rest by helping you make informed and empowered decisions on how to deal with your business throughout life and in the event of an emergency. We offer a complete spectrum of legal services, including a New Business Planning Session or an Existing Business Review Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. You can begin by calling our office at (650) 761-0992 today or book online to schedule a Business Planning Session and mention this article to find out how to get this $950 session at no charge.
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