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One of the downsides of running a business is that eventually you’ll have to terminate an employee. In almost every state, employers may terminate workers “at will” for any reason that is not explicitly illegal. The most obvious exception is that employers cannot terminate someone for a discriminatory reason, such as race, gender or age. But there is a web of other, less straightforward legal restrictions to avoid. If you aren’t careful when terminating employees, the costs of legal fees, management time and negative attention can quickly add up. Even employers making legitimate personnel decisions should be sure to follow a well-planned procedure for terminations. So, how can you minimize the costs of termination?
Make consistent decisions
While the law allows employers to terminate employees at will, you should be thoughtful about your hiring and firing choices and strive to treat employees equally. It may be legal to terminate an employee because you dislike violinists, but giving such an odd reason will raise suspicions that you actually have an illegal motive. Having consistent responses to employee problems and reserving termination for the most serious performance and behavior problems will help you avoid any potential legal issues.
Many employers are so concerned about lawsuits that they’re reluctant to take any adverse action against employees who have some legal protection, such as employees who have filed harassment or discrimination complaints, or those on a leave of absence. However, workers are only protected from adverse actions that are brought because of their protected status. Managers are still entitled to sanction them for behavior and performance problems that are unrelated to their protected status. When workers in a protected class miss work without giving notice or get in arguments with costumers, it is still appropriate for a manager to discipline them.
The best way to stay on the right side of the law is to treat employees consistently. If all workers are given a written warning for their first unexcused absence and are terminated for their third, it will be clear that you are enforcing a companywide policy rather than targeting a specific employee. Before you take adverse action against an employee, review your policies and any records of what you have done in similar situations. Make sure you are treating employees fairly and consistently.
Keep a paper trail
For employees who have ongoing behavior or performance problems, it’s important to keep records of the issues and any action that was taken. Even if a manager merely sits down with an employee to warn him about a minor performance problem, you should keep notes or other written documentation of the meeting. Then, if issues continue to mount and you eventually need to terminate the worker, you will have a paper trail that supports your reason for the termination.
Once you’ve decided to terminate an employee, you should review his employment file and any other records you might have on his performance and behavior. If you ever face a legal challenge to the termination, you need to be able to explain any conflicting documents. For instance, if you are terminating an employee for poor performance, but all his prior performance reviews were excellent, you need to be able to explain the difference. In most cases, employment records and notes about an employee should reflect the reason why you are terminating him.
Managers should always keep detailed records of conversations with employees about sensitive topics, like leaves of absence or retirement. Before you terminate an employee, you should review these documents along with the rest of the employee’s personnel records. If the employee decides to sue for discrimination, any comments a manager makes can be attributed to the employer.
Should you offer a separation package?
Many employers attempt to ease a termination by offering the employee a separation package. In exchange for the separation package, employers typically ask for a release of any existing legal claims against the company. If you plan on offering a separation package in exchange for a release of claims, you should consult an attorney to ensure the release follows any procedural roles that might apply. For instance, employees must have time to review and rescind an agreement if it releases age-related legal claims.
Separation packages typically include pay or other benefits, and the size varies dramatically depending on the situation. In order to induce an employee to give up potential claims, your company may have to offer a very generous package, and you may decide it’s not worth the cost.
Separation packages can also affect how the worker you are terminating and other people in the company perceive the termination. One benefit to a separation package is that it can give the employer, and in some cases the employee, closure. However, if you don’t regularly provide separation packages, it can give the impression that the company has done something wrong and is offering the package because it fears a lawsuit. On the other hand, if your company routinely gives separation packages to terminated workers, people may come to expect and feel entitled to termination packages.
Communicating the termination
Once you’ve decided to terminate an employee and done your due diligence by reviewing personnel records and deciding whether to offer a separation package, it’s time to let the employee go. It’s always best to terminate workers in person, rather than by phone or in writing. You should plan to have a meeting with the employee where you tell him about the termination. During the meeting, briefly discuss the reason for the termination, and then focus on the logistics of the separation.
The first decision you have to make is who should tell the employee about the termination. Typically, the employee’s immediate supervisor or manager will let the worker know about the termination. A direct supervisor is most likely to know the employee well and have a clear understanding of the behavior that led to the termination. Another option is to have a human resources professional or higher-level manager meet with the worker. If you are concerned that the person being terminated will react badly, becoming extremely angry for example, you may decide that it’s best to have two people from the company present. You should be aware, however, that the employee may feel he is being “ganged up on.”
During the conversation, you should avoid going into too much detail about why the employee is being terminated. You should be clear about the cause, but you shouldn’t talk about how he can improve or get into an argument over whether the offense justifies the termination. The decision to terminate the worker has already been made, and too much discussion will only draw out the process. Instead, you should focus on details like final pay and return of the employer’s property. When you terminate an employee, be prepared to pay all of the back wages he is owed, as well as any unused vacation or personal days.
Next, you need to decide when and where to have the termination meeting. You should choose a time and place that are discreet. Many employees opt to terminate employees at the end of a workday so they can clean out their desks in privacy after their co-workers have left. Another alternative is to pull aside the employees who work near them for a brief meeting. That way you can tell the co-workers who work closest to the employee being terminated about the decision, and the worker being let go will have the chance to clear out his space privately.
Talking about the termination
You should be discreet about the circumstances of the termination. However, that doesn’t mean you should pretend it didn’t happen. If you ignore the termination altogether, it could lead to gossip, or make other employees feel like they may be terminated at any time. Consider having an employee meeting or informally meeting with the people who worked closely with the terminated worker to tell them about the change. Avoid trying to explain why the employee was terminated or justify the decision. Instead, you can make a simple statement like, “Yesterday was Patrick’s last day with our company. We wish him the best, and we expect to hire a replacement within the next month.” If people ask follow-up questions about the employee, emphasize the need to respect his privacy, and focus on how the company will be handling the transition.
While you shouldn’t discuss the circumstances of any single termination, you should be clear and open about the company’s discipline process so other employees understand the kinds of infractions that may result in termination and how many warnings they can expect.
When discussing the employee with clients or other professional acquaintances, don’t offer details about the termination. You can simply tell them that the employee has left the company.
After a worker is terminated, you may be contacted by perspective employers. I can’t cover all of the pitfalls of providing references in this article, but as with all aspects of the termination process, you should decide on a companywide policy for handling these inquiries. Once you have a plan for responding to inquiries, assign a point person or a small group of staff members who are authorized to answer questions from perspective employers. Many employers choose only to provide basic employment information, like job title and dates of employment. If you choose to disclose that the employee has been terminated, be brief and factual about his performance and the cause for the termination.
The dirty business of firing workers is an unavoidable part of being a business owner or manager. You can’t eliminate all legal risks or make the process pleasant, but if you follow this basic advice and handle the termination with professionalism and discretion, you will limit your legal liability and improve your company’s reputation.
Patrick McGuiness is a partner at Zlimen & McGuiness, PLLC. His law practice focuses on assisting green industry businesses and organizations with a wide range of legal issues. He can be reached at firstname.lastname@example.org.