No one likes the idea of firing an employee. Unfortunately, it's unavoidable for most business owners and managers. Terminating an employee is an inherently difficult situation that exposes the company to legal liability if not handled property.
Following best practices throughout the termination process will help you avoid legal trouble and make the process less stressful for all involved.
Understand the Nature of the Employment Relationship
Before meeting with the employee, make sure you understand the nature of the employment relationship. Is there an employment contract that says that employees can be fired only for a good reason? Or is this at-will employment that can be ended at any time without cause? If there’s an employment contract, it will usually spell out the reasons an employee can be fired, such as tardiness, unexcused absences, or misconduct.
Employers should be careful not to make statements that could create implied employment contracts with employees. For example, a boss who tells a top employee, “We’ll always have a place for you here,” might be inadvertently creating an oral contract of employment.
Most employment is performed “at will.” This is important because at-will employees can be fired for any reason and at any time, with some legal limitations discussed below. It’s a good idea for employers to require new employees to sign an at-will agreement prior to starting work.
Make sure you keep copies of any signed at-will agreements, written policies, employment handbooks, work evaluations, or other documents that support at-will employment. Verify that there is no written policy in an employee handbook or manual that creates a "good cause" requirement or provides additional job security.
Review the Employee’s File and Know the Law
There are a number of federal, state, and local laws that protect employees from discrimination on the job. It’s important to review the employee’s file and be familiar with these laws to ensure that the termination is not discriminatory.
The size of your company could dictate whether a federal law applies. Generally, smaller businesses are less likely to face federal regulation, but be aware that many federal statutes cover employers with as few as 15 employees. These laws include:
- Title VII of the Civil Rights Act, which prohibits discrimination based on sex, race, color, national origin, and religion
- the Americans With Disabilities Act, which protects people with physical or mental impairments, and
- the Pregnancy Discrimination Act, which bars sex discrimination based on pregnancy.
In addition, the Age Discrimination in Employment Act applies to employers with 20 or more employees, while the Family and Medical Leave Act covers those who employ 50 or more. Clearly, many small and medium-sized companies will fall within the gambit of federal law.
Understanding what constitutes an illegal termination is important. Firing someone based on their sex or race is clearly unlawful. But it would also be illegal, for example, to terminate or discipline an employee for filing a discrimination complaint with the Equal Employment Opportunity Commission, or for reporting unsafe working conditions to the Occupational Safety and Health Administration. An employer who retaliates against a complaining employee is putting the company in serious legal jeopardy.
State and local laws could also impact the termination process. Almost all states have adopted laws that in some way prohibit workplace discrimination—whether due to age, race, color, national origin, gender, sex, marital status, pregnancy, or another factor.
When both federal and state law apply to your situation, you should follow the one that benefits the employee more. If you have any doubts as to how or whether a law applies, contact an employment attorney before moving forward.
Severance Agreements and Waiving the Right to Sue
If you are offering a severance package to an older employee in return for a waiver of the right to sue, consider the Older Workers Benefit Protection Act, which protects the employment benefits of employees who are 40 and older. This act requires employers to include specific language and safeguards in the waiver agreement that protect the employee.
Tips for Meeting With the Employee
There’s no easy way to fire someone. To increase the chances that things go smoothly, the meeting should be carefully planned, with the dual goal of protecting the company and helping the employee move forward. Some best practices include:
- Meet at a time and place that ensures privacy. This will limit the employee’s embarrassment and help prevent workplace disruption should the employee become argumentative.
- Make sure another manager or human resources representative is present. It’s important to have a witness who can verify what was said during the meeting.
- Offer a concise explanation of the company’s decision. It’s not necessary to give a detailed account of every single reason for the termination. Keep it brief but professional, avoid small talk, and don’t argue with the employee.
- Be respectful. Thank the employee for any contributions made to the company.
- Explain what happens next. Be sure to address their unpaid wages, expenses, unused vacation days, bonuses, health insurance and other benefits.
- Be prepared to answer all types of questions. These might include the reasons for the company’s decision to what coworkers and clients will be told about the termination.
- Arrange for the return of company property. Make sure you account for any company property the employee should return.
- Issue the final paycheck as soon as possible. Many states have laws that require employers to issue an employee’s final paycheck by a certain deadline.
If you follow these best practices, you’ll limit your company’s legal liability and minimize the stress of one of the most difficult tasks employers and managers face.