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April 16, 2014

Contemplate Before You Terminate: Rules of Termination

Donald Trump makes it look easy. With a simple statement (“You’re fired!”), the employee gets up and exits the boardroom. And like that, the underachiever is nixed from the show, ushered into a limo, and never seen again (at least, until the “All-Star” season). If only the real world was that easy. The decision to terminate an employee can give any employer anxiety, even if it is undoubtedly for the betterment of the business. This sense of dread is not without warrant; termination can be a legal landmine. Even terminating “at-will” employees requires cautious consideration. You can cover your bases, though, by carefully drafting policies, adhering to procedures, and relying on some common sense. Before any action is taken, review these simple rules that can protect you from a lawsuit.

Determine the employee’s status

If someone is an “at-will” employee, he or she can be terminated any time, for any reason. Yes, you can fire someone simply because you do not like them. Review any existing employment agreements or contracts that could be deemed to negate the at-will status. If an employee is not at will, then they usually have a set period for employment and a termination is governed by an employment contract that likely includes a provision requiring termination “for cause.”  In such an instance, you must remember to review the contract and follow its terms before terminating that employee.

It should be noted that even if  all of your employees are at-will, you are still not out of the proverbial woods. At-will employees can file post-employment lawsuits for a variety of reasons. Any employee, no matter the status, can claim that he was terminated, at least in part, because of a legally protected category (such as gender, religion, disability or age). An employee can also always allege he was terminated for exercising a legal right, such as taking a leave as permitted under the Family and Medical Leave Act, or for refusing to engage in illegal activity.  The term “at-will” is not an insulator for liability but there are steps an employer can take to protect itself against claims of wrongful discharge.

Documentation

The key to avoiding termination lawsuits is documentation.  All instances of substandard performance or misconduct should be documented (even for at-will employees). The recording of these things can provide support for the termination.  Check records to see if an employee has received a previous warning or has been written up—evidence of past problems can go a long way in justifying a termination decision which negates against wrongful termination.

On the other hand, if an employee recently received a raise or earned a stellar performance review, then a sudden discharge may raise suspicion if other factors are present.  A positive paper trail can indicate termination was predicated upon illegitimate (and perhaps unlawful) reasons.

Review company policies and procedures

Take time to review the company policies and procedures to make sure the punishment fits the crime. For example, if you are considering firing an employee who violated the company dress code, but the employee manual says that such an offense first requires a warning, you may be left to explain why you did not abide by your own rules.

If the employee manual is silent, consider whether treatment of this employee is consistent with the treatment of others similarly-situated. Consistency is crucial. An experienced HR employee can help you determine if uniformity in management decisions is present.

Calm down and investigate

Never, ever (ever!) explode on an employee and end the outburst by telling him he is fired. Acting out of anger or frustration can just cause more problems. An employee whose termination is preceded with yelling or other emotion-driven acts is much more likely to become disgruntled. There may be times when a sudden discharge seems warranted, however, best practices dictate that you should suspend an employee first and conduct an investigation. This will give you time to cool off and collect evidence of the wrongful act.

More often, though, a decision to terminate may not be so clearly defensible. If an investigation is required, act promptly. Document your findings, and remain neutral in your treatment of the suspect employee (and the accuser employee, if there is one) until the facts are uncovered.

Cut the cord face-to-face

When it is time to let the person go, do not take the easy way out by writing an email or letter. Not only is this impersonal, but things in writing can be misinterpreted. Likely, if you do put something in writing, the employee will read it, think it over, and then confront you about the decision. It is better for all involved to handle the issue head-on and with a witness present.

If you are nervous about how the employee will handle the news, then take time to “script” how you would like it to go. By planning the encounter, you will be less likely to deviate from the objective or make the meeting more excruciating than it has to be. Termination is like pulling off a Band-Aid—it hurts less if you do it in one sweeping motion. Before the meeting, remember to:

  • Arm yourself with any documentation you may need to back up your reason for the decision.

  • Decide who else you would like to be present in the room; it is always a good idea to have an unbiased party privy to the meeting.

  • Be stern in what in what company items or information must be handed over before departure and review with the employee any non-compete or confidentiality clauses that have been signed.

  • State exactly how long the employee has to remove his belongings and self from the premises. If you do not want it to disrupt the office environment, consider letting the employee gather his things during off-hours with the accompaniment of security or personnel.

  • If there is any chance of violent retaliation, have a procedure in place beforehand for removing the employee from the premises and consider having company security personnel on-hand.

Before you sit down with the employee, you should contemplate the issue of severance pay. Any time an employee is fired, there is possibility that legal action will follow. To avoid this, a severance agreement can be negotiated with the employee. The employee will sign a release foregoing their right to sue in exchange for something of value. Keep in mind that the exchange does not have to be money, but can be something intangible, such as an agreement to provide positive job references or to not contest unemployment benefits.

To ensure that your agreement will hold up if challenged in court, make sure any agreement is in writing, signed by the employee, and states that the waiver of right to sue is knowing and voluntary. You will also want to allow the employee some time to consider signing it and in certain circumstances, the law sometimes requires a twenty-one day consideration period.  Also always allow the employee to review the document with an attorney if he so chooses.

The wrap-up

Once the employee is out the door, you can breathe a sigh of relief. But know there is still work to be done. A terminated employee may be legally entitled to benefits, such as COBRA or vested 401(k) or pension benefits. You will want to check with your HR staff or an attorney about the necessary procedures for compliance with these. You will also have to issue the employee’s final paycheck, which may have to include payment for accrued or unused vacation days.

© 2014 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.

About the Author

Cynthia L. Effinger, Employment Attorney, McBrayer Law Firm
Associate

Cynthia L. Effinger, an Associate of the firm, joined McBrayer, McGinnis, Leslie & Kirkland, PLLC in 2012. Ms. Effinger has a broad range of legal experience gained through 13 years of practice throughout the Commonwealth of Kentucky where her clients conduct business. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. She also has experience with First Amendment litigation, securities litigation and complex litigation.

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