Employment Terminations: How To Avoid Legal Problems

You Can Legally and Ethically Fire an Employee if You Take Care

When you fire an employee, take all of these recommendations seriously to stay out of legal difficulties.
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The decision to terminate an individual’s employment carries with it the risk of a possible legal challenge. Depending upon an employer’s policies or whether an employee has an employment contract, an employee may, for example, have a breach of contract or wrongful discharge claim.

An at-will employer—that is, an employer who reserves the right to terminate employees without cause—generally does not need to worry about such claims.

Like all other employers, however, an at-will employer still must be concerned about many other possible claims.

In recent years, at-will does not always protect an employer so having documentation of employee performance and of the reasons for the termination is increasingly important.

Possible Claims of Discrimination Upon Employment Termination

All employers need to be cognizant of possible discrimination claims that can arise from employment termination. To prevail, the former employee would have to prove that he or she was terminated, at least in part, because of his or her employee’s protected status (gender, religion, race, national origin, age, disability, and so forth).

In addition, discharged employees could claim that their former employer defamed them by:

  • making false, disparaging comments about them to coworkers or other parties;
  • treated them in a manner intended to cause emotional distress;
  • invaded their privacy by improperly disclosing the reason for an involuntary termination; or
  • terminated them in retaliation for exercising a legal right, such as reporting discriminatory or other unlawful employment practices or taking a leave under the Family and Medical Leave Act or the Military Leave Act.

    Legitimate Business Reasons for Employment Termination

    Even though at-will employers may terminate employees for any reason—or for no reason at all—terminations are easier to defend when they are justified by a legitimate business reason. Legitimate business reasons could include problems with the employee's contribution, misconduct, a reorganization resulting in the elimination of the employee’s position, or financial considerations of the employer.

    Regardless of the nature of the employment relationship, an employer should consider establishing work rules that list conduct that could result in discipline or termination.

    At-will employers should include a disclaimer in the rules making clear that the existence of company rules does not nullify or in any way change an employee’s at-will status.

    Moreover, employers (at-will or otherwise) should include a disclaimer stating that the reasons listed are not all-inclusive and that the employer retains the right to terminate employees who, in the employer’s discretion, have either engaged in misconduct or who have not performed at an acceptable level.

    In addition, if progressive discipline is provided for, the employer should retain the flexibility to discharge employees immediately when circumstances warrant.

    Questions Employers Need to Ask Before Employment Terminations

    Before deciding to terminate an employee, the employer should ask themselves the following questions:

    • Does the employee have a legitimate explanation for his or her actions or poor performance? Before deciding whether to terminate an employee, conduct a thorough investigation of the events in question and get the employee’s version or explanation. Consider whether a neutral third person would find the employee’s explanation plausible.
    • Does the punishment “fit the crime”? Consider whether a neutral third party would agree that termination was fair given the nature of the conduct or the seriousness of the performance problems.
    • Is the decision to terminate inconsistent with previous actions of the company? For example, has the employee recently received a favorable performance review, promotion or pay increase? If yes, this would make it more difficult for an employer to justify terminating an employee for performance related reasons if you were involved in a legal proceeding.
    • Is the decision to terminate the employee premature? Determine whether alternatives to termination are more appropriate, such as giving an employee a last chance, using progressive discipline to get their attention, or placing the employee on a performance improvement plan.
    • Does the employee have any pre-termination rights? Ensure that any pre-termination procedures provided for by the company are followed. (Note: special procedures may exist for public sector employees who have certain due process rights not accorded to private sector employees.)
    • Has the company administered discipline in a consistent manner? Ensure that members of any protected classification are treated the same as employees outside of the protected classification who engaged in similar conduct, under similar circumstances (severity of ​the conduct, prior offenses, the length of employment, and so forth).

    Actions That an Employer Needs to Take Following an Employment Termination

    Following an employment termination, an employer can reduce the likelihood of a court challenge in a number of ways.

    • Ensure that appropriate post-termination procedures are followed. Public sector employees may be entitled to a post-termination hearing. Private sector employees would also be entitled to a hearing if provided for in company rules, the employee handbook, or in an employment agreement or contract.
    • Be candid with the employee. Be candid when advising the employee of the reason for termination. Don’t sugarcoat the reason in order to avoid hurting the employee’s feelings. If an employee later sues, these statements will adversely affect the employer’s defense.
    • Respect the employee’s feelings. Do not do anything to embarrass the employee during the termination process. When possible, avoid escorting the employee from the workplace in front of coworkers. Employees who have been humiliated are more likely to challenge their termination.
    • Respect the employee’s privacy. After termination, advise only those employees and managers who have a need to know the reason for the termination, and advise them not to discuss the matter with anyone.
    • Obtain a release. If any severance benefits are provided such as severance pay, payment of medical insurance premiums, outplacement counseling, and so forth), in addition to those owed an employee under company policy, consider making the benefits conditioned on the employee signing a release of claims.

      For a release to be effective against federal age discrimination claims (employees 40 or older), the release must contain several specific provisions, including a 21-day consideration period and a 7-day revocation period.
    • Avoid inconsistent post-termination statements. Do not make post-termination statements in a termination notice, reference letter or response to the state unemployment compensation office that are inconsistent with or contradict the reason for termination. Such written statements, like comments to the former employee, will create credibility problems for the employer.
    • Maintain relevant documents. An employer should secure the employee’s personnel file and retain all documents, including the employee’s poor work product, which support the decision to terminate the employee.
    • Help the employee find other employment. Consider providing outplacement services and, in certain cases, a neutral reference to aid the employee in finding another job. The sooner an employee is reemployed, the less likely the employee is to bring an action against his or her former employer.

    Disclaimer: Although Mel Muskovitz is an attorney, please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.­­

    This article contains a brief overview of potential legal issues in an employment termination. It is not intended to be a comprehensive discussion of the subject.

    Further, because every set of facts and circumstances may raise different legal issues, this article is not intended to be and should not be regarded as a legal opinion. 

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