Employment Terminations: How To Avoid Legal Problems

You Can Fire Employees Legally and Ethically

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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.

Possible Claims of Discrimination Upon Employment Termination

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

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, misconduct, a reorganization resulting in elimination of the employee’s position, or financial considerations.

    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/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.
    • Is the decision to terminate premature? Determine whether alternatives to termination are more appropriate, such as giving an employee a “last chance” 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 a protected classification are treated the same as employees outside the protected classification who engaged in similar conduct, under similar circumstances (severity of conduct, prior offenses, length of employment, etc.).

    Interested in the questions an employer should ask themselves after employment terminations?

    The first part of this article addresses the questions an employer should ask themselves before employment terminations.

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

    • Ensure that 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 or in an employment agreement.
    • 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 co-workers. Employees who have been humiliated are more likely to challenge their termination.
    • Respect the employee’s privacy. After termination, advise only those who have a need to know the reason for the termination, and advise them to not discuss the matter.
    • Obtain a release. If any severance benefits are provided severance pay, payment of medical insurance premium, outplacement counseling, etc.), in addition to those owed an employee under company policy, consider making the benefits conditioned on the employee signing a release.

      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, that 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 will bring an action against his/her former employer.

    The first part of this article addresses the questions an employer should ask themselves before employment terminations.

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    Disclaimer: Although Mel Muskovitz is an attorney, because this website is read by people from all states and from countries all over the world, the advice offered is correct, but different laws may govern your approaches to human resources and labor issues. Please check with an employment law attorney to ascertain your decisions, policies, and practices meet the legal standards where you live and practice.

    This article contains a brief overview. 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.

    Mel Muskovitz is an attorney who represents employers about labor and employment matters in state and federal courts and before administrative agencies. He also assists his clients to avoid legal problems by preparing or reviewing employee handbooks, conducting training, and advising on appropriate preventative measures such as employee discipline.

    He assists employers to comply with the Fair Labor Standards Act, the Family and Medical Leave Act, the Americans with Disabilities Act and Title VII of the Civil Rights Act of 1964. He can be reached at Dykema Gossett PLLC, FAX: (734) 214-7696, or by Email.

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