The vast majority of employment-related lawsuits follow an employee’s involuntary termination, and the majority of fired employees who hire a lawyer do so because they felt their firing was not fair. While the default rule in most jurisdictions is employment at will, meaning businesses can fire an employee at any time, with or without a reason, the number of exceptions often leave employers feeling like the rule has been nullified.
Unlawful reasons for termination include discrimination or retaliation for exercising a right, such as taking protected leave, making a complaint about wages or filing a workers’ compensation claim. Some states, like Alaska, even impose a duty of “fair dealing” in all employment relationships. The bottom line is that businesses should be thoughtful and fair. Companies invest a lot of time in hiring the right person and encouraging their career development. They should be just as thorough regarding the termination decision. To minimize legal liability, keep in mind the “three P’s” — people, procedures and paperwork.
A key decision is having an internal process for reviewing a termination decision. It helps if the decision is reviewed by the employer’s human resources staff or its legal counsel before the company tells the impacted employee. Review the supporting documentation, legal risks and whether the it seems fair before the decision is made – not after the terminated employee complains. This process can avoid inconsistencies that may be construed against the employer. In larger organizations there may be more than one person to review and approve the termination decision before it is communicated.
It is also important to decide who is going to communicate to the employee that his or her employment is ending. That person needs to have a working knowledge of the relevant facts and possess the skills and personal qualities to communicate the termination decision in an appropriate manner. If the person who hired the employee handles the termination, that will assist with the company’s legal defense to some discrimination claims. The person should also be a strong communicator and ready to handle a difficult conversation. Knowing what to say or not to say is critical in this situation.
Others should also play a role in the termination. For example, another trusted person should be present as a witness when the termination decision is communicated – taking notes, rather than participating.
When workplace issues arise, it is good practice to give the employee an opportunity to respond to any discipline and to follow progressive discipline when appropriate (start with less formal performance counseling and move to suspensions and then a last and final warning). Witnesses should be interviewed and the employee should be given the opportunity to present his or her side of the story.
The employer should consider perspectives of the offending employee, witnesses, management and others who may be involved before making any final decisions. These procedures help insulate the employer from claims and ensure the process is fair. However, unless you have promised it in a handbook or contract, neither due process nor progressive discipline is required by law for a private employer. Review your workplace performance policies to ensure they give you flexibility and discretion to decide how to handle employee performance issues in the best manner for the specific situation.
As mentioned previously, have an internal review procedure before the termination decision becomes final. This preliminary review should consider the potential factual and legal issues presented by the situation and what actions could be taken to shore up the employer’s position. Consider what disciplinary action was taken against other employees in similar situations and any possible disparate impact on legally protected classes.
Review of the relevant documentation is also critical in advance of the termination meeting. Documents relating to the employee in question, as well as those related to other employees in similar situations should be analyzed. For example, consider the employee’s last performance review. It’s a huge red flag if the employee’s last performance review was stellar, but the company decides to terminate him or her for poor performance.
Once this is complete and the decision has been made, develop a detailed plan for the termination meeting and conduct it as soon as practical. There is no magic time to hold such a meeting. It should be conducted in a place and at a time that affords the employee the most dignity. For example, consider if the employee will be disappointed if they cannot say goodbye to colleagues, or if the employee will instead feel humiliated by having to walk out in front of co-workers. Be ready with arrangements for gathering and returning the employee’s personal possessions in the most respectful manner.
The person communicating the termination decision needs to have a planned narrative that gets right to the point without too much explanation. It is helpful to identify a triggering event that precipitated the termination. The reason for the termination should be truthful, succinct and without sugar-coating.
If the company decides to offer severance pay, best practice is to get a release of all claims in return. Also do not make promises that can’t be kept, such as unemployment benefits. Those are determined by the specific state agency, not the employer.
Cover final pay issues and post-termination benefits such as final paycheck; payment of any accrued, but unused vacation pay, if required by state law or a contract; medical insurance policies or retirement benefits; or be ready with a written document that gives these details.
Arrangements should also be made for immediately securing the employer’s electronic and physical assets. Depending on the employee’s anticipated reaction to the termination, as well as any theft or sabotage concerns, the employer may want to consider if security is needed on site or at least have a plan to avoid a situation that could increase the risk of theft (such as computer access) or escalate into violence. The company should have a plan that it communicates to the employee to retrieve its property such as keys, access or credit cards, vehicles, tools, computers, cell phones or PDAs.
Employers generally have a right to communicate with current employees about how they will be affected by the departure of a terminated co-worker. Such communication should generally relate to new work assignments or reporting relationships or affirmation of existing employer policies or work rules. As a professional courtesy, however, it is best to avoid sharing the specifics of a particular employee’s termination. To the extent that the terminated employee may be discussed, the employer should only make truthful, nondefamatory comments. Among other things, the employer should never say that the terminated employee broke any laws or committed any crimes.
Employers should review any documents related to the termination and similar comparative situations before firing any employee. This may include more formal documents, such as performance reviews, and less formal, such as emails or documents that would support any performance issues. Consider creating a timeline of key events as part of a pre-termination review that sticks to the relevant facts; this will also be a useful tool should any claim arise.
Depending on the circumstances, employers may decide to offer separation pay in exchange for a general release of all claims. Making sure the release complies with all applicable laws is essential to closing the door for any downstream litigation.
If the employee was subject to any post-termination restrictive covenants, such as non-disclosure, non-solicitation, non-competition or non-piracy agreements, the employer should monitor compliance with such agreements and take the appropriate action deemed necessary to protect its interests. It is good practice to remind the employee of their obligations at the termination meeting and give them a copy of the agreement they signed.
By involving the right people, following the right processes and considering all the relevant paperwork, employers can ensure a dignified termination process that should also mitigate against legal claims that may arise from employee terminations.
Catharine Morisset is an experienced litigator and partner in the Seattle office of Fisher & Phillips LLP, a national law firm committed to providing business solutions for employers’ workplace legal problems. She and her colleagues counsel cannabis retailers, growers and other supporting industries with operations in California, Colorado, Oregon and Washington in all aspects of employment law. She can be reached at firstname.lastname@example.org.