This article goes through the proper way to terminate an employee. It provides the three legal reasons to terminate an employee and it provides the reader with the steps that they need to take to be able to defend their position in case they are ever faced with a wrongful termination lawsuit.
When terminating a worker, employers must take care to follow specific legal guidelines. By adhering to the necessary procedures, an employer can ensure that he avoids any legal entanglements and that they are handling the problematic situation as smoothly as possible.
The Employment-at-Will Doctrine
The basis for an employer to terminate an employee without being sued is the employment-at-will doctrine. This doctrine is just a statement that is signed by both the employee and employer at the time of hire that states that the employee can quit at any time for any reason without notice and that the employer can terminate the employee at any time for any legal purpose. I say “legal” right because employers do have a few limitations on why they can fire an employee.
State and federal laws create most of the limitations to the employment-at-will doctrine. The first restriction imposed on the employment-at-will doctrine is state law. Most states require “just cause” before the employer can terminate the employment relationship. For example, in the states of California and New York, state law requires that an employer have “just cause” before they can legally terminate an employee. If the employee suspects that their employer frivolously terminate him, then they can bring suit against their employer and collect damages for loss of income due to the illegal termination of their job.
Protective provisions outlined in state and federal laws create the second set of limitations that make it illegal for employers to terminate an employee based on protected statuses. For example, it is against federal law to terminate an employee because she is pregnant because the employee is over forty years of age, or because the employee is not white.
Public policies and interests also must be taken into consideration when terminating an employee as these considerations may make the termination illegal. For example, an employer cannot fire an employee because they took time off to serve on jury duty. It is also not legal to terminate an employee because they refused to perform an illegal act that their boss ordered them to do.
While the employment-at-will doctrine does give employers and employees the individual freedom to enter and exit the employment relationship, employment contracts may limit when and why they can terminate the relationship. A signed contract can give employees protection for the life of the contract or provide them with specified monetary compensation if the employer terminate them before the contract expires. For the employer, the agreement also protects their investment in the employees by requiring them to serve the company for the entire duration of the deal. It helps to limit the threat of turnover by highly skilled and desirable employees.
Implied contracts can also impact the employer’s legal ability to terminate an employee. These specific situations can get employers into legal trouble if they are not aware that their oral assurance that employment with their company is guaranteed as long as the employee “keeps their nose clean” and is just as binding and defensible in a court of law as a written contract making the same claim. To avoid being trapped in this situation, avoid making any statement at the onset of employment that could be interpreted as a guarantee of jobs regardless of circumstances or the employee’s performance.
The final issue that can determine the legality of a termination is the covenant of good faith and fair dealing outlined in the Uniform Commercial Code that states that “every contract…imposes an allegation of good faith in its performance or enforcement.” What this means in regards to an employment relationship is that employers must act in good faith when entering into an employment contract with an employee. They must not set out intending to work in a manner that is devious or malicious. It includes not entering into an employment contract planning to terminate the employment relationship prematurely or on a whim.
To protect your right to terminate the employment relationship at-will, you need to document this agreement at the time of hiring an employee. To do this, write out a statement that dictates that the nature of your business relationship with the new employee will be as an employee-at-will. A further outline that you can terminate the employment at any time, for any legal reason, and that the employee can terminate the job at any time for any reason. Conclude the statement with the following explanation for the employee to sign and date:
I have received a copy of the above statement, I have read and understood the information provided, and I agree to the terms set herein.
Signed Date
Printed name
A court of law will usually uphold this statement as a binding agreement between you and the employee. However, even with this signed document, you may need more evidence to defend yourself against wrongful termination lawsuits.
Three Legal Reasons for Terminating an Employee
- The Employee violated a known company rule.
- The employee is not able to perform the job adequately.
- The company is reducing its workforce for economic reasons.
1. The employee violated a known company rule or rules.
The first legal reason that an employer can use to justify the termination of an employee is if the employee violated a “known” company rule. In order for this reason to be upheld in a court of law the employer will need to prove that: (1) the rule actually exists; (2) the employee knew that it existed; (3) the rule was violated; (4) they also terminate other employees for the same infraction; and (5) the termination was reasonable punishment for the violation.
Documentation is critically important to defend yourself in a wrongful termination lawsuit. The first two things that the court will consider is if the rule that employee broke existed and that the employee knew of its existence. To prove this you, as the employer, must be able to show where the rule was written down, and how it was displayed so that it is reasonable to assume that the employee was aware of its existence.
Many employers get into legal trouble when they terminate an employee because they broke an “unwritten but known” rule. If it is not in writing, it may not be defensible in a court of law, and most likely the judge will rule in favour of the employee. To protect yourself against this, have ALL of your company rules written and have ALL of your employees sign a copy of these rules stating that they have received a copy, read, understood, and agree to abide by the rules. This signed document will help prove that the company’s rules exist and that the employees are aware of them, and that they agree to abide by them.
Documentation will also help defend your position and prove that the employee broke the rule and that the infraction was severe enough to necessitate termination. Here witness reports, video recordings from security cameras, and job samples may all be gathered and used to defend your position.
When deciding if your termination was legal and warranted, the courts will also look at your past reactions to similar infractions. If in the past another employee has been fired for breaking the same rule, the court will see that you are reasonable and equally applying your rules and disciplinary actions to all of your employees and should rule in your favour. However, if you did not terminate an employee who broke the same law in the past, then the court will probably order in favour of the employee.
Past precedents of your reactions to rule infractions will determine the legality of your termination policies in the future. Because of this, many lawyers and legal advisors suggest that you terminate every employee that breaks a rule to preserve your constitutional right to terminate employees in the future.
The final factor that courts take into consideration when determining if a termination due to a rule infraction is legal is if the separation is an appropriate reprimand for the rule that employee broke. This not only takes into consideration the type of rule that was broken but also the length of time that the employee has been employed. As a general rule the longer that the employee has worked for you, the more corrective or disciplinary steps you have to take before terminating their employment.
For example, an employee who is still in their six-month probationary period you can fire for breaking a rule immediately. However, an employee with tenure you can only fire after you have made “reasonable attempts” to correct their behaviour or to correct the situation. These attempts may include verbal and written warnings, demotion, reduction in pay, and even counselling.
While you need to take these steps terminating a tenured employee in most cases, certain situations necessitate immediate dismissal including stealing money from the company, displaying violent behaviour, endangering employees and customers, and any other unlawful behaviours and actions are all reasonable grounds for immediate dismissal without other disciplinary steps.
2. The employee is unable to perform the job adequately.
The second legal reason to terminate an employee is if they are not able to perform their job adequately. To be able to defend this reason for termination in a court of law the employer must be able to prove that the employee was incompetent, that the employer took reasonable steps to try and improve the employee’s performance, and that the employer had addressed the issue in several instances before terminating the employee. To prove that the employer’s position in this kind of situation they will need documented evidence.
First, employers need to prove that their expectations for work standards were reasonable and that an average employee can perform at your set criteria. To prove this, employers need to provide documents that detail the minimum work standards for the job such as job analysis, and/or a job description. To prove that an average employee is capable of meeting these standards, they should also provide the performance records of other employees who have the same job responsibilities as the terminated employee. The comparison of many employees’ performance records to the terminated employee’s performance record you can use as proof that indeed it is possible and common for employees to meet or exceed the standards set out and that the terminated employee was well below what is normal.
The next pieces of evidence that employers need to produce are evaluations of the employee in question that document consistent failures to meet the job’s performance standards and that disciplinary actions were taken to address the issue in several instances. Evidence to prove this can include: critical incident reports, employee evaluation forms, feedback forms, signed disciplinary actions, notes made by the employer in regards to the employee’s performance, etc.
The key to defending your position in this situation is a properly formatted and current performance-appraisal system. It should include job analysis and contain specific and concrete standards that employees have been made aware. It should be set out in writing signed by the employees. It will affirm that they understand and agree to meet the standards. This system should also include provisions that address behaviour measurements, and all evaluations should be carried out by some reviewers to rule out any chance that a personal distaste biased any decision for the employee. The system should also provide employees with the opportunity to appeal the findings. Without this documentation, employers are relatively powerless to defend themselves.
3. The company is reducing its workforce for economic reasons.
The final legal reason for terminating an employee is if it is in the best economic interest of the company in question. Layoffs are common reasons for terminations, especially in larger corporations that are downsizing or restructuring. Here, employee expect courtesy, and employees who are involved in a large-scale layoff you need to give at least 60 days notice of the dismissal. This courtesy is necessary by the Worker Adjustment and Retraining Notification Act (WARN).
Documentation
Documentation is your key to protecting yourself from wrongful-termination lawsuits. To make sure that you have all of the documentation that you need, keep your personal files current and complete. Try to keep the following items on hand, either in every employee’s file or a clearly labelled personnel file:
- Critical incident reports
- Employee evaluations (at least once a year. I would recommend assessments every six months, especially for new employees for the first three years.)
- Job analysis of all jobs. (Conduct job analyses at least every two or three years.)
- Job descriptions for every position. (Update job descriptions at least every two or three years.)
- History of how infractions you have handle in the past.
- Supervisor’s employee log documenting good and bad incidents.
- Customer evaluations and feedback forms.
- Work samples.
- List of rules, signed by each employee.
- List of progressive disciplinary actions signed by each employee.
- Employment-at-will doctrine signed by each employee.
The Termination Process
- Preparation
- The termination meeting
- After the termination meeting
1. Preparation
When you are preparing to terminate an employee, you will want to make sure that you are ready. First, you will need to go over your reasons for terminating the employee to make sure that the termination is for a legally defensible reason. Secondly, you will want to make sure that you have the documentation that you need to support your position. That includes – evidence that the employee was aware of the rule or standard that they disregarded, proof that the employee broke the rule or that he did not met the standards, and documentation that the employee was made aware of the problem, and that you took reasonable steps to correct the problem.
Next, you will need to decide if your company is going to give the employee a severance package. The severance package is not only a courteous option to offer an employee who is being laid-off, but you can also use it as a way to avoid being sued for wrongful termination. In exchange for money, extended benefits, etc., you can have the terminated employee sign a waiver stating that they won’t sue you over the termination. It may be a necessary evil if the termination is expected to be controversial or combative.
Finally, once you have put together your documentation and severance packages, you will need to schedule a termination meeting. You should schedule this meeting for a Monday or Tuesday so that the employee can get professional advice if they need it. You should also choose a location that is neutral and non-threatening.
2. The Termination Meeting
The termination meeting is going to be stressful and uncomfortable for all involved. To reduce the amount of stress, keep it brief and to the point. Don’t try to sugar coat things or hmm and hah because most likely the employee already knows why they are there, so get to the point right away and make it as quick as possible. Give the employee the reasons why they are being let go, express your gratitude for their efforts, offer the severance package if applicable, take care of administrative duties like collecting keys and company property and hand the employee his or her final check.
3. After the Termination Meeting
After the terminated employee has left the building with his or her personal belongings, it is a good idea to meet with the company’s other employees to let them know what happened without divulging private information. This information meeting will help reduce employee anxiety, and it will help to minimize rumours and misinformation from being spread.
Review of Key Issues
- Make sure that ALL company rules are written out.
- Make sure that ALL employees have read, understood, and signed a copy of the company’s rules, disciplinary procedures, and employment-at-will doctrine.
- Make sure that you are terminating an employee for a legal reason.