When an employment relationship turns sour, it is only natural for any employer to think about ending that relationship. Typically, the employer wants to be able to simply move on by having the employee go away.
Termination may indeed be the solution, but if not done properly, the employee may continue to remain a problem. Failing to properly handle the termination process can lead to the even less enjoyable experience of defending an expensive lawsuit filed by the former employee -- whether that lawsuit is meritorious or not.
One Simple Rule
When terminating any employee, an employer should adhere to one simple rule: be fair in the treatment of the employee. Interestingly, although no law requires an employer to be fair in its treatment of employees, it is axiomatic that an employee who has received fair treatment - even one who is unhappy because of a termination - is substantially less likely to file a lawsuit regarding the termination.
The reasons for this are twofold:
- People who think that they have been treated fairly do not feel as if they have an axe to grind with their former employer and, therefore, do not seek to sue; and
- Even if a fairly-treated employee wants to sue their former employer, that employee will have greater difficulty convincing an attorney to represent him or her because good plaintiff's attorneys know that juries are unlikely to award large damages to a terminated employee who was treated fairly by the employer.
There are two main places in the termination process that are likely to trip up an employer and lead to litigation which would otherwise be avoidable:
- the review of the decision prior to the execution of the termination;
- and the execution of the termination itself.
This article looks at some guidelines for both the review and the execution of the termination to help employers ensure that they treat employees fairly in the termination process and thereby greatly reduce their risk of facing litigation following a termination.
Review the Termination Decision First
The importance of a careful review of the termination decision before the termination takes place cannot be stressed enough. A careful analysis of the decision before terminating the employee will often thwart the filing a lawsuit because it will prevent making a mistake in deciding to terminate and will provide evidence that the termination decision was fair and lawful.
Employers should analyze (preferably through the employer's human resources representative and/or legal counsel) the following points prior to delivering a termination notice:
Is the Employment "At Will"?
In states where employment is presumed to be "at will", employment can be terminated at any time, for any reason or no reason at all. Also, most employers have "at will" language in employee handbooks and offer letters. This employment status changes, however, if an employee has a contract only permitting his or her termination "for cause."
An employee may also have an "implied-in-fact" contract not to terminate except for good cause if other factors are present; for example, the employee has received promises of continued employment and has been a long-term employee who has consistently received raises and merit bonuses. An employer should know before making a termination decision whether the employment may be terminated "at will" and, if not, what constitutes appropriate "cause" for termination.
What is the Reason for the Termination?
Even with an at will employee, the employer is well-advised to be able to articulate a reason for the termination. Although there are many reasons why it may be important to isolate the reason for termination, the primary reason is that employees perceive it as unfair when their employment is terminated without any reason. When the employee believes that the decision is unfair, that employee is more likely to file a lawsuit.
Is the Reason for the Termination Lawful?
Even an at-will employee cannot be terminated for an unlawful reason. Numerous federal and state laws prohibit termination based upon protected class status such as age, race gender, national origin or sexual orientation. See, e.g., the federal Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. §§ 621-634; Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e; the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101-12213; and the California Fair Employment and Housing Act (FEHA), Cal. Government Code § 12900 et seq.
An employer also cannot terminate an employee for taking certain actions such as whistle-blowing, filing a workers' compensation claim, engaging in union activity, or taking a protected medical leave under the federal Family and Medical Leave Act or California Family Rights Act.
Is the Reason for the Termination Consistent and Clear?
Knowing that the employer has a lawful reason for the termination is not enough. The justification for terminating an employee should be legal and clear. If the decision-maker is fuzzy about the reason for the termination, or gives inconsistent explanations for why the decision was made, such fuzziness or inconsistency can put the true reason for the termination in question and can be viewed as possible evidence that the employer's real motivation for the termination was unlawful.
Who Made the Termination Decision?
The employer should be comfortable that the person making the decision has objectively evaluated the situation. An employer may not want to follow through with a termination decision made by a supervisor who has a history of problems with employees or who just had a heated argument with the employee. The reasoning behind such decisions should be carefully scrutinized; the supervisor may have hidden motives.
Is the Company Following its Own Policies?
An employer must be careful not to terminate an employee in violation of its own policies. An employee handbook or code of conduct manual may prohibit the employer from terminating the employee for the reason contemplated. Also, an employer's policies may require it to follow a progressive discipline policy. A review of the termination decision should encompass a review of the company policies and procedures to ensure that such policies and procedures are followed. Even if the company is not contractually bound to follow its policies and procedures, failure to do so is viewed as unfair and can foster litigation.
Is There Proper Documentation to Support the Termination?
If the employee is being terminated for performance reasons, an employer should make sure documents (such as botched work assignments or unsatisfactory performance reviews) support this determination. Files should be reviewed to determine whether this employee has been receiving pay increases and/or praise by supervisors, since such documents may be inconsistent with a determination to terminate an employee for subpar performance. Similarly, if the employer has a progressive discipline policy, the files should demonstrate that this process was followed.
If the employee is being terminated due to reduction in force, there should be documentation both supporting that such reduction in force took place and supporting the basis upon which employees were selected for job elimination. Additional considerations must be taken and notices prepared before a mass reduction in force because other laws, such as the Federal Worker Adjustment and Retraining Notification ("WARN") Act, 29 U.S.C. § 2101 et seq. and the California WARN Act, Cal. Labor Code §1400 et seq., come into play.
Is the Employee Being Treated in the Same Way as Other Employees were Treated in the Past?
This is a slight variation on analyzing the reason for the termination; an employer should treat similarly situated employees the same. For instance, do not terminate an employee for being one hour late to work if other employees have only been suspended for the same behavior.
Did Criticism of the Employee Begin only After the Employee Complained of Unlawful Conduct?
It is unlawful to retaliate against an employee for reporting unlawful conduct (including unsafe working conditions or discrimination) to a government agency such as the Occupational Safety and Health Administration or the Equal Employment Opportunity Commission. An employer cannot take any adverse employment action against an employee, such as termination or demotion, for asserting his or her rights to report unlawful conduct.
Has the Employee's Side of the Story been Considered?
An employee's version of events could lead to a reversal of a termination decision. In certain circumstances, an employer may want to ask the employee to explain what happened prior to finalizing the company's decision.
Have Alternatives to Termination been Considered?
Certain situations do not necessarily warrant termination and may be better handled by counseling, demotion or suspension. Particularly when a termination decision is based upon performance, the employer should ask, "Has this employee been given the tools and opportunity to succeed?"
Executing the Termination
The perceived unfairness of the termination decision is not the only factor that can lead a former employee into litigation. Many employees sue because they are disgruntled about how (not why) they were terminated. The termination process is just as important as the decision-making process. Employers should abide by the following steps when carrying out any termination:
- Private Office
Hold the meeting in a private office or conference room. This will protect confidentiality and keep interruptions to a minimum.
Give careful consideration to who attends the meeting. Two persons representing the employer should attend the meeting in order to provide the employer with two witnesses to the meeting dialogue and conduct. But the selection of these individuals can vary. A human resources representative and manager are usually appropriate. The employee's supervisor may not be optimal if there is too much conflict between the supervisor and the employee.
- Timing of Meeting
Consider the timing of the meeting. If it can be done, terminate an employee on a Monday or earlier in the workweek, not on Friday. This enables the employee to spend his or her days following the termination feeling productive by conducting a job search, rather than stewing over the weekend.
- Prepare for the Meeting
Anticipate that the meeting will be awkward and most likely upsetting for the employee. In order to make the process as smooth as possible, rehearse what you will say to the employee. Try to anticipate questions that the employee may ask and think about how you intend to answer those questions. A review of the employee's personnel file or other documentation may also be necessary to prepare for the meeting.
Treat the Employee with Dignity and Respect
There is no need to be unprofessional or mean-spirited towards an employee who is being terminated. This type of behavior only fosters ill feelings and gives the employee motivation to seek revenge.
- Verbally Address the Reason for the Termination
An employer should briefly and firmly state the reason for the decision, but avoid giving the employee a document describing the reason. When stating the reason, an employer must be careful not to embellish; the reason given must be true and accurate. Truth and accuracy are important in order to avoid a defamation cause of action based on the "self-publication doctrine," whereby the employee may sue a former employer claiming the employee was forced to publish the false reason for the termination to potential future employers. McKinney v. County of Santa Clara, 100 Cal. App. 3d 787 (1980).
- Avoid a Debate and Keep the Meeting Brief
It is important to let an employee speak during the meeting and ask questions, but an employer should not be pulled into an argument. Listen to what the employee has to say, but make clear that the decision has been made and that it is final. This will help to avoid an argument because the employee will know that there is no point in trying to change the decision. Limiting the time on a termination meeting (i.e., to 30 minutes or less) will also help avoid the problem of arguing over the termination and of becoming emotional or defensive.
- Final Check and Benefits Information
Give the employee benefits information, a final paycheck and expense reimbursement forms. An employer must inform the terminated employee of his or her right to continue benefits that may apply, including pension, job search assistance, and severance, and COBRA benefits. Consolidated Omnibus Budget Reconciliation Act of 1985, 20 U.S.C. §§1161-1168. California Labor Code § 201 requires the employer to pay to the employee at the time of termination any unpaid wages and vacation time. An employer that violates California Labor Code § 201 may be subject to penalties. Also, provide the employee with any forms he or she will need in order to be reimbursed for business expenses.
- Collect Employee Materials
Collect materials and terminate voicemail and computer access. An employer should collect any keys, security pass cards, cell phones, computers, documents or other company materials in the employee's possession or make clear arrangements for this to be done. Remind the employee not to take any company information with him or her. Additionally, when the termination is effective, the employer will want to make sure the employee's voicemail and computer (including e-mail) access rights are terminated.
- Remind Employee of Any Agreements that were Signed
Remind the employee of confidentiality or non-solicitation agreements. If the employee has entered into any such agreements, provide the employee with a copy of the agreement.
Consider a Separation Agreement
Consider providing the employee with a separation agreement. One way to avoid litigation over a termination is to pay the employee severance in exchange for a release of claims. Depending upon the circumstances surrounding the termination, the employee may welcome this opportunity to bring closure to the process and to have some severance pay to help ease the transition. If a separation agreement is going to be proposed, give the employee a copy of a separation agreement and briefly explain its purpose. Give the employee time to consider the agreement; do not require that he or she sign the agreement during the meeting or by the end of the day. In fact, if the employee is 40 years of age or older, the Older Workers Benefits Protection Act (OWBPA), which amended the ADEA, has specific timing requirements for the employee's consideration of the separation agreement.
Minimize Discussion with Other Employees
Minimize discussion of the termination with other employees. Any notice given to remaining employees should be brief and in general terms (i.e., "the employee has left the company"). Avoid any descriptive and unnecessary communications regarding the termination.
Of course, there is no foolproof way to avoid a lawsuit. Nevertheless, following the guidelines outlined in this article will go a long way toward ensuring that an employer remains litigation-free after a termination.