While employment lawsuits arise out of all sorts of circumstances, the event that still triggers most employment-related lawsuits is discharge. It is critical, therefore, that all managers and supervisors with firing authority receive training in the recognition and avoidance of situations in which their actions could put the company and themselves at risk. Although the first step is to gain an understanding of the various protected classifications, and the other exceptions to the employment-at-will rule managers and supervisors need guidelines to direct them through the minefield of the termination process. This chapter is designed to give them a road map, so that they can fire their "best friend" without remorse and without subsequent recourse to employment litigation.
We recommend a 10-step approach to the termination process:
1. Train managers and supervisors in the basic employment concepts.
2. Consider the use of progressive discipline.
3. Document the problem and document the decision.
4. Investigate the preliminary decision to terminate for fairness and legality.
5. Terminate an employee with privacy and respect.
6. Consider doing a deal with the terminated employee.
7. Conduct exit interviews for voluntary quits.
8. Evaluate post-termination consequences.
9. Maintain the confidentiality of the employer's actions.
10. Conduct an audit of termination practices and procedures.
There are more than 50 different legal actions that can be raised to challenge an employment termination. Following our 10-step approach will not guarantee that terminated employees will not file lawsuits; it will, however, maximize employers' and supervisors' prospects to successfully resolve such lawsuits.
- Step One: Train Managers and Supervisors in
the Basic Employment Concepts
Although the employment relationship in many states is at-will (i.e., an employee can be fired for any or no reason), each and every employment termination should be considered a potential lawsuit. In order to both lay the groundwork of an effective defense and to avoid these lawsuits entirely, supervisors and managers must be trained to understand when and how employees should be fired. This training should focus on the practical and legal aspects of termination.
- Train Them in the Basic Employment Concepts.
First, supervisors must have a thorough understanding of legislation that governs the particular employer. Second, they must understand that no employee may be fired for exercising a statutory right, such as serving on a jury. Finally, they must know that, when discharging an employee, they must follow all employer policies governing discipline and termination.
Supervisors should understand the two basic theories of employment discrimination. They are:
1. Disparate impact: Discrimination that results from employment policies or practices that appear to be neutral, but actually disadvantage employees or applicants in disproportionate numbers based on a protected characteristic. For example, height and weight requirements, while neutral on their face, would tend to impact women and certain minorities more harshly.
2. Disparate treatment: Discrimination that results from intentionally treating employees or applicants differently because of a protected characteristic. For example, requiring female applicants to take pre-employment tests not required of male applicants.
They also have to understand how discrimination cases are won or lost. These cases most often turn on proof of disparate treatment, which consists of three steps:
a. Plaintiff's prima facie case;
b. Defendant's showing of a legitimate business reason for its action; and
c. Plaintiff's showing that the business reason is just a "pretext" for discrimination.
Supervisors have to know that pretext (evidence of hidden intent to discriminate) can be proven in at least three ways:
(1) Jokes/slurs/epithets/derogatory comments;
(2) Inconsistent treatment; or,
- Train Them in What They Can Say and Do in the Workplace.
They must know that just a few "magic words" can either prove pretext or create a contract:
"Your stock options would be worth about $4,500,000 if you come aboard."
"You will always have a job with [XYZ] as long as I am with the company."
"I don't want any over-50 burnouts promoted."
"I want to Americanize the branch and eliminate the Mafia shop."
Employers must give supervisors a litmus test to allow them to evaluate their own conduct. For example, supervisors should ask themselves: "Would I make the comment if the employee's spouse were present?"
- Train Them How to Terminate Employees Under a "Just Cause" Provision in a Labor Contract.
1. Employees who are represented by a union will usually be protected by a "just cause" provision contained in a labor contract. In order to sustain a discharge of a unionized employee before a labor arbitrator, an employer will have to prove that it had "just cause" to terminate the employee. Thus, the employer must be able to prove the employee's wrongdoing and establish that the punishment of discharge is consistent with the employee's act of wrongdoing.
2. There is a "common law" of labor arbitration involving just cause. Employers and supervisors should be aware of seven principles that arbitrators will often use when reviewing a termination decision under a labor contract. They are:
a. Adequate notice: Did the employer by past practice or prior notice give the employee forewarning of the probable consequences to the disciplinary conduct?
b. Reasonable rule: Was the company's rule or order related to the proper operation of its business and could it be reasonably complied with or performed by the employee?
c. Fair investigation: Did the employer adequately interview persons with sufficient knowledge of the conduct to reach a reasonable conclusion that the conduct occurred and the employee was responsible for it?
d. Opportunity to respond: Did the employer afford the employee or his representative reasonable opportunity to answer the claim of misconduct prior to being formally charged?
e. Substantial proof: Was the direct or circumstantial evidence sufficient to convince a reasonable employer that misconduct occurred and the employee was responsible for it?
f. Equal treatment: Did the employer treat all employees substantially the same for similar misconduct, as aggravated or mitigated by their prior work attendance and disciplinary record?
g. Appropriate penalty: Was the employer's penalty appropriate to the misconduct found and the prior record of the employee?
- Train Them to Document Their Employment Problems.
1. From a practical perspective, managers must be prepared to support their termination decisions with objective evaluations and/or documentation. They must evaluate each situation independently, not relying solely on the opinions of subordinates for a recommendation to terminate an employee. To the extent that documentation of the employee's inadequate performance (or other reason for termination) exists, the manager should review it to ensure that it is factually correct and free from unlawful bias. Above all else, managers should strive to be fair in their dealings and to ensure that employees know that they are trying to be fair. This respect for employees helps to encourage loyalty and productivity, as well as to defuse potential legal problems.
2. Although there is no magic formula to be used in committing disciplinary actions to writing, there are a few items that need to be included in the documentation:
- The document should be dated.
- The document should be signed by the person preparing it.
- The employee's problems in the business context should be thoroughly and objectively set forth.
- The document should reflect what the employee was told as to what the next step would be if the needed improvement is not shown.
- The document should explain what assistance the employer can give, but state that the responsibility for improvement is on the employee.
- The document should state that the employee was told that the document will be placed in the employee's personnel file.
- The employee should be asked to sign the document if an employer requires that all documentation concerning discipline be signed by the employee (and it should); if he or she refuses, it should be specifically noted on the form.
- Step Two: Consider the Use of Progressive Discipline
- The Progressive Discipline System.
Employers are making increasing use of progressive disciplinary systems in an attempt to deal with employee problems and head off wrongful discharge and discrimination claims. This system imposes progressively greater disciplinary measures upon an employee whose performance continues to be substandard. For example:
- Give an oral warning first.
- If the problem continues, issue a written warning.
- If the problem continues after the written warning, give a final written warning, stating that termination will occur if the problem is not corrected within a defined time period.
- Terminate the employee.
The sole purpose for a progressive disciplinary system is to give the offending employee an opportunity to improve. If the employee fails to heed the system's admonitions, discipline, up to and including termination, may result.
Remember, there is no legal requirement that a progressive discipline system contain certain steps. Indeed, many businesses "merge" the verbal and written steps, depending upon the nature of the work rule violation. Further, most employers reserve the right to sidestep the progressive disciplinary system for serious work rule violations such as theft, flagrant insubordination, etc. For such major offenses, the company may specifically reserve the right to move immediately to the more harsh disciplinary steps of suspension or even termination.
Flexibility to amend or forgo the steps of the system should be preserved in writing by an employer. The employer should also include an appropriate contract disclaimer in its policy or handbook as discussed in Chapter Three.
- Make an Evaluation Before Instituting the System.
Why institute progressive discipline? Doesn't it just create an administrative headache for an employer? Doesn't it just give disgruntled employees yet another reason to file breach of contract claims?
On the one hand, there are a number of obvious reasons for using progressive discipline.
- Progressive discipline may "salvage" or "rehabilitate" a wayward staff member, thus allowing the employee to be returned to the status of a productive worker.
- With rehabilitation, the employer avoids the increasingly expensive process of recruiting and training a new employee.
- The morale of other employees will be elevated when a friend and co-worker is given a second opportunity to succeed.
- Should a legal claim be filed, a jury may be more receptive to an employer's position if the facts show that the employer has used progressive discipline in dealing with the employee. Jurors generally believe that every person should be given an opportunity to improve his or her performance before termination except under the most egregious circumstances.
On the other hand, progressive discipline systems may cause severe problems if not applied uniformly. An employer needs only one instance of an employee being treated leniently without a good reason for every other employee to demand, in court, equally lenient treatment. In addition, implementing such a system can be time-consuming and expensive.
- Employer Education Is a Must.
To have such a system, employers must educate managers and supervisors about the details of the system. They also must educate managers and supervisors about the current state of the law concerning the employment relationship. Supervisory employees need to understand how serious the consequences of improper handling of disciplinary matters can be. If supervisors and managers are not properly educated and trained in connection with this system, the system will not work, and disgruntled employees may end up having more of a basis for a claim or lawsuit than if the system had never been used.
Implementing such a system may cause supervisors and managers to be more evenhanded and thorough in dealing with disciplinary situations. Implementing such a system will make supervisors and managers much more aware of what can and cannot be lawfully done.
- Step Three: Document the Problem
and Document the Decision
Document, document, document. Disgruntled employees occasionally "embellish" the truth. Consequently, an adequate system for employment discipline must be anchored upon appropriate documentation. Supervisors must be instructed on how to document incidents of employee misconduct and progressive discipline. Personnel files must contain a chronology of the problems and incidents to enable an employer to apply discipline and defend against employment claims. An adequate paper trail will lead an employer "out of the wilderness" of employment litigation. Supervisors must be instructed that they will be subject to discipline if they fail to adequately document their files.
- Employers Should Not Ignore the "Problem" Employee.
It is important for employers to promptly deal with a problem employee. What happens too often, however, is that a poor employee will be carried on the payroll for an extended period of time, for the following reasons:
1. The employee's supervisor is too lenient.
2. The employee falls through the cracks, as he is moved from department to department.
3. The employer tries too long to rehabilitate the employee's performance.
4. Management mistakenly believes that firing this employee would cause a lawsuit.
This also does not mean that you should shortcut the process. If you have a progressive discipline system, use it. If you choose to bypass the progressive discipline system and discharge a nonprotected employee because performance is bad, there is no reason you should not do this to an employee in a protected class. Treat an employee in a protected class just like any other employee, particularly one who is not protected. Don't be afraid to act, but do so consistently.
Keeping a poor employee too long can be a particular problem in an age discrimination case. It is not uncommon for employers to say that they have kept particular employees on the payroll for years when, in fact, these employees should have been terminated. This has permitted employees to move into the protected age group, and when the termination finally occurs, often the employee will sue for age discrimination, After all, performance has not changed. If the performance was so bad all along, why wasn't the employee fired earlier? What's the real reason for the discharge? Sometimes employees convince a jury that the real reason is indeed age discrimination, particularly when the employee has been replaced by someone considerably younger or is fired by a new supervisor who is considerably younger than the terminated employee.
While most people do not enjoy firing an employee, an employer is not well-served when a poor worker is permitted to continue on the job because: a)someone is being paid for a poor job; and b)the groundwork is being laid for a dangerous termination.
- Disciplinary Notices.
Often in employment litigation an employer's witnesses are asked to recall instances when the plaintiff was warned, reprimanded, counseled, or disciplined for his or her conduct or performance. Memories fade over time and often personnel files offer little supporting documentation to help the witness's recollection. One way to avoid this problem is by preparing disciplinary notices. If properly drafted, disciplinary notices can become more valuable over time. They provide a contemporaneous record of events, fill in stretches of employment, and tie together the employee's history and the employer's defense. Disciplinary notices need not be complex, long-winded documents. Keep them simple. They should:
- be consistent
- be completed timely
- be factually descriptive
- if possible, include the names of witnesses
- state the action taken
- be objective
- provide consequences
- provide future expectations
- discuss prior disciplinary actions
- be dated and signed
Remember that disciplinary actions should be taken after the supervisor has had time to coolly and rationally think about the situation. Disciplining an employee in anger will likely be ineffective and detrimental.
- Dangerous Documents.
Just as properly prepared documents can aid in the defense of or even avoid employment litigation, there are several categories of documents that can seriously weaken the employer's case.
1. Documents containing misstatements, "damning" admissions, and "smoking gun" documents. Statements in employee handbooks or other documents that employees will only be discharged for cause, that they will be treated "fairly" or that they will continue to be employed as long as they are doing a good job can form the basis for wrongful discharge claims. In the discrimination context, documents that overtly mention an employee's race, sex (including pregnancy), age, or other protected characteristics can be "smoking guns."
2. Inconsistent records. Employers should keep the same types of documents for similarly situated employees. When employees are subject to disciplinary action for violating the employer's rules and regulations, the employer should take care to prepare the same document for the same or similar offenses. For example, take the case of a black employee and a white employee who are found fighting on company property, in violation of a no-fighting rule, and neither is clearly the aggressor. Assuming that their prior histories are the same, both employees should receive the same discipline and the documentation placed in personnel files should be the same. If only the minority employee is disciplined or has a warning placed in his personnel file, an inference of unlawful discrimination arises.
3. Obvious "set-ups." Employers should avoid preparing a "paper trail" to support the termination of a particular employee when similar documents are not maintained for other employees with similar problems. Since the decisions of judges, juries, and arbitrators are frequently guided by a sense of fairness, employees who may have been singled out for discipline are more likely to win sympathy. Evidence of "set-ups" may also be used to support allegations that employers acted maliciously, to support punitive damage claims.
4. Inaccurate and incomplete records. Since inaccurate and incomplete records have less credibility, all documents, whether formal or informal, should be dated and signed so they can be placed in chronological sequence.
5. Overly subjective records. All records should be specific and not contain vague statements or descriptions. Inappropriate employee conduct should be specifically described. The need to specifically describe employee misconduct is also applicable to disciplinary write-ups and warnings.
6. Documents containing inflammatory or derogatory language. Personnel documents, correspondence, and internal memoranda should never contain inflammatory or derogatory language. As a result of potential defamation liability, employers should avoid describing employees as "totally incompetent," "lazy," "an airhead," and similar derogatory terms. Words that connote criminal activity, such as "embezzlement," "fraud," "forgery," "assault," and "sabotage" should also be avoided. Instead, documents should contain the facts of the situation, stated in simple English.
- Step Four: Investigate the Preliminary Decision
to Terminate for Fairness and Legality
- Review Each Termination Decision for Fairness.
These decisions are often reviewed by juries, and sometimes the EEOC and judges as well, from the standpoint of fairness. The technical legal definitions of discrimination often become merged with the concept of fairness. To pass the test of fairness, an employer should:
- strive to avoid arbitrary termination decisions by requiring higher-level management approval of any termination decision prior to its execution;
- fairly obtain the employee's side of the story prior to any termination;
- carefully investigate all the facts;
- make sure the type of discipline fits the offense;
- take into consideration employment records of good performance, particularly for long-term employees; and
- truthfully explain the reasons for any termination to the employee.
- Investigate the Preliminary Decision to Terminate.
Before making the final decision to terminate an employee, review all documentation of the individual's performance deficiencies. The documentation should support the decision to discharge and should reflect the fairness and appropriateness of the action. Employers are advised to define the reason for discharge clearly, citing specific examples. Rather than simply saying that the employee is "not a team player," be prepared to provide specific examples of instances when the employee failed to cooperate with co-workers. The specific event triggering the decision to discharge should be fair and well-documented. If the documentation does not support the discharge decision, consider pursuing an independent investigation of the performance to determine whether discharge is, in fact, warranted. See Termination Checklist at Appendix, Form No.17.
- Ensure That the Decision Has All the Necessary Elements of a Defensive Decision to Terminate.
1. Element No. 1: The reasons for the termination are definable.
It's far better to carefully define the reasons for termination prior to the event than it is to scramble for or change them later on. Too many employers permit generalizations to drive a termination.
Examples: "He's a poor performer."
"She's not a team player."
"He just doesn't have it anymore."
The generalizations may be correct, but they don't win cases. It's important to define the reason behind the generalizations.
Example: He's a poor performer because:
- he doesn't complete work in a timely manner
- work had to be redone because of errors
- the work is never done, despite repeated requests
2. Element No. 2: Define the triggering event that leads you to conclude that now is the appropriate time to terminate the employee.
a. A "history" of problems with the employee is important, especially if documented, but charges and complaints can be defended successfully even in the absence of such a history. It is difficult to successfully defend a termination in the absence of a triggering event. The absence of a trigger makes it appear as though old problems were dredged up to justify an otherwise unjustifiable termination.
b. Although time should be taken to fully investigate the facts prior to termination, too long a period of time between the alleged triggering event and the termination may also give rise to suspicion of pretext. Therefore, it is important to document the triggering event in a timely manner.
3. Element No. 3: The preliminary decision is put to the "smell" test.
Once the reasons for termination have been carefully articulated, get the opinion of an uninvolved party to see if he or she agrees with the action being taken. The commission representative, judge, and jury are "uninvolved parties." If you can't convince your associate, fellow manager, or counselor of the validity of the termination, how will you convince those who are not willing to give you the benefit of the doubt? To protect yourself, this should be someone who has a confidential relationship with the company. The attorney-client privilege protects most conversations in this area.
This review should include:
a. Whether it's legal.
b. Whether the contemplated action seems reasonable under the circumstances.
c. Whether the backup (statements, causation-triggering event, etc.) is sufficient to support the decision.
If it fails the "smell" test, don't be afraid to reexamine the decision. Chances are the business won't collapse if the employee is fired a week or a year from now, rather than today.
4. Element No. 4: Make the decision.
Assuming it passes the "smell" test, the decision should be to terminate, but it should not be cast in stone.
- Step Five: Terminate an Employee
with Privacy and Respect
- Prepare for the Meeting.
Conduct a dry run of the anticipated confrontation at the termination meeting. You should know exactly how you are going to begin, what you will say, and what you expect the employee to say. Anticipate his objections or responses, and be ready with your answers. Prepare an outline for the meeting. (See Appendix, Form No.18.) This will keep you off the defensive during the interview. It will also help you keep your cool if the employee is likely to become abusive. You must keep control of the discussion and avoid a shouting match where you might say things you will later regret.
- Timing Is Everything.
Why do people wait until Friday afternoon to fire someone? That is, perhaps, the worst possible time. If you wait until the end of the day, it will certainly cause the employee to think you have used him right up to the very last moment. If you wait until Friday, several bad things can happen. He might go on a weekend binge, and the topic of discussion with his buddies will be how rich he will get by suing you. He will get lots of encouragement -- to get even! In any event, he will probably brood over the situation all weekend.
- The Setting for the Termination Meeting.
Employees should be terminated in a face-to-face meeting. Terminations by memo or telephone bother judges and juries immensely. Exceptions can be made where the employees are currently incarcerated or there are serious and verifiable safety concerns. The employer's representatives at this meeting should ideally consist of two people, and should include the person who made the decision to terminate the employee. Two witnesses are better than one, in the event a dispute develops over what was said. The employer should not have more than two people present, as it tends to overwhelm the employee and creates a coercive atmosphere.
The meeting should take place in the spokesperson's office or a similarly formal atmosphere. Do not permit interruptions. If privacy can't be achieved in the spokesperson's office, do it elsewhere. The discussion should never occur in the employee's office. The discussion should not occur where other people will overhear.
- The Termination Meeting.
The management representatives should explain that the meeting was called to deal with a serious problem; do not engage in preliminary "small talk." Give the employee the reasons why it is necessary for the company to make a decision at this point. All of the generalizations and reasons should be given at this time. If you don't bring them up now, raising them at a later time may be perceived as pretextual. Don't give specific instances unless asked.
Give the employee every opportunity to talk. It's a cathartic experience for the employee. It gives the employer the opportunity to learn the employee's defenses. The employee may raise a point not considered by the employer, and further investigation may be warranted. The spokesperson should cut off further discussion if it's going around in circles.
After hearing what the employee has to say, the employer can exercise one of two options:
1. If new questions have been raised that call the termination decision into question, don't terminate. Tell the employee you're going to investigate the situation further. Send the employee home, with pay, pending further investigation. Conduct the investigation promptly, retracing former steps, and following new leads provided by the employee.
2. Inform the employee of his or her termination. If she or he continues to argue, permit it to go on for a while, for the reasons set forth above. Do not reverse your decision in this meeting, no matter what new facts may come to light at that point. The employer can always reinvestigate and reverse the decision later.
- End the Meeting and the Employment Relationship With Dignity.
Keep the meeting short and sweet, and avoid any temptation to part company with a rebuke. The last thing you want the employee to do is to walk out the door looking for a lawyer. Do everything you can to help the employee retain his dignity and sense of esteem. Your major objective at this point should be for him to obtain other employment. The sooner he gets a job, the sooner he quits thinking about suing you. If he feels worthless and down-and-out, he probably won't even look for work -- and if he did, he would make a poor showing in an interview. You should also consider offering assistance to help him find work, such as having your secretarial staff prepare a good resume, provide copies, and mail them for him. By viewing termination as a process -- and not an event -- you obtain and retain control in a potentially disastrous situation. You should make sure the termination is the end of the problem, and not the beginning.
- Step Six: Consider Doing a Deal with
the Terminated Employee
In some instances in which an employer believes the potential for a lawsuit is great, the employer may strike a deal in which the employee receives enhanced separation benefits in exchange for signing a release of the employer's liability for any and all claims related to the employee's employment and termination. Releases are not appropriate in all cases, and employers should consider carefully before offering one. If a release is appropriate, it should be prepared by the employer's attorney so that it fully protects the employer and contains the language necessary to withstand legal challenge.
To avoid confusing the basis for the termination, no separation package should be offered until after the employee is terminated. The separation package should usually be offered to the employee in writing, and the offer should be absolutely clear that it is contingent on the employee's signing a full release. Allow the employee to discuss and negotiate the deal during the meeting, but do not allow the package to be accepted at that time. Rather, advise the employee to take an appropriate period of time, usually no less than seven days. If the employee is over age 40, tell him or her in writing to seek the advice of an attorney and allow at least 21 days for the individual to consider the offer. Under the Older Workers' Benefit Protection Act, employees over age 40 also have seven days to revoke any release they have signed. When necessary, employees should also be informed of their rights to continued health insurance benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA). This process is explained in greater detail in Chapter 14: Resolving Employment Disputes.
- Step Seven: Conduct Exit Interviews for
Employers should consider conducting exit interviews of all employees who quit voluntarily. Exit interviews provide an opportunity to clarify various areas and, more importantly, to defuse potential hostility, misconceptions, and lawsuits.
The primary focus of an exit interview is to discuss the reason for the employee's quitting. Not only can employers learn ways in which to improve their workplaces from this information, but the employee also becomes locked into a reason for quitting that cannot easily be changed in a trial setting. The employer should elicit information regarding any complaints that the employee has about the job and the workplace. By eliciting this information, the employer may be able to decipher the possibility of any claims or lawsuits planned by the employee.
Particularly, the employer may be able to determine whether the employee feels "constructively discharged," that is, that the working conditions were so intolerable that the employee believes there was no alternative but to quit. Under the law in many states, an employer may be liable for a constructive discharge if the workplace conduct cited by the employee would have the foreseeable result of creating conditions so unpleasant or difficult that a reasonable person in the same position would resign. It is not necessary that the employer specifically intend that the employee quit.
At the exit interview, the employer should also provide the employee with information regarding benefits owed to him or her, such as accrued vacation and holiday pay, insurance coverage and conversion procedures, pension rights, and severance pay. Employers should also require the employee to return all company property at this time.
As with a termination meeting, it is a good idea for two management representatives to be present at sensitive exit interviews. Notes should be kept of what was said and what subjects were covered. An exit interview checklist, signed by the departing employee, can be an invaluable document in a subsequent lawsuit. Without exception, the employer representatives should avoid inflammatory or defamatory remarks about the employee or others. All paperwork and paychecks should be prepared in advance, as should the company's position on unemployment compensation. Finally, be prepared to deal with any final comments the employee may make that indicate a plan to file a lawsuit or a charge of discrimination.
- Step Eight: Evaluate Post-Termination Consequences
Even though the termination is complete, the employer has not yet surmounted all potential problems. Some concerns in the post-termination phase include owed compensation, replacements, unemployment compensation benefits, job references, and defamatory statements.
- Owed Compensation.
In many states, if an employee resigns or is terminated, the employer must pay all earned wages and compensation no later than the next payday on which the amount would ordinarily be paid. In the event that there is a dispute over the amount of wages due, the employer must give written notice of the amount conceded to be due and pay that amount at the regular time. If the employer fails or refuses to pay the amount owing, it often may be subject to monetary penalties, as well as potential criminal liability. It also may have to pay the employee's legal fees. Corporate officers can be held individually liable for amounts wrongfully withheld.
When a minority, older, female, or disabled employee is terminated, employers should pay special attention to the employee's replacement, if any. An employer can always defend its selection as the most qualified applicant or employee. However, employers should be aware that, in discriminatory discharge cases, one of the elements the employee must prove is that the replacement is not a protected class member (or, in the case of the protected age class, that there is a substantial disparity in ages). Thus, if the former employee's replacement belongs to the same protected class, it is more difficult to prove that the employer discriminated on the basis of that protected characteristic.
- Unemployment Compensation Claims.
Under state law, former employees are usually entitled to collect unemployment compensation benefits unless they have quit their employment voluntarily or have been discharged for "willful misconduct." Thus, in the vast majority of terminations, the employee will receive unemployment compensation.
The state determines the employee's eligibility for benefits based on information submitted by both the employee and the employer. Thus, the employer may have some impact on whether an employee receives benefits. In some instances, an employer may decide not to contest the employee's eligibility in order to appease an otherwise disgruntled employee or as part of a package of enhanced separation benefits. Although an employer can never promise an employee's receipt of benefits, an agreement not to contest eligibility may defuse a potential lawsuit.
In any event, employers should pay careful attention to all claims for unemployment compensation filed by former employees. What a former employee states as the reason for termination can be of great significance in a subsequent legal proceeding, since it may be possible to discredit an employee by pointing out differences in statements made to obtain unemployment compensation and statements made in court. At the same time, an employee's claim may provide forewarning of a potential constructive discharge lawsuit if the employee states that intolerable working conditions left no alternative but to quit. Similarly, the employer must be accurate in its statement of the reason for separation.
- Job References.
Employers should have firm policies concerning what information they will release about a former employee when a job reference is requested. Most employers are no longer willing to give the "full story" on former employees for fear of a defamation lawsuit. Because of society's current litigious climate surrounding employment, some employers have a policy that provides that the only information given out about former employees is the fact of past or present employment; dates of employment; and title or position. If the policy limits the information to be given to prospective employers, it should also be specified that the prospective employer should not interpret the limitation negatively or positively.
If you plan to provide information other than "name, rank, and serial number," you should require that the former employee present a signed, written request for the reference and specifically state his or her permission to provide full information. The written request should contain language that releases the employer from liability arising from or related to the information provided in the reference. It is advisable to have an attorney draft a standard reference request that could be used for all former employees. See generally Chapter 9: Avoiding Defamation in the Workplace -- Giving References and Disciplining Employees While Avoiding Liability.
- Step Nine: Maintain the Confidentiality
of the Employer's Actions
- Internal Concerns.
Employers may desire to inform other employees about the disciplinary measures taken against an employee. Similarly, employees may have an interest in understanding how the employer handles misconduct. Despite this interest, employers must be extremely cautious to limit the disclosure. Explaining disciplinary action to numerous employees might be outside the scope of the qualified privilege if the employees do not have a legitimate business interest in the information. Without the privilege, the employer will be required to prove the truth of every potentially defamatory statement to avoid liability.
In a recent case, an employer announced the reasons for a termination decision to the employee's co-workers. The reasons turned out to be false, and the employer was liable for defamation. While an employer may have the right to fire an individual based upon false information, it does not have the right to publish the false information to an audience outside the scope of the privilege.
Statements made in an internal personnel report should be protected by the qualified privilege due to the legitimate needs of an employer to document employment decisions.
Remember that conduct can substitute for communication in establishing defamation. For example, escorting a terminated employee from the workplace with security may imply reasons for the termination that are untrue. If an employee is not being terminated for dishonesty or violence and inappropriate behavior is not anticipated, use of a security escort can support a claim for defamation by conduct.
- External Controls.
In an attempt to avoid making defamatory statements, employers should consider the following suggestions:
- Agree with the employee on the wording of the reference to be given out in the event of the employee's termination. A mutually agreed upon reference should be in writing and the employer's copy should be signed and approved by both the employer and the employee.
- Adopt a policy requiring a release from both former employees and prospective employees or applicants for the right to check references. The releases should be as specific as possible and, in the case of references given by the employer, the employee should understand in advance what kind of information could be released.
- Institute procedures within the company for centralized control over all references or comments regarding the reason for an employee's termination or any adverse employment decision. Such procedures would require designating certain employees to be trained to handle employment inquiries. The designated employees would have written instructions as to the specific information that they may release. Employees not specifically designated to handle employment inquiries should be informed that they are not authorized to give such information to third parties and be told the procedures for referring such inquiries to the proper authorities.
- Step Ten: Conduct an Audit of Termination
Practices and Procedures
- Conducting Audit Interviews.
An effective step in conducting a self-audit of employment practices is to interview a range of employees (and outsiders) involved with the company's various human resource systems. To learn more about how the employer's discharge practices actually operate, members of a self-audit team could interview persons from the following categories:
1. members of senior management, especially those heading departments that have experienced reductions in force or significant employee discharge activity;
2. mid-level managers in various departments who frequently make termination decisions;
3. former employees (although this needs to be done carefully and can sometimes be better accomplished by reviewing notes of employee comments during exit interviews, if the company performs them);
4. employees who have complained about various aspects of the company's discipline or discharge systems, particularly if complaints implicate legal compliance issues such as discrimination;
5. members of the human resource staff who may not be serving on the self-audit team but who are often involved in employee termination decisions and procedures;
6. employees who receive and investigate complaints from other employees about workplace problems. This includes personnel who administer employee grievance systems or act as "ombudspersons"; and,
7. outsiders" who deal with your terminated employees, such as outplacement counselors, if the company has used that service.
- What to Tell Audit Interviewees.
When self-audit team members interview employees (or outsiders) about the company's discharge practices, interviewees should understand what is taking place. Auditors should explain the following at the beginning of the interview:
1. The goals of the employment law self-audit process and the role of the interview in that procedure.
2. A description of how or why this interviewee was selected (randomly, or because of particular knowledge).
3. The importance of maintaining the confidentiality of the audit interview. Interviewees should also be given an opportunity to ask questions about the self-audit process.
- What to Ask Audit Interviewees.
This will vary considerably depending on the type of employment laws with which the employer must comply and the position of the person being interviewed. Below are some fairly typical issues that employers may want to explore when conducting self-audit interviews about discharge practices.
1. What are the types of offenses for which employees are terminated? Are those set forth in a written policy and, if so, what else does the policy say about job security?
2. Are other oral or written promises made to employees regarding job security or the reasons for which they can be terminated? If so, what are they and who makes them?
3. Is there a progressive discipline system, and is it being followed?
4. How are investigations of disciplinary offenses conducted, by whom and involving what information?
5. Who decides the reasons for which an employee should be terminated (for disciplinary offenses, performance issues, or as part of a reduction-in-force), and what criteria are involved in those decisions?
6. Is there any review by higher management or the human resource department of a decision to terminate an employee?
7. Does a sampling of termination decisions show that similarly situated employees are treated differently or that employees who complained about workplace problems were later terminated?
8. Are terminations handled any differently when the employee has been injured on the job, filed a workers' compensation claim, sought family or medical leave, or suffered from a disability?
9. What forms or other documents are used in the termination process?
10. What training is provided for employees responsible for making termination decisions?
11. How and by whom are termination decisions communicated to the affected employee? To other employees? To people outside the company (customers, the media, suppliers, government agencies)?
12. Is there an internal review or appeal procedure for terminated employees? If so, is it set forth in a written policy, and what procedures govern its operation? Is the appeal procedure followed?
13. Are exit interviews conducted with departing employees and, if so, by whom, and what is done with that information?
14. Are any different procedures followed if the termination is a result of a large-scale reduction-in-force (with particular attention to employee and governmental notification)?
15. Are terminated employees given written severance documents explaining benefits? Are they asked to sign a release of claims against the employer?
16. How and when are terminated employees paid their final wages and monetary benefits? How and by whom are their rights to benefit continuation upon termination explained?
17. Does the organization use outplacement consultants and, if so, what documents govern their service and control their actions?
18. What are the policies and actual practices regarding references for former employees? Are departing employees asked to sign a release in order to receive such a reference? Are reference policies being followed?
19. Have past legal challenges indicated problems with termination policies or procedures?
- Examining Documents of Discharge Practices.
In addition to interviewing certain employees and outsiders as part of the self-audit, members of the audit team will want to examine a variety of documents generated during the process of discharging employees. The following documents are of particular interest:
1. Hiring materials, such as recruitment advertising, position descriptions, employment applications, and offer letters, together with employee handbooks and written policies on such topics as performance evaluations, discipline, layoff, and termination. Employees have relied on all of these documents in successfully arguing to courts that they had employment contracts restricting the employer's right to discharge them.
2. Individual employment contracts which may govern when an employer wants to discharge an employee covered by such documents.
3. Collective bargaining agreements, if applicable.
4. Applicable government contracts that may restrict the reasons for employee terminations or impose particular procedures.
5. Restrictive covenants the employee may have signed at the time of hire or during employment that may govern the use of confidential information after termination, or the employee's ability to compete with the former employer.
6. Contracts with outside third parties, such as outplacement firms.
A well-advised employer that treats employees consistently and fairly will reap the benefits of a productive workforce and will be able to avoid or defend against employee lawsuits. The key is to invest resources in developing and implementing personnel policies that are effective and manageable, and training managers and supervisors to understand the legal and practical consequences of their decisions. The two most important employment actions are to: hire right and fire right. Both must and can be managed in a fair and legal fashion.