Termination
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Firing an employee has always
been an uncomfortable task, but it used to be clearcut—and relatively free of
legal complications. You simply
paid the former employee for accrued wages plus any earned but unused vacation
time to which the employee was entitled.
Things are more complicated now. Firing someone—even a
person who is demonstrably incompetent—can be a risky endeavor. Do it for the
wrong reason or in the wrong way and you can be obligated to pay substantial
money in damages, or to rehire the worker.
In firing employees, you must beware of potential legal
sticking points. For example, a former employee who believes that he or she was
fired in retaliation for reporting a workplace hazard to OSHA may have legal
grounds for filing a claim against you. And, in some situations, an employee
who asserts that your employee handbook amounted to a contractual guarantee of
job security may be found to have a valid claim.
As a result of these and other exceptions to the at-will
employment principle, lawsuits by former employees against their former
employers have increased. And despite the fact that many employees have been
fired for valid reasons, some of them have won cases based on illegal firing
simply because the employer was sloppy in terminating the employment
relationship.
For a more in-depth discussion of how to fire
employees without running afoul of the law or harming your business, see Firing
Without Fear, by Barbara Kate Repa (Nolo).
Copyright
© 1999-2001 Nolo.com All Rights Reserved
A. Wrongful
Discharge Cases
Cases in which former
employees claim that they were terminated for an improper reason or that an
employer bungled the process are known as wrongful discharge cases—and they’re
based on a number of legal theories. You can better avoid being sued for
wrongful discharge if you grasp these theories.
Because state laws and court decisions vary in this area,
not all of the legal theories for wrongful discharge will be available to all
former employees. Also, since the law can change—and many recent changes favor
workers, not employers—you need to keep up to date on the specific rules in
your state.
Many state trade associations publish newsletters or magazines to
help keep their members informed of changes in employment law. Your state
chamber of commerce may also have helpful publications on this subject.
1.
Statutes
If you discriminate
illegally in firing an employee, a statute may give him or her the right to
base a wrongful discharge case against you on that ground. Other statutes
prohibit firing an employee for specified reasons, unrelated to discrimination.
The main statutes that employees rely upon in asserting wrongful discharge
claims are described here.
a. Race, color,
religion and national origin discrimination
Under federal law—and many
state statutes as well—it’s illegal to discriminate against workers based on
race, color, religion or national origin. These same statutes make it illegal
to retaliate against a worker who complains about discrimination or who
otherwise asserts his or her rights under the statute.
b. Age, gender and
pregnancy discrimination
Additional federal and
state statutes bar discrimination based on age, gender and pregnancy. These
same statutes make it illegal to retaliate against a worker who complains about
discrimination or who otherwise asserts his or her rights under the statute.
And discrimination based on sexual orientation is also prohibited in a growing
number of states, cities and counties.
c. Sexual harassment
Sexual harassment is a
form of illegal discrimination covered primarily by statutes prohibiting sex
discrimination.
d. Disability
discrimination
The Americans With
Disabilities Act bars discrimination against people with physical or mental
disabilities. It also bars retaliation against people who complain about
discrimination or who otherwise assert their rights under the statute.
e. Refusal to submit
to lie detector test
A federal law, the
Employee Polygraph Protection Act, makes it illegal to fire an employee for
refusing to take a lie detector test. Many state laws also set out strong
prohibitions against using lie detector tests in employment decisions.
f. Alien status
The Immigration Reform and
Control Act requires you to verify that an employee is eligible to work in the
United States. But you can’t use alien status as a reason to fire a worker who
is legally eligible to work here.
g. Complaining about
safety or health conditions
Under the Occupational
Safety and Health Act, you can’t fire (or otherwise retaliate against) someone
for complaining that working conditions fall short of complying with state or
federal safety and health rules.
2.
Court Decisions
Wrongful discharge
lawsuits are not always based on statutes. Many courts have awarded wrongful
discharge damages to former employers for nonstatutory or common law reasons.
The main ones are discussed here.
a. Breach of
contract
Employers sometimes make
promises to job applicants to entice them to become employees. And some
employers may also dangle inducements in front of current employees to
discourage them from leaving. A number of judges have ruled that if a person
relies on such promises, an enforceable contract of employment has been
created. An employer may be held liable for wrongful discharge if the employee
is fired in violation of that contract.
Example: Betty, a diligent worker at AutoTec, is offered a job by
a rival employer. She declines the job after AutoTec’s president tells her
she’ll have a job for life at AutoTec if she continues to effectively manage
her workload. Three years later, AutoTec fires Betty even though she has kept
up with her work. Betty sues for wrongful discharge, claiming AutoTec violated
its employment contract with her by firing her.
Specific promises of job security—either written or
oral—are not always necessary for a judge to rule that an employee can’t be
fired arbitrarily. Some judges have allowed fired employees to collect damages
or be reinstated to jobs because the employer created a legitimate expectation that
employees wouldn’t be fired without good cause. The typical focus in these
cases is on inferences of job security made by the employer in a written
document such as an employee handbook. It, too, may be enforced as a contract.
Example: After six months on the job, Tom is fired from his job at
Syspro, a small software house. He sues for wrongful discharge, claiming that
Syspro’s employee handbook led him to believe that he’d only be fired for good
cause—and that, in fact, Syspro fired him without a good reason. The judge
agrees that it was reasonable for Tom to conclude, after reading the employee
handbook, that his job was secure. The court rules that the employer’s wording
of the handbook constituted an implied contract.
b. Breach of good
faith and fair dealing
A few wrongful discharge
cases have been based on the premise that every employment relationship
includes an automatic commitment by the employer to deal fairly and in good
faith with the employee. Applying this doctrine, judges have held that a
discharge was wrongful when an employer has dealt arbitrarily with an employee.
Almost all of these cases have involved longtime employees who were fired as
they neared retirement age.
Example: Rita has worked for Jones Enterprises for nearly 25
years. The company fires her just three months before her retirement benefits
are to become permanent. In a wrongful discharge case against Jones, the judge
finds that the company fired Rita to save itself the expense of paying her the
full benefit of her retirement program. The judge rules in Rita’s favor because
the firing breached the implied covenant of good faith and fair dealing.
c. Violation of
public policy
Judges sometimes rule that
a firing was wrongful because it was against the best interests of the public.
Most courts do not allow an employer to fire an employee, for instance, because
he or she was trying to correct a potentially harmful business practice.
Example: Clinical Lab Center, a small company that processes blood
tests for doctors, fires Joe, a medical technician, because he has twice
complained to management that the inadequate testing of blood samples by other
technicians has led to many inaccurate test results. A judge rules that Joe’s
firing was wrongful because it violated public policy. Workers, the judge
notes, should be free to speak up about sloppy practices they find on the
job—especially those affecting public health or safety.
Courts have held that it’s against public policy to fire a
worker for refusing to file phony reports with a state environmental agency,
bribe public officials, commit perjury or engage in industrial espionage.
Courts have also held that it is against public policy to fire an employee for
refusing to commit an illegal act or for threatening to report an employer’s
illegal conduct.
Copyright
© 1999-2001 Nolo.com All Rights Reserved
B. Guidelines for Firing Employees
Even though your motives
in firing someone are completely honorable and legitimate, the action may
remain legally risky business. But there are several steps you can take to
greatly reduce the chances of a former employee suing your business and being
awarded a judgment against you.
1.
Contractual Commitments
Before you fire an
employee, check into whether you’ve made an oral or written contractual
commitment that may limit your right to fire. Consider the following:
• Is there a written or oral
contract or document (including a hiring letter) that promises the employee a
job for a fixed period of time?
• When you hired the employee,
did you make any oral commitments about job security?
• Have you assured the employee
that you’d only fire him or her for good cause?
• Have you listed causes for
termination—in a contract, employee handbook or elsewhere—in a way that limits
you to those specified causes?
• Does your employee handbook
or other written policy or memo make any promises about job security?
• Does your company have
written or customary procedures that must precede firing?
Your answers to these questions will help you identify
whether you’ve limited your ability to fire the individual. Even if you are
positive that you have never given the employee any assurances of job
security—either oral or written—you should still proceed with caution,
especially when dealing with an employee who has been with your business for a
number of years. Some courts have held that a long employment relationship can imply
assurances of job security, which in turn can imply an employment contract that
limits your ability to fire the employee. If an employee has only been working
for you for a few months—or even for a year—you probably don’t have to worry
about this issue. If the employee has been with your business for, say, 15
years, however, you should be careful. If you don’t have a really good reason
for firing the employee, consider consulting an attorney before taking action.
Employment contracts can be a two-way street. While they
may limit your right to fire an employee, the flipside is that they usually
spell out the employee’s obligations to your business. If the employee isn’t
performing well, chances are that he or she is in breach of the contract,
giving you the legal right to terminate the relationship. Because the
interpretation of contract terms can involve legal subtleties, consider having
a brief conference with a lawyer before firing an employee who has a written
contract.
Say What You Mean
And Mean What You Say:
The words you use in hiring someone and in writing an
employee handbook can create a contractual commitment that you didn’t
anticipate. Your employee handbook and similar documents should reserve your
right to terminate employees at your discretion. While you may also wish to
list some specific types of conduct that will result in termination, such as
dishonesty or excessive absenteeism, those shouldn’t be stated in a way that
implies they are the only ways to end the relationship. Also, your handbook and
other communications with employees should not make any promises about
long-term job security. If they do, it’s time for a rewrite.
2.
Lawful Reasons for Firing
To head off the
possibility that an employee may try to base a wrongful termination action on
alleged illegal conduct or motives in your workplace, be prepared to show the
real reason for the firing.
Reasons that may support a firing include:
• performing poorly on the job
• refusing to follow instructions
• abusing sick leave
• being absent excessively
• being tardy habitually
• possessing a weapon at work
• violating company rules
• being dishonest
• endangering health and safety
• engaging in criminal activity
• using alcohol or drugs at work
• behaving violently at work
• gambling at work, and
• disclosing company trade secrets to
outsiders.
Depending on the nature of your business, you may have
other legitimate reasons to fire employees as well. Whatever reasons you use as
a basis for firing people, it’s absolutely essential that you treat your
employees evenhandedly. That is, if you regularly let some employees engage in
prohibited conduct, you’ll be on shaky legal ground if you claim good cause for
firing others for the same reason.
Example: Andrew, a black patient attendant, is a half-hour late
for work three days in a row. His employer, a medical clinic, fires him. In
suing for wrongful discharge based on illegal discrimination, Andrew shows that
two white attendants had been similarly tardy in recent weeks, but received
only a verbal warning to shape up. Even though excessive tardiness is a valid
business reason for firing someone, the jury awards damages to Andrew because
the employer applied the rules unevenly and unfairly.
Getting Help Before Firing a Violent Employee
Almost always, if an
employee behaves violently or makes threats in the workplace, that will
constitute a valid reason to fire him or her. After all, you need to protect
other employees as well as customers and others likely to come into contact
with the violent person. Yet, judges in a few cases have suggested that a
violent or threatening employee may be entitled to some latitude or
accommodation if the violent behavior stems from a mental or emotional disorder.
On balance, it’s
generally best to proceed decisively and fire the violent employee—as humanely
as possible, of course. You may, however, want to confer in advance with an
experienced employment lawyer to reduce the likelihood of later legal
entanglements.
Copyright © 1999-2001 Nolo.com All Rights Reserved
C. The
Firing Process
Where possible, give
employees ongoing feedback about job performance, conduct formal job
evaluations once or twice a year and impose progressive discipline. Ideally, a
firing shouldn’t come suddenly or as a surprise.
When you’ve reached the point where firing an employee is
the best or only option, you must mind some legal strictures as you carry out
the firing.
Speedy Action is Sometimes Appropriate
There can be
situations in which moving quickly to fire someone—without a warning—may be the
best course. For example, if your delivery truck driver is convicted of drunk
driving, it makes sense to get rid of the driver. Similarly, you shouldn’t feel
it necessary to give advance warning to a bookkeeper who has embezzled money
from your company. In general, use your judgment and err on the side of giving
an employee a chance to correct a problem. But in extreme circumstances, don’t
hesitate to act quickly.
1.
Severance Packages
Many employers and
employees wrongly believe that every fired employee is legally entitled to
severance pay. The truth is that you must only give severance pay when it’s
required by a contract with the employee. Still, in some cases, you may wish to
offer severance pay and other benefits to help cushion the impact of a
firing—and alleviate ill will.
If you’re inclined to offer a severance package, it makes
sense to be more generous with longtime employees than with those who have been
with you just a year or two. For a short-term employee—someone who’s worked for
you for two years, for example—you might offer one month’s pay plus payment of
health insurance premiums for 90 days. For an employee who’s been on your
payroll for 15 years, it would be reasonable to offer six months of salary plus
one year’s worth of paid health insurance premiums.
You can be creative in putting together a severance
package. The benefits you may wish to consider include:
• severance pay
• continuation of employee benefits, such as
payment of health insurance premiums for a limited time
• a favorable letter of reference if your
normal policy is to give only a former employee’s position and term of
employment
• releasing the employee from special
obligations such as a covenant not to compete
• allowing the employee to keep any advance of
expense funds or commissions that otherwise would be repayable to your business
• allowing the employee to keep the desk,
chair, computer, cellular phone or tools that he or she has been using
• agreeing not to contest the employee’s right
to unemployment compensation
• paying for outplacement services, and
• promising to pay an employee’s moving
expenses, up to a stated limit.
Also, consider paying the employee for unused vacation
time that the employee would otherwise lose. Normally, the conditions under
which an employee will be compensated for unused vacation time are a matter of
policy to be set by an employer—but you can bend that policy to benefit a
departing employee.
Example: Alpine Ski Shop pays its employees for two weeks of
vacation time each year, but states in its employee’s handbook: “You must take
your vacation during June, July or August and while you are on Alpine’s
payroll. Vacation time not used during that period will be forfeited unless you
secure prior approval.” Employee Kurt takes one week of his vacation in July
and doesn’t ask for permission to take the second week later. In October,
Alpine fires Kurt because of an attitude problem. As part of a severance
package, Alpine pays Kurt for the unused week of vacation time.
Paying for Vacation Time May Be Mandatory
In some states, the law doesn’t allow an employer to set a policy
forcing employees to forfeit unused vacation or sick time once it has accrued.
In such states, the accrued vacation or sick time is treated as wages and must
be included in an employee’s final paycheck. The key legal issue is whether the
vacation time has accrued. Check with the state department of labor to learn
how much latitude you have regarding payment for vacation and sick time.
2.
Preparing the Paperwork
Before you fire an
employee, prepare a letter describing the severance package you intend to
offer. And if you want the employee to waive possible legal claims against your
business to qualify for the severance benefits, consider preparing a severance
agreement as well.
For a release to be enforceable, you must offer the
employee something of value in exchange for giving up his or her possible
claims against your business. The severance package in the sample agreement
satisfies this legal requirement.
Also, give the employee a reasonable time—three or four
business days, for example—to decide whether to accept your severance package
and sign the severance agreement containing a release of claims. A coerced
release is legally worthless.
Special rules apply if the employee is releasing claims
under the Age Discrimination in Employment Act. If you present a release to an
individual employee who’s 40 years old or older, you must give the employee a
fixed period of time in which to decide on signing the waiver. That period must
be at least 21 days if the waiver has been presented to the employee alone. If
you’ve presented the waiver to a group or class of employees, you must give
each worker at least 45 days to decide whether or not to sign. In either case,
a worker has seven days after agreeing to such a waiver to revoke his or her
decision.
3.
Return of Property
In planning for the
termination meeting, make a list of all company property that has been given to
the employee. Be prepared to get back these items from the employee either at
the meeting or within a reasonable time afterward. Items to think about
include:
• automobiles
• computers, cellular phones
and beepers
• confidential manuals and
other documents
• keys, credit cards, uniforms,
ID badges, and
• parking permits.
Don’t overlook any expense account funds you advanced to
the employee. You may be entitled to deduct such advances from the employee’s
final paycheck.
4.
The Termination Meeting
Call the employee into a private office or meeting room
and inform him or her of your decision. Be honest and direct in stating your
reasons for ending the employment. If you’ve given the employee ongoing
feedback, the firing shouldn’t come as a complete shock. Make it clear that
this is a final decision and that you’re not going to change your mind. Unless
the employee is likely to be a menace in the workplace, allow a day or so—but
no longer—to clear out his or her desk and say goodbye to co-workers.
The Right to Have a Co-Worker Present
All employees have
the right to have a co-worker present with them at investigatory interviews or
meetings that the employee believes will result in disciplinary action from
their employer. Disciplinary action could include termination.
This right is called a Weingarten right after a U.S.
Supreme Court decision. (To read that decision—NLRB v. J. Weingarten, 420 U.S.
251 (1975)—go to Nolo’s Legal Research Center at http://www.nolo.com.) That
decision only gave the right to employees who were members of a union. In 2000,
however, that right was expanded to nonunion employees as well.
Although no court has held that
employers have an affirmative duty to inform employees of this right, it’s
prudent to do so—and to allow the employee to have a witness by his or her
side.
Common Sense Can Help Avert Violence:
You may have zeroed in on scary newspaper headlines about
disgruntled former employees who open fire on former employers. The actual
incidence of such violence is quite low. Still, it pays to be prudent.
Violence following a firing is most apt to occur in a workplace
where there are high levels of stress, autocratic and unpredictable managers,
poor communication and employees who feel powerless.
Be especially careful if
you’re firing an employee for performing poorly—a charge that may be
emotionally loaded. Some workers who are fired without warning can go over the
edge because they feel there was nothing they could do to control the
situation. In giving feedback before a firing, let workers know if their
performances are below par—and focus on the specific ways in which job
performance falls short of the mark. Warn workers that they may lose their jobs
if they don’t improve.
At a termination meeting with a potentially volatile employee,
confine your discussion to the specific behavior about which the employee was
warned. Never attack the worker personally. Remind the worker that he or she
was given fair warning and an ample opportunity to change work habits.
Let the fired employee know that you won’t be discussing the
reasons for the firing with his or her former co-workers and that you’re
prepared to give a neutral letter of recommendation to prospective employers
who inquire. This will help preserve the employee’s self-esteem, making
violence unlikely.
Troubled employees often
exhibit behavioral clues that you shouldn’t ignore: high absenteeism, known
substance abuse, chronic tardiness, and harassing and threatening others. If
you’re about to fire someone who appears to have a potential for violence,
consider consulting first with a psychologist who specializes in workplace
issues.
Copyright
© 1999-2001 Nolo.com All Rights Reserved
Excerpted from the “The Employer’s Legal
Handbook”, by Fred S. Steingold