How To Avoid Legal Problems With Employment Terminations

You Can Legally Fire an Employee if You Take Care to Avoid Discrimination

A manager sitting at a desk terminating an employee sitting across from her and explaining the reason for the termination.
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The decision to terminate an individual’s employment carries with it the risk of a possible legal challenge. Much of the risk involved is dependant on the employer’s policies and if the employee has an employment contract. An employee may, for example, have a breach of contract or wrongful discharge claim.

An at-will employer—that is, an employer who reserves the right to terminate employees without cause—generally does not need to worry about such claims. Like all other employers, however, an at-will employer still must be concerned about many other possible claims. Having documentation of employee performance and of the reasons for the termination is important.

Possible Claims of Discrimination

All employers need to be cognizant of possible discrimination claims that can arise from employment termination. To prevail, the former employee would have to prove that they were terminated, at least in part, because of their protected status. Protected status can include different treatment based on gender, religion, race, national origin, age, disability, and other biased behaviors. The Equal Employment Opportunity Commission enforces many laws against inequality in the workplace. Some of these laws include:

  • The Civil Rights Act of 1964
  • Age Discrimination Act of 1967
  • Title I Americans with Disabilities Act of 1990
  • The Pregnancy Discrimination Act

Termination and Defamation Claims

In addition to discrimination, discharged employees could claim that their former employer defamed them. A claim could involve that the employer made false, disparaging comments about them to coworkers or other parties or treated them in a manner intended to cause emotional distress. The employee may claim the employer invaded their privacy if they improperly disclose the reason for involuntary termination.

In some cases, the employer may be charged with retaliation against a whistle-blower. They may claim they were terminated in retaliation for exercising a legal right, such as reporting discriminatory or other unlawful employment practices or for taking leave under the Family and Medical Leave Act or the Military Leave Act

At-Will Employment

Most states are considered at-will employment states. This means the employee or the employer may terminate their work relationship at any time without the need to provide prior notice or without the need for just cause. Even though at-will employers may terminate employees for any reason—or for no reason at all—terminations are easier to defend when they are justified by a legitimate business reason. Legitimate business reasons could include problems with the employee's contribution, misconduct, a reorganization resulting in the elimination of the employee’s position, or financial considerations of the employer.

Regardless of the nature of the employment relationship, an employer should consider establishing work rules that list conduct that could result in discipline or termination. These policies are best communicated in an employee manual. Also, the employee should sign a receipt acknowledging they received a copy of such policies. Keep this acknowledging

Your att-will employer policy should include a couple of disclaimers. First, make clear that the existence of company rules does not nullify or in any way change an employee’s or the employer's at-will status. Secondly, include a statement that the reasons listed for termination are not an all-inclusive list. Finally include that the employer retains the right to terminate employees who, in the employer’s discretion, have either engaged in misconduct or who have not performed at an acceptable level.

If your workplace employs a progressive discipline policy, the employer should retain the flexibility to discharge employees immediately when circumstances warrant.

Questions Employers Need to Ask

Before deciding to terminate an employee, the employer should ask themselves the following questions:

  • Does the employee have a legitimate explanation for their actions or poor performance? Before deciding whether to terminate an employee, conduct a thorough investigation of the events in question and get the employee’s version or explanation. Consider whether a neutral third person would find the employee’s explanation plausible.
  • Does the punishment “fit the crime”? Consider whether a neutral third party would agree that termination was fair given the nature of the conduct or the seriousness of the performance problems.
  • Is the decision to terminate inconsistent with previous actions of the company? For example, has the employee recently received a favorable performance review, promotion or pay increase? If yes, this would make it more difficult for an employer to justify terminating an employee for performance-related reasons if you were involved in a legal proceeding.
  • Is the decision to terminate the employee premature? Determine whether alternatives to termination are more appropriate, such as giving an employee the last chance, using progressive discipline to get their attention, or placing the employee on a performance improvement plan.
  • Does the employee have any pre-termination rights? Ensure that any pre-termination procedures provided for by the company are followed (Note: special procedures may exist for public sector employees who have certain due process rights not accorded to private sector employees).
  • Has the company administered discipline in a consistent manner? Ensure that members of any protected classification are treated the same as employees outside of the protected classification who engaged in similar conduct, under similar circumstances (severity of the conduct, prior offenses, the length of employment, and so forth).

Following an Employment Termination

Following an employment termination, an employer can reduce the likelihood of a court challenge in a number of ways. They should ensure that appropriate post-termination procedures are followed. Public sector employees may be entitled to a post-termination hearing. Private sector employees would also be entitled to a hearing if provided for in the company rules, the employee handbook, or in an employment agreement or contract.

Inform the Employee

Be candid with the employee. Be candid when advising the employee of the reason for termination. Don’t sugarcoat the reason in order to avoid hurting the employee’s feelings. If an employee later sues, these statements will adversely affect the employer’s defense.

Respect the Employee

Respect the employee’s feelings. Do not do anything to embarrass the employee during the termination process. When possible, avoid escorting the employee from the workplace in front of coworkers. Employees who have been humiliated are more likely to challenge their termination.

Respect the employee’s privacy. After termination, advise only those employees and managers who have a need to know the reason for the termination, and advise them not to discuss the matter with anyone.

Other Employer Safeguards

If any severance benefits are provided such as severance pay, payment of medical insurance premiums, or outplacement counseling, in addition to those owed an employee under company policy, consider making the benefits conditioned on the employee signing a release of claims. For a release to be effective against federal age discrimination claims (employees 40 or older), the release must contain several specific provisions, including a 21-day consideration period and a 7-day revocation period.

Do not make post-termination statements in a termination notice, reference letter or response to the state unemployment compensation office that are inconsistent with or contradict the reason for termination. Such written statements, like comments to the former employee, will create credibility problems for the employer.

An employer should secure the employee’s personnel file and retain all documents, including the employee’s poor work product, which supports the decision to terminate the worker.

Consider providing outplacement services and, in certain cases, a neutral reference to aid the employee in finding another job. The sooner an employee is reemployed, the less likely the employee is to bring an action against his or her former employer.