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One of the worst things you can do after you terminate an employee is change the reason for ending the employment relationship. Instead, decide on a defensible rationale—a performance problem or rule violation, for example, or perhaps a business downturn—and document that decision and all the supporting evidence.

Here’s why: If the employee later comes back and claims some form of discrimination, you may be unwisely tempted to throw more discharge reasons into the pot. That will only spoil the stew.

A court may see your shifting explanations as evidence you are trying to cover up the real reason: discrimination. And that can lead to a lost jury trial, plus punitive damages and a large attorneys’ fee award. That’s what happened in the following case.

Recent case: Terri Wallace worked as a manager at a rental car company until she was fired shortly after reporting alleged sexual harassment.

At first, the company said she lost her job because the location where she worked was overstaffed. It said the economic downturn meant she was slated for layoff because she was the least senior staffer at the location.

Later, the company said it had also terminated Wallace because of poor performance.

She sued, and a jury concluded she had been fired for reporting the alleged sexual harassment. It awarded her $10,000 in lost wages and benefits, $20,000 for other pain and suffering, and a whopping $500,000 in punitive damages, plus $220,000 in attorneys’ fees.

The company appealed and the court refused to overturn the jury’s decision that she had been terminated illegally. All the appeals court would do was reduce the punitive damage award to a more reasonable $120,000. (Wallace v. DTG Operations, No. 08-1474, 8th Cir., 2009)

Final note:
Pick a solid discharge reason and stick with it.

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