How to Fire an Employee the Legal Way: 6 Termination Guidelines
These days, it’s much harder to get rid of a problem employee. Workers are more aware of their rights under the law—and they’re more likely to seek the advice of an attorney if they think they’ve been wronged by their employer. The result: A lot of workers are getting even by suing their employers for wrongful discharge or discrimination.
The lesson: Fire away, but do it the right way. Use this special report, How to Fire an Employee the Legal Way, as your guide on proper procedures to exercise your right to fire at will, lay the groundwork with progressive discipline, avoid wrongful termination lawsuits, and conduct termination meetings and exit interviews.
Termination Guideline #1 — Fire at will: Employers' rights
Under the law in most states, if there’s no employment contract, workers are employed on an “at-will” basis. That means employers have the right to fire employees at any time for any reason or no reason at all, and, conversely, employees have the right to leave the organization at any time.
If an employee is under contract, though, the terms of the contract apply. A written contract may specify the reasons you can terminate the employee, while an oral contract usually implies that termination can occur only for cause. That means the employer can terminate the worker only for poor performance, dereliction of duty, an act of dishonesty or insubordination, or because the company needs to eliminate the employee’s position.
Over the years, the employer’s right to fire at will has been limited, as courts have recognized exceptions to the at-will doctrine. Here are three major exceptions:
Exception 1: Discrimination. Under federal law it’s illegal to terminate workers because of their age, race, religion, sex, national origin or a disability that does not influence their job performance. Some states add other limitations—for example, in many states, you can’t fire someone over sexual preference.
Exception 2: Public policy. You cannot legally terminate an employee for reasons that violate public policy. That means you can’t fire one of your engineers for informing the EPA that your company has been dumping toxic waste in the river. By the same token, if a court orders you to garnish the wages of a worker who’s behind on child support, you can’t fire him merely to save yourself the hassle of additional paperwork.
Exception 3: “Just cause” promise. If you tell your workers that they will be fired for cause only—or otherwise establish guidelines that spell out how and when terminations will be handled—you may be creating an implied employment contract.
Termination Guideline #2 — The right way to fire: Lay the groundwork
It’s a lot easier to discipline a worker if you’ve made your expectations clear from the beginning. Each employee should have a job description that lists the tasks you expect accomplished daily or weekly. Make it clear, however, that these tasks are subject to change depending on the organization’s needs.
If you have rules specifying how certain tasks should be performed, post them in the work area. That helps workers do their jobs correctly and helps you point out when a rule is broken. Some employers state clearly in their handbooks that employees are subject to firing without cause. Some companies ask employees to acknowledge this by signing a form. There’s a trade-off here: Signing such a statement won’t endear your workers to you and the company. A policy of firing only for just cause is more likely to build loyalty, but it might subject you to judicial review.
Termination Guideline #3 — Avoid wrongful termination suits: Use progressive discipline policy
While no federal or state law requires you to create and follow a progressive discipline policy, courts often come down hard on employers that promise progressive discipline but fail to deliver it. In fact, many employee lawsuits stem from the employee’s perception that he or she didn’t receive a “fair” deal.
That’s why the most reliable way to protect your organization from wrongful termination charges is to establish a progressive discipline system and make sure your supervisors enforce it.
An increasing number of lawsuits have been filed in which terminated employees complain that employers have violated their own progressive discipline policies by firing the employee before working through all the rungs on the progressive-discipline ladder.
That’s why your policy should include language allowing you to skip progressive discipline and fire employees right away for particularly egregious behavior.
While it’s usually your right to terminate at-will employees at any time for misconduct or lax performance, a progressive discipline policy lets you make clear that problems exist and need improvement.
How it works: Your policy simply increases the severity of a penalty each time an employee breaks a rule. Typically, a policy progresses from oral warnings to written warnings, suspensions and then termination. That way, employees won’t be surprised when they reach the end and are fired. By taking the surprise out of the firing, you lessen your exposure to a wrongful termination lawsuit.
Termination Guideline #4 — Beware of constructive discharge
Constructive discharge occurs when employees claim their working conditions were so intolerable that they were forced to quit. Employers must stay within federal employment laws so they don’t contribute to factors that trigger constructive discharge claims, and don’t heighten the risk of employee lawsuits.
1. What do the courts look at when it comes to claims of constructive discharge? What types of actions can lead to such a claim?
Here’s how one state supreme court defined constructive discharge: “An employee who is forced to resign due to actions and conditions so intolerable or aggravated at the time of his resignation that a reasonable person in the employee’s position would have resigned, and whose employer had actual or constructive knowledge of the intolerable actions and conditions and of their impact on the employee and could have remedied the situation, but did not, is constructively discharged.”
What falls into the intolerable or aggravated category? Think: actions intended to humiliate (e.g., demoting a vice president to janitor overnight); actions intended to harass (e.g., requiring a black employee to work extra hours for the same pay as white co-workers and punch a clock while others do not); actions intended to destroy the employee’s career or guarantee job loss (e.g., sudden, unexplained drops in performance ratings, skipped promotions, forced demotions, pay cuts).
2. What other types of factors contribute to a constructive discharge claim?
Factors that may contribute to a constructive discharge claim—either singly or in combination—include whether an employee suffered:
Termination Guideline #5 — Termination meeting: Choose ‘firing words’ carefully
The time has arrived … You’ve evaluated all the reasons why an employee should be terminated. You’ve run the decision through an employment law audit and made sure you have appropriate records and documentation supporting the decision. Now it’s time to tell the employee that he or she is about to become a former employee.
How you break the news to the employee is key: Follow basic rules of legal and business etiquette to allow the employee to leave with dignity—and not return with a lawsuit.
If the employee’s manager, rather than HR, is designated the bearer of bad news, at least have an HR rep present at the meeting to answer questions the employee may have and to help reduce the risk of legal exposure by keeping both sides focused on the matter at hand. Also, it helps to have a witness, in case the employee challenges the termination later.
Briefly deliver the news by summarizing the well-documented, job-related reasons for the termination. That way, while the employee may not like it, he or she will have little to dispute. Allow the person to offer his or her side of the story—and even vent a little emotion—without interruption.
Also, avoid using any harsh words during termination meetings that would serve only to inflame the issue. Stick to the facts; don’t make generalizing statements.
Termination Guideline #6 — Conducting exit interviews
Many employers think that conducting exit interviews with employees who have been fired is a waste of time. After all, angry or bitter ex-employees would not be motivated to do something beneficial for the organization that just let them go. And if they’re harboring negative feelings toward the company, how helpful could their feedback be?
Exit interviews, whether with an employee who has been fired or who has resigned, can be a valuable resource. Information learned in an exit interview can pinpoint areas of concern and provide a foundation for implementing changes.
Use the Exit Interview Form (Involuntary Termination) included in this report as a guide for asking questions, or give it to the employee to complete during an exit interview.