How employers can reduce risk when terminating employees

The last thing any employer wants when terminating an employee is to have that termination lead to costly, time-consuming litigation. Accordingly, it is worth the time and effort for employers to familiarize themselves with best practices for reducing risk when terminating employees. To ensure clean terminations, employers may want to consider the following practices.

Documentation is key

One of the simplest ways to minimize risk when making any employment-related decision is to document the reasons underlying the decision. In the context of termination, employers should ensure that the termination decision itself, as well as any performance-related issues, company-wide economic considerations, or other related concerns are documented. Such documentation should be done in an objective manner, in real time, and should become part of that employee’s personnel file.

One method for ensuring that documentation is created for all relevant personnel events is to establish a practice of following up with the relevant parties via email to summarize the contents of in-person meetings. Another beneficial practice is to regularly conduct and document performance reviews for all employees.

By maintaining comprehensive and regular documentation, employers can spare themselves the “he said, she said” game in the event of potential litigation. Even if termination is not being considered, consistent documentation practices can provide benefits, such as allowing new managers or supervisors to quickly learn the history of their team.

Implement progressive practices

Employers understandably want talented and skilled employees. As such, it can be incredibly tempting to immediately separate from any employee who is perceived to be a “bad apple.” What many employers fail to recognize is that taking immediate and permanent action can result in increased costs and decreased employee trust in the business.

Instead, employers should use a progressive discipline model where the severity of discipline increases incrementally and uniformly with each incident of misconduct or poor performance. A transparent progressive discipline process is beneficial for both employees and employers.

For employees, progressive discipline provides clear expectations regarding performance and opportunities to resolve identified issues. Clearly communicating and enforcing a progressive discipline policy gives the employer an opportunity to forgive mistakes and help an employee grow in their role, which increases employee trust in their employer.

For employers, progressive discipline substantially reduces the risk of litigation from a termination. Progressive discipline puts an employee on notice that they are not meeting expectations and gives the employer opportunities to document the employee’s progress toward improving their performance. If performance has still not improved at the end of the progressive discipline process, the employer will have written evidence that the employee had multiple opportunities to improve, and sufficient documentation to rebut any claims that the basis for the termination was unlawful.

Look out for red flags

Employers should ensure that anyone involved in the decision to hire or fire employees does not make employment decisions based upon protected activity, protected class, or a protected status. If an employer cannot readily prove that the termination decision was based solely on reasons unrelated to an individual’s protected class or activity, even when the connection is inadvertent, the risk for litigation increases.

For example, a termination decision made soon after an employee gives notice of the need for protected leave could give rise to an inference of discrimination or retaliation and land the employer in the witness seat. Accordingly, employers should establish a process for reviewing termination decisions to ensure that protected activity and statuses are not implicated.

Documentation comes into play here, too. If an employee’s personnel file demonstrates that sufficient, lawful reasons exist to terminate the employee, it will be easier to rebut a claim of discrimination or retaliation.

Set or review final paycheck policies

State law may require that terminated employees receive their final paycheck for “all wages earned and unpaid” at the time of termination by the end of the following business day. (Final paycheck deadlines differ when the employee unilaterally ends the employment relationship.) Failure to abide by this requirement could result in additional, costly penalties.

When issuing final paychecks, it is in the best interest of employers to establish and follow a written policy regarding whether accrued but unused sick time and vacation pay will be cashed out. Cashing out for unused sick time is not necessarily required unless the employer has a policy or practice of doing so. However, accrued but unused vacation time likely must be cashed out with a final paycheck unless the employer has a written policy stating that vacation time will not be cashed out at termination. To avoid disputes about final paychecks, employers should establish and follow a clearly written policy regarding whether these benefits will be cashed out when the employment relationship ends.

Takeaways

This is by no means an exhaustive list of all the ways that an employer can mitigate risk when reducing its workforce. Preemptive policies and practices can help ensure that all reasonable steps are taken to ensure that terminations are conducted lawfully and carefully. Offering severance in exchange for a release of claims can also provide additional protection from future litigation, as can consulting with employment counsel prior to effectuating a termination. Above all, employers should remember to document all events relating to a termination to ensure that, even if litigation arises, reliable evidence is available to show that the termination was lawful.

Ashley Korkeakoski-Sears is an attorney with Barran Liebman. She advises and represents employers on a wide range of workplace issues.

Lex Shvartsmann is a law clerk with Barran Liebman. She partners with attorneys in client trainings, legal research, and drafts of employment policies and handbooks.