Terminating an employee is never a pleasant task, but at times it is a necessary part of managing your workforce. Here are some steps you can take to protect your business against possible wrongful termination claims:
1. Understand the Employment At-Will Rule
Almost all states recognize employment at-will. This means that, absent a law or express agreement to the contrary (such as an employment contract), employers may generally terminate an employee for any reason and at any time.
However, there are important exceptions to the at-will rule. For example, under both federal and state law, covered employers may not discriminate on the basis of certain protected characteristics (e.g., race, color, sex, age, national origin, or disability). Another common exception to employment at-will is violation of public policy, meaning an employer cannot terminate an employee for such actions as filing a workers’ compensation claim, taking leave to which he or she is entitled, or reporting violations of law.
Exceptions vary by state, so employers should consult an employment law attorney who knows their state law in order to gain a full understanding of rights and responsibilities. Employers should also state that the employment relationship is “at-will” (to the extent permitted by law) in all employee communications, including employee handbooks.
2. Document Performance-Related Issues
Even when the traditional employment at-will doctrine applies, if the reason for an employee’s termination seems unreasonable, there is a chance the reason may be deemed a pretext for discrimination or some other unlawful motive, should a lawsuit follow. Therefore, it is in the best interest of all employers to carefully document all instances of poor performance, including records of employee performance reviews and any previous disciplinary warnings or notices. Complete and accurate documentation offers evidence of what occurred, promotes consistency and objectivity, and is a necessary step for companies to support decisions regarding employee discipline and termination.
3. Follow Up on Post-Termination Responsibilities
Termination of an employee does not necessarily end the employer’s relationship with, or obligations to, the employee. Post-termination responsibilities may include:
- Delivering the final paycheck, if not provided at the time of termination (be sure to check your state law for requirements related to timing of the final paycheck);
- Continuation of group health benefits under federal COBRA or state continuation laws;
- Unemployment insurance — generally, employees who lose their jobs are entitled to unemployment compensation benefits (check your state law to determine specific notice requirements that may apply); and
- Benefits to be paid through a qualified retirement plan.
Terminating an employee is a very sensitive matter which requires careful communication and documentation to avoid potential lawsuits or other future problems. It is prudent to consult an employment law attorney before taking any specific steps should the need to terminate an employee arise. You can find additional guidance, forms, and checklists in our section on Discipline & Termination.