Employment Law 101: Employee Terminations

by Gray Reed & McGraw
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Who, What, Why . . .

Who does it apply to: Any employer faced with letting an employee go. In this edition, I am taking a break from my regular format to pass on advice about handling terminations. 

Before the Termination Meeting:

• Plan when. An employee humiliated during termination is much more likely to feel the desire to seek revenge by suing. Fire on shoulder hours – at the beginning or end of the day when fewer people are around. Don’t fire an employee on their birthday or adjacent to a holiday.

• Plan where. It is usually best to pick a private place on neutral territory that way either side can leave without a problem. If you do it in your office, you are trapped if they won’t leave. If you do it in theirs, it will be more uncomfortable to them.

• Plan for any security concerns. If the employee is particularly volatile, it may be appropriate to warn building security and have them on standby. In a very bad case, call the police or sheriff, they will usually send someone out to oversee the event. Terminate this type of employee before they make it into the building if possible.

• Check payroll. Does the employee have any outstanding loans to the company or borrowed vacation they have not yet repaid? If they do and the loans are not memorialized, be sure to plan to get an agreement for repayment in writing at the meeting. This may include an agreement to deduct from final pay.

• Company property. If the employee has a laptop, uniforms, company car, or cell phone, make arrangements to have the employee bring them to the meeting. Make something up if you have to. Getting that property will be costly and a pain after the employee leaves.

• Limit computer access. Think of all the ways the employee has access to your computer system from the outside. Turn all access off before the meeting.

• Complete documentation. Be sure that you have documented the employee’s file for all the factors and reasons that support separation. Be sure the documentation is consistent with your employee handbook.

• Consider potential claims. Is the employee in a protected class? Is there anything the employee could argue you have done wrong? What can you do to limit your exposure before you terminate them? Call your legal counsel to talk it over if you have any concerns. It will likely cost less with your lawyer to do so before the termination than after.

• Do you need a release. If there is a potential claim for which you want to get a release, prepare the release document in advance. Remember, you are buying a release from a claim – not paying additional wages or “severance” so the payment should be a lump sum with no taxes taken out. You will want to “1099” the payment. DO NOT tie receipt of a final check to signing off on a severance agreement. You do not want the former employee arguing that the money paid for the release was just additional regular pay that was owed. And, use a round number – if you want to use 2 or 4 weeks pay, round to the nearest $500 up or down as you see fit.

During the Termination Meeting:

• Always have two people in the room. Two recounts of what happened are better than a he-said she-said fight between a former employee and the employer in a later lawsuit.

• Always try to have a person of the same sex, and if possible, race, religion, etc., as the employee in the room. A jury will like that person’s perspective better than a boss of a different gender or race in a lawsuit against a former employee of the opposite gender or race.

• Do not give a reason. This is the hardest one for clients to follow. There is a strong urge to treat termination like a high-school break up with the “it’s not you, it’s me” excuse or some other excuse made to help the terminated employee feel better about their separation and ease the conscience of the terminating employer. For later defending a claim, employment lawyers are then hemmed into a polite excuse, rather than the real reason which is likely that the employee was no good. To preserve a clean slate for the employment lawyer to use, don’t give a reason.

• Keep it short. The fired employee will likely want to know why. Much like the teenager who is told he can’t spend the night at a friend’s house, he wants to know why so he can debate you about why the reason you have is not good enough. After all, the person is about to be unemployed. Don’t take the bait. Every word uttered in the meeting just clutters the landscape in a future case. You want as few words spoken as possible to decrease the words for the employee to use against you later.

• Be professional and polite. The terminated employee is going to make a decision about whether to sue, or report your company for any violation he or she can think of to governmental agencies based on how he or she feels shortly after the separation. You need to avoid making the employee feel badly as much as possible.

• Present any severance and release agreement you’ve determined to offer. Put it in an envelope and hand it to the employee. Invite them to read it after they leave and have a chance to consider it. You don’t want the employee arguing you forced them to sign it. If they are over 40, they have at least 21 days to consider it anyway.

• Clear any debts. Present any agreement you prepared to collect any loans from the last paycheck and make payment arrangements beyond that.

• Don’t offer the employee help finding another job. Doing so either means you think the former employee was not so bad at the job that they should be fired, or that you are going to lie to someone to suggest he or she should be hired even though you fired them.

After the Termination Meeting:

• Do not make the employee do the walk of shame. Studies show that a former employee’s desire to sue is somewhat related to how they felt about the termination. If you humiliate the person, they will have a stronger motivation to get revenge. As noted above, fire at the edge of business hours when there are fewer people around and allow the employee to leave after the meeting to return later for their belongings, which you can box up, if they prefer.

• Do not allow computer access. It never ceases to amaze me how many people let the employee go back to their office after a termination. An angry employee might do damage.

• Prepare a memo. Each person who is in the meeting should sit down and prepare a short memo about exactly what happened in the meeting. A lawsuit involving the meeting will not come for months or a year. It will help a jury believe your recitation of what happened if you can point to a memo about what transpired.

• Final Pay. Deliver the final paycheck within 6 days after termination. It is the law

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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