The steps that you take when firing an employee matter. Not only do they have an effect on company morale, but more importantly, if you're not careful you can open yourself up to legal action in the form of a wrongful termination lawsuit. Be prepared by taking the following precautions.
Documentation
You should always document instances of poor performance and keep a file of written warnings. These will provide legitimacy to your actions and could be valuable should a wrongful termination lawsuit ensue. Also, make sure you retain these records even after the employee has left. Although it varies greatly, the statute of limitations for wrongful termination claims because of discrimination under federal law can be as high as three hundred days. And for contract claims, the statute of limitations can be as high as fifteen years. Hold on to your records.
Include the "At Will" option
If you haven't already included the proper legal language in your employee contracts, you should at least consider a basic "At Will" policy. This stipulates that an employer may terminate an employee at any time, for any reason at all. The "At Will" option is available in every state except Montana.
Avoid discrimination
Although the "At Will" option is a good start, it doesn't give you carte blanche to terminate at your discretion. Specifically, you cannot discriminate against an employee because of gender, religion, age, race or disability. You also can not terminate a 'whistleblower' - an employee who complains about illegal activity such as health and safety violations. Finally, it is illegal to fire an employee for exercising their legal rights, such as family, medical or military leave.
Be consistent
A good way to lose a wrongful termination lawsuit is to be inconsistent in your firing practices. If the employee can show that he or she was treated differently than someone else who committed the same infractions, you could be in trouble. The simplest way around this is to have termination procedures outlined in your employee handbook.
Inform employees of their rights
Keep yourself in the clear by letting employees know they are eligible for COBRA, unemployment insurance and any retirement plans they are vested in. If you fail to do so and the employee misses his or her chance to file a claim, you could be sued for not informing them of their benefits.
Be clear and brief
The last thing you want to do is get into a lengthy discussion with the terminated employee. If the conversation should spiral out of your control, you may find yourself uttering statements that could be used against your company later. Specifically, avoid listing multiple reasons for the termination. Simply point out the most glaring example of company policy that was violated and stick to the facts.
Executive summary
When it comes to terminating an employee, there are steps you should take to facilitate the process. Preventive measures include using an "At Will" policy in your employee contracts and documenting violations of company policy. You should also be sure your reasons for termination aren't discriminatory or inconsistent with treatment of other employees. Finally, during the termination meeting, keep things simple and be sure to inform the employee of any benefits they are entitled to. Although letting someone go can be an uncomfortable situation, it's your job to make sure the process is a pain-free as possible and that your company is protected from any legal action that may arise.
For more information about employee termination, contact Carrie Cox via email, or Cindy McSwain using her information below.
Senior Vice President
Outsourcing Services
Cindy McSwain leads AGH’s outsourcing services group. Her team provides payroll, accounting, funds disbursement, controller, and other financial outsourcing services to numerous clients throughout the U.S. Prior to joining the outsourcing group, Cindy served AGH’s audit clients for 10 years, working with a wide range of middle-market, closely held and family-owned organizations.
Her current clients cross many industry sectors, including manufacturing and distribution, restaurants, retailers, medical and not-for-profit. She has participated in numerous SEC filings and public registrations and has experience in mergers and acquisitions. Cindy is a certified public accountant and a member of both the American Institute of Certified Public Accountants and the Kansas Society of Certified Public Accountants.
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