Intro:
Before you begin
Step 1:
Be sure you're sure
Step 2:
Be aware of potential problems
Step 3:
Avoid illegal termination
Step 4:
Build a case
Step 5:
Design an exit package
Step 6:
Hold the termination meeting

2torial #0955:
Learn2 Terminate an Employee

How to fire without getting burned

At some point, every employer must bid farewell to an unproductive, perpetually tardy, or otherwise troublesome employee. But it's almost never easy to take this step. In fact, many bosses wait until the discomfort becomes acute before they act.

Most American employees work under at-will contracts. That is, both employer and employee can theoretically end the relationship at any time, for just about any reason. But in practice, a maze of laws and court rulings is making matters more complicated all the time.

This doesn't mean your hands are tied. You still have the right to let under-performing workers go, but you must build a solid case. Here's a guide to potential trouble spots, plus some diplomatic suggestions on how to make your employee's last day as painless as possible.

Every U.S. state except Montana operates under the assumption of at-will employment. However, a patchwork of laws and court decisions makes the situation much more complicated. If you have concerns about your specific case, consult a good attorney who specializes in workplace issues.

In the meantime, make sure you don't offer employees what's known as an implied contract. Even without an actual signed document, you may be making unintended promises that courts could interpret as a legal contract. Here are some reasons why courts have ruled that an implied employment contract was in effect:

• A long term of service with one company

• A history of raises and promotions

• Written policies (such as employee handbooks) that define the conditions under which an employee can be fired

• Vague written or verbal promises of a permanent position or a long future with the company during or after the recruiting process (for example, an offer letter stating an annual salary instead of a bi-weekly pay rate could be misinterpreted as a yearly contract)

To help avoid implied contracts, have new employees sign an agreement that specifically states that their employment is at-will, or include such a statement on job applications. Courts in Alaska, Arizona, California, Connecticut, Delaware, Idaho, Kansas, Massachusetts, Nevada, Utah, and Wyoming are particularly strict. And in Montana, a termination must have "good cause," which can include clearly unsatisfactory performance, economic hardship, or legitimate business restructuring.

It's always a good idea to keep informed of any changes to employment laws in your country, state, or even your county.

Be sure you're sure

Technically, you can terminate at-will employees just because they get on your nerves. But reality teaches otherwise. Never fire an employee in anger or on the spur of the moment. Take a step back and ask yourself if your reasons are economic or personal. Consider the following questions:

• Does the employee harm the business?

• Would you fire other employees under the same conditions?

• Have you already taken steps to solve the problem, short of termination?

• Do you have clear-cut evidence of misconduct or under-performance?

If you answer yes to all of the above, you're probably doing the right thing.

Be aware of potential problems

It's never easy to look someone in the eye and say, "You're fired." Unfortunately, that could be just the beginning of your problems. Disgruntled employees can make a lot of trouble for you, so before taking action, become aware of potential pitfalls:

Company problems. Does your employee have any knowledge of, shall we say, irregular business practices? These might include wage and/or hour infractions, tax irregularities, or environmental violations. Be sure you keep your side of the street clean.

Gossip. Could an ex-employee make you look bad in the eyes of clients or competitors? Treat big mouths with kid gloves.

Theft, vandalism, and harassment. While rare, some employees are capable of committing criminal acts against you, your company, or other employees. If you feel this is a legitimate fear, act with particular care.

Avoid illegal termination

Whether justified or not, employees can challenge a termination for a variety of reasons, even if they're working on an at-will basis. Before making a final decision, ask yourself if the employee:

• Is filing a workers' compensation claim

• Is about to receive a promised bonus or retirement package

• Has refused the sexual advances of a superior or coworker

• Has a legal case pending against you, your company, or coworkers

• Has reported inappropriate businesses practices to the authorities

• Has served as a juror or has had to respond to a legal subpoena

• Has part of his or her wages garnished for child support

• Belongs to a group that, by virtue of gender, race, religion, ethnicity, national origin, sexual orientation, disability, and so on, is otherwise underrepresented in your office

If any of the above are true, seriously consider the services of a lawyer. A relatively short consultation could save you big money down the road.

In addition, you should review any contract you and your employee may have signed in the past. Obviously, you'll have to follow the contract's terms. Again, the eyes of a good lawyer may be necessary to shed light on vague terms like "good cause" or "legitimate business reasons."

Build a case

If you do hire a lawyer, he or she is bound to tell you to gather evidence before a termination. You may never have to present it to a court of law, but at least you'll have your bases covered. The key here is to maintain proper documentation. Be especially careful to document the following:

Under-performance or misconduct. Proving a pattern of poor performance, rather than just a single, minor incident, is especially effective. Take particular care to document the final action that led to termination.

Employee understood stated policies. Evidence might include a signed job application, employment contract, or employee handbook.

Warnings. Show that you have warned the employee and attempted to remedy the situation.

Performance reviews. Past performance reviews help back up your assertions by indicating that problems were long-term. If you don't currently provide regular reviews, consider doing so.

And by all means, don't invent documents after the fact. It will cast doubt over your entire case.

Design an exit package

Perhaps little more than a swift kick is in order, but a decent exit package may be more profitable to you at the end of the day. It can create goodwill and reduce the chance of litigation. And in some cases, it's the law. Consider the following:

Health insurance. If your company has at least 20 employees, the U.S. government legally requires you to offer fired employees COBRA coverage (that is, the option to continue their health benefits by paying for the same insurance that you, as their employer, had provided), unless the employee has engaged in "gross misconduct," which generally means illegal activity while on the job.

Vested retirement funds. You must pay retirement funds in full to workers who've met the minimum length of service to qualify, even if they've been fired. Again, it's federal law.

Unemployment benefits. Employers are required to notify employees (including terminated employees) of their right to file an unemployment claim. Posting notification in the office is generally sufficient. Employees who have been fired don't qualify, but employers have the burden of proof.

Severance pay. While not legally necessary, you might want to consider offering an employee a small financial cushion. Two weeks' worth of salary is a rule of thumb, though the amount can vary according to the situation.

If you do offer more than what's required by law in your area, consider asking the employee to return the favor by signing an agreement not to sue. Ask a lawyer to help you prepare such a document so it will stand up in court.

Hold the termination meeting

When you have all your ducks in a row and know termination is the only option, it's time to act. The meeting should be short (10 to 15 minutes) and to the point. Tell the employee he or she is fired, explain why, and leave time for questions or comments. Explain the severance package (if any), deliver the final paycheck, and then collect any items that belong to the company that might be in the employee's possession (keys, credit cards, cars, laptops, and the like). If you want the employee to sign a severance agreement, provide it at this time.

Throughout the termination process, you should preserve the dignity of the employee and demonstrate that your decision is fair. This will make you both feel better, and reduce the chance of problems down the road. Here are some specific tips:

Provide reasons. Don't just say, "You're fired." Try to make the employee understand why you've made your decision. If he or she thinks you've been fair, a lawsuit is less likely.

Prepare a checklist. Termination can be very emotional, so prepare a checklist of the points you want to cover so you don't leave out anything crucial. Keep emergency and security numbers on hand, just in case the bad news prompts an outburst of anger or some kind of physical ailment.

Meet face-to-face. Never fire someone over the phone. It shows a lack of respect that may come back to haunt you. It also raises doubts in the employee's mind about your intentions.

Rely on an immediate supervisor. Don't let an anonymous bigwig do the dirty work. The worker's direct supervisor should take on the burden. After all, this is the person who can best explain the reasons behind the termination to show the decision is fair.

Maintain privacy. Make sure other employees can't overhear your conversation. This helps the employee save face. If you have a small office, you may want to consider a neutral location such as a nearby cafe or restaurant.

Be firm. Before you go into the meeting, make sure your decision is final. Leave no room for negotiation, or you may walk out with an undesirable worker still in your employ.

Make it one-on-one. Just one company representative should be present at the meeting, or it could seem like you're ganging up on the employee. The employee can bring a silent witness, but not an advocate.

Meet early in the day and week. People handle stress better in the morning than the evening. To avoid outbursts, schedule the meeting for early in the day. Likewise, try to hold the meeting early in the week so the employee can begin the job search right away rather than brood over the weekend.

Listen. Give fired employees a chance to vent their anger in your office rather than in court. If you genuinely listen to their response (without giving in to any demands), your decision is more likely to seem fair.

No matter what you do, the termination process is going to be painful. But you can do a lot to reduce the sting. Just remember: The easier you make it for the employee, the easier it will be for you.

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