How do I go about firing an employee?

QUESTION:

I have an employee who isn’t working out. What’s the best way to go about firing this person? I don’t want to get sued for discrimination or unfairly treating someone. What should I do in advance to protect myself?

ANSWER:

by Ethan Stone, Stone Business Law

First, a quick but important clarification: I’m not your lawyer and this answer doesn’t establish a lawyer-client relationship. I’m giving a generic answer to a generic question to educate the users of this site.

Now to the question: The most important thing to bear in mind here is that most lawsuits happen because someone is angry. People who feel they have been treated fairly and respectfully usually don’t go looking for lawyers. They usually go looking for new work.

I know that’s easier said than done, but it should be the top concern of anyone planning to fire an employee. Every employee has a different personality and every failed employment relationship has its own dynamic, so it’s hard to generalize. The most important thing to consider, however, is dignity. So regardless of whether you think the employee deserves respectful and considerate treatment, give it. It won’t cost you much (if anything) and it could save you a lot of trouble and money.

So, for example, if you need to cut off the employee’s computer access, don’t do it before giving him/her a chance to draft a farewell e-mail. If you think the risk is particularly high, you might insist that someone sit by to make sure that’s all he does. But make it very clear you’re doing it to follow protocol, not because you think the employee is untrustworthy (even if you think he is). Again, unless there’s a real risk, don’t have security escort the person out of the building or watch the employee every second. Most people aren’t going to commit sabotage and they’ll resent deeply any suggestion that they might. By all means be careful about taking back key cards, canceling computer access etc., but do it professionally and gracefully.

Sometimes employers want the employee out of the building immediately for fear that she will damage morale by hanging around the office complaining. This is almost always a stupid instinct. Remember that the employee will be calling, texting, e-mailing or tweeting friends in the office within seconds of leaving and will be drowning her sorrows with them at a nearby bar within hours. So the employee is going to say what she wants regardless. The difference is that if you escort the employee out like a criminal, that will be the best part of the story. The better move is to try to handle the termination in a way that doesn’t make you look petty and, ideally, leaves the employee saying you were fair.

When you fire an employee, it’s a good idea to have two people in the room, with one person taking careful notes. You should also be very clear and firm (but no need to be nasty) on one key point: The termination decision has already been made, it’s final and is not negotiable. Otherwise, the situation can get very messy. It’s also a good idea to go over benefits issues, such as COBRA, and possibly the process for making an unemployment insurance claim (assuming you aren’t planning to oppose it). People panic over these things. You may be able to reassure them and establish that you want to be helpful by giving them useful information. If you’re going to do this, make sure the information is actually helpful. The employee won’t appreciate being given a pile of useless paper.

Another general point is not to say anything stupid. That may seem obvious, but firing employees is stressful for most of us and we have a tendency to get flustered or embarrassed and say things we shouldn’t. Also, you should anticipate that the employee will get very emotional and upset and may lash out and say things they wouldn’t under normal circumstances. That’s very understandable, so be understanding. Let the employee vent and don’t let yourself be provoked. Of course, you don’t want to come across as a scripted robot. But think through the main points you want to convey in advance. Don’t promise things you don’t mean. Don’t lie, if at all possible. Most importantly, don’t say anything at all relating to the employee’s age, race, sex, national origin, religion or disabilities (more about that below).

Now for the legal part.

Bear in mind that each state has its own employment laws. This answer can’t start to address them all, but they will apply. So it’s important to consult with someone (a lawyer or HR specialist) in the state where the employee is employed about any special state requirements.

Also, special federal and state laws apply if you’re laying off a lot of people at the same time. I won’t discuss those here.

Federal law, generally speaking, protects employees from termination on the basis of age (over 40), race, sex, national origin, religion and disability. Assuming this is not actually the basis for terminating the employee, you have to worry about false claims. The risk of a false claim depends on the characteristics of the employee and the office generally. So, for example, if the only white guy in an office of Indians is let go because he “isn’t fitting in,” the employer should be worried about a race/national origin claim. If one of the many white guys in an office is let go for the same reason, the risk is much lower.

The good news is that an employee can “release” (agree in advance to give up) all of these discrimination claims. You have to be very careful, however, in drafting a release and presenting it to the employee. Regulatory agencies and courts take a skeptical view of releases and may invalidate a release if it is overbroad or wasn’t “knowing and voluntary.”

If age discrimination is an issue (i.e. the employee is over 40), you need to meet a specific checklist: (1) the release has to be drafted in language the employee can understand, (2) it must specifically reference the Age Discrimination in Employment Act, (3) the employee must be advised to talk to a lawyer before agreeing to sign it and the release should say that advice was given, (4) the employer must give the employee at least 21 days to consider the release and the release should say that was done (the employee can agree to the release earlier, but the “offer” has to be good for 21 days), (5) the release must give the employee the right to revoke it for seven days after signing it (the employer should not, of course, pay anything before that’s over), (6) the release can’t try to release claims for future actions (e.g. future age discrimination if you rehire the employee later on), and (7) the employer must give the employee “consideration” for the release: something of value that the employee was not otherwise entitled to get.

These specific requirements don’t apply outside of the age discrimination context. Other than (4) and (5), however, they’re a pretty good guide to making a release enforceable.

It’s particularly important to give consideration for the release. This usually means a severance payment, but it can include other things, like outplacement services or allowing the employee to keep a laptop or iPhone. If you already have a severance plan or a severance agreement with the particular employee, it should require a release as a condition to getting severance. If it doesn’t, though, you have to offer more. If the employee doesn’t have any existing rights to severance, you should offer something for the release.

You don’t have to break the bank to give consideration for a release, but you should give something substantial, relative to what the employee was paid. In this regard, it’s worth emphasizing the first point above: Try not to leave the employee angry. Consider the employee’s emotions and need for dignity. A fairly small amount, properly presented, can leave someone feeling deeply grateful. A large amount, presented badly, can leave someone feeling deeply insulted. Try to be generous and genuinely understanding and to be perceived that way. The money you spend will probably be a lot less than your first lawyer’s bill if the employee leaves angry and sues you.

I hope these brief pointers are helpful. It’s worth emphasizing that it’s a good idea to involve a competent lawyer or HR specialist. At the planning stage, they can help you come up with a set of standard termination documents and policies that are practical and meet your legal requirements. Leaving aside protecting yourself against lawsuits, there may be agreements you want to get from your departing employees, such as confidentiality or an agreement not to badmouth you. A good adviser will help you think these things through and draft them properly. When it comes time to fire someone, a good adviser can help you think through the particular circumstances and alert you if they require a departure from your standard documents and policies. In particular, a seasoned adviser can help you step back and see the situation as an outsider (like a juror). If you have very good reasons to fire someone, you can miss circumstances that would suggest to an outsider that your real reason was something else.