At first glance, it might seem that firing an employee is a straightforward process. After all, under U.S. laws, employers and employees have the right to end their working relationship at any time. This is because most employment arrangements in the country are “at-will,” which means they aren’t subject to a specific time frame.
Even so, terminating an employee can become problematic and could expose employers to the risk of lawsuits. Legal issues can arise if the work contract is part of a collectively bargained agreement or individual employment terms. Because of the risks involved, many businesses obtain employment practices liability insurance (EPLI) for protection against legal issues that may arise from firing a worker.
Actions that violate labor discrimination laws
It’s also important to realize that employers can’t just fire company personnel “at-will” even if the worker agrees to those terms. When terminating employees, employers need to weigh the legal implications under the federal law against labor discrimination based on the following:
- Race
- National origin
- Religion
- Disability
- Age (employees 40 years old and over)
- Pregnancy or childbirth
- Gender
In some states, labor anti-discrimination laws also cover sexual orientation and marital status. In addition, it is illegal for employers to fire employees who assert their rights under state or federal labor laws.
When is termination justified?
Employers may only terminate employees due to practical job-related issues. Legal grounds for termination include the following:
- Unsatisfactory job performance
- Disruption of company operations
- Other legitimate reasons related to the business
Safeguards against illegal termination
As a business owner, you will inevitably have to fire an employee at some point because of unsatisfactory performance or policy violations. Here’s how you can ensure that the termination is legal:
- Follow the guidelines in the employee handbook
All workplaces should have an employee handbook that defines company rules, guidelines, and disciplinary policies. It would be helpful to seek legal advice when developing the guide to ensure compliance with state and federal laws and appropriateness to your business.
The handbook should be distributed to all employees, each of whom must acknowledge its receipt in writing. Before terminating an employee, review the guide to ensure that your grounds for termination are justified.
- Document employee violations
You can avoid employee termination lawsuits by documenting the offending employee’s policy violations or non-conformance with work standards. You should also give a copy of the document to the employee concerned and have them acknowledge its receipt.
If possible, allow the employee to rectify errors and meet work requirements via a performance improvement plan. However, you should continue to document continued violations or non-conformance as well as any improvements made. Having an employee record on file can help strengthen the case for termination.
- Investigate the grounds for termination
Investigate the validity of the documents and evidence relevant to the termination. Your investigation should also include documented interviews with the supervisors and co-workers of the employee in question. All documentation, including pertinent email and computer files, should be set aside as evidence.
- Apply termination policies consistently
Claims of wrongful termination often arise from inconsistent policies and perceived favoritism. Always enforce termination policies consistently among your employees. Never bend the rules due to special circumstances, especially if the situation involves race, gender, age, or disability. Even if you mean well, relaxing the rules could lead to an anti-discrimination lawsuit in the future.
- Handle job terminations tactfully
Diplomacy is a must when terminating an employee. If possible, have a one-on-one conversation in private. Be brief and factual, but be tactful and considerate as well. Although you will have to get your message across firmly, genuine warmth and compassion wouldn’t be out of place.
Try to schedule an exit interview with your company’s HR representative as soon as possible after the conversation. This will allow the employee to find out what severance benefits they are entitled to receive.
- Comply with all legal obligations
Make sure that the terminated employee is fully informed of all the benefits they have coming to them. These typically include COBRA benefits, their last paycheck, unemployment benefits, and transferable insurance. The employee should acknowledge having been informed of these benefits in writing.
Terminating an employee is never easy and often exposes employers to the risk of costly lawsuits. You can reduce these risks by following the suggestions provided here and getting expert legal advice when necessary. It is also advisable to obtain appropriate insurance coverage for added protection in case a terminated employee files a lawsuit against the company.
About Arroyo Insurance Services
Arroyo Insurance Services was officially established in 1986, but we have roots dating back to before 1950. One of California’s leading client-oriented and independently owned agencies, we have over 140 employees with a combined experience of over 450 years, spread across 11 locations. We are committed to providing the best insurance and risk management services at the most competitive premiums, and backing it with hands-on service tailored to our customers’ needs. For more information on how we can mitigate your risks, contact us today at (877) 220-4769.