Employee Terminations: Ten Must-Do Steps When Letting Someone Go--Direct Marketing, Mail Order, E-commerce News

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Employee Terminations:
Ten Must-Do Steps When Letting Someone Go

By James W. Bucking, Foley Hoag LLP

Most employment litigation stems from employee terminations. Nearly 90% of discrimination charges filed with the Equal Employment Opportunity Commission are discharge-related claims. The reasons are obvious: terminations cause hard feelings, create economic need, provoke plaintiffs’ lawsuits, and remove the powerful disincentive to sue inherent in an ongoing working relationship. Litigating termination claims is also expensive – six- and even seven-figure damage awards are not uncommon. A 2004 survey of wrongful discharge cases tried by jury in federal courts revealed a median award of $89,000 with an average award of over $1 million.

As the U.S. economy continues to stagger, with or without the official label of a recession, it’s certain that the rate of employee dismissals will rise, as companies in multiple industries are forced to lay off large groups of workers, including more senior executives caught in pre-emptive downsizing. Which means that not only HR officers, but more line managers, department heads and business owners are going to have to take on the uncomfortable role of terminator for their companies.

The best time to head off a discharge-related lawsuit is at the moment of the termination, or even before. By the time litigation ensues, it is often too late. There are two basic components to this strategy: litigation avoidance and litigation preparation – i.e., handling the termination so as to enhance the likelihood of winning if an action is brought. Below are 10 tips to accomplish both objectives.

1. Know the Facts. As an employer, you have broad authority to compel employees to talk to you, including any you have cause to consider terminating. Take advantage of this right. Talk to supervisors, co-workers and subordinates as appropriate and necessary, and write down what they say. You should also speak with the employee at issue—there is nothing to lose, and better to know before you fire somebody what they have to say than to hear it first at a deposition. If the employee refuses to speak to you, or is evasive and/or contradictory in respond, these reflect badly on credibility in any subsequent litigation.

2. Review the documents. Related to the need to investigate is the need to review documentation concerning an employee about to be fired, especially commonly inflated performance reviews now endemic in workplaces. Before you fire a chronically underperforming employee, come to terms with any “stellar” performance reviews. Also review disciplinary records of other employees similarly situated to this employee. There may be perfectly good reasons for treating employees who seem similarly situated differently and you need to consider these differences in advance. Disparate treatment is a big problem in employment litigation, particularly in discrimination claims. One final point: look everywhere for these documents, including supervisor files, electronic records and e-mails.

3. Create new documents. Sometimes the problem with a termination is that there are few if any documents supporting your decision to fire an employee. There is nothing wrong with creating such documents—in fact, it is a good idea. Don’t fabricate or back-date, of course. Rather, create documents beforehand giving full reasoning for your decision. Human memory changes with time; documents do not. We advise clients to give little explanation in termination letters: A good back-up document allows you to have a bare-bones discharge letter without losing the benefit of a contemporaneous written record of your motivations.

4. The electronic scourge. Technology can be your friend, or your enemy, and this applies with force to employee terminations. Many people and documents are typically involved in discharge decisions, and today’s technology keeps a permanent record of the untidy, behind-the-scenes process, which might include a long back and forth on all the possible reasons for letting someone go. Litigation discovery can reveal it for the world to see. In the old days, superseded drafts of termination letters were immediately discarded, and people spoke about issues rather than emailing or instant-messaging. Have an attorney involved at all stages, cloaking a paper trail in attorney-client privilege. If an attorney is not involved, take great care to avoid creating a permanent electronic record.

5. Tell the truth. This advice is not moral, but legal. The worst thing you can do when terminating an employee is be dishonest as to why. Yet this is a common mistake, for the same reason employers routinely give overly generous performance reviews. Employers avoid confrontation and hard truths, so when they fire an employee for poor performance they characterize it as a “layoff.” The majority of termination disputes involve a claim of discrimination, and most discrimination allegations turn not on direct evidence (like racial slurs) but on “pretext” – an employer gives a false reason for termination, creating the inference that the real reason was unlawful. At trial, white lies that spared an employee hurtful criticism will be portrayed by the employee’s counsel as evidence of discrimination. Having a good reason for termination is not enough; your statements and documentation must square with that reason.

6. Don’t be gratuitously cruel. This is the corollary of “tell the truth,” meaning that all you have to do is inform the employee of the reason he is being fired; you do not need to convince him that you are right or win a debate. What to you is a legitimate business decision is to the employee a highly personal event, and hurt feelings lead to lawsuits. If a case does go to trial, it does not play well before a judge, and especially a jury, for an employer to appear cold-hearted.

7. Conduct the termination in a respectful way. The manner by which you give notice is important. A recent news article quoted a plaintiff, who had just won a million-dollar judgment from his former employer, as having been “devastated” by his dismissal at 10:30 a.m. in front of his co-workers. While there are cer tain business prerogatives that will affect the calculus, a good practice is to be as private, respectful and decent as possible. The employee surely is not enjoying himself—you should not appear to be enjoying yourself either.

8. Have backup. Just as you plan and document the reason for the termination, you should plan and document the termination itself. Two people should be present, and both should take detailed notes. Be sure to record anything of substance the employee said. Also record what you said, particularly as to the reason for termination. To avoid pretext claims, it is important to have documentation that what you told the employee was consistent with your previous oral and written statements regarding discharge.

9. Pay all compensation due. Wage claims are one of the fastest-growing categories of employment litigation. Wage laws tend to favor the employee both substantively and procedurally, often allowing the employee to recover double or triple damages, litigation costs and attorneys’ fees, and civil and criminal fines. In planning a termination, it is important to ensure that all monies due to the employee are paid promptly. In Massachusetts, and many other states, all compensation owed to an employee must be paid on the day of discharge. Employees being terminated are losing future income, which is hard enough for them to accept; losing part of their past income only makes it more likely that they will find a plaintiff’s lawyer or file a claim.

10. Think about other agreements and commitments, real or potential. Although most employees are at-will, there are nonetheless agreements between the employer and employee that you should revisit at the time of termination. These might include non-compete and non-disclosure agreements and, more importantly, individual employment agreements, severance agreements or other commitments. Make sure you understand and comply with any obligations you have to the departing employee, and make sure she understands any obligations she has to the company. In addition to ensuring the return of company property and other security measures, it is good practice to review with the employee her ongoing obligations, such as protecting trade secrets.

Put these reminders in writing, and consider whether new agreements are advisable. Depending on the circumstances, it may be a great investment to pay a few weeks of severance for absolution from litigation.

Regardless of the steps you take, the most you can hope to do is minimize the risk that a lawsuit is filed, and to maximize your chances of winning if it is. Following these tips will be a big step in that direction.

Note: Mr. Bucking is co-head of the Employment Department at Foley Hoag LLP in Boston. He regularly represented corporations and other employees in labor and employment disputes, including those arising from employee terminations. He can be contacted at jbucking@foleyhoag.com.