There are few employment decisions more stressful for an organization than terminating an employee. Telling someone they’ve lost their job is hard enough, but there are also legal issues that need to be considered. Whether an employee is being terminated for performance, misconduct, or because of necessary downsizing, it is in the employer’s interest to follow proper procedures to minimize risks.
But, how does an employer keep track of all relevant employer laws about termination when they vary from state to state and in some cases, by the size of the company? Navigating this legal minefield requires a clear understanding of employment laws and ensuring compliance can be daunting for even the most experienced HR professionals. That’s why it’s important to have a sound process for terminating an employee that your company follows each time a termination is necessary.
Understanding the Legal Framework
Employers should begin by familiarizing themselves with the federal laws that apply to their business when it comes to terminating an employee legally. The Equal Employment Opportunity Commission (EEOC) enforces laws that make discrimination illegal in the workplace, including during the firing process. There are also other federal laws that address certain employee rights, including the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Civil Rights Act, among others. Most states also have their own laws and statutes imposing additional requirements.
- The FLSA prevents employers from terminating employees in retaliation for filing a complaint, testifying, or serving on an industry committee.
- The FMLA, which applies to businesses with 50 or more employees, prevents employers from terminating employees solely because they took family or medical leave.
- The Civil Rights Act, which applies to businesses with 15 or more employees, prevents employers from terminating employees because of their race, color, religion, sex, or national origin.
In addition, for employees who are members of a protected class such as older employees under the Age Discrimination in Employment Act (ADEA) or workers with disabilities under the Americans with Disabilities Act (ADA), the employer needs to tread carefully so that the termination will not be seen as discriminatory.
Businesses that terminate an employee while breaching any of these laws are at risk of being sued for wrongful termination.
At-Will Employment Laws
While the exact terminology differs from state to state, labor laws in every US state other than Montana are based on the principle of at-will employment, which permits employers to fire employees for any reason or for no reason at all, as long as that reason is not illegal. A wide variety of exceptions and legal protections limit when at-will terminations can occur, including those under implied contracts, collective bargaining agreements, and public policy violations.
Documentation Is Key
One of the most critical elements in legally terminating an employee is documentation. It’s not enough for the termination to be based on good reason or in good faith if there is no documentation to support that. Employers should keep detailed records of employee performance problems, including misconduct and other behavior issues, along with any disciplinary actions, to protect themselves from wrongful termination claims.
Performance evaluations, warnings, and written improvement plans should all be clear, factual, and communicated to the employee in writing. These documents show that the company took reasonable steps to resolve performance problems before resorting to termination. If misconduct is the reason for termination, document all incidents, including witness statements and your company’s attempts to investigate the behavior.
Fair Process and Communication
A fair and transparent termination process is crucial to avoid claims of unfair treatment. Employees should be informed about and given the opportunity to address and improve their performance or problematic behavior over time, receiving warnings and a performance improvement plan.
Even if the termination is not for poor performance reasons, the process should still be transparent. Employers should clearly communicate the reason for termination – whether it be a restructuring of the company, economic hardship, or other business needs. Severance packages, if offered, should be carefully considered to ensure they align with company policy and regulatory requirements.
During the termination meeting itself, the worker should be treated with respect and professionalism. The discussion should be straightforward, brief, and sympathetic – and, for the sake of documenting what happened, it is a good idea to have a witness present (for example, an HR representative).
Regulatory Considerations and Final Paychecks
Employers must also satisfy the regulatory requirements for final paychecks and other benefits. Many states specify how quickly an employee must receive their final paycheck upon termination. Some states require immediate pay for a terminated employee, while others provide a window of a few days for the employer to process payment. Benefits, such as accrued paid time off (PTO) that can be used after accrual, must be paid out by law in some jurisdictions.
Also, any employee benefit plans (such as health benefits, retirement plans, and stock options) should be dealt with before terminating an employee. Employers with 20 or more employees that offered group health plans within the last year will be required to send the employee information about COBRA continuation coverage explaining that the employee is eligible to continue health insurance coverage temporarily after job loss.
Avoiding Retaliation Claims
Among the most common legal landmines in the termination process are retaliation claims. Retaliation often arises when a terminated employee claims that the company punished them for engaging in legally protected activity, such as complaining about discrimination, filing a workers’ compensation claim, or participating in an investigation. An employee who engaged in protected activity shortly before their termination can easily file a retaliation claim.
To minimize this risk, employers should make sure that there is a paper trail indicating that the termination decision was made for lawful, non-retaliatory reasons – such as documented performance problems or other business-related issues not involving protected activity.
How Seay Management Consultants Can Help
Terminating an employee legally and ethically can be complex, but Seay Management Consultants helps businesses navigate these challenges. We can assist your business with all employee matters including discipline and dismissal, while ensuring that you maintain compliance with federal and state employment regulations. We stay current with ever-changing regulations, giving your business the ability to protect itself while maintaining a fair and compliant workplace.
When businesses work with Seay Management Consultants, they can feel confident in their termination process, knowing each step is defensible. From initial disciplinary actions to the final dismissal, we provide expert support, allowing you to focus on growing your business.
