Prevent a Termination from Becoming a Lawsuit
Best Practices for Terminating an Employee in California
One of the most common reasons why clients contact us is for help navigating employee terminations. Terminating an employee is a sensitive and strategic process that requires careful consideration of the basis for the termination, skillful handling of the termination itself, and a plan for communicating the departure to remaining staff members. Below are best practices and important considerations for terminating an employee in California. Please keep in mind that terminations are often very fact-specific and we recommend consulting with legal counsel prior to performing a termination.
Identify the Basis for the Termination and Ensure it is Well-Documented
While California is an at-will employment state, it is still critical for employers to have a legitimate, non-discriminatory basis for the termination. Whether it is performance concerns, attendance issues, financial restraints, misconduct, and/or a combination of other factors; the company should identify the basis for the termination, and ensure that the basis is legitimate and well-documented. For example, if performance concerns are the basis for the termination, the employer should have a solid written record of the performance issues, demonstrating that the employee was on notice of the concerns, was given a chance to improve, and failed to do so. Similarly, if the basis for termination is misconduct, the employer should be sure to have the misconduct well documented. Documenting the underlying basis for the termination ensures that, down the road, should the former employee bring a claim against the employer (which often happens even when there is no readily discernible illegal reason for the termination) the employer can defend itself by showing the legitimate, documented basis for their decision.
Analyze Risk Factors or Special Circumstances
We also look at whether there are any risk factors or special circumstances that may impact the decision to terminate. For example, if the employee has recently been on a leave of absence, disclosed a medical issue, or if the employee belongs to a protected class, those factors may make the termination higher risk. If there are special circumstances or risk factors at play, we often recommend that the employer offer the departing employee severance. However, offering severance and asking for a release in exchange, is a good step for a lot of employers regardless of the risk factors at play.
Consider Offering Severance
Regardless of how legitimate and well-documented the basis for termination may be, the departing employee may still have heated emotions about her imminent departure. Former employees often attempt to bring employment claims regardless of the merit or lack thereof of. A severance agreement—in which the departing employee is paid an extra sum beyond what they are owed in exchange for a waiver and release of claims—is commonly used any time an employer wants to know that it will not face the risk of a lawsuit, whether valid or not.
Wage and Hour Considerations
We also advise clients to take a careful look at their compliance with California wage and hour law before terminating an employee, especially if the employee is classified as non-exempt. For example, the employer should ensure that the employee took their rest and meal period breaks, were paid for all overtime owed to them, etc. Plaintiffs’ attorneys are often eager to pounce on any wage and hour missteps and attach those claims to a wrongful termination claim (or bring wage and hour claims on their own). Plaintiffs’ attorneys also often argue that an employee was misclassified as exempt but their job duties do not fit an exemption - probably the most common legal mistake employers make. For these reasons, if the employer discovers that they have wage and hour liability prior to terminating an employee, we often suggest offering severance in which a waiver covering all wage and hours claims is obtained from the employee in exchange for the severance payment.
Prepare for and Hold the Termination Conversation
We recommend conducting terminations in person, if possible, or at least over a live communication (video conference or phone). In our experience, a live conversation often allows the employer to deliver the termination news in the most empathetic and humane manner.
In terms of the conversation itself, try not to get into excessive detail about the underlying reasons for the termination so that the employee feels they have to defend themselves. Instead, a simple restatement of the main basis for the termination, if needed, is ideal. Best practices dictate that the employee should already be well aware of the reasons they are being terminated, and those reasons should be carefully documented. However if they are not, do give some information on why the termination is happening so the employee does not feel that only a lawsuit is necessary to gain transparency around her dismissal. In addition, when employees are not given a reason for their termination, they often assume that’s because the reason behind the termination is illegal.
Finally, be sure to have the employee’s paycheck ready on the day of termination, including accrued but unused vacation and any owed commissions or bonuses.
Make a Plan for Logistics Related to the Termination
Many employers forget to consider the practical logistics that result from a termination; for example, the employee’s email account and access to other software needs to be disabled at the time of termination. Particularly, if the termination is likely to be contentious, and/or if the employee has access to highly-sensitive company information, it is critical to have a plan to disable the employee’s access to such accounts and information before or during the termination conversation. Similarly, the employer should make a plan for obtaining return of all physical equipment in the employee’s possession. If the employee works from home or is entirely remote, employers should cover the cost of shipping the items back to the employer or provide the departing employee with a pre-paid shipping box. There are also companies that provide this service. For in-person terminations, we highly recommend NOT escorting the employee out of the office as if they did something illegal, but instead giving them some time to say goodbye and collect their things. The more you can make an employee feel that they are being treated humanely in the process, the less likely they will feel the need to sue to re-empower themselves.
Communicate with Remaining Staff
We recommend communicating the termination to the rest of the staff members in a professional and concise manner, while respecting the departing employee's privacy. We usually recommend not providing much or any detail to the remaining staff about the reasons for the termination (or even that the departure was a termination) except what was agreed upon with the departing employee. Having a conversation with the departing employee on what they would like the public to be told about the termination is the best way to stay consistent in messaging (your messaging and that of the employee’s). In addition, defamation causes of action have become increasingly popular lately. While a true defamation case requires an intent to be untruthful, that has not stopped plaintiffs’ attorneys from alleging that even a suggestion of negative conduct is grounds for defamation. In addition, aligning with the departing employee on what your messaging will be is another way to be compassionate and thoughtful about the termination process. Again, the best way to prevent a lawsuit is to treat your employee the way you would like to be treated if you yourself were terminated.
We hope that this overview is helpful but please keep in mind that terminations can be very fact-specific. We recommend consulting with legal counsel prior to performing a termination. Maier Law Group routinely assists our clients with terminations – please reach out to us!
Author: Emily Harrington, Associate.
This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact Maier Law Group directly.