Top 10 Things to Consider When Terminating Employees

For California employers, as businesses change and grow, employee additions and terminations are part of doing business. If you are an employer, my heart goes out to you during these tough economic times. Terminations and layoffs are almost inevitable, and with them come the potential of lawsuits, so here are the top ten things to consider before you terminate someone. Using these tips will decrease your exposure to wrongful termination lawsuits.

Following these ten steps when terminating an employee will grade you an A in the realm of employer compliance and compassionate conduct, and the list is offered as preventative advice.

1) Is the termination absolutely necessary? Of course, if you can get away without terminating someone or laying him or her off, do. Employers are being increasingly creative about reducing work schedules and salaries instead of cutting jobs. You might hire a personnel expert (I can get you some names if you don’t have them) to look at your bottom line and see how you could rearrange positions and salaries to avoid laying workers off.

2) If you’re terminating someone for performance reasons, have you employed progressive discipline? Progressive discipline allows both employers and employees to become invested in improving the problem performance. If an employee is terminated after being subjected to progressive discipline, she is more likely to feel she received a fair chance, something that prevents lawsuits in the long run.

3) Offer severance and ask for a release of claims in exchange for the severance payment. The more likely a successful lawsuit, the higher the amount of severance you should offer. There’s a case for offering severance to even the worst employee: he’ll still badly need the money for the upcoming transition, and the employer benefits because the signed release prohibits a potential lawsuit. Severance also offers closure to the employee, an underrated virtue that helps prevent lawsuits.

4) Is there a pattern to whom you’re terminating? If so, make sure it’s not a pattern around a protected class, like those over 40, women, people of color, etc. There should be a justification for whom you’re terminating that’s related to salary, performance, or something else that’s not a legally protected status. However, also ask…

5) Are the higher paid workers you’re terminating also the older workers? Salary is not a legitimate basis upon which to terminate someone when it acts as a proxy for age. Be careful when making decisions based on salary, as salary is often based on experience, which is often based on years in the workforce. If all your laid-off or terminated employees are both the highest earners and the oldest workers in your company, you should reconsider how you've structured your termination or layoff.

6) Is there an economic justification for who/when you’re terminating? If there is, be upfront about it. A true layoff that occurs because a company is suffering financially is hard to attack under the law, so tell your employee if this is why he’s losing his job. Also, support the personnel file with other indicia of the financial hardship. This leads me to a more general piece of advice…

7) Tell the truth to the employee you’re terminating. So often employers don’t want to make an employee feel bad, so they don’t tell her about their performance concerns along the way or at the time of termination. This sets a company up for a lawsuit. Tell your employee about your concerns early and often so she knows that her termination is based on a legitimate reason. More importantly, the negative feedback will give her a chance to improve. At the very least, tell her why you’re terminating her when the reason is based on performance, and give examples. It’s a fine line to walk because you don’t want to demoralize your employee even more, but you need to be honest about why she’s being terminated, or she might assume illegal reasons were the basis for the termination.

8) If you’re not terminating someone based on performance, offer to be a reference. The more gifts you can bestow on the employee at her departure, the better. If you can offer a rave review of the employee, let her know that. It’s a way to provide something of tremendous value to the employee without compromising your economic bottom line.

9) Advise the employee to consult an attorney if you’re asking him to sign paperwork. If he later contests his signature on the paperwork, the court will assume that the employee knew what he was signing.

10) Pay all outstanding wages and vacation on the day you terminate, provide COBRA notice, and make sure you comply with all other state and federal requirements for terminating an employee.