When you terminate an employee, take care to avoid lawsuits

  • Inappropriate sexual remarks to co-workers
  • Inconsistent productivity
  • Reduced profit
  • Disparaging comments about the company left on Facebook
  • Taking money from a cash register.

These are all real examples that have forced employers to terminate jobs. No business owner wants to be put in the position of having to fire someone or have lay-offs but sometimes circumstances require it. This can be daunting because of the fear of wrongful termination lawsuits.

Thankfully, lawsuits are not the norm but business owners do need to be careful when ending an employer/employee relationship.

For an expert opinion, we turned to Bill Smith, an employment attorney and vice president of Mountain States Employers Council. In his 17 years with MSEC, there isn’t much in the way of employment law that he hasn’t encountered.

“Every case is different so determining factors won’t be the same,” Smith said. “But employers terminate people for three reasons — because of performance, conduct or the need to eliminate the job for economic reasons.”

Performance is a subjective concept because what does or does not constitute acceptable performance is unique to each company or organization. As a business owner, you have the right to set performance standards for your company and to terminate employees who fail to meet those standards.

Smith considers what is fair. “If an employee fails to meet acceptable performance standards, you should have an initial meeting to discuss where improvement is needed,” Smith said. “This puts the person on notice that their work is unacceptable and gives them an opportunity to correct it.”

Termination because of an employee’s conduct can result from a single event and can be immediate. Smith cited examples of inappropriate and/or harassing behavior that causes co-workers to feel threatened, behavior that is damaging to the employer’s reputation, or conduct causing harm to customers, such as a restaurant employee who maliciously contaminates food. “In these cases, you should document what happened, when it happened, and how severe it was,” Smith said.

In recent years, many jobs have been eliminated due to financial considerations. In these cases, Smith believes it’s important to be as fair as possible. “In an ideal situation, discussions about the fiscal fitness of the organization will have taken place so the employees won’t be blindsided,” Smith said. “But because of financial considerations, many companies choose to operate up to the final hour before telling employees their jobs are being eliminated.”

“Documentation is a necessary practice, regardless of the reason for termination,” Smith said.

“For instance, if it’s because of poor performance, notes should be placed in the personnel file to document meetings with the employee regarding their work.”

Smith has dealt with employers on the issue of involuntary separation countless times throughout his career with MSEC. He believes it’s always better to have a single, well-documented reason for termination rather than citing multiple reasons. “You shouldn’t say, ‘Your job is being eliminated and, oh, by the way, your performance hasn’t been that great.’”

He also cautioned against being untruthful by telling them you’re eliminating their job and then hiring someone else 30 days later. “It’s always more about the employees who will still be there and the impression you make on them than the employee you’re letting go,” said Smith. “Your remaining employees will probably hear about the reason you gave the person who was terminated and they’ll know if it wasn’t the truth. That will erode their trust and loyalty.”

Smith explained that certain states, including Colorado, are “at will,” which refers to a non-contractual employment arrangement in which either party can end the relationship at any time. However, he points out that simply operating in an at-will state doesn’t eliminate the possibility of lawsuits arising from firing someone. Employers still need to exercise caution whenever someone is terminated.

“At-will doctrine has been chipped away with the many individual rights that employees have been afforded through State and Federal statutes,” Smith said. At-will is a legal position, but Smith advocates a more pragmatic approach. “If you do what a reasonable person would consider to be fair, practical and acceptable, you’re generally going to satisfy the legal standards.”

Telling someone they’ve lost their job is always an unpleasant situation, regardless of the circumstances. But sometimes it simply has to be done for the health and well-being of the company. When it comes to involuntary termination, Smith believes the bottom line is to treat people fairly, keep good documentation, use basic common sense and exercise caution.

Laddie and Judy Blaskowski are partners in several businesses, including BusinessTruths Consulting. They are authors of The Step Dynamic: A Powerful Strategy for Successfully Growing Your Business. Judy@BusinessTruths.com. Connect with them on LinkedIn.