HOW TO TERMINATE Employees— DOCUMENTATION, DOCUMENTATION, DOCUMENTATION.

In Parts 1 and 2 of this series, we examined how to hire and manage employees. Unfortunately, even the best hiring processes don’t always pick the right candidate, and best management practices don’t always guarantee that an employee will be the right fit for your company. In this article, I’ll discuss the issues that can arise when you have to fire an employee and tell you how you can avoid or overcome them.

Failure to Have Proper Reasons for Termination and Associated Documentation

Even though North Carolina is considered an “at-will” employment state, an employer must still make sure that it does not terminate an employee’s employment for reasons that are prohibited by federal or state laws.  An employer’s best defense against claims from terminated employees is strong documentation of the proper reasons for termination.  This documentation may be in the form of appraisals, discipline reports, or other memoranda.  Such documentation should be kept in the employee’s personnel file.  The following outline some of the major claims faced by employers related to employment termination and employment actions prohibited by law. In all the following cases, clear, consistent documentation of the employee’s dissatisfactory performance or behavior leading up to and causing termination will help the employer’s case.

• Discrimination Claims: Generally, a terminated employee will claim discrimination based on the protected classes of race, color, religion, sex, national origin, handicap, age, or ancestry.
• Retaliation Claims: A more popular claim recently is where an employee claims that the employer terminated or demoted the employee in retaliation for certain legal acts by the employee, such as filing a discrimination claim, reporting OSHA violations, whistleblowing activities and filing a worker’s compensation claim.  An employee need not be terminated in order to file a claim for retaliation.
• Constructive Discharge Claims: Certain states and federal courts will also allow claims for constructive discharge.  In these cases, the employee claims that the employer treated the employee in such a manner as to effectively discharge the employee or make the employee’s performance of his or her duties impossible.

Failure to Conduct the Termination Properly

An employer must train its managers to properly terminate employees with respect, in compliance with applicable laws and policies and in a safe manner.

• Taking Too Long: If an employer plans to terminate an employee, but is waiting for the “right” time, many other problems may develop.  The employee or other employees could learn of the plans or general morale of the company may be affected.
• Arguing: A terminated employee may get angry or try to argue, but the employer should not argue with the employee.  If the decision has been made to terminate the employee’s employment, the termination should not be further argued with the employee.
• Letting the Word Out: The employer should keep the knowledge of any impending termination limited to as few employees as possible, in order to treat the terminated employee fairly and respectfully, as well as to not affect morale.
• Making Promises or Over-Sympathizing: Many employers or managers will sympathize with a terminated employee and want to offer help.  However, a sympathizing employer or manager may get too emotional and make promises that he or she is not capable of keeping.  It is best to avoid making such promises that might obligate the employer to further expenses or problems in the future.
• Being Emotional: An employee that is being terminated will likely be emotional and managers or employers will likely be affected by that emotion or be emotional themselves.  However, the employer or manager should strive to not be so emotional that the decision to terminate does not appear to be rational.  Also, the manager or employer not being too emotional will generally help the terminated employee from becoming more emotional and escalating the situation.
• Failure to Anticipate Actions of Employee: Some employees may react very emotionally or even violently to having their employment terminated.  It can often be difficult to tell exactly how an employee will react.  In that case, certain precautions should be taken.   Depending on the anticipated response of the employee, the employer may have a system in place to contact the police or other employees quickly, prepare the room where the termination will take place by removing dangerous objects, offer outplacement services, or take other similar steps.
• Conducting the Termination Alone or in Public: Generally terminations should be conducted in a neutral setting (a conference room, for example) with the employee and two managers or employers present.  Conducting a one-on-one termination is risky because the employee may later claim that the employer or manager said something that he or she did not actually say.  Therefore, it is better to have another witness present.  Also, conducting the termination in public is disrespectful to the employee and may affect the morale of remaining employees.  It may also allow others to interfere or escalate the emotions of the situation.
• Access to Premises and Security Issues: Depending on the situation regarding the terminated employee, an employer will generally want to be sure that the terminated employee has limited access to the employer’s property after the termination.  An employer may have another trusted employee help the terminated employee gather his or her belongings or have security personnel do so.  The employer may want to change locks and keys as well as passwords to ensure the safety of the employer’s property.  Generally, the less intrusive and public the security measure, the more smoothly the termination and exit from the property by the terminated employee.
• Not Conducting Exit Interviews: If possible, employers should conduct exit interviews to clarify post employment obligations of the employer and employee, as well as to help clarify any issues the employer may have that can be identified by the employee.  Exit interviews are also generally when releases and covenants not to compete should be discussed.

Failure to Ensure Proper Enforcement of Covenants and Releases

While not every very employee needs to sign covenant not to compete or a release, employers should carefully consider the following issues.

• Covenants Not to Compete: Every business wants to protect its client list, its trade secrets, and its market share. But covenants not to compete must be carefully drafted to avoid running afoul of the constantly shifting caselaw in this area – they must reflect the details of the business and the individual employee. Before drafting a covenant not to compete or having an employee sign one, contact the Venn Law Group to discuss your unique situation.
• Releases: Employers concerned about possible employment related claims from terminated employees will often request that the employee sign a release from such claims in exchange for some form of severance pay. Releases must be completed for consideration (i.e. payment) that is separate from the final compensation already owed to an employee.  Also, certain types of releases require a waiting period prior to becoming effective.  If you want a terminated employee to execute a release, we recommend that you ask an attorney at the Venn Law Group to draft one for you.

Failure to Ensure Compliance with Post-Employment Obligations

Employers have several obligations to terminated employees. These obligations take many businesses—especially smaller businesses—by surprise.

• Final Paychecks: North Carolina law requires that employers pay all compensation owed to a terminated employee on the next scheduled payday, except where wages are based on commissions, bonuses, or other methods of calculation. Those wages must be paid on the next regularly scheduled payday after calculation.
• COBRA: Certain employers offering group health plans to employees are required by federal law to offer continuing coverage to terminated employees for a period of time following termination of employment. Such employees must qualify for the benefit and generally will have to pay an additional amount to maintain coverage.  Certain procedural requirements and restrictions apply to such benefits.  A service provider or attorney can provide an employer with more details and a COBRA benefits plan that will help ensure compliance.
• References: Generally, employers should have an established policy on giving references or reporting work history to future employers of a terminated employee. In order to avoid claims of defamation, employers should report only verifiably factual information about a former employee.

Conclusion

There’s so much more to terminating someone’s employment with your company than simply deciding to do it. You have to:

• Have the right reasons for termination.
• Document your reasons for termination.
• Execute the termination properly—be sure to avoid the nine errors I described in this article.
• Carefully consider whether to have the terminate employee sign a covenant not to compete or a release.
• Comply with your post-termination obligations.

Fortunately, the attorneys at the Venn Law Group can help you with all five of those steps. If you’re facing any termination-related issues, contact us for a consultation.

By Edward Woodall