Ten Practical Suggestions for Terminating an Employee

By Chauncey M. DePree, Jr., and Rebecca K. Jude

E-mail Story
Print Story
AUGUST 2007 - When a manager offers a job to a professional and the professional accepts, both parties are optimistic. Both look forward to a successful working relationship, but sometimes things don’t work out. The list of reasons is endless, but sometimes employees overstate their qualifications, behave inappropriately, or simply cannot or will not do the job an employer needs done. Even when a professional provides excellent service, business necessity may require a layoff. Either way, at some point, a manager will have to terminate an employee.

While nothing will make a termination painless, the following 10 suggestions may make the process less likely to result in a costly legal battle. The advice is also applicable for a company’s nonprofessional employees and may be helpful to anyone having to fire a worker. The first recommendation is easy to say, but may be the most difficult to do.

Do not fire an employee in anger. This may seem obvious but, in the heat of the moment, self-control is paramount. Before discharging an employee, take time to evaluate the decision. A cooling-off period may not change one’s mind, but it will provide time to evaluate the decision and plan the termination. When a manager is confronted with behavior that requires prompt action, such as intoxication or use of illegal drugs at the workplace, consider suspending the employee while preparing for a discharge.

Review the employee’s file and the company’s employment policies. If the file contains a history of warnings, counseling, and opportunities to improve, then litigation is less likely. The employee should not be surprised by the decision and may already be looking for other employment.

A longtime employee whose personnel folder is filled with adequate, if not glowing, evaluations may conclude that the dismissal is motivated for reasons other than performance. So for a single instance of poor performance, consider a written warning, demotion, or an opportunity to improve after being counseled. If the change in behavior appears to coincide with a change in supervisors, it may be worthwhile to reassign the employee to get a second opinion. No one wants to casually discharge someone who has been, and has the potential to continue to be, a productive employee.

Follow policy. If a company has written employment policies, including termination procedures, managers should follow them consistently. If management ignores company policy, the courts may determine there was an improper motive for the termination. If an employer does not follow its written policy or does not have a written policy, the way management has handled similar situations with other employees may limit the company’s actions. From a legal perspective, past terminations may set procedures as effectively as if the policy had been codified in writing.

A further complication exists if an employee files a claim with a regulatory agency such as the Occupational Safety and Health Administration (OSHA) or the Equal Employment Opportunity Commission (EEOC). The employer may face a claim of retaliation. Be sure to meticulously document the reasons for discharge. Absent a detailed record of misconduct, the likelihood that a court will believe an employer acted to punish an employee for exercising a right granted by law increases significantly.

It may also be appropriate to consider the timing of a termination. Pregnant women fall within a legally protected class. If a woman is fired soon after she advises an employer of her pregnancy, a perception is possible that the two events are related, regardless of what her personnel file shows. Financial constraints and the need for benefits create a motivation for litigation. Additionally, a woman who is fired during pregnancy will elicit considerable sympathy from a jury. From an employer’s point of view, being right may be irrelevant.

Document the reasons for discharge. An employee file should provide a meaningful history that explains the dismissal. Whenever a termination is not documented with warnings or efforts to improve employee performance, a likely conclusion is that there was an improper motive for the decision.

Although most states affirm employment at will—which in theory means the employer or employee may terminate employment for a good reason, a bad reason, or no reason at all—almost every employee can claim to belong to a legally protected class. The most common protected classifications include race, religion, sex, pregnancy, sexual orientation, age, and physical or mental disability. Employees may also assert reverse discrimination, which entails protection under discrimination laws even for individuals not in the minority group. Prudent managers will place more faith in documentation of misconduct than a philosophy of employment at will.

Be truthful. An employer may be tempted to soften the blow by telling an employee that the company is cutting back when in fact the employee’s performance is unsatisfactory. Then, when the employer takes steps to replace the employee, these actions cast doubt on the employer’s credibility. And, if an employee decides to take legal action, the employer’s reason may look like what it is: a falsehood. A lie may lead a jury to question everything an employer has said as self-serving and false.

Pay the employee at the time of discharge. While not legally required, if an employee is entitled to payment for time worked, sick leave, vacation, or anything else, pay the full amount when the employee is terminated. Money paid at the time of termination may assuage a disgruntled employee. If payment is not made at the time of discharge, assure the employee of prompt payment.

If the employer intends to offer severance, this is the time to do it. A severance package, however, requires careful consideration. It may buffer the employee’s transition and reduce the level of animosity likely to lead to litigation. On the other hand, if the offer is contingent on the employee signing a release of claims against the employer, the employee may view it as an acknowledgement that the employer did something wrong.

In any event, if an employer offers severance in return for a release, it should be drafted by an attorney. An improperly drafted release may have no legal force and may be used against the employer in front of a jury. For example, if the employee is more than 40 years old, a release must comply with the Older Workers’ Benefit Protection Act of 1990 (OWBPA; 29 USC section 626) to effectively release any age discrimination claim. The OWBPA allows an employee 21 days to evaluate the agreement, and the release must also specifically acknowledge that the employee had the opportunity to speak with counsel. Not surprisingly, tendering such a release will probably encourage thoughts of litigation.

Include an observer. Termination should be conveyed in person. Because termination interviews are fraught with emotion, an observer should be present. One person can communicate the decision while the other takes notes to document the meeting. If a manager elects to attend the meeting alone, immediately after the meeting, the manager should draft a detailed memorandum stating what happened and what was said.

Consider having both a man and a woman at any termination hearing. If possible, one of these persons should be the employee’s direct supervisor. A supervisor may have valuable insights about what action the fired employee may take. For example, a direct supervisor may be able to help identify employees who are unlikely to find another job quickly or who believe the decision is unfair, including those likely to take legal action.

Use a termination letter. Rarely is a written explanation for a discharge required by law. Drafting a termination letter, however, allows time to carefully think through what is said and how it is said. The termination letter should be delivered to the employee upon termination and should convey the decision to terminate and a general statement of the reasons.

Stick with what can be proved. Give a sufficient reason to justify termination—more-serious reasons are not necessary. If an employee admits to an offense, do not draw conclusions that may be unwarranted or difficult to prove. For example, a professional begins to miss meetings or the overall performance declines precipitously. On several occasions, the employee is observed drinking during lunch. Failure to provide client services or missing meetings are legitimate reasons for discharge in this case; there is no need to accuse the employee of alcoholism without evidence

Be respectful. Termination proceedings should be handled with as much tact and consideration as possible, regardless of the reason. It may be helpful to use a neutral location, such as an empty office or conference room. If the meeting is insulting and disagreeable, the likelihood of legal action increases.

Stop talking. A lot of time may be spent writing a termination letter. Let the employee read it. During the discussion, keep comments short and to the point. The decision has been made and there is nothing to discuss except to convey the decision and its terms and conditions. Optimally, an employee will acknowledge the reasons for termination and leave. If that is not the case, being drawn into an argument can only create problems for an employer. For many employers, the natural tendency is to ease the termination by saying something complimentary, albeit untrue, about the employee. Do not do it. Words spoken in kindness may come back during legal proceedings when the employer must admit that the statement was false.

These recommendations are not a complete statement of legal advice concerning employment termination, but following them may help make the process more professional and less painful, and minimize legal problems.

Chauncey M. DePree, Jr., DBA, is a professor at the school of accountancy and information systems at the University of Southern Mississippi, Hattiesburg, Miss. He is also a consultant, and Rebecca K. Jude, JD, is an attorney, both at Jude & Jude, PLLC, Hattiesburg, Miss.




















The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

©2009 The New York State Society of CPAs. Legal Notices