Minimizing Blowback From Firing Employees
This article will give a brief overview of steps employers can take to minimize any blowback from terminating an employee. It is by no means a comprehensive treatise on the subject and you should always get case specific legal advice before considering such actions.
Once upon a time firings were financially painful only for the employees. However, today terminated employees are often using state and federal agencies to bring suit and collect from former employers to get what I have deemed a form of an “extorted” severance package. Whether or how much an employee can recover depends on who was fired, why and what a judge or jury decides.
The Protected Classes
Federal and state laws prohibit termination because of race, gender, religion, national origin, citizenship, disability, union activity, age (between 40 and 70 under federal law), filing benefit claims, protesting discrimination, asking for a benefit or whistle blowing. Employees can file charges with state and local agencies as well as the federal Equal Employment Opportunity Commission. If these agencies don’t help, private lawyers will happily sue.
If a terminated employee contends that a personnel manual or somebody in authority said that employment would be “permanent” or that termination would be only for “just cause,” the employee is entitled to a trial to determine whether the reason for termination was sufficient. In some states, like California and Massachusetts, even if nothing is said in the manual there is an implied obligation to act in good faith in terminating an employee.
Employees can win big — reinstatement, back pay, lost future pay, damages for pain and suffering, and even punitive damages.
Approach every termination as if it will be attacked in court. Once in court, the employer must present a reason for the termination that is consistent with any statute or other law. During that litigation, all the company’s records on this employee and others in similar situations will be brought into court and will probably have to be explained to a judge or jury.
I. WHAT HAPPENS IN TERMINATION LITIGATION
Terminated plaintiffs most commonly claim they were terminated because they were members of a group protected from employment discrimination by federal, state or local laws. To prevail, the terminee must prove that protected group status was a determining factor in their selection for adverse treatment. A successful defense requires a sound fair reason for the termination which can convince a jury that the real reason had nothing to do with illegal discrimination.
This issue normally turns on the intent of the employer. The only direct evidence of intent is generally the testimony of the actor, but triers of fact are skeptical of self serving testimony.
A. What Employers Stand To Lose
Losing employment discrimination litigation means the employer pays two people for the same work: the retained employee and the terminee. Losing an age discrimination claim can mean paying three times because a terminated employee wins double damages if the plaintiff shows that the unlawful age discrimination was “willful.” Losing a federal discrimination claim concerning sex, national origin, religion or the like can add up to hundreds of thousands of dollars for “pain and suffering,” future “pecuniary losses” and even punitive damages.
B. Remember The Time To Defend Begins Before You Hire
There is an old saying I once heard a senior attorney tell a client, “either you pay me $500.00 now or $5,000.00 later. Either way, it does not matter to me because your money is going to become my money.” The saying applies here, the only way to win employment litigation is to avoid it.
If an employer wants to retain the prerogative of terminating an employee for any reason (other than those that are contrary to a statute), it had better be spelled out in writing and signed by the employee before or at hire. The best places are in a signed employment application spelling out at-will employment as well as in any employee manual.
C. Beware of Unintended Promises
Thoroughly review personnel manuals, employee bulletins and other documents that state terms of employment. High minded promises of fair treatment or other vague lofty aspirations result in lawsuits where the court system decides what is fair.
D. Minimize Your Risks Before You Use The Ax
Before you use the ax, be sure there is a provable, unassailable business reason for the decision — such as a clear violation of published work rules or a documented record of warnings for poor performance or excessive absenteeism — for any termination the reasons should be reviewed and established before the employee is let go, not after.
A great way to invite a disastrous lawsuit involves a long term employee who received wage increases every year and whose personnel file contains no written warnings. Then someone decides that a formerly acceptable level of performance is inadequate and the employee is unceremoniously shown the door. If the employee had been warned of substandard performance, given fair warning and a reasonable opportunity to improve, the employer would have a far better case.
Another invitation to court occurs when there are several employees with a chronic problem (like absenteeism), but the older (or female or other protected class member) employee is the first one fired. Instead discipline the bottom of the barrel first. When younger people, not in any protected group, with similar problems are not terminated, the employer faces a strong inference that the real reason for termination was age, sex or otherwise. But if those with the worst absenteeism records are let go first, especially after numerous warnings, it is harder to prove that hidden pre-textual discrimination was the real reason.
E. Ten Ways To Avoid (Or Win) Employment Termination Litigation
1. SAY WHAT YOU MEAN — YOU MAY BE STUCK WITH WHAT YOU SAY
This may seem elementary, but before hiring, review documents like employment applications and personnel manuals, that are likely to be involved in a termination dispute. Be sure that they promise only what you want them to deliver. Be sure that they spell out that oral promises will not change the written rules.
2. SHUT UP
Be sure no one in authority makes promises you do not intend to keep.
3. DON’T SOFTEN THE BLOW
Kind employers may seek to soften the blow by downplaying an employee’s marginal or bad performances and telling an employee “we are eliminating your position” or “it’s because we want to get new or more vigorous talent on board.” When a jury hears this is false (especially when the employee is replaced shortly thereafter) or assumes “new” means younger, you will lose.
4. BE AWARE OF WHO IS ON DECK
Scope out who is going to do the terminee’s job after they go. If a protected class individual’s job is going to be done by a non-protected class individual (a terminated minority replaced by a white male, or a 65 year old replaced by a recent college graduate), the termination reason needs to be above all solid.
5. FAIR WARNING WINS LAWSUITS — COMMUNICATE WORK RULES AND WARNINGS
Have written work rules and make clear that infractions lead to discipline and discharge. Don’t adopt overly rigid rules by using rules like honesty, courtesy, excessive absenteeism, sobriety and a duty to cooperate in company investigations. Be sure every employee receives a copy and signs for it. Use (but don’t promise) progressive discipline for lesser infractions — that is, give an employee an opportunity to correct unacceptable behavior. This might include a written warning or two acknowledged by the employee and perhaps even a suspension before termination for less serious offenses.
6. DISCIPLINE THE WORST FIRST
If discipline is necessary, deal with the worst offenders first.
7. LOOK BEFORE YOU LEAP
Get the employee’s side of the story in front of witnesses and, if possible, in writing signed by the employee. Then, investigate it before you act. It is best to recognize factual weaknesses in your case before it is too late. If you really don’t want the employee on the payroll until the facts are clear, suspend the employee during your investigation.
8. CONSISTENCY IS A GOOD PREVENTATIVE
Be consistent in discipline — similar infractions should receive similar punishment. Being harsher on members of protected classes is a recipe for an expensive lawsuit.
9. FAIR TREATMENT WINS CASES
Review the employee’s personnel file with an eye to fairness: Fair treatment as well as fair warning. Ask yourself how you would react if you were an impartial juror. For example, employees with longer seniority merit more opportunities to correct their actions than newly hired people.
10. YOU JUST MAY HAVE TO BUY OUT THE BAD RISKS
If you have to fire someone but think your termination rationale could be viewed as suspect, give some serious thought to severance pay in exchange for a release from any claims that might arise from the termination. Not the severance pay or vacation pay that you give to anyone who is terminated, but additional compensation.
11. NEVER DISPARAGE THE RECENTLY DEPARTED
Don’t stand in the way of the terminated employee’s future employment. An employee who has a new job is much less likely to bring a lawsuit against you. Bad references will only lead to expensive lawsuits. However, good references are an admission that there was not proper cause to terminate. So, adopt a policy of simply confirming dates of employment and title.
CHECKLISTS FOR TERMINATIONS
I. PRE-TERMINATION CHECKLIST FOR INDIVIDUAL FIRINGS
A. WHY?
- Does it make sense?
- Does it seem fair?
- Does it seem excessive?
- How serious is the infraction?
- How long is the employee’s seniority?
- How have others been treated?
B. DID THE EMPLOYEE DO IT?
- Get the employee’s side of the story in writing
- Prepare evidence if needed
- Consider mediation or arbitration
C. REVIEW PAPER TRAIL
- Personnel file
- Grievance procedure
- Other writings
D. DISPARATE TREATMENT
- How have employees been treated in the past for this type of behavior?
- Who is going to replace the terminee?
E. CONSIDER SETTLEMENT OF TROUBLESOME CASES
- Valid release (reviewed by your labor attorney)
- Out-placement
F. NEUTRAL REFERENCES
- Only provide title and dates of employment
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