Involuntary Termination of Employment in the United States
Overview There are myriad reasons for an organization to execute involuntary terminations in an ethical, rational and consistent fashion. Termination affects recruiting, retention, employee relations, morale, productivity and more, but so does maintaining underperforming or badly behaving employees on the payroll. In addition to the business reasons for effective termination practices, numerous legal risks arise whenever an employer fires an employee. Depending upon the particular circumstances, a discharged employee may take legal action against the employer, managers involved in the decision or the discharged employee’s co-workers. In the United States, the doctrine of “employment at will” or “at-will employment” refers to an employment relationship between an employer and an employee, under which either party can terminate the relationship without notice, at any time and for any reason not prohibited by law. The at-will doctrine is the fundamental rule of employment in the United States and is the presumed relationship between employer and employee except when a formal contract or agreement exists. State and federal legislation and court-created exceptions, however, have limited the circumstances in which an employer can terminate its employees without being subject to challenge. Legal claims arising from involuntary terminations may be based on the common law, federal or state statutes or local ordinances. This article is organized into six main topics:
By following best practices in involuntary terminations, employers can help prevent:
Pre-Termination Planning Managing the risks associated with involuntary terminations of employment requires planning that begins before hiring and continues throughout the term of employment. Unanticipated circumstances are inevitable, so the prudent course of action is to control those variables that can be controlled. Begin before hiring A strategic approach to involuntary termination of employment begins with a strategic approach to hiring. See, Hiring Source Book: A Collection of Practical Samples. Accordingly, organizations should have one or more standardized employment applications that require applicants to fully disclose their prior work history without gaps in time and the reasons for termination of prior employment. Applicants should be informed that false information on the application, or material omissions of requested information, will be deemed grounds for rejection and, if employed, termination of employment. Applications should be used for all positions instead of just lower-level positions because résumé fraud is a problem that occurs at all levels. The application should authorize the employer to conduct appropriate background investigations and reference checks. Ordinarily, the organization will want to emphasize in the application that employment is being considered solely on an at-will basis. The interviewing process should clearly convey to the applicant what the employer’s expectations will be, including standards for attendance, performance, workplace conduct and employee ethics. Making these standards clear during the hiring process may increase the new employee’s understanding of workplace rules and eliminate the need for an involuntary termination later. A new hire should also be given a copy of the organization’s employee handbook and any written employment policies and practices, including the company’s employment-at-will policy. The employer should obtain the employee’s written acknowledgement of having received and read the handbook and polices. See, Preparation of the Employee Handbook. For some positions—particularly for executive, temporary or seasonal positions—it may be appropriate to enter into written contracts with new hires. See, Written Employment Contracts - When? Why? How? It may also be appropriate for some positions to have new hires sign agreements that protect intellectual property, prohibit competitive employment for a specific period and geographic area after termination of employment, or prohibit solicitation of co-workers to leave the employer. The organization should consider whether to address severance pay in exchange for a release of claims on an ad hoc basis or by means of an established severance plan subject to the Employee Retirement Income Security Act (ERISA) of 1974. As to employers covered by the Age Discrimination in Employment Act (ADEA) of 1967, a release of claims under the ADEA must comply with the detailed requirements set forth in the Older Workers Benefit Protection Act of 1990 (OWBPA). These considerations will be very important when the actual decision to terminate employment is made. However, most of these matters must be addressed well before then. Continue through the decision to terminate Planning for involuntary terminations continues during employment. Employers should develop and consistently apply uniform performance standards for each position. These standards may be established in job descriptions, management-by-objective agreements, policies and procedure manuals, and performance evaluation forms. Serious misconduct such as harassment, workplace violence and theft or destruction of company property should be promptly and thoroughly investigated and appropriate remedial measures taken. See, Investigations Toolkit. Recognizing that an appropriate course of corrective action for disciplinary issues may be very different than an appropriate course of corrective action for performance improvement, organizations should consider whether to adopt policies on progressive disciplineand corrective action. For resources on disciplinary action, see, Discipline Toolkit, Practical Tips for Successful Progressive Discipline and Corrective Action, not Coercive Action. For resources on performance improvement, see, Performance Management Toolkitand Functional Feedback: Working With ‘Performance-Challenged’ Employees. Often, employees will disagree with the employer about the appropriateness of corrective action. Consequently, an employer may want to develop an internal dispute resolution program to ensure that termination decisions are made only after the affected employee has been afforded due process. See, Developing an Alternative Dispute Resolution Program. If a manager concludes that a particular employee should be discharged, this decision should be carefully and independently reviewed by at least one more person—perhaps someone in the human resources department, the manager’s own supervisor or legal counsel—before the termination is implemented. Such a review should include a careful examination of all facts leading to the manager’s desire to terminate the employee and a thorough review of the employee’s entire personnel file. See, Cardinal Rules of Termination A supervisor’s recommendation to terminate an employee raises a red flag:
Documentation of the termination review process and the ultimate decision to terminate should be prepared before the termination meeting. Notification of the Termination Decision Notifying an employee that his or her employment has been terminated is a delicate task, the circumstances of which should be thought through carefully before taking action. Who Typically, the employee’s direct supervisor and a human resources representative will attend a termination meeting. This helps avoid a situation where it is one person’s word against another’s as to what occurred during the meeting. Generally, an employee should not be allowed to bring a co-worker, family member or attorney to the meeting. What Individuals in charge of termination should always plan in advance what to say in a termination meeting. Essential topics to cover are:
When There is no “right” day of the week or time of day for every discharge. A Friday afternoon termination may allow the employee to cool off over the weekend and make it more difficult to immediately contact an attorney, but it may also give the employee an entire weekend to stew with a spouse, friends or attorney-acquaintances. A mid-week termination may permit the employee to take immediate constructive steps, such as seeing a counselor or outplacement advisor, revising a résumé, applying for unemployment benefits, or networking to find a new job. Termination at the end of the day may make sense if the employer has reason to believe the employee may be disruptive or threatening. Termination mid-day may allow the employee time to say good-bye to co-workers and clean out his or her office. A termination first thing in the morning may relieve managers from worrying about the meeting all day long, but it may leave the employee feeling like the employer wasted his or her time by making the employee come to work unnecessarily. Where Termination meetings are best held in a neutral, private setting such as a conference room. Terminating managers should select seats that minimize the risk that an angry or violent employee will be able to block the exit. How Employers should be prepared in advance to:
Post-Termination Interactions Employers should prepare for a variety of post-termination communication challenges, including inquiries from other employees, government agencies, prospective employers and the former employees themselves. The employer should prepare a clear, brief and general explanation about why the employee is no longer with the organization. The failure of the employer to address the issue with remaining employees leaves dissemination of this information solely up to the discharged employee and the “rumor mill.” Employers should consider whether to use an exit interview or questionnaire to address the discharged employee’s views about areas of concern for the particular business. Although most organizations do not do exit interviews in discharge situations, it may be better to hear about employee complaints in this process rather than learn about them later from an employee’s attorney or the Equal Employment Opportunity Commission. A discharged employee may speak more candidly about very real problems with the organization than any employee on staff ever would. Discharged employees are justified in expecting to be treated professionally and courteously in post-termination communications concerning their employment, including having telephone calls returned promptly. Reference inquiries about the discharged employee from prospective employers should be handled in accordance with the organization’s reference policies and procedures. Even if not required by an applicable state law, the employer should consider allowing the former employee to have a copy of his or her own personnel file upon the employee’s request, as refusing to do so may provoke the terminated employee into calling an attorney and may later appear to a jury to have been an unnecessary and hostile act on the part of the employer. Employment records relating to former employees should be retained as required by applicable laws. When records are no longer needed to satisfy legal retention requirements or business needs, they should be shredded, burned or pulverized to prevent misuse of the sensitive information they contain, some of which could be used to perpetrate identity theft. Employers should be careful to thoroughly destroy electronically stored information as well as paper records. Legal Challenges to Termination: Common-Law Claims The at-will doctrine is the fundamental rule of employment in the United States. See, U.S.: Employment at Will Prevails Despite Exceptions to the Rule. In contrast, see, U.K.: Most Employees are Protected from Dismissal by Statute or Contract. Under the common-law exceptions, some U.S. courts recognize that there are instances when an employee may be entitled to enhanced job security based on contract or tort theories:
Contractual claims An employee may allege that he or she was discharged in violation of:
Employers must be careful and consistent in what they say, both in writing and orally, in order to avoid claims for wrongful discharge on these bases. Tort claims Some of the torts that a discharged employee may claim occurred in connection with his or her involuntary termination include:
Other common-law claims Two types of common-law claims that do not fit neatly into the categories described above are:
Legal Challenges to Termination: Claims Based on Federal, State and Local Legislation Since the 1960s, a complex of federal, state and local laws has been enacted, prohibiting discriminatory discharges and retaliation against employees for exercising protected rights. These have greatly limited an employer’s right to terminate an employee at will. Federal equal employment opportunity laws The following federal equal employment opportunity (EEO) laws prohibit discrimination in employment actions—including termination—on the basis of protected characteristics, including race, gender, pregnancy, age, religion, national origin, disabilityand military service:
There are two general types of illegal discrimination: disparate treatment and disparate impact (or adverse impact) discrimination. Disparate treatment discrimination occurs in terminations when an employer consciously takes the employee’s protected status into consideration when making a discharge decision. Disparate impact discrimination occurs when an employer adopts a policy or practice that seems neutral and nondiscriminatory on its face (such as a method for selecting employees who will be let go during a reduction in force) but that has a disproportionately negative impact on members of a protected class. Federal laws prohibiting retaliation Federal EEO laws also prohibit retaliation on account of an employee exercising rights under the particular law. For example, Title VII makes it illegal for an employer to discriminate in retaliation against an employee because that employee:
See, EEOC Fact Sheet on Retaliation. Other federal laws outside the EEO area also protect employees against termination in retaliation for the employee exercising rights under the statute, including:
Federal laws providing job-protected leave The Family and Medical Leave Act of 1993 (FMLA) and The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) have provisions prohibiting the termination of employment for a certain period time while the employee is on leave in accordance with these statutes. State and local laws Most states have laws similar to Title VII, the ADEA, the ADA, USERRA, OSHA, the FMLA and the FLSA. Frequently, the state statutes provide greater protections or apply to broader classes of persons than do their federal counterparts. So, for example, some state statutes provide protection against termination for:
State laws also frequently address various aspects of the termination process, including:
Local legislation (such as municipal ordinances) sometimes goes beyond what federal and state legislation have guaranteed to employees in terms of grounds for termination.
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