Stop Terminating Your Employees (Until You’ve Read Our Essential Guide)

It’s inevitable. The employee you thought would rocket to the top of your corporate ladder has been consistently slipping. Performance is taking a nosedive and careless mistakes are adding up. Eventually, it becomes clear you can’t fix this problem employee. You’ll have to let them go.

Or maybe a recent reorganization has turned up too much job redundancy and it’s time to pare down your team.

Or perhaps your bottom line is pointing toward a round of layoffs in order to keep the company afloat.

Involuntary termination is rarely simple or easy. In fact, if you’re not careful it’s possible to make big mistakes that can hurt you legally and financially. Don’t jump into firing, layoffs or retirement-incentive programs until you’ve checked out our ebook: Before You Fire: Resources for Workforce Reduction. Here’s a sneak peek:

Circumstances around each termination are unique, but you still need to be objective and follow your policies every time to protect yourself and your employees. What’s your procedure for making firing decisions? What steps do you take to help failing workers, give warnings, document problems and communicate your intentions clearly? Do you follow best practices for exit interviews? What happens after the employee is gone?

True, “at-will employment” means you can technically fire someone at any time for any reason; however, it must be legal reason. You may not fire based on discrimination, retaliation or as a consequence for taking FLMA leave, military service, voting or jury duty.  According to thebalance.com, “terminations are easier to defend when they are justified by a legitimate business reason [such as] problems with the employee's contribution, misconduct, a reorganization resulting in the elimination of the employee’s position, or financial considerations of the employer.”

Learn more about the states that have exemptions to at-will employment (a full list is available from the National Conference of State Legislatures). The exceptions include the public policy exception, the implied contract exception and the covenant of good faith exception. It's in your best interest to understand the specific laws in your state.

Unemployment Benefit Claims Affect Your SUI Rate

Unemployment insurance rates are based on the number of cases an employer has, so “every approved application could potentially tip your organization into a new rate category,” says Labor Law Center. It just makes sense to keep a close eye on unemployment claims coming from past employees. Your company should have a written procedure to guide you through the appeals process, and it never hurts to consult with legal counsel either.

But, don’t employees engaged in misconduct fail to qualify for unemployment benefits? That varies from state to state. Labor Law Center explains, “unintentional errors, petty arguments and off duty incidents that were not connected to the job are unlikely to rise to the level of disqualifying misconduct, even though your company may consider them misconduct for disciplinary purposes … disqualifying misconduct typically refers to intentional incidents by the employee, which have a significant adverse effect on the business. Theft, fraud, harassment and workplace violence are all likely to be considered misconduct.” Again, each case is unique, which means each case demands your attention.

Employee age is a protected status, so when terminated workers are over 40, you must be in compliance with the Older Workers Benefits Protection Act (OWBPA). It often comes into play when severance packages are on the table during layoffs or retirement-incentive programs. Many employers include a release of claims waiver that requires the employee to give up rights to sue for age discrimination under the Age Discrimination in Employment Act (ADEA).

There are certain requirements for a valid waiver. As the Equal Employment Opportunity Council (EEOC) states, “the consideration offered for the waiver of the right to sue cannot simply be a pension benefit or payment for earned vacation or sick leave to which the employee is already entitled but, rather, must be something of value in addition to any of the employee’s existing entitlements.”

Employees are also entitled to a “knowing and voluntary” release of claims. That means you must provide them with information about how you decided who to terminate and who to retain. Employees must be able to make an informed decision based on the information you provide, and they need to have enough time to make that decision.  

Just remember, as Upcounsel.com advises, “the EEOC can enforce the ADEA and any other applicable laws even though a release has been signed. A release may not include any language that would prevent or prohibit an employee from filing a complaint with the EEOC. It also will not stop an investigation into the matter by the EEOC.”

Are you starting to think it would be easier to swear off workforce reduction altogether? Worried that you’ll miss a legal or ethical step? There’s a lot to know about letting employees go, and that’s where Horizon Payroll Services can help. Our ebook, Before You Fire: Resources for Workforce Reduction, explains these thorny termination issues and gets you started creating policies and procedures to keep your business safe every step of the way.