Terminating an employee is one of those uncomfortable topics that no employer wants to deal with, but every employer will likely experience at some point. It is common to encounter employees who are not the best fit and sometimes flat-out difficult to work with. Disgruntled employees can cause quite the mess for business owners, especially if terms were not explained clearly during hiring, or not addressed completely at termination. It’s important to remember that there is a difference between employment laws in your state vs federal employment laws, so always consult both and adhere to your state’s requirements. If in doubt, call your lawyer. Below are five general strategies to help you effectively terminate an employee.
- Know When It Is Illegal to Fire
The majority of states apply an at-will default employment status to employees (see below). While at-will status does allow you to terminate for pretty much any reason at all, you cannot under any circumstances fire an employee for an illegal reason. Generally, if you fire someone because of their age, race, gender, gender identity (in states like California), sexual orientation, religion or disability, the termination will likely be deemed illegal due to unlawful discrimination. Additionally, if you employ a certain number of employees, some states require you allow them to take a leave of absence for family, medical, or military purposes. This also goes for allowing your employees to vote, and you cannot terminate someone for reporting potentially illegal activity. This is called retaliation. Again, each state has its own set of regulations that interplay with the federal ones, so it’s important you either know how both work, or contact your attorney to make sure you’re not terminating an employee in violation of the law.
- Understand Whether Your Employees are At-Will or Not
As previously mentioned, many states’ default employment status is “at-will.” “At-will” employment means an employer can terminate at any time, for any reason, or even without one. Every state (excluding Montana) allows employers the option of using this policy, and may even be the default without something in writing to the contrary. When making an offer of employment, it’s important to not put anything in writing that could lead an employee to believe they have an employment contract that supersedes the default at-will policy. An at-will policy allows the employer more flexibility in terms of terminating employees when it deems necessary.
- Document Performance Issues
Even with an existing “at-will” policy, it can be crucial for employers to keep an accurate record of any and all performance issues and performance reviews at the time of occurrence. Creating a history of events to pull from when terminating will often help employers defeat any potential claims that the termination was unlawful. Performance issues can include but aren’t always limited to, absenteeism, tardiness, client service issues, behavior requiring disciplinary action and interventions. Keeping this kind of documentation in an employee’s file is a great way to stay protected and aid you in the actual termination process. Sometimes, significant performance issues warrant termination for cause, as opposed to at-will, which can be provided to the employee in writing.
- Understand Employee Rights Post-Termination
Employees may be entitled to certain benefits, even after termination. This may include but is not guaranteed to include, a continuation of medical coverage, unemployment insurance, and a vested retirement plan.
If you have 20 or more employees, the federal law enforces COBRA. If you maintain a group health plan, you are required to provide coverage for spouses, dependents and the terminated employee. If you employ under 20 people, check with your state on the requirements. If an employee is eligible for unemployment insurance, you are often required by law to make them aware of their eligibility.
- Pay All Wages/Benefits Due to Terminated Employees
Employers must pay employees their earned, unpaid wages when terminating them. You cannot simply refuse to pay the employee what they’re owed, because they no longer work for you. However, the laws regarding precisely when an employee needs to be paid vary depending on the state you are in. In some states, you are not required by federal law to give a final paycheck immediately at termination, sometimes including unused vacation days. However, in some states, like California, all earned, unpaid wages are due at the time of termination if the employer is the one terminating. If the employee gives no notice and quits, the employer has 72 hours to make the payment. This is why it’s always important you either know the laws yourself or have a specialist (like a lawyer or human resource worker) guide you on your state’s regulations.