Procedures to Reduce the Risk of Litigation and Liability for Employment Terminations
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If you run a business, you will inevitably have to face the situation of discharging an employee. While terminating an employee may never be pleasant, sometimes it's necessary. Before you terminate an employee, you'll want to be sure you are following the law to ensure you don't face a lawsuit later.
The following guidelines can help companies limit their liability with regard to employment termination decisions:
- Carefully train supervisors about personnel matters and their obligations under the applicable laws governing the employment relationship.
- Insist on thorough and complete documentation of supervisory decisions involving all personnel matters.
- Review employee handbooks, work rules, job applications, and other forms of employee communications to delete or limit statements regarding fair treatment, progressive discipline, and permanent employment.
- Review all employment handbooks and personnel policies at least annually. Appropriate disclaimers and legal safeguards should be incorporated as advised by counsel.
- Use "at-will" language in both employee handbooks and employment applications.
- Consider defining the employment relationship to clarify the employer's right to exercise its sole discretion in implementing such actions as demotions, transfers, and changes in assignments, duties, responsibilities, and rate of pay. By contrast, consider not using a probationary period. If you use a probationary period, define its purpose and state that completion of the period does not increase the employee's rights in his or her job.
- Review what recruiters and interviewers, including supervisors, say to prospective employees. Avoid references to "the good future that exists here if you work hard." Use standardized language in all interviews -- and make certain interviewers stick to the script. Avoid references in recruiting to job tenure, partnership track, career path, security, permanent, the future.
- Ensure that employee reviews are conducted on time, and are accurate and consistent with company policy and practice. Establish a system to review evaluation forms so that the evaluation correlates with the particular job the employee performs. Review completed evaluations to ensure that individuals are not being overrated. Consider using narrative rather than checklist evaluations, and generalizing the standards for evaluation.
- Review all employment policies to ascertain what obligations they impose (for example, an obligation to consider alternate job placement when an individual demonstrates inadequate performance). Delete those obligations that are not usually followed, and follow those policies that remain.
- Establish a system to review employee terminations when they involve individuals in protected classes or with long service.
- Standardize the procedures used for communicating and implementing terminations. Do not deviate from the established method. Carefully monitor all statements made by the employer in describing the termination. And, consider offering reemployment immediately when you determine that substantial exposure to liability exists or a material error has been made.
- Consider providing an internal appeal procedure or mandatory arbitration.
- Any time an employee leaves, consider using exit interviews.
- Never provide a letter of reference that contains inaccurate statements (either positive or negative) regarding a terminated employee.
- Consider obtaining a release and/or settlement agreement from certain terminated employees.
Supervisor's Checklist for Personnel Decisions
Supervisors should carefully review the following considerations in making decisions affecting personnel:
- Consider whether the decision is based solely on the employee's individual performance, or whether general assumptions have been made about an ethnic minority, women, persons who are 40 years of age or older, persons with disabilities, and so on.
- Are there solid business-related reasons for the decision? Document the reasons for the decision, giving specific examples. Ensure that the decision and its implementation are consistent with company policies.
- Consult with the personnel department regarding any inconsistency.
- If there is a performance problem, document your efforts to help the employee improve. The employee's failure to respond to counseling should also be documented.
- Be accurate and straightforward in evaluating employees, both in praising and criticizing when warranted. Rate employees as satisfactory only when you really believe their work is satisfactory. Consult with the personnel department when you believe a problem is developing before it gets out of hand.
- Ensure that the bases for the decision are consistent with the employee's work record and what other supervisors have told the employee.
- Check that actions taken against this employee are consistent with the treatment accorded other employees.
- Be complete and accurate in telling the employee the reasons for the discharge.
Whether an employer's liability insurer is responsible for defending or indemnifying the company against claims of intentional wrongful discharge will depend on the terms of the policy, and the facts involved in the case. Employers should review their insurance policies carefully should such a claim arise, and seek professional guidance on this issue. Consideration should be given in every case to tendering a complaint to the insurance carrier.
If you are contemplating firing an employee in your business, you'll want to follow all laws to limit your liability. Speak to a business and commercial law attorney today or learn more on our business litigation legal answers page.