Decreasing the Legal Risks of Employee Termination

By now most people are familiar with the term "at will" employment, a concept that means either the employer or the employee is free to end the employment relationship at any time, with or without notice or cause. Most employers throughout the United States establish at-will relationships with their

employees, either as the result of the law or existing policy (or a combination of both). But does this broad principle that seemingly gives you the freedom to manage your workforce as you see fit actually function in the way it is written? The answer is both yes and no. 

Assuming that you haven't used an illegal basis for terminating an employment relationship nor done anything during the relationship to change the at-will status of your employees, the at-will doctrine means what it says. But, in reality, the exceptions to at-will employment can gobble up the rule. And unless you've followed good practices to enable you to defend against termination claims, at-will employment status of your employees will do no more than look good on paper.

It is a rare occurrence that you would actually terminate an at-will employee simply because you feel like it. Even though good cause is not needed, most employers usually have a reason for a termination, such as sustained poor performance. But even then, the risks associated with terminating a poorly performing employee can sometimes paralyze an employer's ability to make important employment-related decisions consistent with business needs.

As a practical matter, you should not completely rely on an employee's at-will status to defend a termination decision. As just noted, there are many exceptions to at-will employment and you may unwittingly fall under one of them. Also, remember that juries are, in part, made up of current and former workers, many of whom do not give great credibility to the corporate representatives who testify on a company's behalf. Regardless of the jury instructions, you should consider that jurors will try to focus on whether you acted "fairly" toward the complaining employee or treated the employee with respect as they determine if you are liable for the person's termination.

Therefore, to give your business the flexibility to make legitimate termination decisions, it's important to consider what best practices you should follow throughout the employment relationship so you can preserve your options. By establishing best practices on the front end, you can exercise your at-will employment rights with minimized risk and, believe it or not, actually generate longer-term and healthier relationships with your employees.

Often, the first time you may hear about a poor-performing employee is when his or her supervisor has reached the breaking point and comes forward to say the employee is the worst thing since sliced bread and needs to be terminated immediately. Unfortunately, when you look at the employee's file, there is not much of a record of poor performance. In fact, you will probably find that the employee received average performance ratings and there are few if any notes or records of the supervisor's attempts to address performance issues directly with the employee. Without that written record documenting that the employee had notice of your concerns, that you supported the employee in trying to address the concerns, and the employee had a sufficient opportunity to try to address the concerns, the risks of a termination could be substantial even if the supervisor's opinion of the employee's performance is accurate.

So what's an employer to do? Establish best practices for your supervisors to follow, and develop solid human resources policies about at-will employment, discipline, and performance management that are well written, widely distributed, and enforced. It is also very important to train your supervisors appropriately. All of these efforts will better position you to defend a termination decision. You may also find to your surprise that with these best practices, you will rarely reach the point of making a termination decision because your supervisors will be managing more effectively.

Here are some tips for your supervisors to help minimize the risks associated with terminating employees:

• From the minute an employee joins the company, establish open communications with him or her.
• Help employees understand the strategic goals of the company and their department and how their works fits into the bigger picture.
• Communicate specific performance expectations (orally and in writing) with employees on a regular and ongoing basis, and not just when there is a performance problem.
• In conjunction with the employee, create clearly articulated performance goals by quarter and by year. Include metrics by which accomplishing the goals can be measured.
• Meet with employees throughout the year to check in on their progress toward meeting their goals; challenges they are confronting; the type of support the supervisor should be providing; and whether goals should be reset to account for changes in business or individual needs.
• In addition to regular "check in" meetings, conduct formal quarterly performance meetings to keep the lines of communication open.
• Conduct annual performance reviews (written and oral). Provide employees with an honest assessment of their work, growth, strengths, and weaknesses and seek feedback from employees to determine if their view of their performance is in sync with the supervisor's view.
• Then set goals for the coming quarters and year.
• Never surprise an employee with negative performance feedback for the first time in a review. By the time an employee receives a review, they should already have been made aware of any concerns about their performance and been given an opportunity to improve performance with management's support.
• Use appropriate oral and written disciplinary tools as may be warranted by performance issues and communicate clearly with the employee about the issues and the impact of the discipline.
• Make detailed notes of your conversations with employees about their performance, positive or negative. Notes should be written on the same day or day after the conversation took place and kept in the supervisor's desk file.
• Make detailed notes of your conversation with employees when delivering quarterly or annual reviews, even if employees are being given a written review with the same information.
• Consider the extent to which a supervisor shares responsibility for an employee's performance failure and readjust the relationship so that the supervisor is supporting the employee's success.
• Use only legitimate business reasons for all decisions related to the terms and conditions of employment.

Here are some best practice tips for the organization as whole to help minimize the risks associated with terminating employees:

• Create clearly articulated at-will employment policies.
• Include a disclaimer in the employee handbook (including any online version) that the company reserves the right to change, amend, and terminate HR policies at the company's discretion, but the at-will policy will never be changed.
• Require employees to sign an acknowledgment of receipt of the HR policies on an annual basis and include a confirmation that the employee is employed at will.Include notice of the at-will status of the employment relationship in all employment applications, offer letters, employment contracts, and other relevant new hire documents.
• Create a discretionary discipline policy by which the company reserves the right to use whatever form of discipline the company decides is appropriate to the circumstances. Include a statement that the policy and/or use of any particular form of discipline is not intended to change the at-will status of the employment relationship.
• When drafting written disciplinary documents, include a footnote on the page with the employee's signature that states something like: "Nothing in this document is intended to change the at-will status of your employment relationship with the company or the company's at-will employment policy."
• Establish a performance management process that encourages ongoing performance conversations between supervisors and employees throughout the year and hold your supervisors responsible in this regard.
• Create an annual review process that requires supervisors to provide thoughtful written feedback to employees and to meet with employees to deliver and discuss the reviews.
• Require supervisors to work with employees to write their individual performance goals as part of the overall performance-management process.
• Develop interactive training for supervisors regarding at-will employment, discipline, and the performance-management process. Include information about documentation standards they are expected to follow.
• Educate managers about workplace laws, how those laws impact their daily relationships with employees, and how to use those laws to improve their communications overall. Roll out effective management training programs where they can practice those skills.

If you and your supervisors follow these practices, employees will be more successful and you will be making termination decisions on a less frequent basis. But when you do need to make those decisions, these practices will help the company defend against many types of wrongful termination claims. By treating employees with respect, communicating clearly and on an ongoing basis, identifying and responding to performance issues as they arise, and documenting performance issues and communications, you will minimize the risks associated with terminating employees.

Work with your human resources and legal departments to design performance-management processes and policies that meet your business needs. And work with them to assess the risk associated with any termination decision. You will learn a lot during the process about how to better protect your company and, as a result, you'll have an overall positive impact on your employment relationships.

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Barrie Gross is former Vice President and Senior Corporate Counsel (Employment Law) for an international Fortune 1000 company and is a regular contributor to AllBusiness.com. She is the founder of Barrie Gross Consulting, a human resources training and consulting firm dedicated to assisting companies to manage and develop their human capital. Visit www.barriegrossconsulting.com to learn more about Barrie and the services BGC provides.

Note: The information here does not constitute legal advice and should not be relied upon as legal advice. If you have a legal issue or wish to obtain legal advice, you should consult an attorney in your area concerning your particular situation and facts. Nothing presented on this site or in this article establishes or should be construed as establishing an attorney-client or confidential relationship between you and Barrie Gross. This article is provided only as general information, which may or may not reflect the most current legal developments or be complete.