Firing an employee may cause anxiety for an employer. In some instances, the employee has been a wonderful asset to the company, but the company is downsizing and must let an employee go. In other circumstances, differences between the employee and the employer make it a good decision to go separate ways. In other instances, an employee has wronged an employer and the employer must take swift action to minimize its damages. Here are some things to consider when determining how to properly terminate an employee.
Regardless of the situation, termination comes with some degree of risk if it is initiated by the employer. These risks include: the employee disparaging the company after they are gone, the employee bringing a claim against the employer for discrimination or retaliation, the employee using confidential information (client list, product details, pricing) about the company in their next job, the employer failing to properly pay an employee at the time of termination, or the employee filing and obtaining unemployment insurance benefits?
So with any termination situation, there is a list of questions that employers should answer prior to initiating the termination process:
1. Is this an at-will employee or contract employee?
a. Arizona is an at will employment state. Unless an employer has specifically created an contract for a specific amount of time, then the employee is an at will employee which means they can be fired for good cause or no cause at any time.
2. What is the reason for the termination?
a. It is important for the employer to determine the reason for the termination. While an employer does not need to tell the employee the reason for the termination if they are an at-will employee, an employer needs to know if they are firing for an improper cause. (See previous post – Do I Have a Claim for Wrongful Discharge).
3. What does the company handbook say regarding termination?
a. Employee handbooks often outline standards that an employee must live up to while employed. Some employee handbooks outline procedures that must be followed leading up to termination. It is important for an employer to follow those procedures if they exist.
4. What documentation is available regarding this employee?
a. In today’s world of emails and text messages, it is important to determine if an employer, supervisor, or coworker of the soon to be terminated employee has said anything that would indicate a wrongful reason for discharge. Additionally, it helps if there are any performance improvement notices, warnings, or personnel file notes that would help strengthen the reason for terminating the employee.
5. What information does the employee have about the company?
a. While this will not determine if you fire an employee, it will determine how you fire an employee. If an employee has confidential information about products, customer lists, marketing plans, etc., then an employer needs to review whether they have a restrictive covenant agreement in place since the time of hiring. If there was not one in place, or if it has not been uniformly enforced, then the employer will need to consider putting together a severance package, including restrictive covenants. The last thing that an employer can afford is having an employee take proprietary information, and have no recourse for that action.
6. What does the company owe the employee?
a. Employers must look to see what amount of money is owed to the employee for wages and their policies on paying out employee PTO and holiday leave at the time of termination. Some of the most difficult termination issues arise where there are outstanding commissions. In those instances, hopefully the employer has a written policy or agreement regarding how commissions are paid. Additionally, an employer must be sure to offer appropriate benefits to an employee at the time of termination, including COBRA.
7. How soon can the company replace the employee?
a. While in some circumstances, it is important to terminate a bad employee immediately and deal with the repercussions, in other circumstances, if an employer is not ready to hire someone it may not be worth terminating someone immediately. Unless required a contract term, or an employee handbook policy, employers should try to avoid giving employees advanced notice of termination. Violations of employee handbook policies should be noted and may even escalate to a written final warning, but when it comes time for termination, it should be done on one day. This avoids the problems that come with a lame duck employee who disparages the employer to other employees, takes confidential information from the employer, or fails to perform their job functions in the days leading up to final termination.
8. How is the employer going to execute the termination?
a. Terminations are best done with another individual present in the room, particularly if an employer feels that it is going to be a contentious situation. This helps create a witness to the events that can contend any claims that a former employee may make that an employer fired them for improper reasons. When terminating an at-will employee, employers do not need to give a reason for the termination and should avoid providing lengthy details regarding the decision.
9. Can the employer afford to fight a potential claim made by the employee?
a. This should be a small factor in a termination decision, but it is important for an employer to calculate if they can fight a claim made by the former employee either to the EEOC or for unemployment benefits. If not, then an employer should begin preparing funds for those types of instances.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding How to Properly Terminate an Employee, or any other personal injury, please feel free to contact Employment Law Attorney Brad Gardner at 480.461.5323, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.