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August 15, 2011, Employment News Number 18
Surviving Tough Financial Times: Fire Underperforming Staff
By and , Esquires
Money won’t buy happiness, but it will pay the salaries of a large research staff to study the problem. — Bill Vaughn
Because of the current economic downturn, many businesses have been faced with the unfortunate reality of needing to lay-off underperforming employees. While employee terminations result in lower payroll costs, employers must keep in mind that their resulting legal defense fees may proportionately increase. Although the typical employment relationship in Pennsylvania is “at will,” there are exceptions that make employers vulnerable to suit by terminated employees. In this newsletter, we will discuss how to terminate an employee so as to reduce the risk of legal claims by the terminated employee.
Some Legal Armor Before You Wield The Ax
Federal, state, and local laws can constrain employers’ termination decisions. More importantly, while you may have done nothing illegal, you may be sued anyway. For example, under federal and state laws, employers may not make any termination decisions based upon an employee’s “protected class” which includes age 40 and over, disability, race, national origin, sex, or religion. Local laws may increase employee protection. For example, the City of Allentown prohibits discrimination on the basis of sexual orientation. To state a claim in court against an employer, the employee essentially only needs to allege that she or he was a member of a “protected class.” Thus, employees can sue you, even if you did not discriminate.
Please note that just because terminated employees can easily bring a claim does not mean that they will win. However, successfully defending such a claim will cost you economically and emotionally.
Legal constraints on the employer do not end with these laws. You may have contracted with your employees for their employment, or your employee handbooks may say that employees can only be fired “for cause.” Such actions by an employer can further limit your ability to lawfully terminate an employee. Accordingly, before firing any employee, consult your employee manuals and any possible agreement struck with the employee.
Fire Without Getting Burnt
(1) Protect your business even before the employee is hired. All employment applications should emphasize that employment is “at will.” The interview process should involve more than one interviewer from your organization and expectations should be explained. Finally, if hired, the employee should receive an employee handbook and any written policies and practices, all of which should specify that the employment is “at will,” unless you specifically intend to contract otherwise.
(2) Termination should not be a surprise to the employee. Employers should document all misconduct, including write-ups which are reviewed with and signed by the employee. Write-ups and other documentation should include a business-based reason for the employee’s discipline, i.e., how was the employee’s conduct harmful to the business?
(3) Get a second opinion. When a manager believes that a particular employee should be discharged, this decision should be carefully and independently reviewed by at least one other person within the company, i.e., someone from your HR department who is familiar with all of the issues surrounding employee termination or by an independent reviewer such as legal counsel.
(4) Be prepared for the termination meeting. A termination meeting should be scheduled with the employee. Documentation of the termination process and the ultimate decision to terminate should be prepared before the termination meeting.
(5) Notifying the employee is a delicate task. The employee’s direct supervisor and an HR representative should attend the termination meeting. This can avoid any “he said” or “she said” quibbles.
(6) The timing of termination should be carefully considered. In many circumstances, a Friday termination would be the safest option for allowing the employee time to cool off—most attorneys’ offices are closed over the weekend. However, a mid-week termination may permit the employee to take immediate action to search for a new job. The decision of when to terminate the employee should be based upon the relevant concerns of the situation and should be carefully considered.
(7) Always protect your business from a terminated employee. Employers should prepare in advance to do the following:
• Block computer system access.
• Change pass codes.
• Remove the employee’s name as a signatory on bank accounts and/or post office boxes.
• Collect keys, identification badges, and company property.
• Obtain personal security if the situation becomes hostile.
(8) Provide the employee with a timely final paycheck. Pennsylvania does not require that employees receive severance pay. However, terminated employees must be paid no later than the next scheduled pay day after their termination. This payment must include all monies owed, including overtime when applicable.
(9) Consider a Separation Agreement. In collaboration with an employment attorney, you may want to consider drafting a separation agreement if you believe that the employee is likely to bring a claim against you. A word of caution: separation agreements must be carefully drafted to be enforceable in court. You are strongly advised to consult an attorney before constructing a separation agreement.
(10) Avoid the reputational harm of the “rumor mill.” Take particular care to protect the employee’s privacy. However, depending upon the position held by the employee, it may be imperative to distribute a brief, general statement regarding the termination. Note that substantive information about the termination should not be shared outside of the management circle.
Bottom Line for Businesses
There are more grounds for “wrongful discharge” than we have listed in this newsletter and employment law is always changing. Also, as noted above, if you cut back your workforce to improve your bottom line, unnecessary legal fees may negate your payroll savings. To avoid these problems, contact your local employment attorney or our to counsel you through this process.
* KingSpry Employment News is meant to be informational and does not constitute legal advice.
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