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Best Practices For Terminating Employees

In this economy, many companies are downsizing and employment issues are rising as a result. Generally, an employer may terminate an employee for any reason, including a change in business conditions. However, an employer must be cautious to avoid the appearance of an unlawful termination that could result in a claim against the company.

An individual who is terminated may make a claim that he or she was discriminated against or was wrongfully terminated. Each of the six New England states has a commission1 where an employee (or former employee) can assert a discrimination claim with or without an attorney. Additionally, claims may be brought with the federal Equal Employment Opportunity Commission ("EEOC").

Unfortunately, it is relatively easy for a disgruntled employee to commence a claim at one of the state commissions or EEOC, and not much more difficult to file suit in a court. This forces companies to spend valuable time and money to defend against the claims, regardless of whether the former employee’s allegations have merit. Accordingly, firms should take steps to minimize the chances a terminated employee will file and successfully pursue a claim.

Most employees in New England are employed on an "at will" basis and may be terminated for any lawful reason at any time. A termination may be unlawful if the employee is a member of a protected class and is discharged for discriminatory reasons, or if the termination would violate public policy or the covenant of good faith and fair dealing.

Federal and state laws provide protection to individuals from being terminated (or from having other adverse job actions taken against them) on the basis of age (persons 40 years old or more), race, sex (or gender, and this includes discrimination based on pregnancy), sexual orientation, color, religion, national origin and disability or handicap (if the handicapped person can perform the essential functions of the employment with reasonable accommodation).

Other laws protect employees from being terminated for refusing to perform unlawful acts such as committing perjury or for performing a public duty such as serving on a jury.

Bear in mind that if a group of employees is being terminated (whether at one time or over the course of several months), the company also needs to assess whether the terminations qualify as a plant closing under state and/or federal law.2

Proceed With Caution

When an employer decides to terminate an employee, the employer should proceed cautiously and first consult in-house counsel. The power to fire employees should rest with few rather than many.

Each individual case should be reviewed thoroughly. The review should also analyze whether the employee may have a potential claim against the company. This involves reviewing the employee’s personnel file and speaking with the human resources manager regarding the reasons for the termination.

If the reason is poor performance, has the employee’s performance been documented? If the termination is for excessive use of sick or vacation days, what does the current vacation or sick policy say?

Is the employee eligible for leave under the Family Medical Leave Act or the Americans with Disabilities Act? Has this employee complained of discrimination or harassment or requested an accommodation? If so, was an investigation done? What was the outcome?

Where several people are being terminated or laid off, the company should analyze whether the layoffs have a disparate impact on a particular class of employees.

In general, severance pay is not required by statute but can be appropriate in some circumstances. Severance should be considered if similarly situated employees have been given severance pay, because an employee may claim he or she has been discriminated against or was not treated fairly if he or she is not offered what others have received.

If such an employee is a member of a protected class, you may find yourself subject to a disparate treatment claim. The termination meeting should be conducted privately by the person’s supervisor or the human resources manager, with one management witness, and the employer should inform the employee of benefit rights (such as COBRA) and unemployment as well as providing a final check for all earned wages, accrued vacation time and holiday pay.

Although an employer is not required to state the reason for termination, it should be done at this time and very simply documented in a few sentences within a memorandum.

Taking care and extra time when proceeding with an employee termination can result in the avoidance of claims that would take much more of a company’s time and expense in the future. Although an employer may be successful in a claim or suit by a former employee, the time spent by management to defend, and the legal fees and costs, can be significant.

Such claims and suits can take years. In addition, should a former employee prevail, the damages can add up, as emotional distress damages, back pay, front pay and punitive damages and attorney fees (to the prevailing party) may be awarded. When your business is faced with cutting back and you must let employees go, take the time to review these issues.

FOOTNOTES:

1 In Massachusetts, claims are filed with the Massachusetts Commission Against Discrimination; in Connecticut the Connecticut Commission on Human Rights; in Maine, the Maine Human Rights Commission; and in Rhode Island, New Hampshire and Vermont with each state’s Commission for Human Rights.

2 Companies with 100 or more employees must determine whether the lay-off will trigger the requirements of the federal Worker Adjustment and Retraining Notification ("WARN") Act. The WARN Act requires employers with 100 or more employees to provide at least sixty (60) days’ advance notice before implementing a permanent or temporary shut down or reductions in force.

Sarah K. Willey is an attorney in Donovan Hatem LLP’s business law department. She concentrates her practice in the areas of business and employment law. Ms. Willey may be contacted at (617) 406.4572 or swilley@donovanhatem.com.

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