Minimizing the risk in terminations

Management Truth #1: Every termination carries risk. That’s right, every termination. From simple unemployment claims to costly allegations of illegal discrimination, unpaid wages, wrongful termination or retaliation — liabilities abound.

Unfortunately, many owners and managers inadvertently dismiss these risks by acting under the mistaken belief that their “employment-at-will” right trumps all other employment laws and regulations. Not so! When it comes to state and federal employment regulations, government agencies that enforce these regulations operate under the “burden of proof” principle. This means you must be able to prove that your employment decisions (including all types of separations) are compliant, nondiscriminatory, and job-related. In the absence of this proof, a government agency will assume a violation.

How do you meet this burden of proof? Indisputable documentation. Depending on the reason for the termination, this can include carefully worded disciplinary warnings and performance evaluations, a comprehensive and compliant employee handbook with a signed receipt, relevant financial or other company records, written customer complaints, job descriptions, payroll records showing pay rates and changes, documentation to establish consistent treatment of workers, and others.

Regardless of the reason for termination or when it occurs (within the 90-day trial period or outside of it), effective documentation is essential. Consider these examples:

• Misconduct: Perhaps the easiest type of termination, misconduct occurs when an employee willfully violates a company policy or practice. (Insubordination is a form of misconduct and occurs when an employee willfully refuses to follow a directive.) In order to willfully violate a company policy, an employee must first have knowledge of the policy or directive. To establish this knowledge, a written policy and signed employee receipt are essential.
• Poor performance: By far the most common type, a poor performance termination carries the most risk. Why? Because of a lack of communication and documentation. Whether managers feel sorry for poor performers and don’t want to “write them up,” whether they are too busy to document performance problems, or whether they have nonassertive personalities and are averse to conflict — the result is the same. Eventually, even these managers reach the point where they have had “enough” and, when they do, often terminate the employee for a history of poor performance that is not documented. Shocked and dismayed, the terminated employee is convinced that race, gender, religion, age, disability, military status, national origin, or some other protected class played a role in the termination. Without documentation to establish there was a pattern of performance problems that the employee was unwilling (or unable) to correct, meeting the burden of proof is very difficult.
• Layoff or failure to recall: contrary to popular belief, sugarcoating a termination by calling it a “layoff” does not minimize risk! Nor does a failure to reinstate a laid-off employee — especially one who was recalled in the past after a seasonal layoff. To meet the burden of proof in a claim alleging that a layoff was discriminatory, an employer must be able to establish a job-related, nondiscriminatory basis for why the particular individual in the given function or department was selected for layoff over others. This also holds true for a recall. Denying employment (recall or otherwise) is an “employment decision” that must be based on job-related, nondiscriminatory criteria.
  To reduce liability, before laying off an employee, always be sure you can answer the question, “Why me?” by providing a legitimate job-related reason for the selection. And, before rejecting a candidate for employment, always be sure you can answer the question, “Why not me?” by proving you hired (or reinstated) the most qualified candidate.

• Constructive discharge: Also referred to as a “forced resignation,” this type of termination occurs when an employer confronts an employee with termination and gives the employee the option of resigning. In these situations, a resignation letter will not change the fact that the employer was the moving party in the separation. The constructively discharged employee can allege that he or she was forced to resign based on a protected class, in retaliation for lodging a complaint, or for any other illegal reason. Should this occur, once again, the burden of proof rests with the employer.
• Misfit: Sometimes, it’s necessary to part ways because an employee is simply unable to do the job or because it’s time to end the pain caused by placing a “square peg in a round hole.” By far, these are the most difficult terminations; however, the same burden of proof principle applies. As undignified as it may seem, documentation to establish that the employee is unqualified or incapable of achieving the required results is essential. Of course, if a medical condition is involved, to meet the burden of proof associated with a disability discrimination claim, before terminating the employee, it may be necessary to consider reasonable accommodations that do not create an undue hardship.
   

As unpleasant and risky as most terminations are, failing to act is not without consequence. When poor performers, noncontributors, and employees who violate norms that strike at the core of the culture are allowed to remain on the team, it sends a strong, less-than-positive message to customers and coworkers that you tolerate substandard performance. In these situations, a failure to act can negatively impact the morale of current workers, your company image, and your culture. Even worse, at risk are your credibility and the trust that employees have in your ability to solve problems.

At times like this, seek advice from a trusted advisor who is neutral, wise, and knowledgeable about employment regulations and risks. Oftentimes, when we’re in the middle of a challenging situation, it’s difficult to see the forest for the trees. A trusted advisor with a different perspective can balance the risks with the rewards and provide insight and information that is fundamental to the termination strategy.

Sound tough? It is. Perhaps that’s why the number one problem with terminations is — quite simply — they don’t happen often enough.

Jean is president of Seawright & Associates, an HR management consulting firm located in Winter Park, Fla. Since 1987, she has provided human resource management and compliance advice to employers across the country. She can be contacted at 407-645-2433 or jseawright@seawright.com. Note: The information in this article is not legal advice. For legal advice, readers should consult with an attorney.