How to Fire an Employee – 5 Legal Considerations

Terminating an employee can be one of the hardest things employers must do. But virtually every employer will have to do it a number of times. Many times termination is the only appropriate step to protect the employer, coworkers, or customers from a given employee’s malfeasance on the job.

Unfortunately, wrongful termination lawsuits have increased. Thus, when terminating an employee, the employer must make sure to conduct the termination professionally, ethically, and legally. Once you decide to terminate an employee, there are a number of steps to take and considerations to make to protect your interests and ensure you conduct the termination with dignity.  Doing so will let the rest of employees know that if it is ever their turn, they can count on you to be professional.  Formulating and executing a policy and procedure for terminations that keep the process professional can also be one of the best defenses to frivolous wrongful termination lawsuits.

1. Tell only those who need to know.

Once you decide to terminate an employee, tell only those who need to know. And make sure that those who are given advance notice of the termination understand that the information is confidential. You do not want the employee to hear through “the grapevine” that he is going to be terminated, as this creates additional potential liabilities for the employer, including the employee using the foreknowledge to gather confidential information of the employer, or the employee starting a retaliatory intraoffice campaign against the employer that lowers coworkers’ morale.

When conducting the termination meeting, do it in an area where other employees cannot overhear the conversation and where you won’t be interrupted.  And don’t disparage the employee or discuss the termination meeting after the fact with anyone who doesn’t need to know. Respect employees’ privacy and dignity. Reassure the employee that the termination will only be discussed with those who need to know.

2. Determine if you want to give a reason for the termination.

In most circumstances, a California employee is going to be an at-will employee, meaning the employee can be terminated for any reason or no reason at all.  One of the big exceptions to the at-will doctrine is when the employee is terminated because they are a member of a protected class or engaged in protected activity, e.g., terminations based on race, gender, engaging in whistleblowing, or taking protected medical leave.  Employers must be wary of creating a situation where an at-will termination is credibly portrayed by an employee as an unlawful termination in order to support a wrongful termination lawsuit.

Given the potential liability of an at-will termination being misrepresented by an employee as an unlawful one, it may be beneficial to give no reason for the termination to the employee.  In fact, the conventional wisdom in Employment Law is that giving no reason is always the safest manner to handle a termination.  The reasoning behind this is that an employer is not bound to any one particular story or reason for the termination if a subsequent lawsuit is commenced.  Where no information about the reason for the termination is provided to the terminated employee, the employer and its attorneys have the freedom to craft the best defense to the employee’s wrongful termination claims without having to deal with any potential harmful or stifling “admissions” having been previously made by the employer.

Despite the conventional wisdom, in some instances it may actually be more helpful to provide an explanation for the termination than to withhold one, particularly if the termination is based on genuine and significant employee malfeasance and the employer is concerned about a frivolous wrongful termination lawsuit being commenced notwithstanding the good faith basis for the termination.  In these instances, the employer and its attorneys should consider crafting a detailed explanation as to why the employee’s malfeasance was the basis for termination and providing that written explanation to the employee during the termination meeting.  The purpose of providing such a written explanation is to dissuade a plaintiff’s counsel who subsequently meets with the disgruntled former employee from taking the employee’s frivolous or marginal wrongful termination case.

Plaintiff’s attorneys hear purported wrongful termination stories all the time from prospective clients.  While they are aware that in many instances they are hearing only one side of the story – the employee’s – experienced attorneys nonetheless usually try to segregate meritless cases from ones that are potentially worth taking.  For these cases potentially worth taking, the detailed written explanation from the former employer of a solid non-discriminatory reason for the termination can lead to a series of questions from the prospective lawyer to the ex-employee that result in the lawyer deciding that the case isn’t worth it and passing on representing the employee.  But the decision to provide a written explanation, which decision already contradicts the conventional wisdom about handling a termination, is not a one-size-fits-all strategy.  Whether to provide an explanation for the termination or not is highly fact-specific and should be decided only after consulting with counsel.  If a decision is made to provide a written explanation for strategic legal reasons, the admissions made in such an explanation should also be crafted with counsel’s advice.

Whether you choose to provide a reason for the termination or not, make sure to control the termination meeting.  Some employees may want to argue with the employer over the reasons for the termination, or will try to press for the employer to provide a reason if the employer has declined to provide one.  Be firm in refusing to engage the employee in such a conversation or argument.  A second person, such as someone from management, human resources, or an attorney, should also be present during the termination meeting as a witness and to provide support to the primary manager informing the employee of the termination.

Finally, please note that not all employees can be terminated at will.  Employees subject to a bargaining agreement or an employment contract may have greater rights to their job that prevent at-will terminations without cause from occurring.  And for some employees who can lawfully be terminated at will, the employer may nonetheless be obligated to provide advance notice of the termination, particularly in circumstances where multiple employees are being laid-off.  Consult with counsel before conducting any termination to determine what your obligations as an employer are.

3. Consider offering a severance package to get a waiver of liability, stronger confidentiality provisions, and buy some goodwill.

Employers are generally not required to provide a severance pay package to terminated employees, but an employer should consider providing one if an employer is worried about the former employee using confidential information in subsequent employment or worried about a potential wrongful termination lawsuit.  Employees facing unemployment also often have grave concerns about how to supplement their income while they look for new employment, and will therefore be more open to a severance package under the circumstances.  A severance package can provide an opportunity for an employer to contractually strengthen non-disclosure obligations of the former employee and buy some additional good will to dissuade the ex-employee’s use of confidential information post-termination as a form of revenge.  More importantly, a severance package provides an opportunity for the employer to bargain with the employee to waive any putative employment claims against his former employer, such as wrongful termination, discrimination, wage-and-hour, and other claims an employer might fear an ex-employee genuinely or frivolously bring against the employer.

4. Don’t let the employee linger following the termination.

Once you’ve terminated the employee, don’t let him linger in the workplace. Have the employee immediately turn over all employer property. This includes keys, key cards, and any other devices used to access the building and parking garage, as well as cell phones, laptops, and any other company property.

If the employee is calm, an employer may choose to give the employee a chance to collect her personal belongings and say a quick goodbye to coworkers. But if the employee gets angry or you believe for any other reason that the employee may be disruptive, take company resources, or cause damage to property, escort him to his workstation to gather his things and then out of the building.  Notify the building’s security personnel. In some instances locks or key codes may need to be changed.

Some employers prefer to always gather the employee’s personal items and turn them over to the employee at the end of the termination meeting so that the employee does not return have to return to her workstation. This minimizes the terminated employee’s contact with other employees.

This brings up another consideration: When is the best time of the day or the week to terminate an employee? There is no conventional wisdom on the best time or day.  Some believe that a termination should be done on a Friday to give the terminated employee time to cool off.  But others argue that this only gives the person time to sit and stew without being able to begin looking for another position or apply for unemployment benefits.  Other factors specific to the employer, such as ease of handling the payroll, or the timing of retaining a replacement worker, may have an impact on the scheduling of the termination. The “when” of the termination is fact and context specific, and there is no general rule that dictates that a particular time or day is better than another to conduct the termination.

5. Have all wage obligations to the employee ready to be paid at the termination meeting.

In California, an employee must usually pay a terminated employee all of his or her outstanding wages, salaries, and unused vacation/PTO pay owed to the employee immediately upon termination.[1] Thus, the employer must have the employee’s final paycheck ready to go at the termination meeting. An employer who delays in presenting the terminated employee with the final paycheck may suffer civil penalties or a lawsuit to recover the unpaid wages as well as penalties and attorney’s fees. Even if the employee’s paycheck has regularly been directly deposited into her bank account, California law requires that the employee provide the paycheck in-hand at termination unless the employee has specifically authorized for direct deposit of the final paycheck.

Do not confuse the final paycheck with severance pay. The employee has already earned the final paycheck, and thus the employer cannot condition receipt of the final paycheck on an employee agreeing to waive rights such as the right to sue for employment violations or the right to seek unemployment insurance benefits.

California also requires that employers give terminated employees certain notices upon termination. These include information about disability insurance, Cal-COBRA enrollment, and the change-in-relationship tax form. Employers should also provide the terminated employee with any other relevant forms such as how retirement accounts will be handled or the availability to the employee of other benefit programs after termination.  Employers should also designate someone from human resources or its analogue as the contact person for the terminated employee to contact regarding issues with payroll, unemployment benefits, and future job references.

Terminations are emotionally charged and pose significant challenges for the employer.  Anecdotally, the trend has been that employees have become more combative at termination meetings and more willing to file lawsuits following a termination than has been experienced in the past by employers.  To control the variables of a termination as much as possible, an employer should have a strategy in place prior to each employee termination, and should be prepared to deal with contingencies specific to each termination in as professional of a manner as possible, as those contingencies

[1] California Labor Code §§ 201 and 227.3.