One of the most difficult aspects of running a business is hiring and firing employees, and termination can be complex in any circumstance.
Proper handling is necessary to reduce hard feelings and the risk that a departing employee will file a lawsuit against the company.
Even for businesses that use “at-will” employment, the risk of dispute is not fully alleviated.
When either the employee or the company can end employment at any time and for any reason (unless illegal), the relationship is described as termination-at-will.
That clause provides important protection, but employers must avoid statements or actions that undermine at-will status, such as verbal assurances that a job is guaranteed.
If performance issues are the concern, do not simply terminate immediately.
Schedule a comprehensive evaluation meeting to review where performance falls short and what is needed to meet expectations.
Set attainable goals with the employee and agree on a reasonable timeframe to improve, making clear that failure to meet the goals may result in termination.
Document the action plan, including goals and deadlines, and have both the employee and employer sign it.
Monitor progress until goals are met or it is clear the employee cannot or will not meet them; this documented process provides stronger legal footing for a later termination.
If misconduct is involved, the employer should conduct a fair, fact-finding investigation focused on whether company conduct standards were violated, not to determine criminal guilt.
When layoffs are necessary, follow applicable notice and eligibility rules such as the Worker Adjustment and Retraining Notification (WARN) Act and older-worker waiver requirements under laws like the Older Workers Benefit Protection Act (OWBPA).
For example, some WARN provisions apply to employers with 100 or more employees and may exclude employees with less than six months of service or those working fewer than twenty hours per week.
If a layoff involves age-related concerns, obtain a valid waiver consistent with OWBPA requirements before asking an employee to release claims.
Consider insurance options designed for employment-related exposures, such as Wrongful Termination Insurance and Employment Practices Liability Insurance (EPLI), to help protect your company from litigation costs and related risks.
Contact our office for information about business insurance products that can help protect your company, or ask your agent to review your options.
This article should not be relied upon as legal advice. Consult an attorney familiar with the laws in your state before taking action.
Frequently Asked Questions
What is "at-will" employment?
At-will employment means either party can end the employment relationship at any time for any legal reason, but employers should avoid conduct that implies a guaranteed job.
When should an employer document performance issues?
Document performance concerns at the first signs of trouble, set clear goals and timeframes, and record meetings and agreed action plans to support fair termination decisions.
How should misconduct investigations be handled?
Conduct a timely, unbiased fact-finding investigation focused on company policy violations and keep clear, factual records of findings.
Do all layoffs require WARN notices?
Not always; WARN and similar notice requirements apply based on employer size and the scope of the layoff, and they often exclude short-term or part-time employees.