Layoffs and Your Insurance Risks
One of the most difficult aspects of running a business is the hiring and firing of employees. In particular, firing or terminating an employee can be a complex issue regardless of the circumstances involved. Proper handling is necessary in order to prevent the employee from harboring hard feelings against the company. Furthermore, in this situation the employee may develop a plan to find employment elsewhere. It is imperative for the business to handle the termination delicately to prevent the worst from happening, namely a lawsuit filed against the company by the ex-employee.
Even for businesses that use “at-will” employment, this risk is not fully alleviated. “At-will” employees are just as dangerous as contracted employees.
When either the employee or the company can terminate employment at any time and for any reason, unless that reason is illegal, the phrase “termination-at-will” is used to describe this situation. This clause is important protection against the potential lawsuit of the employee. That does not mean that employers can let their guard down, however.
In the jurisdictions where termination-at-will applies, employers need to tread very carefully to avoid putting the employee’s at-will status in danger. An example application of this principle would be if the employer gave the employee verbal assurances that their job was secured. If the employee is later fired, this could be grounds for a lawsuit, since the verbal assurances directly contradicted their at-will status.
If performance issues are at the forefront, the employer cannot simply fire the employee. First, they must schedule a comprehensive evaluation meeting with the employee and go over exactly where the employee is failing to meet their standards and what can be done about it. The two key components of this meeting must be a set of goals that the employee considers attainable and a reasonable time frame in which to achieve those goals. Crucial to the success of this meeting is the understanding that the employee will be terminated if they cannot meet these goals within the time frame.
It cannot be emphasized enough that this is the key protection the company has against a lawsuit. To finalize this protection, an action plan that documents the goals and the time frame must be created and signed by both the employee and the employer. Until the goals are met or until it becomes clear that the employee cannot or will not meet them, the employer must monitor the employee’s progress. Satisfying these constraints provides firm legal ground for the termination of an employee, since that termination can be shown to be fair and the last resort.
Aside from job performances, the other two issues affecting termination lawsuits are termination based on misconduct and termination based on layoffs. If misconduct is at the forefront, the employer needs to marshal evidence that they did, in fact, conduct a thorough and unbiased investigation of the employee’s conduct. This investigation must be of a fact-finding nature that determines whether the employee violated any behavioral conduct standards. The employer must avoid trying to find out if the employee violated the law; only possible violations of company policy are the purpose.
When an employee is laid off, the layoff procedure must comply with the stipulations of the Worker Adjustment and Retraining Notification Act or WARN Act or the Older Workers Benefit Protection Act or OWBPA. Companies with 100 or more employees are subject to the constraints of the WARN Act. There is a time limit associated with the WARN Act: they do not cover employees who have worked less than six months at the company, or employees that work fewer than twenty hours per week.
If the worker is laid off due to age-related concerns, the employer must seek an agreement from the employee that the employee will not sue for age discrimination. Under the OWBPA, there are stringent constraints for age discrimination claim waivers. Previous court cases have handed down rulings that these stipulations are unqualified and meant to be applied exactly as written.
Contact our office today for information about the Business insurance products that can help to protect your company against employment-related risks.
This article should not be relied upon as legal advice. Please consult with an attorney familiar with the issues and laws of your state before taking any action.