At some point, nearly all business owners must make the difficult decision to terminate an employee. Whether that decision arises from a failure on the employee’s part, or from economic circumstances, one thing is clear: How a business handles this delicate situation can either increase or decrease the risk of negative consequences. Here are some best practices for terminating an employee.
1. Involve your human resources department and/or your employment law attorney from the beginning. Your company’s human resources (HR) department can be especially helpful during the termination of an employee. HR is likely familiar with (or has access to records regarding) the employee’s hiring process, for example the terms of their job offer, written expectations and duties, and restrictive covenants. HR is also likely trained in regard to applicable laws and how to handle delicate situations with personnel. HR can also ensure that the employee’s final paycheck and notice regarding continued health benefits comply with legal requirements. Finally, your HR team can provide at least one witness to the termination meeting or other communications that occur. With this training and experience, HR is uniquely equipped to advise you regarding the proper steps to take. If you don’t have an HR department (or even if you do), consult an employment law attorney.
2. Examine the contractual relationship between you and the employee. While many, if not most employees are considered “at will” and can be terminated for any reason, or no reason at all, some employees cannot be so easily terminated. Review documentation pertaining to the employee’s hiring and determine if there is a written employment agreement that guarantees employment in the absence of specific circumstances. If there is an employment agreement, and the employment is not at-will, examine the complete contractual arrangement to assist in determining what steps need to be taken and what conditions first need to be met.
3. Familiarize yourself with federal, state, and local laws to ensure that termination is lawful. Minnesota employment relationships are also governed by federal, state, and in some cases city regulations and ordinances. As a result, an employer must consider all the laws that apply. For example, terminations can never be discriminatory or retaliatory and, in the instance of mass layoffs or plant closures, must comply with the Worker Adjustment and Retraining Notification (WARN) Act. Unionized employees may also be granted greater rights during terminations.
4. Use fair and consistent criteria supported by documentation when making termination decisions. In addition to complying with governing laws, an employer should apply the same criteria across the board when deciding whether or not to fire an employee. A lack of consistency provides ample ammunition for a disgruntled employee alleging wrongful termination. From an internal perspective, inconsistency may also damage morale among your remaining workforce. Appropriate documentation in such instances includes, but is not limited to, the terminated employee’s application and offer letter outlining the expectations of employment, employee handbooks and manuals, performance reviews, performance improvement plans, and disciplinary records. By keeping adequate evidence of the expectations of employment and the employee’s performance, you create a more objective view of the employee.
5. Keep interactions with the terminated employee limited and fact-based. During a termination meeting, emotions can run high. It is therefore critical for the employer to keep any conversation rooted in facts, rather than in emotion. For the same reason, keep meetings and communications with terminated employees brief. Minnesota employers do not have to even give the reason for termination, unless the employee makes a timely written request. Employers are advised to consult with HR or an employment law attorney before putting the reason in writing.
6. Determine what, if any, severance pay you intend to offer. Minnesota law does not guarantee severance; neither does it provide a formula for determining what severance should be. Some employers do, however, guarantee severance contractually to their employees, while others do so only on a case-by-case basis after the termination decision is made. If you choose to provide a severance package, check with HR and your insurance providers to understand the limitations you may face. Additionally, a severance offer may include an agreement in which the employee releases all potential claims against the employer. Federal and state laws provide specific review and rescission periods for releases, depending on the employee’s age and the circumstances of the termination.
7. Remember to exercise compassion. Regardless of the reason for the termination, it is important to keep in mind the effect a termination can have on an individual’s life. The mere act of respecting a person’s dignity during this time may make all the difference to the terminated employee.
The steps outlined above are not exhaustive; each termination will have unique factors to weigh and consider. However, these steps provide a starting point. Terminating an employment arrangement should not be done rashly.
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