As a business owner, you have to make difficult decisions every day. Letting an employee go is arguably one of the most unpleasant and difficult tasks you can face. Human resources challenges like this can be challenging not only for managers but also for employees and significantly impact company morale. Even if you handle everything perfectly, there will likely be hurt feelings and uncomfortable conversations to navigate. Throughout this decision, it’s crucial to comply with regulations to ensure legal coverage for your business.
Despite many employers operating under "at-will" employment, which allows them to terminate employees without cause, there are still legal boundaries to consider. Many states enforce regulations around good faith and fair dealing, protecting employees from terminations rooted in malice. Additionally, federal and state anti-discrimination laws safeguard employees from being fired for reasons related to race, gender, age, religion, disability, sexual orientation, and other protected classes.
If firing an employee is necessary, you need to properly prepare to safeguard your business and remain compliant with federal and state laws.
Before Termination
Before you decide to fire an employee, it's crucial you’ve done your due diligence. This includes having well-defined policies and procedures in place for your team. Key policies should cover areas such as harassment and bullying, employee discipline, and termination procedures. It's also important to have your team regularly review these policies to ensure everyone is aware and in line. This approach minimizes the risk of an employee claiming they were unaware of your standards and filing a lawsuit for wrongful termination in the future.
In addition, set clear, achievable goals for your employees over a defined timeframe and provide consistent performance feedback. This approach ensures employees are aware of their standing and areas for improvement.
Performance improvement plans (PIP) are an excellent tool for employees who do not consistently meet expectations. These plans should comprehensively outline the employee's shortcomings and include documentation of expected performance. Additionally, it should lay out the potential consequences, including termination, and a corrective action plan with signatures from both the employee and their supervisor. This paper trail can help you defend your decision if a former employee files claims against you.
Employee Termination Best Practices
If you've determined that letting an employee go is the necessary course of action, it's essential to handle the process with care, as how you handle the dismissal can affect their reaction and potential legal actions. Think about the timing and location of the conversation. It's best to avoid public areas where other employees might overhear. Legally, a face-to-face meeting is not required (unless the employee has a disability that requires it). Termination can be conducted over the phone or via videoconference and should be in situations where:
- The employee's behavior could cause you or your staff harm
- The employee cannot be located
- The employee is a remote worker
- The employee is unable to meet in person
Before the termination meeting, it's essential to be well-prepared. Aim for a concise yet informative discussion covering:
- The purpose of the meeting: At the beginning of the meeting, clearly state why you are meeting
- Performance review: Summarize the performance issues that led to this decision
- Grounds for termination: Provide a straightforward explanation for the termination
- Effective date: Inform the employee of the date when the termination takes effect
- Finality of decision: Make it clear that the decision is final and not open for negotiation
- Company property: Outline the process for returning any company equipment or property
- Next steps: Discuss any additional steps, such as final paychecks and benefits information
During the termination meeting, it's vital to ensure there are at least two members from your organization to witness. This should include the employee's immediate supervisor, who is most familiar with the employee and clearly understands the reasons behind the termination, and an HR representative. If your team doesn’t have an HR representative, include a senior member of the company or the business owner.
They're essential for covering the termination's administrative and procedural aspects, including final pay, benefits, and other relevant information. In addition, an HR representative can help manage and diffuse emotional responses, ensuring the conversation remains professional and respectful.
Communicate With Your Team
The final step in the termination process is to inform the remaining team members. It's essential to strike a balance between transparency and confidentiality. You should communicate internally that the employee has left the organization but avoid sharing sensitive details. Focus on discussing the transition plan, outlining how the team will adapt and move forward. Be prepared to address any concerns that arise promptly and clearly. Furthermore, dispelling rumors is crucial to maintaining a positive and productive work environment.
Termination Compliance And Documentation
When terminating an employee, one of your primary obligations is to provide their final paycheck. Be aware that different states have varying regulations regarding the timing and method of delivering this final payment. Ensure you understand your state’s specific laws and requirements to avoid legal penalties or complications. Compliance with these regulations guarantees a smooth and lawful termination process.
In addition to their final paycheck, other information to provide includes the following:
COBRA notice
If your terminated employee is eligible for continued health coverage, you must inform them of their rights. They should receive a notice detailing their options for health coverage continuation, such as COBRA in the United States, within 30 days of their termination. This notice should clearly explain the process for electing continued coverage, the associated costs, and the coverage duration.
Benefits
Clarify how their benefits will be handled. This includes details about life insurance policies and compensation for accrued vacation or sick time. Many states require the employer to pay out unused paid time off (PTO), so ensure you follow the laws of your state.
Severance
If you have a severance agreement with your employee, follow the terms of the contract. This includes adhering to provisions regarding monetary compensation, continuation of benefits coverage, handling of company equipment, and any other aspects specified in the agreement.
Restrictive contracts
If your employee has signed a non-compete or non-solicitation agreement, reviewing these documents as part of the termination process is important. This review helps protect your company's assets and confidential information.
Maintaining proper documentation regarding employee performance and ensuring compliance with local state laws and regulations are paramount strategies for protecting your business. By having clear, documented justifications for the termination and adhering to legal requirements, you create a strong defense in case of any legal challenges. This not only demonstrates fair and lawful employment practices but also reinforces the integrity and professionalism of your business operations.
Human Resources With GMS
Partnering with a professional employer organization (PEO) like GMS can give you peace of mind when it comes to compliance. Not only do we offer assistance regarding laws and regulations, but we can also help you train and track your employees’ progress with our human resource information system (HRIS).
Our HRIS is software that can collect and report all employee data in a centralized hub. It manages the entire lifecycle of an employee from their initial application through hiring, retirement, or termination. Ready to save time and grow your business through expert HR management and technology? Contact us!