Planning and Documentation Keys to Successful Employee Termination

In the current economic climate, many companies may need to decrease personnel to cut costs or may take the opportunity to prune under-performing employees. Firing employees can be one of the most difficult and stressful functions of a manager. Aside from the emotional component, there are a number of legal considerations that must be considered. Proper planning for the termination can reduce the employer’s risks of a discrimination suit and lowering morale for remaining employees. A combination of preparation and documentation are the keys to a successful termination. This is not the time to skimp on legal counsel. 

Virginia is an “at-will” employment state, which means that unless there is an employment contract that has other provisions, an employee can be fired at the will of the employer (at any time, for any legal, non-discriminatory reason). But even in an at-will state, firing employees without reason, and without having substantial documentation of that reason in their personnel file, is asking for trouble. 

Terminating an employee should be the last resort. Having well-written job descriptions, good interviewing and hiring procedures, providing meaningful coaching and feedback to employees during employment and having routine performance evaluations can help prevent the need to terminate employees. 

Before deciding to terminate, it is imperative to review an employee’s performance and personnel file. Compare the employee’s performance to the job description. Review any performance appraisals, warnings or other correspondence with the employee that is in the file. Review the company’s disciplinary procedures and termination policy and procedures. If appropriate, meet with the employee to review shortcomings and give the employee the opportunity to improve. If the employee’s performance reviews or personnel file do not contain evidence of poor performance, the company may have trouble defending itself from a post-employment discrimination suit. If the employee is in a protected class due to age, gender, race, etc., you are well-served to consult an employment attorney prior to the termination to lessen the chances or success of a post-employment discrimination suit. 

Once the decision to terminate has been made, only the employee’s direct supervisor should be informed. News of firings should not be in the company grapevine ahead of time. Make sure to follow all formal policies and procedures of the company. 

Employers used to fire employees late Friday afternoon. That standard has changed, with current practice to fire early in the week and early in the day, to avoid having employees stew all weekend and possibly become violent. Call the employee into an office, conference room or other private space. Have a witness present, such as the director of human resources (HR) or a manager. Witnesses should not be low-level employees. Have the personnel record in front of you. Tell the employee directly that he or she is being fired, and briefly give the reason. Tell the truth, but don’t give a lot of details or focus on them. It is important for the manager to be calm and as unemotional as possible. The employee will likely be angry or otherwise emotional. You may have to explain several times why the employee is being terminated. Try to limit discussions or debate with the employee, but answer the employee’s questions as succinctly as possible. Be prepared to say: “I’m sorry, but my mind is made up.”

Explain what pay and benefits the employee is entitled to after termination. If the employee has money due, have a check ready at the meeting. Be aware of any specific laws or regulations that might pertain to terminations. In Virginia, for instance, it is unlawful to hold back the last paycheck for any reason (such as waiting for an employee to return her uniform). The best practice is to have the employee leave the premises immediately. This limits any spiteful damage the employee can cause, and it will be easier for the remaining staff. Prepare to change the employee’s passwords while he or she is in the meeting or just before you start the meeting. Collect all keys, credit cards, phones, computers, disks, manuals, documents, uniforms, tools, and other company materials. Have a box or two ready and escort the employee out.

In Virginia, no severance payments are required by law – severance payments are a matter of contract between the employee and the employer. Many employers choose to have terminated employees sign an agreement in which they get a severance payment in exchange for agreeing not to sue the company. These agreements are very difficult to draft, as they must integrate provisions of multiple federal discrimination statutes, which change frequently through legislation, agency regulation, or court interpretation. Have employment counsel draft the separation agreement and waiver ahead of time. Employees may have up to 21 days under federal statutes to consider the separation agreement. 

After the meeting, review the terminated employee’s job description as well as policies on warnings and dismissals. A different job description may have made a better match of employee to job. The job may have changed over time and the original job description may no longer be accurate. The disciplinary system also may not have worked well. This type of review may eliminate the need to fire someone in the future.

Keep details about the employee’s termination confidential to maintain the employee’s privacy. It is important, however, to reassure your remaining employees that their jobs are not in jeopardy. Let them know that the employee has left the company. It’s also important to act quickly to get the terminated employee’s work reassigned and a job opening posted, if necessary.

If the employee files an unemployment claim, the company should consider whether it wishes to take the time and expense to fight the claim. Many human resources professionals advise not to routinely fight the unemployment claims. As attorneys, we consider that a business and culture decision, but will advise you to consult with counsel immediately upon receiving a notice from the employment commission, as the form is deceptively simple. Failure to take the first notices seriously could severely impact your options later.

Henry C. Spalding, III is a Virginia employment lawyer, shareholder and member of Sands Anderson Marks & Miller since 1992. Donna Ray Chmura is a North Carolina Lawyer who concentrates her practice on working with businesses through formation, growth and acquisitions, including contract, employment and intellectual property needs.