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Ready, Set, Fire – How To Successfully Terminate an Employee

August 12, 2004


Although it may be the least enjoyable part of any business, it is certainly necessary and inevitable that an employer at some time, and perhaps several times in any given year, will terminate one or more of its employees. It is an employer’s hope that all problems will cease upon the employee’s last day, and that this will mark the end of its dealings with the individual. However, this often is not the case, since it is not uncommon that lawsuits are filed as a result of an employee’s discharge. Nevertheless, lawsuits and other problems may be minimized and even avoided altogether with thoughtful preparation that starts long before an employee’s final day.

It is important for employers to consider whether the employment of the individual is governed by a written contract. When an employee is under a written contract, it is obvious that the terms of the contract govern the nature of the employment between the employer and the employee, including the conditions under which an employee may be terminated. Often such contracts state that the employee may be terminated for “cause,” with “cause” being defined within the contract. Even if there is no written employment contract between the employer and employee, under certain circumstances, there may be an implied contract. Such a contract may exist based on oral promises made at the time of hiring, or by terms and conditions in an employee handbook which provide for certain employee rights. From an employer’s perspective, therefore, an employer should guard against having discussions during the hiring process that might be construed as contractual, and explicit language should be included in an employee handbook stating that the terms therein are not contractual in nature.

The employment of the majority of the workforce is not governed by an employment contract; these individuals are thus termed “employees at-will.” Such employees may be terminated for any reason or for no reason, as long as the termination is not based on any illegal grounds or does not violate public policy. Such reasons for claiming a termination to be illegal include it being discriminatory in nature, for depriving an employee of what he or she has earned, or for exercising a legal right or for fulfilling legal obligations.

Discrimination claims typically allege that the termination of an employee was not for an appropriate cause, such as for unsatisfactory performance of the employee’s duties, but was based on the employee’s age, religion, race, national origin, handicap, sex or sexual orientation. These areas constitute protected classes within which an employee might fall. Generally, to show discrimination, an employee must prove that he or she is within a protected class, performed the job at an acceptable level, was terminated, and that the motivation for the termination was the employee’s status in the protected class. If the employee proves these elements, then the burden shifts to the employer to show a lawful non-discriminatory reason for the employee’s termination.

Another common action alleges that an employee was terminated for the purpose of depriving the employee of what he or she has earned during the course of employment. This alleged deprivation often concerns vested stock options, commissions, or bonus monies which were earned prior to termination, but were never paid to the employee.

Additionally, state and federal courts have found other grounds upon which an employer may not terminate an employee, such as termination of an individual in violation of clearly defined public policy. An employee may not be terminated for asserting a right which is legally guaranteed (e.g., filing workers’ compensation claim), for fulfilling a legal requirement (e.g., serving on a jury), or for refusing to do that which is legally forbidden (e.g., committing perjury). Further grounds include terminating an employee for “whistle-blowing.” The Massachusetts Supreme Judicial Court in Shea v. Emmanuel College found that an at-will employee may recover after being terminated for internally or externally reporting criminal misconduct taking place within a company. However, such a recovery may only be imposed when an employee reports violations of criminal law or governmental regulation, and not for mere violations of company policies or rules.

It is common for an employee to allege “constructive discharge” when resigning from employment that he or she felt constituted a hostile or unpleasant environment. In GTE Products Corp. v. Stewart, the Massachusetts Supreme Judicial Court found that the conditions of work must be so intolerable that a reasonable person in the same circumstances would have resigned. One event or circumstance will not support such a claim; usually, there must be a continuous pattern of intolerable conditions.

An employer may effectively avoid the above actions by instituting certain practices and planning prior to an employee’s termination. One such recommendation concerns the hiring process of an at-will employee, where it is advisable that the employer discuss an employee’s position in a way that does not give an impression that the employee is under contract. For example, the employee’s salary should be discussed in terms of x dollars per week, and not on an annual basis. In this manner, an employer is portraying accurately an employee’s compensation, but is not representing that the employee is being hired for any extended term. Likewise, an employer should avoid any discussions that might be taken as an oral contract or promise to the employee of a guaranteed term of employment during the hiring process.

An employer should document the performance of an employee and retain this information in an employment file for the individual. Such record-keeping should include regular reviews of the employee’s job performance, as well as documentation as to reprimands, complaints and unsatisfactory performance of his or her duties. In this manner, evidence may be accumulated and presented later to prove that an employee’s termination was based solely on poor performance, and not for any improper cause. The importance of maintaining such documentation cannot be over-emphasized.

An employer should be sure to pay the terminated employee all wages due, as well as any accumulated vacation pay and other reimbursable benefits at the time of termination. This is required under Massachusetts law, and will prevent claims against the employer regarding unpaid compensation.

A termination meeting should be conducted privately and not in a way to embarrass the employee in front of former co-workers. The reasons should be laid out for the termination, and the employer should not give false reasons which may gloss over the root issues concerned. For example, an employer should not state that the reason for termination is a lack of work, when the real issue is poor performance. Even if the real reason for termination is not illegal or actionable, giving the employee a reason which is untrue will only serve to cast doubt on the employer’s intentions in the event of a subsequent lawsuit. Therefore, an attempt by the employer to spare the employee’s feelings may only cause an unfavorable result for the employer.

The meeting should be short, to the point and end without a debate with the employee about the merits of grounds for termination. It is also a good idea that a human resources representative or other supervisor be brought in to witness the meeting to vouch for the events that transpire as to the termination. At the time of the termination, the employer should obtain from the employee any property of the employer in the employee’s possession. Typically, this can include company keys, credit cards, customer lists and other employer documents.

An employer should keep in mind that lawsuits based on an employee’s termination are common and are many times inevitable. It is wise for an employer not only to understand the potential actions, but also prepare for them accordingly, beginning at the hiring process and continuing until the employee’s final day. This may well alleviate such time-consuming and costly lawsuits from arising after the employment relationship has ended.

Paul H. Rothschild, Esquire, is Chairman of Bacon & Wilson, P.C.’s Litigation Department. His practice is concentrated in general litigation, including employer/employee disputes, as well as personal injury and product liability. He also represents a number of employers in general business and higher education, providing advice on issues relating to termination, discrimination, and avoidance of disputes. Paul can be reached at 413-781-0560 or [email protected].

by: Paul H. Rothschild, Esq.

August 2004

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