Terminations.  It is not a subject you cover in management class, or any class for that reason.  But yet the termination process is one of the more common business decisions that will receive the most scrutiny, and are probably the most legally challenged decisions in the workplace.  In addition, terminations trigger immediate legal obligations that the company must be ready to deal with on a moment’s notice.  I’ve written another article about terminations recently, and provided a webinar earlier this week on the subject (you can subscribe to receive email updates and upcoming webinars here) because I believe the topic needs more attention on the legal and management issues it raises.  Just as companies focus on making the hiring process as good as possible, the same attention needs to be given to the termination process.  Doing so will reduce liability.

1)     Do not sugar coat the reasons for a termination.

Document performance as you see it.  If the termination was for cause – document that it is for cause – don’t take the easy route out and say that the employee was laid off.  It is important to document any for cause termination (i.e. for poor performance, theft, etc.…). to defend against potential litigation.  A company does not want to be in the position of stating that the reason for termination was a layoff, but then if litigation is initiated attempting to explain that the true reason was for the employee’s poor performance.  This looks like the company is changing its reason for the termination, and will affect the company’s credibility regarding why the employee was terminated.

2)     Respect the employee during the termination process.

I do not have anything scientific here, but I’m a true believer in good bedside manner.  Most employees might not like the termination, but probably will understand the decision if they have been given proper performance reviews leading up to a termination.

3)     If offering severance, obtain a release of claims from the employee.

If a company is paying money in terms of a severance payment that is not owed to the employee, the company should obtain a release from the employee.  A release can be a simple document, sometimes a page or two, if there is not any anticipated litigation.  While offering an employee some severance pay may cost the company money in the short-term, but doing so could save a lot of time and money in the long run.  If done properly, an employee’s acceptance of a severance agreement would effectively waive any and all claims against the company.

4)     Documentation.

  • Keep payroll and time records for at least four years on a rolling basis (statute of limitations for many wage claims can extend back four years).
  • Keep personnel files for at least three years after termination.  Employers are required to keep personnel files for three years under the law, but it may be advisable to retain the files longer in order to be able to defend other claims with longer statutes of limitations, such as wage claims than can extend back four years.
  • Document paid sick leave – keep these records for at least one year, or longer.  As you may recall under California’s paid sick leave requirements effective in 2015, if an employee leaves employment and is rehired by the employer within one year, previously accrued and unused paid sick days must be reinstated.  The employee is entitled to the previously accrued and unused paid sick days in addition to accruing paid sick days upon rehiring.
  • If litigation is expected, employers should ensure documents and files are retained and kept safe until the litigation is resolved.

5)     Develop a checklist to follow for your company.

Checklists are used by pilots and doctors to ensure that nothing is overlooked.  I believe in checklists in order to avoid missing simple items during a termination, and reducing liability.  Also, the process of thinking through the steps of a termination is helpful to do when there is no pressure, and time can be taken to ensure that all aspects are addressed.  A checklist is also helpful for organizations to ensure their managers are following all of the legal and organizational requirements of a termination.