Donald Trump makes it look easy. With a simple statement (“You’re fired!”), the employee gets up and exits the boardroom. And like that, the underachiever is nixed from the show, ushered into a limo, and never seen again (at least, until the “All-Star” season). If only the real world was that easy. The decision to terminate an employee can give any employer anxiety, even if it is undoubtedly for the betterment of the business. This sense of dread is not without warrant; termination can be a legal landmine. Even terminating “at-will” employees requires cautious consideration. You can cover your bases, though, by carefully drafting policies, adhering to procedures, and relying on some common sense. Before any action is taken, review these simple rules that can protect you from a lawsuit.
Determine the employee’s status
If someone is an “at-will” employee, he or she can be terminated any time, for any reason. Yes, you can fire someone simply because you do not like them. Review any existing employment agreements or contracts that could be deemed to negate the at-will status. If an employee is not at will, then they usually have a set period for employment and a termination is governed by an employment contract that likely includes a provision requiring termination “for cause.” In such an instance, you must remember to review the contract and follow its terms before terminating that employee.
It should be noted that even if all of your employees are at-will, you are still not out of the proverbial woods. At-will employees can file post-employment lawsuits for a variety of reasons. Any employee, no matter the status, can claim that he was terminated, at least in part, because of a legally protected category (such as gender, religion, disability or age). An employee can also always allege he was terminated for exercising a legal right, such as taking a leave as permitted under the Family and Medical Leave Act, or for refusing to engage in illegal activity. The term “at-will” is not an insulator for liability but there are steps an employer can take to protect itself against claims of wrongful discharge.
The key to avoiding termination lawsuits is documentation. All instances of substandard performance or misconduct should be documented (even for at-will employees). The recording of these things can provide support for the termination. Check records to see if an employee has received a previous warning or has been written up—evidence of past problems can go a long way in justifying a termination decision which negates against wrongful termination.
On the other hand, if an employee recently received a raise or earned a stellar performance review, then a sudden discharge may raise suspicion if other factors are present. A positive paper trail can indicate termination was predicated upon illegitimate (and perhaps unlawful) reasons.
Review company policies and procedures
Take time to review the company policies and procedures to make sure the punishment fits the crime. For example, if you are considering firing an employee who violated the company dress code, but the employee manual says that such an offense first requires a warning, you may be left to explain why you did not abide by your own rules.
If the employee manual is silent, consider whether treatment of this employee is consistent with the treatment of others similarly-situated. Consistency is crucial. An experienced HR employee can help you determine if uniformity in management decisions is present.
Calm down and investigate
Never, ever (ever!) explode on an employee and end the outburst by telling him he is fired. Acting out of anger or frustration can just cause more problems. An employee whose termination is preceded with yelling or other emotion-driven acts is much more likely to become disgruntled. There may be times when a sudden discharge seems warranted, however, best practices dictate that you should suspend an employee first and conduct an investigation. This will give you time to cool off and collect evidence of the wrongful act.
More often, though, a decision to terminate may not be so clearly defensible. If an investigation is required, act promptly. Document your findings, and remain neutral in your treatment of the suspect employee (and the accuser employee, if there is one) until the facts are uncovered.
Cut the cord face-to-face
When it is time to let the person go, do not take the easy way out by writing an email or letter. Not only is this impersonal, but things in writing can be misinterpreted. Likely, if you do put something in writing, the employee will read it, think it over, and then confront you about the decision. It is better for all involved to handle the issue head-on and with a witness present.
If you are nervous about how the employee will handle the news, then take time to “script” how you would like it to go. By planning the encounter, you will be less likely to deviate from the objective or make the meeting more excruciating than it has to be. Termination is like pulling off a Band-Aid—it hurts less if you do it in one sweeping motion. Before the meeting, remember to:
- Arm yourself with any documentation you may need to back up your reason for the decision.
- Decide who else you would like to be present in the room; it is always a good idea to have an unbiased party privy to the meeting.
- Be stern in what in what company items or information must be handed over before departure and review with the employee any non-compete or confidentiality clauses that have been signed.
- State exactly how long the employee has to remove his belongings and self from the premises. If you do not want it to disrupt the office environment, consider letting the employee gather his things during off-hours with the accompaniment of security or personnel.
- If there is any chance of violent retaliation, have a procedure in place beforehand for removing the employee from the premises and consider having company security personnel on-hand.
Before you sit down with the employee, you should contemplate the issue of severance pay. Any time an employee is fired, there is possibility that legal action will follow. To avoid this, a severance agreement can be negotiated with the employee. The employee will sign a release foregoing their right to sue in exchange for something of value. Keep in mind that the exchange does not have to be money, but can be something intangible, such as an agreement to provide positive job references or to not contest unemployment benefits.
To ensure that your agreement will hold up if challenged in court, make sure any agreement is in writing, signed by the employee, and states that the waiver of right to sue is knowing and voluntary. You will also want to allow the employee some time to consider signing it and in certain circumstances, the law sometimes requires a twenty-one day consideration period. Also always allow the employee to review the document with an attorney if he so chooses.
Once the employee is out the door, you can breathe a sigh of relief. But know there is still work to be done. A terminated employee may be legally entitled to benefits, such as COBRA or vested 401(k) or pension benefits. You will want to check with your HR staff or an attorney about the necessary procedures for compliance with these. You will also have to issue the employee’s final paycheck, which may have to include payment for accrued or unused vacation days.
Letting go of an employee is rarely as easy as Mr. Trump makes it look, but with some planning and forethought, you can traverse the legal landmine safely.
Cynthia L. Effinger, an Associate of the firm, joined McBrayer, McGinnis, Leslie & Kirkland, PLLC in 2012. Ms. Effinger has a broad range of legal experience gained through 13 years of practice throughout the Commonwealth of Kentucky where her clients conduct business. Ms. Effinger’s practice is concentrated in the areas of employment law and commercial litigation. She also has experience with First Amendment litigation, securities litigation and complex litigation. Ms. Effinger can be reached at firstname.lastname@example.org or at (502) 327-5400, ext. 316.
This article is intended as a summary of state and federal law and does not constitute legal advice.
Trade Associations in Kentucky are being asked to show that they meet ERISA “bona fide association” requirements in order to continue to provide group health insurance for their members under health reform requirements effective in 2014. Such group health insurance may be a more affordable option for some businesses as new health reform requirements begin to take effect.
In a nutshell, ERISA requires that an association be considered an “employer” to sponsor a group health plan at the association level. In order to qualify as an “employer”, an association must meet bona fide association requirements, including like-industry and participant control requirements. By sponsoring a group health insurance plan at the association (rather than the individual employer) level, associations are able to pass along to their employer members reduced coverage premiums available under large group plans.
Important health reform changes are applicable to insurance plan renewals occurring on or after January 1, 2014. Trade associations should act now to confirm that they are structured to be eligible to purchase group insurance coverage, if their member benefits include health care coverage. If you need help restructuring your association for this purpose or have questions, contact Clay Wortham in the Lexington office. He can be reached at email@example.com or at (859) 231-8780.
Clay B. Wortham is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Wortham concentrates his practice in healthcare law and is located in the firm’s Lexington office. He can be reached at firstname.lastname@example.org or at (859) 231-8780.
This article is intended as a summary of state law and does not constitute legal advice.
There is no shortage of recent court rulings dealing with implications and consequences of social media. One of the latest comes from a New Jersey federal court and its holding should get employers’ attention. In Gatto v. United Airlines and Allied Aviation Servs., et al., No 10-CV-1090 (D.N.J., March 25, 2013), the plaintiff, Frank Gatto, was employed as a ground operations supervisor at John F. Kennedy Airport. He brought suit against United Airlines claiming that, while he was unloading baggage, a United Airlines aircraft caused a set of fueler stairs (owned by Allied Aviation) to crash into him. Gatto claimed that the resulting injuries rendered him permanently disabled.
After the suit was filed, the defendants made a request for documents and information that related to Gatto’s social media account. The request was based on defendants’ suspicion that Gatto’s Facebook posts detailed physical and social activities that would be inconsistent with his claimed injuries and damages. Gatto refused to comply with the request and a U.S. Magistrate Judge ordered him to execute an authorization for the release of his Facebook records and provide access to the account by disclosing his password to defendants.
Counsel for United thereafter accessed the account and printed portions of Gatto’s Facebook page. This action prompted Facebook to send a notification to Gatto advising him that his account had been accessed from an unfamiliar IP address. Upon notification, Gatto proceeded to deactivate his account. Facebook permanently deleted the data fourteen days later, in accordance with its company policy.
Defendants asked for sanctions against Gatto for purposely deleting evidence. So, how did the court rule on this matter? Did Gatto intentionally destroy the evidence of his social media accounts? Did the employer have a right to ask for it? Check back on Wednesday to learn about the court’s ruling.
Jaron Blandford is a member of McBrayer, McGinnis, Leslie & Kirkland, PLLC and is located in the firm’s Lexington office. Mr. Blandford focuses his practice on civil litigation with an emphasis in all areas of labor and employment law. He can be reached at email@example.com or (859) 231-8780.
According to the 2012-2013 Edition of Jury Award Trends and Statistics, the national median award for employment practice claims in 2011 was $325,000, up from $172,500 in 2010. This figure confirms what many in the employment law community already know to be true, that the number of employment practices claims has increased, and with that increase there has been an increase in the size of awards over the years as well. There is no reason to believe that this trend will not continue, and no business should believe itself to be immune from employment practice claims.
Every business of size should seriously consider carrying Employment Practices Liability Insurance (“EPLI”) to protect itself from employment-related claims, which can encompass everything from sexual harassment, to wrongful termination, to defamation. Although a business’s first line of defense should always be thorough up-to-date and well written HR procedures and policies, EPLI coverage can be a valuable lifeline when an expensive and lengthy lawsuit is looming and it just may save your business from financial ruin.
Costs of EPLI policies vary greatly; the price is generally based on your business type, size and associated risk of employment practices. Insurance companies will normally want to review copies of the HR forms, policies, and manuals to assess risk probability. If you seeking EPLI, there are some things you should be looking for in a policy. These include, but are not limited to,
- A broad definition of “insured,” so that all directors, officers, and employees are covered;
- A broad definition of “claim,” so that criminal, civil, and administrative proceedings are covered, as well as arbitrations and investigations;
- A practical deductible that can be met if the insurance is needed;
- A carve-out for claims under federal statutes; if an employee brings a whistleblower claim for exercising rights pursuant to certain statutes such as COBRA, ERISA, or OSHA, you will likely want these claims to be covered by the policy; and
- A choice of counsel provision so that the business can utilize an employment attorney that is familiar with the business, locality, governing law, and particular claim.
As an added bonus, some EPLI insurers even offer additional services free to their customers, such as a call-in line for general employment questions or sample employee handbooks. EPLI can offer peace of mind and valuable protection in the increasingly litigious employment law arena, and the attorneys at McBrayer, McGinnis, Leslie & Kirkland, PLLC, are happy to provide assistance in this area.
Luke A. Wingfield is an associate with McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Wingfield concentrates his practice in employment law, insurance defense, litigation and administrative law. He is located in the firm’s Lexington office and can be reached at firstname.lastname@example.org or at (859) 231-8780.
This article is intended as a summary of federal law and does not constitute legal advice.