M. Employer Legal Options and Strategies

There are ways to fire employees without encountering legal battles. A little time and education on the part of your company's executives can result in legal hiring and firing procedures that protect the company. Keep in mind the following points.

For-Cause Firing

Understand problems of proof associated with "for-cause firings." Many employers employ union workers who are covered under collective bargaining agreements stating that they can only be fired "for cause." Other companies use written employment contracts or company manuals with non-union employees. Some of these contracts subscribe to either a "firing for cause" or "hiring for a definite term" practice. This distinction hiring an employee with the promise of secure employment unless there are grounds for termination, as opposed to being hired at will which means the worker can be fired at any time, with or without notice and reason is a critical one, yet many companies apparently do not appreciate the difference.

When a terminated worker consults a labor lawyer, one of the first questions asked is whether he or she was hired at will. If so, the chances of obtaining damages from a company based on legal theories that include wrongful discharge and breach of contract are dramatically reduced. However, if an employee was hired under an agreement that he or she could only be fired "for cause," the company must then be able to justify the firing with sufficient legal reasons (e.g., fighting on the job, etc). Many companies have difficulty proving this.

Although such cases may appear to be fairly straightforward, it is often difficult to prove that the infractions occurred with sufficient intensity to justify a firing. Arbitrators and judges look first to see whether a legitimate company rule was violated and whether that rule was justified. Sometimes, an act or behavior cited as the reason for termination may not even fit in a "for cause" category for example, some labor contracts do not specifically define drug or alcohol abuse as unacceptable workplace conduct.

TIP: One standard manual that arbitrators use to assist them in rendering employment decisions lists standards for "just cause" firings. Every company official entrusted with hiring and firing employees should be familiar with these guidelines:

• Did the company have a clear rule against the kind of em-
• ployee behavior for which the discipline was administered?
• Is the rule reasonably related to the orderly, efficient and safe operation of the company's business?
• Has the company granted employees reasonable oppor- tunity to learn the company's rules?
• Has the company provided employees with reasonable opportunity to learn the possible consequences of disre- garding the rules?
• Has the company administered and enforced the rules even-handedly and without discrimination among the employees?
• Did the company investigate fairly the circumstances involved in an alleged offense?
• Did the company, through its investigation, obtain substantial evidence of guilt?
• Was the penalty imposed for a fairly investigated, fact-supported offense reasonably related to the serious- ness of the proven offense and/or the nature of the guilty employee's past record?

Counsel Comment #136: The burden of proving these points typically rests with the company. Because that burden is usually one of "clear and convincing" proof rather than the "preponderance of the evidence"handbooks or manuals that were previously distributed to employees. Finally, avoid hiring employees under any other circumstance than at will. This is the best preventive advice of all.

Legal Opinions In Sensitive Situations

Consider obtaining a formal legal opinion in sensitive and difficult situations including employee terminations that appear headed toward confrontation and possible litigation, or those which pose complicated legal questions. Large-scale terminations or layoffs due to business reorganizations should always be planned with counsel before implementation. The same is true for mandatory retirement programs the company wishes to institute. Early consultation with counsel may reduce the legal risks associated with employee terminations, as well as develop defenses to subsequent litigation stemming from employee firings.

Peer Review

As previously discussed, consider utilizing a peer review system before the actual firing takes place. In evaluating a proposed termination, the reviewer should consider a list of major issues. Among the points to be included are the following:

• What is the employee's seniority? What kind of overall record does the employee have?
• Is the termination consistent with the employee's performance appraisals?
• Has the employee received progressive discipline before the discharge?
• Is the proposed termination consistent with the company's actions in similar circumstances in the past?
• Is the company disciplining the worst offenders first?
• Are there any mitigating factors that may explain or excuse the employee's prior performance or misconduct?
• Are there mitigating circumstances which suggest that less drastic action be taken?
• Was the employee aware of the performance standards, work rules, or other standards for which he or she is to be terminated?
• Are there any statutory problems such as race, sex, age, pregnancy discrimination, or violations of whistleblowing laws or exceptions to the employment-at-will doctrine?
• Do any of the circumstances suggest actual or apparent problems under the National Labor Relations Act, or other employment statutes?
• Have any representations been made to the employee concerning job security? If so, is the proposed termination consistent with those representations?
• What does the employment contract say about firings? Were all provisions (e.g., sending a formal notice by certified mail) followed?
• Are there any public policy concerns? For example, has the employee recently exercised a legal right (i.e., attended jury duty) that your company complained about?
• Has the employee been involved in any controversial events that may include misconduct on the company's behalf (e.g., wrongful surveillance, eavesdropping, excessive interrogations or other violations of employee rights of privacy)?
• Has the supervisor complied with relevant portions of the personnel policies and procedures?
• Is the employee close to earning substantial financial benefits such as a vested pension, large commission or bonus? If so, will the firing deprive the employee of that expected financial benefit?
• Under all of the circumstances, does this case present a fair and honest reason, regulated by good faith, for termination?
• Are there legitimate adverse business conditions or other bona fide economic reasons necessitating the elimination of the em- ployee's position?

TIP: Although this list does not cover all considerations, it is fairly inclusive. Certainly companies must recognize that all terminations should be handled in a consistent manner in accordance with a well-defined policy.

Determine How The Firing Will Occur

Once the decision to terminate has been made and approved by management, companies must determine how the firing will occur. Most termination decisions should be announced to the employee personally. Avoid communicating the message by letter or memorandum if you can help it. Issues such as who should tell the employee, when the conversation should take place, and where the conversation should take place should be decided on a case-by-case basis.

Break The News Properly

Employers should decide how to terminate the employee with an eye to minimizing the employee's discomfort, including embarrassment, and maximizing the chances that the employee will have an opportunity to regain his or her composure and begin taking steps to find employment elsewhere. Once the decision to terminate has been made and approved by management, companies must be careful about how the news is broken to the terminated worker. There is no single, best way to tell a worker that his/her services are no longer needed. However, certain rules can help you break the news properly. How an employer elects to inform the employee of the termination can dramatically affect the risk of wrongful termination litigation, because it can determine the degree of anger, frustration and hostility with which the news is received. In addition, the way the employee was told may reflect on the company's degree of humanity, a consideration that can influence a jury if litigation arises.

An employee should be told the specific reasons for the firing. Some states have passed laws called service letter statutes that give fired workers additional legal protection. Generally, under the laws in these states, employers are required to give a terminated worker a true written statement regarding the cause of his or her dismissal. Once such an explanation is received, the employer cannot furnish prospective employers or others with reasons which deviate from those given in the service letter. In those states, an employer can be sued for damages for refusing to tell a worker why he or she was fired, for providing the worker with false reasons, or for changing its story and offering additional reasons to outsiders or during legal proceed- ings at a trial or arbitration.

Counsel Comment #137: Since workers may have the right to demand and receive a true reason for the firing, avoid potential exposure by furnishing the truthful reason to the discharged worker from the onset. In the event of litigation, a jury may well believe that decency and compassion require, at the minimum, that the employer tell the employee why he or she is being terminated; be consistent in holding to the first reason offered.

Some supervisors are embarrassed to say negative things which reveal true personal facts regarding the employee's character (such as honesty traits, etc.). Instruct them to be as direct and honest as possible since the company will have to be able to prove the true business reason for the termination at a trial. Avoid being apologetic when telling the news, since this could be interpreted as a sign of weakness. On the other hand, avoid being overly specific or detailed in explaining the reason for the termination because the more information you give, the greater the chances that some of it may be incorrect and could hurt the company at a trial. In the uncomfortable setting of a term- ination interview, the supervisor may well get the facts wrong.

Avoid confrontations. If the terminated worker begins to shout, do not respond angrily. Wait for the outburst to end. If the employee persists, call security if necessary. Never accuse or make derogatory comments about the ex-employee in front of non-essential third parties because you may be creating a ready-made defamation claim.

Make sure the employee knows the decision is final and non-negotiable. Give workers a specific date and time on which they are no longer employees. If they are eligible for any benefits, and if other matters need to be clarified (such as how references will be handled, outplacement counseling, the time frame for leaving, etc.), spell these out at the final termination session. If the person handling the firing is not knowledgeable about all the benefits due the individual, refer the ex-employee to the appropriate administrator in the personnel department.

Treat the individual with dignity. Avoid telling the fired person to clear out his/her desk immediately except in cases of blatant insubor- dination or theft. However, be sure to recover all company property before he/she departs. This may include such items as automobile keys, samples, company brochures and literature, customer lists and other information. Some companies expedite this process by holding back voluntary payments (such as severance) until company property has been returned.

Counsel Comment #138: Avoid holding back final accrued wages, salary, vacation and other payments previously earned and due to avoid an investigation and other penalties imposed by your state's Department of Labor. In many states, earned payments such as wages and other monies must be paid immediately upon a firing and presented to the terminated employee in the form of a check at the time of the exit interview. Since substantial fines, penalties and other problems can ensue, including personal liability for officers and directors of companies in some situations, avoid holding back these pay- ments unless counsel has recommended or approved that such action be taken.

Statements To Current Employees

One of the most overlooked items on management's agenda is what to say to the employees left behind. Offer your employees a frank presentation of the situation where warranted but never badmouth the terminated worker ("he was fired because he was a crook") because word of such statements may get back to the ex-employee and create defamation problems. And, if the reason was because of a layoff and you advise present workers of this fact, other employees may be fearful of losing their job (creating potential morale and productivity problems). Thus, consider carefully all the ramifications of what will be said to current employees.

Advantages Of Non-Monetary Benefits

Consider offering non-monetary benefits to "sweeten" the termination if necessary. For example, the company can advise the individual that although it has no legal obligation to provide prospective employers with references, favorable or otherwise, it will do so provided the employee accepts the termination graciously.

Other options include continued use of a company office, telephone, secretary, resume preparation, outplacement guidance, waiving the enforcement of a previous non-compete agreement, and so forth. You can be surprised by their effectiveness in reducing the chances of post-termination litigation.

Planning Ahead

The best planned terminations are typically orchestrated by a team, including a manager and a human resources person. Experts recommend that it be formal and clear; the manager should present the facts for the termination and the human resources person should discuss the severance package and field any questions. Some companies hand the employee a formal termination letter and a written description of the severance terms. Where warranted, the employee might be asked to sign a waiver.

If the employee wants to stall or requests that the decision be reconsidered until another day, insist that the offer is non-negotiable and is the same as is offered to others. This may persuade the terminated individual that any negotiation for more severance and other benefits will be futile. In many situations, companies favor firing workers in the early afternoon so that the employee has plenty of time to leave the premises by the end of the day.

Using Releases

Consider the signing of releases when appropriate. A properly executed general release, provided it was not signed under circumstances suggestive of fraud, duress or mistake, can protect your company against lawsuits by prohibiting a terminated individual from instituting a lawsuit to collect damages stemming from the firing. If you are seeking to be released from potential discrimination claims, the release must also contain language giving the employee a significant amount of time (typically seven days after signing) to rescind it before it becomes effective.

Counsel Comments #139: Since many individuals are reluctant to sign releases without first obtaining proper legal counsel, and the entrance of a lawyer into the picture may create further problems (such as a request for more benefits before the release is signed), the decision to request a signed release sometimes makes sense only in cases where significant, additional benefits (such as generous severance pay) are being offered up-front. In such situations, it may be difficult for the employee to refuse to sign a release when the package is too good to pass up.