For most small businesses the hiring and firing processes bring some of the business’s trickiest and most important moments. On the one hand, hiring an employee, while bringing legal responsibility and potential legal liability, is a positive sign of growth and potential for the business. On the other hand, firing an employee may be one of the most difficult decisions the business makes and it can be fraught with potential legal issues. This blog post only discusses issues relevant to the firing process.
One of the most common small business questions our office receives is “how do I fire an employee without getting sued?” In short, the default rule is most employees are employed “at will” and the business can fire the employee at any time without cause. While this is generally the case, there are numerous exceptions carved out by federal and state law.
Various anti-discrimination laws prohibit an employer from terminating the employment of an at-will employee based on some specific characteristics of the employee, including, the employee’s race, sex, religion, national origin or color; in some cases the employee’s age; the employee’s disability, genetic information or family medical history; the employee’s military service; the employee’s marital status and in some cases the employee’s pregnancy, childbirth or related conditions, such as lactation.
Retaliatory Discharge and Discharge Against Public Policy
An employee may have a wrongful discharge claim if he or she is fired for exercising a right that is protected by law, such as filing a Workers’ Compensation Claim. Employers are also prohibited from firing an employee for a reason that violates public policy, such as requesting to take leave under the Family Medical Leave Act, or filing a health or safety complaint against the employer.
Of course, if the employee has a contract with the employer the “at-will” may be modified by the contract and the employer will have to abide by the terms of the contract. Some employers may find themselves in the difficult position of having unintentionally transformed an at-will employee relationship into a contractual one. For example, under limited circumstances, an employer’s oral assurances regarding the length of employment can potentially result in an implied contract for employment. Employee handbooks or other documents containing written policies regarding the duration of employment may also constitute an employment contract thereby eliminating the at-will default rule.
These are only a few of the exceptions to “at-will” employment–and there are exceptions to the exceptions, so it can get complicated. Before firing an employee an employer should consider the circumstances present at the time of the proposed termination and discuss the matter with the company’s attorney before proceeding.
While there is no foolproof method to ensure that a former employee will not assert a wrongful discharge claim, there are steps employers can take to minimize such claims:
- Document issues with the employee. For example, document (whether internally or to the employee) any performance issues, such as, if the employee shows up late routinely, the employee is rude to customers, or the employee does not have the requisite skills to perform the job.
- Ensure that you are following your business’s employee handbook procedures and that you are treating your employees equally and applying your policies and standards consistently.
- Make sure your employee handbook contains explicit language informing the employee the position is considered at-will and neither the contents of the handbook nor any other employment-related documents are intended to change that status.
- Communicate with the employee regarding any job fulfillment issues. A common complaint (and impetus for pursuing litigation) from recently-fired employees is that they did not know that the business was not satisfied with their performance. That is, no one ever said, “you aren’t performing to the expectations and requirements; improve or you will be fired.” While this is not a requirement, it certainly helps—particularly if it is documented.
- Follow the law! Employers often get into legal trouble when they, in fact, break the law.
While every situation is different, you should always consult with your attorney prior to firing an employee. Thinking through the legal implications ahead of time can often save a lot time and money down the road. Running a small business is hard enough without having to litigate a former employee’s wrongful discharge case.