Termination of employment is often emotional, certainly for the employee and often for the employer. Because emotion is involved in the termination decision and process, it can cloud judgment. When judgment is clouded, the termination is not always handled in a manner that protects the business from employee lawsuits.
Employment lawsuits and administrative charges are rampant in California, largely due to the expansive protection that employees receive under California state law. For example, a 2017 study conducted by Hiscox revealed that California employers have a 46% chance of an employment charge being filed against them compared to the 10.5% national average.
Based on experience advising employers on terminations and representing employers in disputes with former employees, here are eight essentials I want to share on how to best address terminations:
Documentation. It is critical to document performance issues, yet often overlooked. Conduct annual performance reviews and accurately document how an employee is performing. Make sure not to include just positive feedback, but also identify areas where the employee is not meeting up to expectations. Also, document performance counseling and employee discipline. Good documentation is the employer’s best evidence in the event of a legal dispute with a terminated employee.
Consider Timing. Always consider the timing of a termination. Are there any key events that occurred before the termination? For instance, if an employee submits an internal complaint of discrimination or harassment, employers should proceed with caution. Submission of these types of complaints is considered protected activity. Even if the complaint is unfounded, proximity between the complaint and the termination may give rise to a retaliation lawsuit. Another timing issue that can lead to a legal dispute is terminating an employee during or shortly after a leave of absence. It is best to seek legal advice before terminating an employee in these circumstances.
Do Not Delay. A common mistake is when an employer unnecessarily delays a termination decision. The employer knows the employee ought to be terminated, but puts off the inevitable or adopts the approach that maybe the person will get the hint and resign. The employee is usually aware of the situation, and putting off the action only makes it worse. The longer an employee suspects that they are going to be terminated, the more time there is for the employee to manufacture a lawsuit. Do not delay once termination is inevitable and other considerations (see point 2) are out of the way.
Conducting The Termination. Generally, employee terminations are best conducted in-person whenever possible. Someone who can stay on message, remain objective and unemotional, and minimize any potential damage to the employer should conduct the termination. Utilizing a Human Resources consultant experienced in conducting terminations is invaluable.
Remember Final Pay Requirements. The employer is legally required to provide the terminated employee their final pay on the employee’s last day of employment. So, have the check cut and ready to hand to the employee on their last day. If the termination is not conducted in-person, the check should be delivered the same day to the employee. Also, accrued and unused vacation or paid time off is considered wages and must be included in the final paycheck. There are waiting time penalties for failing to issue all wages in a timely manner. The waiting time penalty is the employee’s daily wage for each day that the final pay is late, for a maximum of 30 calendar days.
Consider A Separation Agreement. If a termination is particularly risky or there is a history of conflict, consider offering a severance payment in exchange for the employee signing a separation agreement releasing all claims. Most employment claims can be released, with some exceptions, such as unemployment and workers’ compensation claims. A separation agreement provides peace of mind that the terminated employee is not going to come back later with a lawsuit. Also, additional clauses can be included in the separation agreement to address employer concerns relating to confidential information, non-disparagement, and non-solicitation of other employees.
Watch What You Say Post-Termination. Disclose the termination reason to other employees on a need-to-know basis. Do not discuss the termination reason with everyone, and certainly be very careful about communications with third parties. If a potential new employer calls for a reference check, limit disclosure to confirming the dates of employment and position.
Don’t Handle Any Fall-Out On Your Own. Employers should seek legal advice as soon as they receive a personnel file or payroll record request from the employee or the employee’s attorney. Records requests are a red flag that a lawsuit is imminent. Do not respond or provide records without an attorney’s aid. Similarly if the employer receives a demand letter from an attorney, do not ignore it or respond to it without consulting an attorney. Ignoring the letter may mean a missed opportunity to resolve a situation before it becomes a lawsuit, while responding without representation often leads to unknowingly making damaging statements. It is best to seek legal representation immediately in these situations.
Shannon Wolf, Esq.
The Law Office of Shannon Wolf
1201 Puerta del Sol, Suite 213
San Clemente, CA 92673
(949) 276-4214 | firstname.lastname@example.org