By Melissa Walker
It’s an unfortunate part of business, but eventually almost every employer will likely have to make the decision to terminate an employee.
Regardless of the size of a business, an owner will deal with employee issues that can result in termination. Absenteeism is one of the most common reasons for dismissal, especially in the retail and manufacturing industries, says Rush Nigut, a West Des Moines attorney with Brick Gentry P.C., who specializes in business, employment and franchising laws.
“If they have employees, it would surprise me if they don’t have to deal with termination at least once but frequently in their career,” he says. “The larger the business, the more often they’re going to have to deal with it.”
No matter what the reason for dismissal, business owners can have a challenging time doing it.
“If you have to let someone go, it’s not easy because you’re impacting someone’s life,” says John Hovey, co-owner of Focus OneSource, a West Des Moines business that handles payroll, employment tax and other human resources issues for small businesses.
Potential legal ramifications and overall tact need to be taken into consideration as well.
1. Did I do everything I could have to prevent this?
Hovey says he recommends clients do everything possible to prevent having to terminate employees.
“Any time you have to fire an employee, you also have to look at yourself as a supervisor: ‘Did I do what I needed to do to make this person be as successful as possible?’ ” he says. “Sometimes that’s true, and sometimes it’s not.”
He continues: “Instead of getting to the final straw and having to let somebody go, we try to coach our clients to plan for those types of situations that happen.”
This may mean developing a corrective action plan for how employees are disciplined and what action will be taken to correct bad behavior or poor performance. Employers need to be up front with employees about their expectations and the company’s policy for how attendance, tardiness, behavior issues or poor work performance will be handled.
If an employer is considering firing the employee, he or she needs to consider the feedback and reviews the person has received. If they’re positive, don’t fire the person immediately. Instead, change signals and warn the individual of what he or she is doing wrong, according to Top Management Degrees, a website devoted to business and management education.
When the employee is warned, give him or her a period of time in which to change, such as 30 days, as well as ways to improve and get back on track. The firing should not come as a surprise if the employer has had a series of discussions with the employee about improving his or her shortcomings.
In the end, Hovey says the business owner has to take whatever steps he or she needs to keep their business sustainable.
2. Do I have policies in place for how to handle terminations or layoffs?
It’s the decision of the employer whether to have a policy that lays out the terms of firing an employee; however, many human resources outsourcing firms and attorneys suggest a formal policy be in place.
Hovey says the policy could be as simple as following past practices: How has the company handled these types of situations in the past? The important thing is to treat every situation as equally as possible.
Nigut says policies could consist of an employment manual, which needs to be written in a way that allows the employer to terminate an employee for an offense. The policy may outline specific behaviors that warrant discipline and could lead to termination. Employers also may want to include a progressive discipline portion, which explains the action that will be taken such as oral and written warnings and how many the employee may receive before being fired.
Nigut says most judges, in general, will support the business in claims of discrimination under the “business judgment rule” if the employer had reasonable reason for taking the action he or she did, followed the company’s policies and gave the employee a fair opportunity to change the things the employer considered to be wrong in the workplace.
“We just want to make sure, at least my clients, that we’re giving employees a fair opportunity, that there truly is behavior that warrants being terminated,” he explains. “You have to have a reasonable justification for it.”
3. What potential roadblocks could I face?
Businesses owners need to be mindful when they attempt to fire an employee who may be part of a protected class. This includes women, minorities, veterans, disabled persons and employees age 40 and older. Individuals who fall within a protected class have their employment rights protected by federal law.
This doesn’t mean an employer cannot dismiss one of these employees; they have to make sure they follow their policies and laws to ensure there are no signs of discrimination.
“If a business has a policy of how to let someone go, then be sure that it’s followed on every single incident: step one, step two, step three,” Hovey says. “You don’t want a protected class of person coming back and saying ‘They treated me differently because I’m a woman.’ ”
Nigut says focusing on the employee’s behavior rather than the individual as a person can help employers treat everyone fairly and equally. Most of the protected class cases he represents have to do with age discrimination.
Employers also cannot fire an employee who is a “whistleblower” and complains about illegal activity, violations or discrimination or harassment in the workplace. Those who are taking family or medical leave, serving in the military, or have been called to serve on a jury also cannot be fired, according to the U.S. Small Business Administration.
Hovey says employers also need to be mindful of changes that will take place in 2017 to the Affordable Care Act that change the premium rates of employees to make those who are older have higher rates than younger employees. This means more expense to the business owner, and employers need to be mindful they are not consciously or unconsciously dismissing an older employee because his or her healthcare is more expensive to the company.
Challenges can also arise for companies where family members are employed. Experts recommend disciplinary issues that involve family members be conducted the same way as all other employees.
“It’s good business practice to treat that family member like any other employee,” Hovey says. “If you don’t, other employees are going to be resentful. If you’re not prepared to deal with your son or daughter, … then don’t make them an employee.”
At the Brick Gentry law firm where Nigut works, several family members are part of the firm. Nigut says they are subject to the same employee issues as non-family members.
The firm has not had any termination issues, but from his experience representing other clients, Nigut says it can be difficult to separate family members from an organization.
“If it’s a family member, it’s much harder to discipline that person just by human nature,” he says.
4. How do I tell the employee, and who should be involved?
Iowa is an “at-will” state, meaning an employer can dismiss an employee at any time for any reason as long as it is not discriminatory and if the employee does not have an employment contract that details the duration of the employment or circumstances for which the employee could be terminated. Employers aren’t required to explain why an employee is being fired, though most experts caution against this.
“You want to treat people reasonably,” Nigut says. “You do not have to provide somebody a reason, in general, why you’re terminating them, though I think it’s an expectation of most employees and juries, as well, that you’ve told somebody why they’re being terminated. I think it’s a good idea to be up front and honest with them.”
If a termination becomes necessary, employers should have at least one supervisor present. It’s a good idea to have a second supervisor or human resources officer present who can attest to anything that was said and be present in case the employee threatens to retaliate. All meetings should be conducted in person and be as efficient as possible.
“Sit down and personally take care of it,” Hovey advises. “Give the employee the opportunity to ask any questions, but don’t let it drag out too much more than a 5- or 10-minute affair.”
The person doing the firing may want to write down his or her thoughts and create a plan before speaking to the employee. This will prevent him or her from jumbling words and allow for the news to be broken in a more concise “get to the point” way.
The person should get to the point, state the termination and skip any small talk. Avoid saying things such as “I understand how you feel” or “I know this hurts right now, but…” Also, avoid justifications but listen to what the employee has to say and thank him or her for the service to the company.
The employer needs to cover all of the bases of what will happen with pay, benefits, unused vacation, references, ongoing projects and more.
Opinions differ on when a termination should be conducted. Some suggest doing it earlier in the day early in the week, which allows employees the rest of the week to find another job. Friday afternoons can be beneficial in that it can allow for less disruption to the rest of the employees.
The employee should also be told when he or she is expected to leave the office. The supervisor should escort the employee back to his or her desk to grab personal things and then escort the person to the door. While the employee is being terminated, his or her computer access should be revoked. Once terminated, the employee needs to be required to turn over any office keys, company credit cards or other company property.
If the person is being let go for performance, the employer or supervisor might list a few examples of how the employee did not meet expectations or was in violation of policy. If the individual is being laid off, let them know whether it’s a permanent or temporary layoff and if there’s a possibility he or she could be called to return to work at a later date.
Hovey says in his opinion there is no good time or day of the week in which to issue a pink slip.
“Anytime you have to let somebody go, it’s not a good time,” he says.
5. Have I documented the case?
Business owners or supervisors need to document any action they’ve taken against the employee. This may include warnings and steps for improvement, as well as documentation of specific incidents of the employee’s poor performance or misbehavior.
This shows the employee was given an opportunity to correct his or her action and supports the employer’s decision to fire the employee, which could become important in a discrimination lawsuit.
Nigut advises employers to ensure they had reasonable justification for firing the employee and that they did so fairly by providing advance warnings and giving the employee a chance to make improvements.
The business owner or supervisor may want to consider any situation that could be twisted to make the termination look like discrimination or a personal grudge.
If the business owner is the only authority figure available to terminate the employee, Nigut recommends he or she create a written memo of the action that took place and a summary of the spoken word.
Nigut cautions about being too specific in the memo or a termination letter about why the person was fired. Any written documentation should be open ended and written in a way that if the firing is contested, the employer has the ability to fill in the details if necessary. For example, if the person was terminated for multiple reasons but their termination letter only specifies poor performance, the employer may be challenged if at a later date he or she says the person also was fired for absenteeism and mistreatment of co-workers.
6. Will I have any continued responsibilities to the employee once he or she has been let go?
Employers have no obligation to provide a terminated employee any severance package or to continue contributions to retirement plans once the employee has been let go. Employees are entitled to their final paycheck, but it can be paid on the next regular payday and does not have to be given to the employee the day of his or her departure, Hovey says.
Depending on the number of employees the business has and the type of healthcare plan it offers to employees, the employer may still need to offer coverage to terminated employees under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 law unless the employee was let go for “gross misconduct” such as theft or assault, according to the Iowa Insurance Division. Companies with 20 or more employees must offer the COBRA continuation for terminated employees if the company still offers the plan under which the terminated employee was covered.
COBRA requires the continuation of coverage be offered to the primary plan holder along with any dependents of the employee if they were to lose health insurance coverage after the termination. The length of coverage varies based on whether it’s for the employee or dependent and for the reason the employee was terminated, but federal law allows for up to 18 months of coverage.
The employee’s cost for continued coverage may now be higher because the employer is no longer required to contribute part of the premium cost.
In Iowa, there is another option for employees of companies with two to 19 employees: the Iowa COBRA. The state of Iowa runs this option and provides for insurance continuation for up to nine months.
Employers also are required by law to let terminated employees know of eligibility for unemployment insurance and to let them remain eligible to receive vested 401(k), profit-sharing or pension benefits, according to The U.S. Small Business Administration.
Terminating an employee is never easy, but sometimes it is the only option.
“If you have an employee who is disruptive and not fulfilling the job requirements — and you’ve worked with them and you feel in your heart you’ve done what you can do to help this employee be successful and they’re not being successful — then you let them go,” Hovey says. ♦