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Firing an Employee - FAQ

Whether you are a small business owner or CEO of a Fortune 500 company, firing someone is never an easy task. There are numerous federal and state laws you must follow to avoid a wrongful termination lawsuit. Other laws affect things as mundane as when employees must receive their final paycheck. This article answers some of the most frequently asked questions about firing an employee.

How can I minimize legal liability when firing an employee?

The best way to minimize liability is by creating a process and sticking to it. When terminating an employee for cause, you should have all your supporting documentation prepared. Follow your company policy regarding verbal and written warnings and have copies ready for the termination meeting.

The Equal Employment Opportunity Commission (EEOC) provides guidance for small businesses on firing employees. Remember, you cannot base termination on an employee's membership in a protected class, such as race, religion, gender, or national origin. You cannot discharge employees for engaging, participating, or acting as witnesses in an EEOC investigation.

Keep all records, including employee termination records, available for a reasonable time after the firing in case of legal action.

Can I fire an employee for any reason at all?

At-will employment is a widely misunderstood concept. Despite the general belief, an employer in an at-will state cannot fire an employee just because they felt like it that day.

Even in an at-will state, employers must use good faith when terminating employees. Let's say the employee signed a contract, or the employee handbook contains a disciplinary process leading to termination. In that case, you and the worker may have an implied contract that requires you to follow the entire termination process.

In addition, state and federal laws prohibit firing an employee:

In general, you should not fire employees without cause that is fully documented in their personnel file.

When do I have to give employees their final paycheck?

Depending on state laws, you may need to give the departing employee their final check at the exit interview or termination meeting. This may also include any unused vacation time, sick time, or comp time they may be due. This area can cause legal headaches, so check with an employment law attorney before you continue the termination process.

The U.S. Department of Labor also requires employers to provide all terminated employees with COBRA health insurance information and information on rolling over their pension or 401(k) if they have one. Don't forget this financial information in the heat of firing a problem worker.

I just fired an employee. Should I tell the other employees?

Other employees will notice that someone is missing, so it's best to dismantle the rumor mill early and issue a simple report when an employee leaves, whether it was voluntary or not. If there were any issues about their departure, provide contact information for someone in human resources who can handle questions.

If the employee is not allowed back on company property, advise any front-line staff of that fact and who to contact if they do return. Above all, do not engage in any gossip, and don't allow any to spread.

Am I required to give a terminated employee a severance package?

Maybe. Providing a severance package depends on the reason for the termination and the conditions of employment. For instance, in a company-wide layoff where many workers are losing their jobs through no fault of their own, a severance package is a kind gesture and is required in some states. On the other hand, firing a worker for poor performance may not warrant a severance package.

If you are firing a contracted worker whose employment contract guaranteed payment upon termination, you are bound by the contract terms. If your company practice has been giving workers severance pay, some legal experts recommend giving all workers severance pay to avoid charges of bias.

Do I need to give references for fired employees?

It's better if you avoid giving references altogether. Tell all employees, no matter how they depart your workplace, that you can only provide new employers confirmation of dates of employment and, if your state allows it, pay rate. This is often the safest route for you and your employees as well.

Can I fire an employee for threatening other workers? 

It's distressingly common to hear of employees harassing or threatening co-workers or even employers via social media or text messages. This leaves the employer with a dilemma: fire a worker who hasn't “done anything," or leave them on the job and hope nothing happens?

Under the legal theory of vicarious liability, you may be liable if you know of wrongful acts committed by an employee and do nothing to prevent them. This is also known as negligent retention. This is true whether an employee posts threatening messages on their social media account or you discover your delivery driver had their license permanently revoked for multiple DUI convictions.

The safest route here is having a company policy that makes it clear that some actions are grounds for immediate termination. Consult a legal professional to ensure you are not violating federal or state laws.

What are whistleblower statutes? How do they affect firing an employee?

All states and several federal agencies have whistleblower laws, collectively called whistleblower statutes. Five federal agencies under the U.S. Department of Labor have these laws:

The EEOC also has whistleblower protections for individuals who have filed discrimination or harassment claims.

In all cases, whistleblower laws protect workers who have filed reports about misconduct or noncompliance at worksites. As long as the worker filed the report in good faith, believing the report to be true, the employer cannot take any retaliatory action.

If you are the subject of any investigation due to whistleblower activity, your best course of action is to cooperate fully with the investigative agency. Even if the report is unfounded, the investigation will proceed more smoothly if the investigators can do their work quickly and leave.

Next Steps for Employers: Seeking Legal Advice

When firing an employee, seek the advice of a legal expert to avoid a potential lawsuit. A local employment law attorney can advise you of your rights as an employer and how to handle firing an employee.

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Contact a qualified business attorney to help you prevent and address human resources problems.

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