How Can Employers Reduce Risk When Terminating an Employee?

February 3, 2022・7 mins read
How Can Employers Reduce Risk When Terminating an Employee?

One of the worst tasks for business owners, HR, and managers is terminating an employee. Either the potential we saw in a new hire didn’t pan out, or a long-term staffer just isn’t getting the job done. No matter the reason, letting someone go is difficult. In addition to the tension of the moment, termination meetings can pose a high risk to employers. Letting someone go the "wrong" way can open the business to retaliation, complaints, and even lawsuits. There are ways to minimize the risk of an unwelcome outcome when terminating an employee. Key factors in separating a staff member the right way require you’re assured the separation is legal, is substantiated by facts, and is executed professionally.

The importance of employee handbooks/policy manuals

If you want employees to abide by the rules, it is critical they know exactly what the rules are. Issue employees a policy manual or employee handbook as soon as they join the company. Many employers review the handbook with the staff member during orientation. This assures they understand the rules or, if they have questions, they can turn to the handbook for guidance. Have the employee sign off (in writing) that they’ve been issued the handbook and understand the rules and responsibilities that are outlined.

An employee handbook can ensure your employees understand company rules and policies.

If you don’t have a handbook or are updating an existing one, you’ll want to distribute it to current employees in the same manner. Hold group or individual meetings to review the policies and rules. Or issue the manuals and require employees to read through and ask questions. Either way, require employees to sign off on receipt of the current or updated manual.

No surprises

No employee should be surprised they're being fired.

Whether they’re long-term employees or the newest hire on the payroll, no employee should be surprised they’re being let go unless the company has a sudden need to downsize. They’ve been issued an employee handbook and know what is expected from them with regard to performance, and what the rules of the company are. They should understand that poor performance or policy violations can (and will) result in disciplinary action up to and including termination — even for a first offense.

Give warnings before terminating an employee

If you’re terminating an employee for a cause — either performance or policy violations — there should have been progressive steps to correct before the termination. They should have been warned, typically the first time verbally, to make a change. Next, you’ll want a written warning, outlining exactly what needs to change and by what date. Continued infractions should result in a final warning, outlining that termination will result if there is no improvement. When the termination meeting is set, the employee should know exactly why they’re being severed, and that they had ample opportunity to avoid it.

When warnings aren't needed for terminating an employee

Certain situations don't need prior warnings.

The only time progressive discipline isn’t necessary is for egregious policy violations, including:

  • Threatening colleagues
  • Assaulting others
  • Bringing a firearm to work

For these, immediate termination, even for a first offense, should be clearly outlined in your handbook.

What’s illegal when terminating an employee?

Discrimination is the key complaint employees file when they believe they’ve been wrongfully terminated. These complaints can be filed at the local, state, and/or federal levels. It’s unlawful to discriminate against employees in any aspect of employment (including termination) on the basis of a protected class. At the federal level, protected classes include:

  • Sex
  • Race
  • Religion
  • Color
  • National origin
  • Age (over 40)
  • Persons with disabilities

Less well-known, the Genetic Information Non-Discrimination Act (GINA) prohibits discrimination on the basis of genetic information. This includes the employee’s or their family member’s genetic tests, or medical history.

Location-specific laws

Some states and local governments have additional protected classes. It is illegal, for example, in Illinois to discriminate (including termination) based on marital or citizenship status. Employers should check with their local and state Departments of Labor for a complete list of protected classes in their area.

Be sure to check your state and local laws when it comes to discrimination.

It is illegal for employers to make any employment decisions based on these protected classifications, including termination.

Where regulations apply

For the majority of businesses, employment is considered "at-will." This means the worker is employed at the will of the employer and can be separated at any time, with or without cause. If you do business in an "at-will" state, you don’t have to provide a reason why you're terminating any employee. You may simply sever the employment agreement. However, the majority of employers do let the staff member know the reason if they were fired for cause. This helps the employee correct the behavior for future jobs, and helps the business establish consistency in applying rules and expectations of all employees.

Exceptions to the rule

There are exceptions. In Montana, the Wrongful Discharge Act (WDEA) requires employers may only terminate employees for just cause (as opposed to at-will) after they’ve completed a probationary period. The default probationary period is 12 months, but employers can set probationary periods up to 18 months or beyond if employees take a leave of absence. In New York City, fast-food employers may not terminate, reduce hours (by more than 15%), or indefinitely suspend workers without just cause once they’ve completed a 30-day probationary period. There are exceptions if the business closes for economic reasons. In Philadelphia, parking workers may not be terminated except for cause.

Protected employees

Employees who have a collective bargaining agreement or a contract that stipulates the manner in which they are let go are protected under these agreements. If you’re terminating an employee who has one of these agreements, you’ll need to adhere specifically to the terms of the contract.

Consistency is key when terminating an employee

Be consistent when it comes to terminating employees. The rules have to apply equally to all staff members to avoid a charge of discrimination. You may think an employee who is regularly 5 minutes late isn’t as bad as one who is always an hour late, but late is late. If you don’t consider 5 minutes late an issue, your policy should clearly outline what "late" means. Everyone should clearly understand the rules and be required equally to adhere to them.

Being consistent in why employees are terminated will help you avoid discrimination complaints.

What to cover in the termination meeting

When it’s time to let someone go, keep the meeting short and professional. Don’t apologize or elaborate more than necessary. If they’re being terminated for cause, briefly outline what the reason is for the separation. If they’re being terminated at will, simply state their employment is no longer required. Then move on to the basics you’ll need to separate:

  • Severance
  • Outstanding PTO payment notifications

Collect any company property, or make arrangements for it to be returned. The meeting should be brief and not open for negotiation. You’ve made your decision, it should be clear to the employee that it’s final. Terminating an employee is never an easy task. In order to minimize risk, make sure you’ve followed the law and adhered to your own policies. If you do so, you’ll be protecting the employee’s rights as well as your business.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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