Employee termination is a topic that comes up frequently among business owners. When thinking of a potential employee termination, there are a number of areas that should be considered by the business owner prior to having a discussion with the employee or providing any type of written notice of termination.
Three things to consider in regards to employee termination:
- The employment agreement
- The reasons why you want to terminate the employee
- Understanding any post-termination responsibilities
The Employment Agreement
The employer should review the terms of the employment agreement as it relates to termination. Many agreements have language that indicate how much time one needs to give to terminate the employment without cause, while some agreements have language that discusses how an employer can terminate an employee with cause, without any notice. The agreement may also not have any language regarding termination and just states that employment is an “at will” employment, meaning that either party can terminate, at any time, with or without cause and with or without notice. Understanding how you can terminate an employee is very important prior to having any discussions with the employee. If an employer terminates an employee that violates the written agreement, the employer may be facing unwanted litigation or settlement fees as a result.
Reasons To Terminate An Employee
Similar to how you can terminate, the employment agreement or even an employee manual/handbook may provide the reasons for termination. Perhaps the employee isn’t following office policy or they embezzled money from the practice or the employee can no longer be insured for professional liability insurance. However, many times the termination is unrelated to a cause and the employee is just not a good fit for the business. All of these reasons are valid for termination, however, the employer must consider the timing of termination. They should ask themselves, “Has the employee made any complaints about the business? Has the employee created a situation with other employees? Has the employee informed their supervisors of issues within the company?” If termination occurs after one of these events, the employee may claim retaliation and thus, creating a potential legal issue with the employee.
Prior to terminating any employee, employers need to take the time to consider the best way and time to terminate any employee in order to avoid potential legal actions against them.
Beyond the how and the why of employee termination, an employer also needs to understand any post-termination responsibilities that the employer has towards the employee after the effective date of termination. Some questions to consider prior to terminating an employee are as follows:
- Is the employee owed any money after the termination date?
- When does any owed money need to be paid pursuant to any federal, state or local rules?
- Are there any benefits that need to be canceled or continued to be provided to the employer for any period of time post-termination? (i.e. health insurance coverage, 401K)
- Is the employee owed any type of commission or bonus pursuant to the contract?
Understanding the employer’s responsibility after the termination of an employee is important to thwart any unnecessary legal issues.
Every employee termination is unique and understanding how to terminate, the reasons behind the termination and the post-termination responsibilities, will alleviate many legal issues after the employee has ceased providing services.
As an employer, regardless of the size of the business, the owner may want to discuss with their attorney, as well as their accountant, to understand the parameters, both legally and financially, prior to terminating any employee. The more the employer knows and understands, the smoother the termination will be and, potentially, the less post-termination recourse the employee will have against the office.
Although this is just a summary of what to look out for, it is a good place to start prior to setting anything into action with an employee who is no longer viable in your business.