How to Minimize Legal Risks When Disciplining and Terminating Employees

This guide will help you minimize the risks involved in disciplining and terminating an employee. It'll give you a strong understanding of your rights and the employee's rights, helping you determine when you can and can't legally discipline or terminate an employee. We'll also go over how to approach all these steps. Let's get started!

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Understanding the Discipline Process

There are different methods used for disciplining employees, but most of them are based on a progressive discipline system. This is a step-by-step process from verbal warnings to termination. Regardless of what your company is implementing or will implement, it’s important that you know the possible legal liabilities that may arise and how you can avoid them.

How to Minimize Legal Risks When Disciplining Employees

1. Have a Well-Drafted Discipline Policy

The first important step is to make employees aware of what conduct is expected and what activities are prohibited. For this purpose, you should have a discipline policy, which is a document covering all the disciplinary rules implemented in your company. Without such a document, employees will not know what conduct is prohibited, and you will lack the grounds to enforce disciplinary actions.

2. Get Employee Acknowledgment

It’s important to provide a copy of the discipline policy to employees before they begin work. Ask for their signature, confirming that they have read, understood, and accepted the disciplinary rules of your company. Without their signature, employees may claim they were unaware of a particular disciplinary rule, and this could lead to liability for wrongful termination.

3. Include Discipline Policies in the Company Handbook

Make sure your employee handbook includes a comprehensive section dedicated to discipline policies. This ensures consistency and transparency throughout the company.

4. Document All Disciplinary Actions

Documenting all disciplinary actions taken against an employee is crucial. Every detail about the employee’s misconduct and your response to it should be properly recorded. By keeping accurate records, you create a strong defense in case of a potential lawsuit.

5. Exercise Consistency

Ensure that your policies are applied consistently. The same infraction should merit the same sanction for all employees who commit that infraction. Sanctions should not be subjective or discriminatory; they should be based on the company’s established discipline policies. Consistent enforcement is key to minimizing potential claims of unfair treatment.

Best Practices for the Discipline Process

When issuing verbal warnings, don’t just approach the employee casually. Notify them in writing and schedule a meeting at a specific time and date. This written notification should include the reason for the meeting, and also explain the employee’s right to be accompanied by a co-worker or representative.

For written warnings, specify all details of the objectionable behavior: what rules were violated, where and when, and under what circumstances. Both you and the employee should sign the form. If the employee refuses to sign, a witness should confirm this refusal, and the witness should also sign for confirmation.

When using a probation period as a disciplinary tool, be cautious. If probation is not mentioned in the employment contract or your discipline policy, it could expose you to a wrongful termination claim if the employee is terminated following the probation. Moreover, avoid placing only a specific category of employees under probation, as this may be interpreted as discriminatory or harassment.

For suspensions, they can be paid or unpaid, depending on your company’s policies. A suspension might be used to investigate a case and prevent an employee from interfering with witnesses or destroying evidence. Ensure that your discipline policy has provisions regarding suspensions.

Employee Termination: Legal Considerations

Before terminating an employee, it is essential to understand employer and employee rights. Rights and obligations will depend on the type of employment, generally categorized as at-will employment or for-cause employment.

• At-will employment means either party can terminate the employment without a special reason.

• For-cause employment requires a valid reason and typically involves a progressive discipline process before termination.

Common reasons for termination include insubordination, incompetence, physical violence, harassment, criminal behavior, and frequent absences. While these reasons may be sufficient grounds for terminating for-cause employment, involuntary termination can also happen in at-will situations, such as during unfavorable business conditions or business transactions.

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Minimizing Risks of Wrongful Termination

The first step is to gather all relevant documents related to the employee’s work activity. This includes attendance records, disciplinary records, performance reviews, and any evidence of policy violations. Check the offer letter or employment agreement for any provisions regarding notice requirements.

Ensure you provide written notification of termination, along with any legally required information, such as COBRA notification for health insurance coverage. You should also schedule a termination meeting, which may include a third-party witness to ensure fairness.

During the meeting, remind the employee about their obligations, such as returning company property and safeguarding confidential information. Provide them with their final paycheck, and mention any other benefits they may be entitled to, such as health insurance and accrued vacation pay.

Wrongful Termination

In every state except Montana, most employment is considered at-will, but that doesn’t mean you can terminate anyone for any reason. Various federal and state laws prohibit wrongful termination based on discriminatory reasons, such as race, gender, disability, or religion.

Laws that protect against wrongful termination include:

• Civil Rights Act

• Age Discrimination in Employment Act

• Pregnancy Discrimination Act

• Americans with Disabilities Act

• Uniformed Services Employment and Reemployment Rights Act

• Genetic Information Nondiscrimination Act

Termination is also considered wrongful if it violates public policy, such as firing someone for performing jury duty or refusing to engage in illegal activities.

Avoiding Retaliation Claims

Retaliation occurs when an adverse action is taken against an employee for participating in a protected activity, such as filing a discrimination complaint. Retaliation claims are common, and their success rate is high. To avoid retaliation claims:

• Establish a non-retaliation policy that clearly defines retaliation and explains the company’s commitment to preventing it.

• Provide training to management on how to handle complaints and protected activities appropriately.

• Document every step of the process to show your efforts to prevent retaliation.

Final Paycheck and Severance Pay

Make sure you comply with state laws regarding the final paycheck. In some states, the final paycheck must be given immediately upon termination.

For severance pay, you may be obligated to provide it if it is included in an employment contract, the employee handbook, or any verbal agreement. It is important to clearly describe when an employee is entitled to severance pay, as termination for-cause often nullifies this entitlement.

COBRA Benefits

If your company has more than 20 employees, you must comply with COBRA requirements, which mandate extending health care coverage to employees who would otherwise lose it due to termination (except for gross misconduct). The coverage period can vary based on circumstances, such as disability.

Conclusion

Now that you know the key aspects of the discipline and termination process, you can act accordingly to minimize legal risks. Always understand your rights and those of your employees, and ensure all disciplinary actions are documented and consistent.

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