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Resignation, retirement, discharge, and layoff all describe the same act: termination. Employment termination is a regular part of doing business and necessary to manage your workforce. Employers must understand that termination of an employee can come with some risk. It is important to follow employment policies and state and federal laws when terminating employees.

Mitigate Risk

What can you do to mitigate risk in a termination scenario? Mitigation begins at the start of the employment relationship and continues beyond termination of the relationship.

Best practices that mitigate risk:

  1. Distribute an employee handbook requiring signed employee acknowledgements. A handbook will communicate company policies, along with communicating to employees what is expected of them and what they can expect from management. For employers, it ensures that they are compliant with state and federal laws.
  2. Ensure that management enforces policies consistently. Making exceptions to policy may lead to disparate treatment of a member of protected classes based upon factors such as age, race, or disability. Provide training to your management staff on consistent use of policies.
  3. Document, document, document! Did you maintain records of corrective actions? How were they written? When speaking to an employee regarding a violation of policy or performance issues, the best practice is to document these in writing and have the employee acknowledge them. While not as favored, emailing a recap of an employee conversation to that employee and placing a copy of it in the employee’s personnel file is acceptable.
  4. As an employer, know the state and federal laws that govern employment. Is there a possibility of discrimination? Might the termination be viewed as retaliation?

By partnering with a Professional Employer Organization (PEO), such as Resourcing Edge, HR professionals can assist you in developing strategies to mitigate risk.

Termination Policy

No matter the reason for a termination, a best practice to avoid a litigation pitfall would be to develop and implement a termination policy. The best way to “win” a lawsuit is to avoid it in the first place. Having a policy will ensure that you always follow set termination procedures. There will be no more, “What did I do last time?” You will also want to train your managers when adopting any policy. Training ensures their buy-in and helps to reduce any inconsistencies. When creating a termination policy, you want to include procedures for both voluntary termination and involuntary termination of employment.

Voluntary Termination

A voluntary termination occurs when an employee resigns. Questions to resolve include: who accepts the resignation; is the employee permitted to work out their stated notice; who needs to know; how will we answer the employee’s questions regarding benefits; what are the next steps? These questions and more can be addressed within a termination policy.

Involuntary Termination

An involuntary termination may occur for different reasons.

  • A reduction in force (RIF), which will result in laying off employees permanently.
    • If a reduction in force is necessary, the employer should prepare an analysis/selection process of those employees affected, using objective criteria to ensure that disparate impact does not occur.
  • A disciplinary termination that includes poor performance and work misconduct.
    • Review for possible exposure to claims of discrimination or retaliation.
    • What is the specific reason for termination? Technically, “at-will” employment allows for termination without cause and without warning, as long as the reason is not illegal. Does the reason align with company policies?
    • Review all documentation. Corrective actions and performance improvement plans (PIP) would be examples. Never construct documentation after the fact.
    • Have you covered all of the alternatives? Can the employee be reassigned? Is additional training available?

Further mitigate your risk by working with a PEO, such as Resourcing Edge, to analyze your risk when terminating an employee.

Lastly, if you are concerned about being sued by an employee, regardless of the reason, you may want to consider adding to your termination policy the use of severance agreements. With a severance agreement, the employee is releasing the company from any future claims in exchange for something of value. Typically, this is a sum of money. The amount offered can be as simple as a standard two weeks, or based on the potential expense of litigation and the claims the employee might bring. Clients of Resourcing Edge have an HR team that will help them with considerations surrounding severance agreements.

If you’d like to learn more about how Resourcing Edge can help you with HR, payroll, benefits, and more so you can concentrate on your bottom line, contact us.

Jackie Clausnitzer, HR Services Partner at Resourcing Edge, has more than 25 years of HR experience gained at manufacturing and service companies. She is certified as a Professional in Human Resources (PHR) and a SHRM Certified Professional (SHRM-CP).

Jackie Clausnitzer, PHR, SHRM-CP, HR Services Partner

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