How to Reduce Legal Risk When Firing an Employee

Employers can avoid expensive lawsuits by identifying risky terminations and knowing when to contact a lawyer.

Because most employment is at will, employers are usually free to fire an employee for any reason—so long as that reason is not illegal. However, sometimes even a legal termination can appear illegal depending on the circumstances. For example, if you fire an employee two days after he makes a complaint of discrimination, it’s going to look like you are retaliating against him for making the complaint. You might have legitimate performance-based reasons for the firing, but unless you can prove it with documentation, you might have a hard time defending against a lawsuit.

Fortunately, employers can often minimize the risk of lawsuits by answering a few questions before making the decision to fire an employee. The questions below are best suited for at-will employees; different considerations might apply if the employee is a member of a labor union or if has an employment contract.

Have You Followed All of Your Policies?

One of the most important things you can do before firing an employee is to make sure that you have consistently and uniformly followed all of your personnel policies. That means that you haven’t skipped any steps or procedures and you’ve applied your policies to all employees in the same manner.

If you have an employee handbook, see what it says about the employee’s situation. For example, if you want to fire an employee for missing too much work, check to see what your handbook says about attendance. Does the employee have too many unexcused absences? Did the employee follow the proper procedures for calling in sick? Does the handbook specify when poor attendance is grounds for termination?

Your handbook may have a progressive disciplinary policy, which means that an employee will receive a bigger consequence for each offense (usually starting with a verbal warning as a first step and ending in termination as a last step). Often times, a handbook will make it clear that employers are not bound by the procedure and can skip steps depending on the seriousness of the offense. But, if your progressive discipline policy doesn’t reserve this right, you should make sure that you’ve taken all the required disciplinary steps. And, even if you’re not required to follow your progressive disciplinary policy, doing so can reduce the likelihood of a lawsuit from an employee claiming that he was treated unfairly.

Another important consideration is whether you have made exceptions for other employees in the past. For example, did you give lighter discipline, such as a suspension or a written warning, to an employee who committed the same offense earlier this year? If you now fire a different employee for the same thing, then you might be subject to a lawsuit from the later employee. For example, you may face a discrimination lawsuit from an employee who claims that you treated her harsher than a similarly situated male because of her gender.

Have You Documented Performance Issues?

One of the best ways to minimize legal risk is to make sure that the grounds for the decision are thoroughly documented in the employee’s personnel file. If there was a specific incident that happened, such as a safety violation or insubordination, then each person involved in the incident as well as any witnesses should be interviewed and asked to write statements if appropriate. Be sure to give the employee write-ups for any other disciplinary issues and have the employee sign to acknowledge receipt.

Similarly, all evidence of performance problems should be saved, such as screen printouts, customer complaints, time card records, production records (for manufacturing employees), or telephone records. You might want to consider saving any surveillance or other video recordings you may have, or taking pictures if possible. You will need these documents to prove that you had a good reason for the termination if the employee later files suit.

Is the Employee a Member of a Protected Class?

Under federal law, it is generally illegal to fire an employee due to race, sex, religion, national origin, pregnancy, ethnicity, or age. State laws may protect additional categories, such as sexual orientation or marital status. When employees are surprised or confused by their terminations, they often file lawsuits claiming that they were discriminated against. Especially if the employee is a minority, female, pregnant, or over 40, it is important to make sure that you are not treating the employee any differently than any other employees. (For more information, see our page on preventing discrimination and harassment in the workplace.)

Has the Employee Recently Taken a Protected Leave, or Is the Employee Disabled?

If the employee is currently on leave under the Family and Medical Leave Act (FMLA), you typically cannot fire the employee. In most cases, employees have the right to be reinstated to their same positions upon returning from FMLA leave (for exceptions, see our article on reinstatement under the FMLA). Employers are also prohibited from retaliating against employees who take FMLA leave. If the employee has recently returned from FMLA leave or given you notice that she intends to take FMLA leave, you should be very cautious before terminating the employee. If you fire an employee soon after he or she exercises rights under the FMLA, a court is more likely to find that the firing was retaliatory. If you feel you must terminate the employee, be careful to follow your personnel policies and document the reason for firing.

Under the Americans with Disabilities Act (ADA), it is also illegal to fire an employee due to his or her disability. If the employee in question has a disability, you should make sure that you’ve followed your policies carefully and that you’ve documented your reason for the termination. If the employee has asked you for a “reasonable accommodation” — changes to help his or her do her job, such as a flexible work schedule, more frequent breaks, or an unpaid leave of absence—you must engage in a conversation with the employee to explore options for accommodation. If you fire an employee for performance problems that are related to a disability and fail to discuss reasonable accommodation, you could face an expensive disability discrimination lawsuit.

For more information on other types of protected leave, see our page on time off for your employees.

Has the Employee Recently Made a Complaint?

Employers should be extremely cautious before terminating any employee who has recently claimed that the employer has done something illegal. For example, if the employee has come forward with a complaint that a manager is sexually harassing someone, that the company is not following work safety regulations, or that the company’s pay practices do not comply with the law, and the employee is then fired, the employee may have a strong case that he or she was fired in retaliation for making the complaint.

All employee complaints of illegal activity should be taken seriously, carefully investigated, and documented. The investigation of the complaint should be kept entirely separate from the employee’s personnel file. And, before firing an employee who has made a complaint, make sure that the reason for the termination is well within your policies and well documented. (See our article on preventing retaliation claims for more details.)

Have You Paid the Employee Properly?

Before firing any employee, check your pay records to make sure the employee has been appropriately paid for all of his time at work. If you haven’t paid the employee at the overtime rate for hours worked beyond 40 in a week, the employee may decide to file a lawsuit against you for unpaid wages. The employee will be entitled to those wages regardless of the reason for the firing.

Most states have their own specific rules about minimum wage, overtime, and meal periods and rest breaks. Many states also have rules about what can be deducted from an employee’s final pay and when the final paycheck must be issued. (Check out our wage and hour page for more information, including state-specific rules.)

Consulting a Lawyer

If any of the above situations apply, you should consult with a lawyer before taking action. Firing employees who are in protected categories, have filed complaints, have taken protected leave, or have not been paid correctly can be risky. A lawyer will be able to help you assess the situation and decide on the best course of action. See Nolo’s lawyer directory for a list of attorneys in your area.

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