Firing an employee is rarely pleasant. However, a properly conducted termination meeting that preserves the employee's dignity can help defuse even the tensest of situations. There are several steps you can take to fulfill your legal obligations to terminated employees and avoid escalating any hostilities over the firing.
Once an employer has made the decision to terminate an employee, whatever the reason, breaking the news is likely to be at the very least, awkward. Make sure you have done the groundwork needed to document and justify your actions. Then you can use the following time-tested advice on how to conduct the actual termination meeting to do what you have to do, minimize your own discomfort, and make things as easy as possible on the departing employee.
Preserving an employee's dignity is vital
We can't say it strongly enough: even when firing a worker, you should make every possible attempt to maintain the employee's dignity.
It's natural for a person being fired to feel resentment toward you and your business. So, everything you do in a termination meeting should be designed to minimize, as much as possible, this natural resentment. We say that not so much out of concern for the worker who is being discharged, but for your own self-protection. It's not good for your business reputation to have ex-employees bad-mouthing you all over town. If customers think that you treat your employees unfairly, they might think that you'll do the same to them.
Bad feelings can bring about bad consequences. You'll also want to avoid, as much as you can, the possibility that you might be sued by a disgruntled ex-employee. Most lawsuits in this area are filed because of the employee's feelings, not because the facts of the case are particularly strong. If you can soften the blow to the person's ego, or at least keep from making it worse, your odds of being sued go down dramatically.
Finally, in the worst-case scenario, there have been times when fired employees become so distraught that they threaten to harm (or actually do harm) their former boss, coworkers or the business. Treating workers as humanely as possible will minimize the chance that this might happen to you.
Setting up a proper termination meeting
If you need to fire or lay off someone, it should always be done face-to-face., not by letter, email or over the phone.
Who should conduct the meeting? In most cases, the immediate supervisor of the worker should be responsible because he or she is usually most familiar with the reasons for the discharge. Also, the supervisor will usually be most familiar with the worker's personality and will be most able to handle him or her in the face of bad news. If you are not the immediate supervisor, let him or her handle the meeting.
Besides the supervisor (which will usually be you) and the worker who's being fired, there are situations where you may want to have a third party attend the meeting. If the person being terminated requests a witness, it's probably best that you allow this, so that the person doesn't feel that he or she is being railroaded out the door unfairly. But do explain that the person is there as an observer only, not to act as a representative or argue on behalf of the worker.
Tip: You may also want to have a witness present if trouble is expected or if an objective third person is needed. Sometimes a second company representative is seen, however, as an attempt to "gang up" on the terminated employee. You'll have to use your own judgment in this regard.
Where to conduct the meeting. You'll want to conduct the meeting out of sight and earshot of any other employees, in a quiet place where you won't be interrupted. The meeting room should be in a location that does not alert other people as to what is taking place.
Many advisers say that meetings should be held on neutral ground — not in your office, and not in the departing worker's office or workplace.
Privacy and neutral territory may be difficult to find in a small business and especially if you work out of your home, so consider holding the meeting in a nearby restaurant or coffee shop. Holding the meeting in a quiet public place has other advantages: it may be easier to avoid emotional outbursts on anyone's part, and it will be easy for you to end the meeting by getting up and walking away (after picking up the tab, of course).
When to hold the meeting? Early in the day and early in the week is generally considered the best time to hold a termination interview.
Avoid Fridays and the day before a holiday or vacation. An employee who is let go on a Friday has two days to brood about his or her treatment by the company and to look for ways to retaliate. On the other hand, discharging a person early in the week provides him or her with an opportunity to focus on the future and begin looking for a new job right away. Also, the person who's doing the firing won't have to leave for the weekend with the bad memory of a distasteful task on his or her mind.
For similar reasons, the discharge should be conducted early in the day. People are fresher, more rested and better equipped to deal with adversity and stress earlier in the day. People tend to be tired and short-tempered later in the day, which may increase the chance for an unpleasant reaction to bad news. Also, discharging earlier in the day allows you to get back into the work routine and overcome any unwarranted guilt that may exist for having to fire an employee.
What to do at a termination meeting
The actual termination meeting should last about 10 to 15 minutes and have the sole purpose of providing a simple and concise statement of the decision to terminate the employment relationship. Have phone numbers ready for medical or security emergencies.
Prepare what you will say ahead of time. It's a good idea to write it out, and have a checklist in front of you so that you don't get sidetracked and forget any important points.
Consider including the following in your termination meeting:
- Give an adequate reason for the discharge. Many workers who sue their ex-employers do so because, at heart, what they really want is a full explanation of why they were let go, and a chance to give their side of the story. You don't have to spend a lot of time going over every last detail of the employee's conduct that led to the discharge, but you should provide a reasonable explanation.
- Seek out the employee's explanation or interpretation of events. You may already have done this when you investigated any misconduct that led to the firing. Even so, you should allow the employee to have his or her say, and even to vent a little emotion. Don't interrupt or talk over the person. If the employee feels that he or she was forced out because of discrimination, harassment, or some other allegedly offensive or illegal conduct on your part, you'll want to know about it now so that you can alert your attorney.
- Make it clear that the decision is final. If you take the position that the decision has already been made, all alternatives have been considered, and all the other managers or owners are in agreement (if there are any others who are involved in decisions of this nature), and that you are merely giving this information to the worker, you'll find it easier to keep your cool and keep control of the situation.
- Briefly run through the benefits. Briefly cover the vacation pay, separation pay, continuation of health insurance or life insurance benefits, etc., that you are offering. If you are attempting to get a release from the employee, now's the time to present it. It's a good idea to have the employee's final paycheck ready so that he or she has something positive to carry away from the meeting.
- Explain your job reference policy. If it is your policy to provide only job title, dates of employment, and salary history, now is the time to say so. If you normally give more information when it is requested in writing by a qualified person (like a prospective employer), tell the employee. In some states, you may be required to provide a service letter on request. In some cases, you may be willing to provide a satisfactory job reference or to tell prospective employers that the worker resigned voluntarily, if the employee is willing to sign a release form.
- Collect what's yours from the employee. You'll need to collect any keys, cell phones, company car, company credit cards, or any other property belonging to you from the employee. You may want to do this now, or you may want to let the employee "save face" by allowing him or her to return these items to you at a specific later date.
- If the employee was working on an important project or has any important files, records, or property belonging to a customer in his or her possession, you'll want to make arrangements to get these back. We suggest that you make it clear that the payment of any severance pay or other benefits after discharge depends on the employee's cooperation with you in this area.
Handling voluntary resignations
If one of your employees informs you that he or she is leaving, you should set up a time to discuss the matter, and then follow basically the same procedures that you would follow if you were the one who was ending the relationship.
Make sure you try to find out why the employee is leaving. It's important to find out the worker's true reason for leaving, because:
- If there is a legal challenge by any party, you may need the information to prepare a defense.
- In a government investigation, you might have to compare your past record with the action in question, or compare future actions with this one.
- The information may be useful if the employee later files for unemployment benefits, and you want to contest them.
- If more than one employee leaves, you want to know if there is a pattern. Turnover is costly, especially for small business owners who have to take time away from their customers to search for, hire and train a replacement. If possible, you want to get the worker's reasons for leaving in writing and keep them in your permanent records.
Benefits for terminated employees
Under federal and state laws, employers have certain legal obligations to the employees they fire with respect to continuing health coverage, unemployment insurance benefits, and vested retirement benefits. Apart from those benefits, the law generally does not require employers to provide severance payments or other benefits to the employees they fire. However, it is not uncommon for employers to agree to provide such payments or benefits as a matter of company policy or pursuant to a negotiated separation agreement with a fired employee.
Warning: Be careful in discussing with employees the benefits, if any, to which they may be entitled upon their leaving your business. More than a few employers have found themselves being sued for benefits they did not intend to provide merely on the basis of some well-meaning comment about benefits that might be available to terminated employees. Refrain from discussing benefits until you know for sure what your obligations will be under the policies you choose to adopt and any applicable laws.
Discussed below are the principal benefits to which fired employees may be entitled under federal and state laws and with respect to which the employer may have some responsibilities.
Continuation of health benefits
Under the federal law known as COBRA, employers with group health plans must offer most fired employees and their spouses and dependent children the opportunity to continue to receive health insurance benefits at the employee's own cost.
Employees who are fired for gross misconduct are not eligible for continuation coverage under federal law. The law does not define the term "gross misconduct." At a minimum, the term likely encompasses felony offenses and other intentional acts of misconduct that are committed in connection with an employee's job.
The federal law does not apply to employers having fewer than 20 employees. However, some states have comparable laws that may apply to employers that are not subject to federal law.
Unemployment insurance benefits
Employers must notify each fired employee of the employee's possible eligibility for unemployment insurance benefits. An employer who fails to provide this notice runs the risk of being sued if the employee is eligible but fails to timely file a claim. In most states, however, an employer can avoid this obligation by posting state-supplied information about unemployment benefits at a place where employees are likely to see the information.
Employers have a right to contest a former employee's eligibility for unemployment benefits. Because claimants are generally presumed to be eligible for benefits unless their former employer raises timely objections, you may be able to include a promise not to contest the claim in a negotiated severance package. However, because your payroll tax rate is affected by your past claims experience, this is not a choice that should be made lightly.
Vested retirement benefits
Fired employees remain eligible to receive any pension or profit-sharing benefits with respect to which they have vested under the terms of the plan.
Be especially careful whenever you are considering firing an employee who is about to vest with respect to benefits under company retirement plans. Federal law prevents an employer from firing an employee solely to prevent the employee from qualifying to receive benefits under most pension, welfare, and deferred compensation plans.
Firing an employee who is about to vest creates two risks. The first is that the employee may sue to recover the benefits to which he or she was about to become entitled. The second is that the federal government may hit you with penalties and your retirement plan conceivably could lose tax-favored status.
Accordingly, you should thoroughly document the reasons for the firing to avoid any appearance that the firing was used to avoid having to pay the employee benefits.