How to avoid painful complications during employee terminations

by on May 29, 2009 · 0 Comment POSTED IN: HR Info Center

How to handle employee terminations and avoid costly lawsuits later

Yes, we’re in a recession, and yes, your company’s managers are facing tough choices right now when dealing with employee terminations. But as they rush to trim payrolls, they may be setting up the firm for lawsuits from angry and desperate ex-employees. These managers might need your help to ensure that the decisions they make today don’t come back to haunt them. Here are some questions you can ask:

If cuts are necessary, your C-suite and/or line managers will want to thin out underperformers. Nothing wrong with that, of course. But remind them that the rules are different for layoffs and employee terminations. An economic layoff isn’t about the employee doing something wrong. If managers decide to try to “build a case” against an underperformer before laying him or her off, they may be asking for trouble. Here’s why: a brand-new paper trail of performance problems may look like a pretext. Or it may suggest to a judge or jury that the company is simply creating the documentation to dodge the employee’s unemployment claim. Of course, if an employee’s performance problems have been well documented, the story’s different. In that case, the company may decide to fire for performance and avoid the hit for an unemployment claim. Key question to ask managers: Is it a layoff or a firing? If it’s a layoff, suggest that managers don’t muddy the waters by suddenly “discovering” and documenting performance problems. In the case of employee terminations, ask to review the documentation before the employee is notified.

If you are terminating for cause, remind managers that it may take time to build a case. If your top management is pressing for employee terminations right away, point out that the company may be at risk if it tries to short-circuit the process. If the case goes to court, a jury might conclude that the employee was railroaded.

Some well-intentioned managers may try to reassure remaining employees by suggesting that their laid-off peers were bad at their jobs or at fault. Managers who use terms like “dead wood” are inviting a defamation suit. That’s especially true for layoffs – which are explicitly not performance-related. Managers can also create problems if the “public” rationale for the cutback differs from what’s in the record. For example, if the employee terminations were performance-related and the manager says the decision was based on some other criteria, they may create an opening for a lawsuit later. Best approach: Managers should stick to the facts, simply pointing out that a layoff is “no fault” and that it would be unfair to the ex-employee to discuss the situation in detail.

If you’re laying off a number of people in a reduction in force, you must clearly state nondiscriminatory criteria and back up the fact that you consistently used them. For example, you can lay off people with the least seniority, or who make the most money. But if the former leads to disproportionate employee terminations for, say, Hispanic employees, you could be in for a “disparate impact” lawsuit. Likewise, if the latter leads to getting rid only of employees over 40, an age discrimination suit could be in your future. Ask to review the criteria that your managers are using for layoffs to be sure they don’t contain hidden land mines.

At the end of the day, cutbacks are painful for everyone. And managers need to move quickly to meet financial targets. But taking time to handle employee terminations right will pay off dividends later.

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