“You’re Fired” – The Importance of Proper Termination Procedure

Terminating employees is never easy.  Simplify the process with a clean break that does not create legal exposure for your small business.  Here are some quick tips for the next time you are tasked with the unfortunate responsibility of letting someone go.

- Abide by internal disciplinary and termination procedure

Generally speaking, internal policies with regard to disciplinary and termination procedure do not create contractual obligations with which employers must comply.  However, termination in violation of such procedure often leaves employees feeling “wronged,” and with or without merit, is the most common reason employees seek out legal counsel after being let go.  While a claim brought strictly on such basis is unlikely to succeed, avoiding litigation is half the battle.  Therefore, it is wise to abide by internal policies or avoid this complication all together by including little if anything in your employee handbooks with regard to grounds for termination and progressive discipline.

- Provide notice of termination in writing

Many legal problems arising from termination stem from ambiguity over whether and when an employee was actually let go.  Be clear and unequivocal by providing notice of termination in writing.  Short and to the point is always best.

- Provide COBRA notice

If your small business provides group health insurance and has 20 or more employees, you have no doubt heard about COBRA.  Under COBRA, employers with qualifying group health plans are required to give employees (and covered spouses and dependents) written notice of their COBRA rights upon termination.  Employers who fail to provide requisite notice may be subject to penalties, and employees who do not receive such notice frequently make complaints to the Department of Labor.

-  Consider offering severance

Except in certain circumstances involving mass layoffs at large companies, employers have no legal obligation to pay severance.  Still, it’s often a good idea to offer severance money in exchange for a general waiver of the terminated employee’s right to sue if you suspect a litigation risk.  Be advised, however, that the law imposes extremely specific requirements on the wording of severance agreements and the rights which employees can actually waive.  Therefore, consultation with an employment law attorney is strongly advised before engaging in severance talks with any current or former employee.

- Immediately pay the employee’s final wages.

Labor Code 201 requires employers to pay terminated employees their final wages immediately upon separation of employment, and Labor Code 203 imposes daily penalties for each day payment is not made.  Despite the clear-cut rule, many employers fail to comply with section 201 and wind up paying thousands of dollars in penalties.  Avoid this common blunder by having final checks ready at the time you provide notice–that way you can hand the employee his or her check and avoid any possibility of complaints.

While the above guidelines generally apply, there is no substitute for consultation with a local employment law attorney when it comes to assessing and managing litigation risk.  The attorneys at Phillips & Associates are highly knowledgeable and experienced in all areas of employment law.  Give us a call to discuss how we can help grow and protect your small business.