One of the most difficult aspects of running a business can be managing the personnel, especially when it comes to terminating employees. Some people say that the three most important things in life are your health, your family, and your job. When the time comes for a business to take away the last one, it’s impossible to overstate the importance of handling the situation in a way that protects the company from any adverse reaction by the terminated employee. If a termination isn’t handled properly, it can cascade into a serious—and costly—legal battle. The following tips are merely examples of some best management practices that, when not utilized, can lead to expensive litigation.
As they say in football, the best defense is a good offense. Proper preparation for a smooth, successful, and effective termination (i.e., one that doesn’t embroil the company in a lawsuit for the next several years) begins long before the need to terminate an employee ever arises. Although it may seem pessimistic, measures to ensure the company’s well-being after an employee’s termination should be implemented at the outset of her employment.
First, before hiring anyone, your company should decide whether you will have employees sign noncompetition agreements. You should take into account a number of often-overlooked considerations, including the nature of employees’ job duties, the location of the company, the location of employees, and the nature of the company’s business. Too often, employers attempt to create a “one-size-fits-all” noncompete that covers all employees, but that approach is rarely effective. Generic agreements usually end up being overly broad, and courts will rarely enforce an overly broad noncompete.
Before insisting upon a noncompetition agreement, employers must also become familiar with any variations in the laws applicable to the different jurisdictions in which they conduct business and employ workers. A company operating solely in one state needs to be familiar only with the law governing noncompetes in that state. However, if your company’s business operations extend outside the geographical limits of your home state, you should realize that there can be significant differences in the applicable law that, if not addressed, can result in the nullification of your noncompete provisions.
For those reasons, it’s best to avoid using a generic document that attempts to address all of your employees. Rather than envisioning a single company noncompete, you should approach noncompetition agreements on a “per employee” basis. Moreover, you should regularly audit your personnel files—at every level of labor and management—to ensure that all employees have signed their respective noncompete agreements.
Another common mistake is to entrust the responsibility for gathering executed noncompetes to a single employee (usually some type of management position) who, when the time comes to terminate her, has mysteriously never executed her own noncompete. Although it can be a bit of an administrative headache, failing to carefully heed this advice can have disastrous effects on your business if a key employee must be let go.
Once the employment relationship has begun, one of the best tools you can use to proactively protect your company from a posttermination lawsuit is to follow consistent procedures for documenting employees’ conduct and performance. This affords you a documented system of effectively tracking the trends in employees’ behavior, and it should account for both overall performance and specific instances of problematic behavior.
Preparing forms that allow managers to quickly and efficiently document incidents of misconduct and establishing guidelines for periodic employee reviews are among the most common methods used to track employee performance. However, if managers don’t use them properly, you can end up with more problems than you would’ve faced if you had no policies or procedures at all.
For example, simply conducting annual performance reviews isn’t the same as having an effective review policy. A performance review shouldn’t be a meeting in which the company focuses solely on the positive aspects of an employee’s performance. While it’s always recommended that you commend and reward good performance, it’s a common mistake for employers not to take advantage of the performance review as an open and nonconfrontational opportunity to provide honest feedback on an employee’s shortcomings.
An effective review should address and document an employee’s shortfalls while simultaneously encouraging the employee by suggesting ways to improve his performance. The reality is, some people simply aren’t comfortable delivering critiques or criticism. They aren’t the managers who should be conducting employee reviews for your company.
ineffective review policy, much like the result of not following an incident-reporting policy, means you won’t have the evidence required to defend your adverse action against an employee if you need to terminate him. Imagine the argument the terminated employee’s lawyer will make to a jury when she asserts he was actually fired on the basis of some type of illegal discrimination: “Not only is there no evidence of poor performance by this employee, but there is actually an absence of any evidence even though the company had a policy of documenting the kinds of problems they are now asserting the employee had.”
Again, although the process of documenting employees’ troubles can be a managerial headache, it’s worth the time and effort. Employers that find themselves in the midst of a lawsuit with a problematic former employee universally regret their failure to adequately document the employee’s problems.
Along with having an effective review policy, you should base the decision to terminate an employee on objective criteria whenever possible. Management must predetermine the criteria employees will be evaluated on and include that criteria in whichever type of performance review is used. That ensures there’s a direct connection between the documented evidence of an employee’s performance and the ultimate basis for termination. If possible, measureable metrics should be used to identify an employee’s shortfalls and establish goals for improvement.
That isn’t to suggest there are no “intangibles” in the employment relationship. Often, issues like incompatible personalities, quick tempers, pet peeves, and myriad other normal human emotions and characteristics cannot be ignored. A well-crafted set of performance criteria can effectively take all those considerations into account without endangering the company by making it appear overly subjective (and therefore susceptible to allegations of underlying discriminatory intent).
Because a workplace is a social environment, the well-oiled machine of a company’s operations requires compatibility and harmony among its employees. Thus, it’s very reasonable to evaluate an employee based on how well he gets along and interacts with other employees and customers. Although getting along with others is a reasonable expectation, it’s also highly susceptible to being challenged as a pretense for an underlying discriminatory motive. Ensuring that you have a documented history of an employee’s social problems in the workplace is crucial if you have to defend a lawsuit by a former employee whose temper in the workplace has translated to a temper in the courtroom.
Unfortunately, there’s no “best way” to end your relationship with an employee. Sometimes, the employment relationship is forced to end because of the company’s economic circumstances; other times, an employee’s work habits are incompatible with management’s expectations of a harmonious or productive work environment. Whatever the cause, a former employee’s ability to retroactively manufacture a discriminatory basis for his termination shouldn’t be overlooked or ignored.
Through careful management and planning, it’s considerably easier to avoid posttermination headaches. A problematic employee hurts the bottom line, but a disgruntled former employee can sink the whole ship. Effectively managing company policies and monitoring compliance with them can be the key to avoiding that unfortunate outcome.
About: Idaho Employment Law Letter:|
Excerpted from Idaho Employment Law Letter written by attorneys at the law firm of Greener Burke Shoemaker Oberrecht, P.A.. IDAHO EMPLOYMENT LAW LETTER is not intended to be and should not be used as a substitute for specific legal advice, since legal opinions may only be given in response to inquiries regarding specific factual situations. If legal advice is required, the services of counsel should be sought. Contact the attorneys at Greener Burke Shoemaker Oberrecht, P.A.