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In the Line of ‘Fire’: Preparation is the Key When It’s Time to Cut the Cord

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In the Line of ‘Fire’

Preparation is the Key When It’s Time to Cut the Cord
Perhaps you can fire any employee "at will," as the legal saying goes. And you may make it stick despite a lawsuit. But who wants an expensive lawsuit where legal costs mean you lose even when you win?

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Even as the labor pool remains tight, there are a lot of labor lawsuits going around. More than half the companies, big and small, surveyed by Society of Human Resource Management reported they had been taken to court by an ex-worker in the previous five years. Half those suits involved some kind of discrimination charge. All of them resulted from terminations.

Average Suit Costs Thousands
Wrongful termination suits cost companies an average of $13,200 each, according to Jerald Greenberg, an Ohio State University professor who has made a study of termination practices. In light of those costs, the $500 to $1,000 fee for an employment lawyer to look over an employee’s file before termination seems money well spent. How you proceed with a termination usually will influence whether you are sued or not.

First, a word about labor law, which intends to protect both employer and employee. Almost all states recognize that the basic concept of "at-will" employment remains the employer’s right to fire a worker for any or no reason. However, you are also bound by federal laws and some state statutes which protect workers from discrimination based on age, sex, race and disability.

Actually, in the hazy vagary of labor law, the basic at-will concept, while not overturned, has been seriously eroded in most states. Now the accent is on "implied contract" which infers job rights even though no explicit contract exists. This implied contract becomes stronger with tenure – the longer a worker is employed, the more likely a court will assume that there is an unwritten binding agreement that discharge will not be without cause.

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Beware the Protected Groups
Tread carefully when the termination candidate is one of the "protected" groups such as women, older folk (40 or over), minority race or covered by the Americans With Disabilities Act (ADA). In all such cases, consult a labor lawyer before you dismiss.

It also gets very sticky with an employee who has an alcohol or drug addiction problem, both of which are covered by the ADA. A worker can claim poor performance stems from an addiction. You should require that the worker offer specifics on how he can improve. While the ADA requires that you make "reasonable accommodations" for the disabled, you do not have to lower performance standards because of a worker’s addiction.

A written policy presented to new hires should state: "We retain the right to discharge employees at any time, for any reason, with or without cause." One survey shows that having such a statement lowered from 82% to 63% the share of employees who believe it is illegal to fire someone for a cheaper replacement.

As with all employee documents, it’s wise to get employees to sign that they have received that written policy.

Poor-Performance Defense
 Eventually you may very well be sued for wrongful termination after discharging a worker. Ultimately, other than in an economic downsizing, the only defensible cause for firing a worker is poor performance. You must have given the employee a clear picture of what his performance should be. When he falls short you must tell him so in writing and then provide a reasonable period for improvement.

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You should conduct a periodic performance review for every employee, putting the result into his file. Too often such reviews are just routine praise. Instead, be tough in job evaluations, advising where and how performance can be improved.

After a warning, how long should you give an employee to shape up? Most labor experts suggest a month. More time probably is needed for a substance abuser. But do stick to your improve-or-else deadline. If you delay, a worker may later claim that while you warned him about his performance, you apparently condoned it by not taking action as promised.

Have Employees Sign
So, document both expectations and the probation terms. In every case have the employee sign that such documents have been received.

Some labor attorneys report that two-thirds of their discrimination clients complain of abusive treatment when they were fired. Such treatment has included being ushered off premises by a uniformed security guard.

In Person and Simple
When you break the bad news, do it in person and simply. Look for neutral turf, not your office where it would be difficult to conclude the meeting if the employee wants to linger. If there is no neutral site, then do cut the cord in the employee’s workplace, but assure privacy. Such a session usually should be limited to five or 10 minutes.

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Tell the employee why you are discharging him without being overly critical. He deserves a reason and telling him may defuse his anger. Recent research shows that employees are 10 times more likely to sue when they are fired without being given a reason.

Also important to the termination meeting is information about worker benefits, such as continuing health insurance (check on the legal requirements) or any severance package. Cover the benefits vocally and also in writing, which will help the worker remember what happened during what is often an emotional meeting.

Defusing Impact on Others
How you fire also will affect other workers. Especially in a small business like a tire dealer or retreader, the staff is almost like family – hurt one, hurt all. The remaining employees need to know enough about the termination to realize that you have been fair, but all without going into detail. Bad-mouthing an ex-employee could prompt a defamation suit or at least turn off other employees.

Another tip on firing: do it early in the week if possible to prevent the employee from brooding over it during the weekend. And it’s better to fire at day’s end or at least in the afternoon to avoid providing a lunch-time worker discussion topic.

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Never fire without being ready. Have the employee’s final paycheck cut and ready to present, including back pay, earned vacation and severance pay if applicable.

Even without an eventual lawsuit, it’s costly to make any termination other than those needed in downsizing. Including such expenses as recruiting, selecting and training, the U.S. Department of Labor estimates it costs a company 30% of a new hire’s annual salary to replace an employee.

Today’s employer-employee relationship is more like dating than marriage. It’s not like the kind of commitment your father had when he worked for a company for his entire career. So, remember that with employees, nothing is forever. Sooner or later a firing becomes necessary somewhere among your staff, and you might be sued.

The best advice? Document, document, document.

Firing is strictly a negative procedure and, unlike many other business actions, does not produce anything for your business. So, the cost of firing such as legal, severance package and hiring a replacement comes right off The Bottom Line.

John Rogers is an editor, a regular writer for business magazines, and has authored two frequently reprinted books: Store Planning and Store Operations. His monthly column – Business Sense – appears in Tire Review.

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