How To Terminate an Employee

It is never easy to talk about termination of employment. Whether an employee is being fired, laid off, or has resigned, the conversation is often sensitive and can be emotional. When handled poorly, these conversations may undermine employee morale and leave you vulnerable to a wrongful termination suit.

But that doesn't have to be the case. With proper planning, a successful employee termination can follow best practices, which can help you comply with applicable legal requirements and treat employees with kindness and respect. Here's what you need to know about navigating these sensitive situations.

What Is Termination of Employment?

The termination of an employee’s employment means that an employee's work with a company has ended. This may happen for several reasons, including layoffs, redundancies, leaving voluntarily, or getting fired. Each of these circumstances requires a slightly different approach and will present different options to the departing employee. For example, an employee who has been laid off may qualify for unemployment insurance, while someone who quit voluntarily or was fired with cause may not.

Types of Termination of Employment

Voluntary Termination

An employee deciding to leave a company on their own typically constitutes voluntary termination of employment. Voluntary termination is a type of expected turnover that may happen because the employee accepted a job offer elsewhere, retired, changed careers, or chose to leave for other reasons. The key is that it was not the company’s decision to do so.

Involuntary Termination

Involuntary termination typically means that an employer has initiated the end of the employee’s time with the company. It may be due to misconduct, poor performance on the job, or business circumstances unrelated to the employee, such as tighter budgets that require layoffs.

Layoffs vs. Termination: Is There a Difference?

A layoff is a type of involuntary termination. Layoffs usually happen for internal company reasons such as a budget cutback or a department closure. It is not the same as being fired or terminated with cause.

Reasons for Termination of Employment

Reasons for termination range from unfavorable economic conditions to violations of company policy. To ensure compliance, employers should understand the differences among the various types of termination and the relevant legal requirements in each case.

Performance-Related Terminations

Poor job performance can be considered termination for cause. For example, if an employee can't meet the job expectations or consistently demonstrates poor work quality, the business won't be able to function at peak productivity, and the employee may be fired.

Misconduct and Policy Violations

Misconduct and policy violations such as chronic tardiness, harassment, insubordination, theft or other criminal activity, or contract violations are often considered grounds for disciplinary action up to and including termination of employment. In these cases, employers should document instances of the behavior to keep on file in the event of a wrongful termination claim, or to use during an unemployment hearing.

Wrongful Discharge and Termination Policies

Termination is an uncomfortable process for everyone involved, and sometimes, a disgruntled employee may attempt to sue the company for wrongful discharge. To help prevent this, clearly state your termination policy in the employee handbook and follow it during any terminations while maintaining consistent communication.

Take note of any specific clauses in employment contracts or collective bargaining agreements that may impact termination requirements.

Understanding Wrongful Termination

Terminating an employee for an illegal reason constitutes wrongful termination, which may result in a lawsuit. Under federal and state law, employees may not be fired for reasons such as:

• Discrimination
• Reporting unsafe or illegal practices
• Reporting sexual harassment or other HR violations
• Taking protected leave

Careful documentation of your reasons for termination and activities leading up to that decision can help you avoid or respond to claims of wrongful termination. Employment practices liability insurance (EPLI) can also help offset financial liability related to costly claims.

Employment at Will

In every state except Montana, the employer/employee relationship is considered "at-will employment" unless the employer offers a contract. At-will employment means that either party has the right to end the employment relationship at any time. The exception to this rule is that an employee may not be terminated for legally protected reasons such as exercising a right, reporting unlawful activity, a discriminatory reason, or where a contract of employment exists.

Notice of Termination

Under at-will employment, employers are usually not required to give prior notice of termination. However, the WARN Act does require employees to be notified in advance in the event of a mass layoff or factory closure. In addition to the WARN Act, there are several similar state laws that may be even more restrictive and would apply in other employment situations. Some employee contracts may include a clause stating a notification period before termination.

Final Pay Related to Termination

Although severance pay may not be required, it can be a good faith practice that helps establish mutual trust in the workplace. Many employers offer severance packages to employees who leave the company through no fault of their own. The severance package compensates for lost wages and may include extended health benefits, job placement assistance, or other support for departing employees.

Severance packages should be reviewed by your company’s legal counsel.

Best Practices for Terminating an Employee

Terminating an employee is often a complicated, emotional process, and conversations can be challenging to navigate during this time. As you interact with departing employees and adjust your teams, you also need to verify compliance with legal requirements and ensure thorough documentation.

A separation of employment checklist can help you manage these logistics and create a respectful, consistent termination process. Below are 5 things to consider as you establish your protocol.

Preparation and Documentation

The decision to fire an employee is never made lightly, but it may feel sudden and unexpected for the departing employee. It is helpful to have thorough documentation of your reasons for the decision. These may include problem behaviors, poor performance reviews, or written warnings. Bring the documentation to the employee termination meeting and review it together to explain your decision.

You should also prepare a termination document that lists specific next steps for the employee. Set concrete expectations around their last day of employment, when they should receive their final paycheck, what happens with unused vacation days, and other logistical issues.

Conducting the Termination Meeting

Determining how to fire someone who is not a good fit is one of the most challenging tasks of an HR manager. A step-by-step process can help you follow applicable legal requirements, protect the company from legal repercussions, and avoid becoming emotional. As you conduct the meeting, follow these best practices:

• Be truthful. Don't sugarcoat the process. Instead, share with the employee that they are being terminated and review your documentation with them to help them understand the reasons that led to the decision.
• Be respectful. Remember that the employee will likely be experiencing a wide range of emotions and anxieties as they consider their financial situation, job prospects, and next steps. Be sensitive and respectful as you answer their questions and communicate specifics.
• Be supportive. In addition to sharing details and next steps, offer the employee any resources that may be available to them, such as information about unemployment insurance, job searches, and other support. Your interaction in this scenario will influence how the employee describes their experience to others, which can impact your company's overall reputation.
• Be thorough. Ask the employee to return company documents, devices, keys, ID badges, and other property. Schedule a time to follow up if any of these items are at the employee's home.
• Be concise. A termination meeting shouldn’t take a lot of time. Be brief, precise, and to the point, and don't waver on your decision.

Scripts for Termination Meetings

It's never a good idea to ad-lib a complicated conversation. Using a script during the termination meeting helps you cover all relevant information and remain professional.

Speaking intentionally can also help you avoid a wrongful termination lawsuit by clarifying your reasons for the decision. Your script should:

• Set expectations: "Thank you for coming in. Unfortunately, I have some bad news to share."
• Clearly state the outcome: "We're terminating you. Today is your last day with the company."
• Review reasons for the decision: "As you know, we have a zero-tolerance policy for harassment, and we have documentation of a violation." You don't have to offer a specific reason if the termination is without cause. Instead, you could say, "We're ending your employment as part of a series of layoffs."
• Communicate next steps: "You can expect your last paycheck next Friday. Here is some information about your severance payment package, COBRA, and some resources to help you begin your job search."
• Ask for company property to be returned: "Please turn in your laptop and ID badge by the end of the day."
• End the meeting: "If you have additional questions, please contact me."

Things To Avoid When Terminating an Employee

The termination meeting is not the time to chat with the employee, offer sympathy, or get caught up in an emotional exchange. The decision has been made, and the topic is not open to discussion. Avoid saying things like:

• "I understand how you feel."
• "What do you plan to do next?"
• "This is really hard for me."
• "I'm sorry." (Unless the termination is a result of downsizing or layoffs)
• "You have always had a problem with your temper." (This is a character judgment, not a documented offense)

Every step of the termination process should be carefully planned in compliance with all legal requirements. Avoid the following mistakes that could create problems:

• Don't hold a termination meeting without a witness. Have an HR representative or other neutral third party in the meeting to help keep the discussion on track and serve as a witness. This helps to ensure that the meeting is fair and unbiased.
• Don't make it about you. The employee is already going to have a difficult time. Don't make it worse by explaining how hard it is for you or how you wish it could be different.
• Don't forget to remove access to the company's network. A disgruntled employee may act rashly. Prevent any potential problems by removing access rights immediately.
• Don't drag the meeting out. Keep the termination meeting short and to the point. Don't get caught up in emotions or allow the employee to bargain with you for an alternative outcome.
• Don't hold a termination meeting without documentation. To avoid a potential wrongful termination suit, always document the specific reasons for the termination and review them with the employee.

Post-Termination Steps

Following employment termination, HR may want to conduct an exit interview to review details like the employee's final paycheck, unused vacation, and extended benefits. Schedule this step immediately after the termination meeting so the employee can wrap things up quickly. Retain records according to your state's requirements.

Managers should also discuss what has happened with the departing employee's team. Give them an opportunity to ask questions, but always protect the departing employee's privacy by not sharing specific details. Instead, focus on the next steps, like whether the position will be refilled or whether duties will be redistributed among the team.

Communication and Support During Termination

Ideally, the communication process should start well before an employee is terminated unless it is for an offense that requires immediate dismissal. There should be a history of interventions, including discipline, performance reviews, and coaching. If the employee fails to improve, the termination meeting shouldn't come as a surprise.

While terminating an employee is unpleasant, it doesn't have to be antagonistic.

Regardless of how the employment relationship terminates, employees should be treated with kindness as they transition out of the company.

Providing Support and Resources

Once you have delivered the bad news, end the employment termination meeting by offering support and resources. For example, offer job search assistance if available, provide unemployment insurance guidance, explain how benefits will work, and review their severance package if they are receiving one. Try to end positively, thank them for their contributions, and offer encouragement.

Navigating COBRA

Employees terminated for reasons other than gross misconduct and participating in your group health plan may qualify for COBRA coverage. COBRA gives terminated employees the right to pay premiums and remain in the group health plan for a limited time as they make other health insurance arrangements.

As the employer, you are responsible for informing both the employee and the plan administrator of COBRA eligibility. Be sure you understand any state continuation of benefits regulations or special circumstances that may apply (for example, an employee who is disabled during the coverage period may qualify for an extension).

Successful Employee Terminations

Each employment termination circumstance is unique but follows a similar process. A successful employee termination is conducted legally, factually, and respectfully. This meeting may be the last experience the employee has as a team member with your company, so help them leave feeling respected and valued.

To provide the best possible experience, plan the meeting, use a checklist, and communicate strategically. How you handle termination will influence your company reputation and may also affect the outcome of a wrongful termination suit, so take time to understand all the legal ramifications and follow best practices in every meeting.

If you need additional help, consider working with an HR consultant to develop a consistent process and get support.