By: Andrew K. Jacobson © 2004, Bay Oak Law
A worker leaving involuntarily is often a heart-wrenching experience for both employer and worker. While anyone who has ever been employed can sympathize with the employee's loss of wages and benefits, the employer is also often troubled. A smart employer will try to avoid such troubles before even hiring someone.
Protecting the Employer Before a Termination Occurs: The Employee Manual
In a fast-moving economic era, employers can rarely afford to promise someone a long-term contract. While California law presumes a job is at-will (Cal. Lab. Code ¡× 2922), it is easy to lose that right. Careless promises that no one would lose a job except for cause can bind the employer's hands in economic straits years later. Employers have unwittingly created enforceable contracts through such concepts as oral contracts, promissory estoppel, and the like.
Protecting the Employer.
An employer needs to take early steps to protect itself. An employer needs to have an employee manual that sets forth the conditions and expectations of the job. A new worker should have to sign to acknowledge receipt of the employee manual when the job begins, as well as a statement acknowledging that following the provisions of the employee manual is a required part of the job. An explicit part of that manual should be a written statement that a job is at-will and may be ended for any cause, or no cause, at all, so long as there is no illegal reason. "Illegal reasons" include discrimination on the basis of religion, race, national origin, age, sex, disability, pregnancy; termination based upon protesting illegal actions; and the like. This portion of the employee manual should make clear that this at-will provision can only be modified in writing by only the President or other top manager.
It is helpful to sometimes remind workers of the at-will nature of the job. Keep copies of the reminders as potential evidence. Also, the laws of employer-employee relations are constantly in flux. When one side gains a victory, the other side usually finds a way to level out the playing field again. Periodic checkups by a professional are as advisable for employee manuals as they are for people.
The employee manual should make clear that a range of discipline, including termination, is possible for any offense. While a few years ago many companies instituted plans of "progressive" discipline, with the sanction becoming more severe with each act, some employees have succeeded in convincing courts that the employer breached an implied promise of progressively disciplining employees, so that an employee cannot be terminated for a first offense, no matter how serious. Avoiding progressive discipline policies protects not only the employer, but potentially other employees.
Maintaining a Fair Workplace: Constructive Termination.
Another way an employer can protect itself is to maintain a fair workplace. A serious problem that employers can face without knowing it is constructive termination, which happens when an employer creates working conditions so intolerable that the employee is forced to resign involuntarily. While this seems like a good idea in theory, it usually turns out to be a serious mistake. A worker subject to such conduct can recover damages if the worker can show that the employer knew or should have known about the conditions. A grievance process, designed to air grievances in a fair manner, helps both the employer and worker.
Sometimes employee layoffs are necessary to the continued survival of the employer, and the jobs that the employer provides to the other employees. A layoff is a doubly-involuntary termination: neither the employer nor the employee wants it to happen.
When a layoff has to happen, a little advance work can pay off later. Layoffs should conform to business needs, not the preferences of management. While this sounds matter-of-fact, carrying it out can be hard. Friends cannot get preferential treatment. Most people prefer those similar to them. This similarity often correlates with impermissible reasons, such as age, sex, race, or national origin. They should evaluate potential layoff candidates for such vulnerabilities. For example, if one person in each department needs to be laid off, make sure that those laid off do not share some common, impermissible trait.
Also, investigate the factors unique to each candidate for layoff. Has that person complained of a harassing co-worker or a procedure that may violate the law? Has that person recently had a change in personal circumstances, such as having gotten pregnant, turned forty, married someone from a different race, etc.? Terminating that employee may invite a lawsuit for wrongful termination. A person independent of the manager making the decision should evaluate and confirm the decision. This may not avoid a lawsuit, but can improve the employer's chances later.
Sometimes an employer must fire an employee for cause. Like a layoff, a firing should be done by both the employee's supervisor and someone independent of the employee's chain of command. While an employer still wants to preserve the "at-will" aspect of employment, a firing implies termination for cause. That cause should be investigated, corroborated and documented. The employee should be directly questioned, if necessary, as to the reasons why a firing may be necessary. While an employee is not entitled to a full "trial" from the employer, a haphazard or biased investigation lends credence to the employee's charge later that the firing was for reasons other than those alleged. The employer should immediately document the reason for the firing for possible later use.
Informing the Employee.
No matter whether the employee was laid off or fired, an employer should make the leaving as comfortable as possible for the employee. The employee should be told in person why the job is ending, by the employee's supervisor and at least one other person independent, if possible, of the employee's regular chain of command. The employee should have a chance to explain his or her point of view, particularly if the employee is being fired. The observer should take notes of what is said. The employer's representatives should have ready all the documents necessary for termination, including final pay and explanations of the employee's benefits after termination, such as COBRA health care benefits, retirement accounts, and the like. An attorney or other human resource specialist should be consulted beforehand as to requirements particular to the business.
Severance pay is usually not required by law. However, an employer may consider doing so for the benefit of both the employer and employee. The employee, of course, gets some money to cover the time between jobs. Both the employer and employee sign a release of liability in exchange for the severance pay.
The release has both immediate and long-term benefits for the employer. The employee is happier, which can raise morale among the remaining employees. A release also removes the possibility of litigation later. If an employee declines to sign a release, then the employer has early warning that litigation is possible, and can act to reduce the possibility of litigation. The severance pay sum should be based upon several factors, including the possible risk, the state of the employer's coffers, and the length of the employee's service.