The time to terminate Featured

7:00pm EDT November 25, 2009

As an employer, you have the right to terminate employees at will or for cause, but you first need to take the proper steps to ensure that doing so doesn’t result in a lawsuit.

Whether you’re terminating because of poor performance, eliminating a position or laying off because business is slow, there are things you first need to think about to protect yourself, says Diane Crandall, director of compliance consulting services with ManagEase Inc.

“When exercising your at-will rights as an employer, make your decisions based on employees’ knowledge, skills, ability and attitude,” says Crandall. “And when terminating for cause, have a performance improvement plan in place that includes, in writing, what’s wrong, what needs to occur, a timeline and the results of not meeting the goals.”

Smart Business spoke with Crandall about how to keep your organization protected when terminating employees.

What steps does an employer need to take before terminating someone for substandard performance?

First, it is essential that you communicate with employees. You have to identify to the employee what he or she is or is not doing that is affecting optimal job performance. Without that communication, the employee may think that he or she is doing a fine job, while the employer is thinking, ‘Why isn’t that person getting these sales invoices processed?’

Communicate what the shortfalls are and that those areas need to be significantly improved on in order to retain the position. Give the employee a step-by-step, detailed list — a performance improvement plan — that sets forth exactly what that person needs to do. You also need to provide a timeline of when you expect to see results.

Finally, you need to make it clear what the result will be if the objectives are not met. Then have both the employer and employee sign it and give a copy to the employee so he or she knows exactly what is expected.

How important is explicit communication with the employee?

That communication is vital. It should never be a surprise to someone who is terminated because of performance. Employees should always know what is going on, what is expected of them and whether they are meeting expectations. Not doing so can result in a lawsuit if the terminated employee thought he or she was doing well and no one ever said otherwise. And having a performance improvement plan can make a difference in claims for unemployment insurance when the Employee Development Department calls to ask if you ever gave the terminated employee an opportunity to improve.

When is the best time to address problem behaviors?

It’s best to address them right away. If you don’t ever address it, and then three years later you do, the employee is going to wonder why it matters now when it never mattered before.

Addressing problems immediately can be positive for morale, as well. As an employee, it’s difficult to work in an environment when you’re there on time, doing your job, producing, and someone else who is always late and is only producing at 50 percent is treated the same as everyone else. If you eliminate those nonperformers, it can be a real boost to other employees.

When is the best time to terminate for cause?

The first is after the employee’s introductory period. After that time, evaluate their skills, contributions and attitude, and if it’s not a fit, it’s a good time to terminate. Or if you can see even in the first few weeks that things aren’t working out, terminate quickly and don’t let it drag on.

Another good time to terminate is at the end of a period when the employee has been given goals and those goals have not been met. And finally, if there have been repeated policy violations, or a major policy violation such as theft, that’s a good time to terminate.

How do you determine whom to lay off if you need to cut staff?

While you have a right to at-will employment, there are some stipulations. You can’t terminate because of race, age, gender or national origin. When you look at whom to terminate, step back and make sure that you’re not terminating them because they’re in a protected class. The key to doing the right thing is to make sure that you are making employment decisions based on knowledge, skills, ability and attitude. If you do that, you are usually going to be fine.

One common mistake that employers make when slating people for layoffs is doing it by seniority. Instead of simply keeping the most senior people, make your decisions based on knowledge, skills, ability and attitude. There may be some newer employees who are excited and engaged and are looking forward to growing with the company. Evaluate what each person brings to the company and make your decisions based on that.

Should an employer get outside help when making decisions about termination?

Yes. There’s a lot to consider, and there is a lot of thought that goes into doing it correctly. If you’re not familiar with best practices, you would be wise to consult an HR specialist, or even an attorney, especially if an issue has been brewing and you haven’t addressed it up until now. A lot of times, by talking to someone, issues will come up that you just haven’t thought of. An expert can share best practices with you and help you explore your options.

Diane Crandall, SPHR, is director of compliance consulting services at ManagEase Inc. Reach her at dcrandall@managease.com or (714) 378-0880.