If an employee doesn’t have a written contract (this is different from an offer letter), then the employee is at will. This means the employee can quit for no reason at all or whatever reason he or she wants. The employer can fire the employee for no reason or whatever reason he or she wants, except for the following areas which are a basis for a wrongful discharge claim:
- Illegal reasons such as discrimination
- Public policy violations including retaliation against an employee who refused to do something illegal, who exercised their legal rights such as voting, or who blew the whistle
- Oral promises such as a promise of job security
- Breach of the covenant of good faith and fair dealing such as firing someone right before their retirement vests
You should have a well thought out, documented, and legitimate business reason for terminating an employee to protect yourself against a wrongful discharge claim. You’re typically free to lay off an employee if your business requires a reduction in force (there are special requirements for employers with more than 100 employees). Other lawful reasons include poor performance, insubordination, excessive absences, dishonesty, criminal activity, using drugs or alcohol at work, disclosing trade secrets, etc.
Before you terminate your employee, you should make sure you haven’t made any oral promises of longevity, you don’t have a written contract with the employee stating an employment term, or provisions in your employee handbook making promises of job security. You should also make sure there isn’t a whiff of discrimination or any other illegal reason in the decision. You should also check your employee handbook to make sure you follow procedures.
If the decision is based on an allegation such as sexual harassment, make sure that the decision to terminate is based on a well-documented and complete investigation with factual conclusions. You may also consider alternatives to termination such as reassignment, counseling, allowing the employee to look for a new job during work hours, etc.
You may want to consider offering a severance package to your employee. You don’t have to give a severance unless you agreed to provide severance in an employment contract or employee handbook. Normally the severance is commensurate with the duration of employment. You should make the severance conditional on the employee signing a release of all legal claims. There are special requirements for releases signed by employees who are 40 years old or older. You may also consider allowing the employee to resign, offer to make a favorable reference, or help the employee find a new job.
Before the termination meeting make a list of all the company property that the employee is to return. You may also want to enlist IT to make sure that the employee doesn’t delete or take emails and other electronic data. This should be done consistent with your policies.
Meet with the employee in private with another manager. State the reasons for termination, explain the benefits and severance, if any, and let the employee respond. Then just listen. Don’t argue. Allow a day or two to clear out belongings and to say goodbye, unless the employee is likely to be a menace. You may include a termination letter and provide it to the employee at this meeting. You may also want to remind the employee about their confidentiality and non-compete obligations. Make sure that you give the employee the final paycheck, benefits, and provide a COBRA notice. You must pay the final paycheck within three days if you terminate the employee or at the next regular pay day if the employee quits.