Firing employees is often painful, complicated, and expensive. What are the legal guidelines for firing? Must I always pay severance? Can I fire someone simply because of a bad attitude?
No federal law requires the payment of severance unless you have promised it, according to Ira Michael Shepard, a partner at the Washington, D.C., law firm of Schmeltzer, Aptaker & Shepard, and coauthor of Without Just Cause: An Employer's Practical and Legal Guide on Wrongful Discharge (The Bureau of National Affairs, Washington, D.C., 1989, $95; 800-452-7773). But if you employ more than 20 people, the federal government may require you, under COBRA, to offer health-care-continuation coverage. The U.S. Chamber of Commerce (202-463-5514) publishes a helpful overview of COBRA. Also, a few states' laws entitle discharged employees to receive continued health benefits. The U.S. Labor Department (202-523-8305) can direct you to the proper state agency to contact for information.
No state or federal law restricts you from dismissing someone for having a bad attitude if you employ him at-will -- that is, if you signed no contract with him or a representative union. But discrimination laws require that you apply performance standards across the board. So if you fired only workers with bad attitudes who are over 40, you're in trouble.
Many states' courts prohibit firing an employee for a reason that counters public policy. "You can't use bad attitude as a pretext to fire someone if the real reason is that he filed a workers' compensation claim, for instance," Shepard says. Or if it's really because he was a whistle-blower or refused to break the law -- to drive an uninspected truck, say.
Nor can you fire an at-will employee if you guaranteed him or her job security in an implied contract. Courts may read an implied contract into such verbal statements by managers as, "As long as you get the work done, Jill, you'll always have a job here." Even long-standing practices may count: if, in the company's 30-year history, you've never fired anyone unless she took a torch to the office, you've set a precedent, and you may court trouble by suddenly getting tough and discharging people for "negativity."
But the biggest risk to employers is an employee handbook or other published material that lists reasons for employee termination. Most states will consider that handbook an implied contract. If you fire someone for an unlisted reason, that employee could sue for wrongful discharge. Shepard's book includes an appendix of state exceptions to at-will law. And Rand publishes a booklet that discusses the at-will doctrine in detail: "The Legal and Economic Consequences of Wrongful Termination" (1988, Santa Monica, Calif., $7.50; 213-393-0411).
"Management has to understand that whatever it writes in a handbook could be interpreted, and in most states now is interpreted, as an employee contract," Shepard says. "If you have no intention of adhering to your handbook, you shouldn't put one out." But a good handbook and strict adherence to it will help establish a record that may protect you in court. Sally Tassani, president of Tassani Communications, a $25-million Chicago advertising agency (see "Necessary Losses," February 1991, [Article link]), believes "you must document your policy in a handbook and make sure that policy is legal." That's an ongoing process, she cautions. "A handbook is not a static document; it's dynamic and needs to be kept up to date.
"Nothing precludes anyone from suing anyone," Tassani says. "You can't keep everyone happy, but you do the best you can. State your position clearly, make sure it's legally acceptable, and follow through, for the benefit of all your employees."