Firing an employee may be a necessary act but it has the potential to be a legal minefield. Terminations can lead to legal claims based on a variety of potential allegations, including discrimination, retaliation, wrongful discharge, wage and hour liability, defamation, and so on. Mishandle firing an employee, or terminate someone in the heat of an argument without paving the groundwork, and your business and its employees could be paying for it for years to come. 

And, yet, firing an underperforming or troubled employee may be the best move for your business. It may improve morale among better performers. It may rid the business of a cancer.

'Firing an employee is both the worst day of your life and the best day,' says Jerry Osteryoung, director of outreach at the Jim Moran Institute at Florida State University's College of Business. 'That's because when you let someone go it affects their family and their livelihood, and it's tough. But it's also the best day of your life because, normally, if you have to fire someone, that person has been a pain in the butt for a while, and it's time for them to go.'

In business, however, it's important to make sure that you prepare well before firing an employee and that you follow the law and your own company procedures. The following pages outline steps to lay the groundwork for firing an employee, holding a termination meeting, and following up after termination. 

How to Fire an Employee: Prepare to Fire an Employee

The groundwork for an effective termination of employment should be laid long before the termination decision. 'The biggest mistake people make is they don't prepare for it. They don't work with the employee ahead of time to help the employee succeed so that firing is a last resort. People tend to put up with behavior until they say, 'I'm through,'' says Nancy M. Cooper, chair of the labor and employment group of Garvey Schubert Barer, a law firm based in Portland, Oregon.

A firing should never be a surprise. If you have worked with an employee to identify problems, goals, and performance metrics, that employee is going to know whether they measure up or not. 'Once you go through everything and see that the employee is still not meeting expectations, nobody is going to be shocked,' Cooper says.

The first step is to make sure you have documented your efforts with the following:

  • The company's employment application
  • An employee handbook describing unacceptable employee behaviors
  • Policies describing the company's right to discipline and terminate employees
  • Job descriptions or other documentations that specify performance expectations
  • Performance appraisals
  • Records of disciplinary counseling and formal disciplinary action
  • Written documentation of the findings of any internal investigation related to the termination

Since these documents will be legally discoverable in the event a former employee sues the company, it is critical they be clearly written, accurate, and do not contain 'inflammatory' statements about the individual.

It may be best to consult with a human resources attorney before taking steps to fire an employee to make sure you are covering the bases. 'The number one thing you have to make sure of is that you don't violate any laws,' Osteryoung says. 'There are a lot of plaintiff's lawyers who love to sue businesses because they failed or did not follow the correct procedures in firing an employee.'

How to Fire an Employee: Think Through, and Review, the Decision to Terminate

 An employee should never be fired on the spur of the moment, and especially not in the heat of anger, Cooper says. 'You want to take some time to reflect,' she adds. A decision to terminate employment should be reached only after careful review of all relevant facts and documents. 

An important, but often neglected, step in the termination process is obtaining a thorough and independent review of the decision.  Sometimes that involves calling in another set of eyes and ears – maybe the direct supervisor, a member of the human resources department, or in-house or outside legal counsel.  'If it's an incident, talk to people and make sure the employee you're focusing on is really the one to blame,' Cooper says.

The purpose of the independent review is to make sure that:

  • The firing is justified by the facts
  • The firing is legal under all applicable laws
  • The decision to fire follows company policies and procedures, such as those in the employee handbook
  • The decision to terminate is consistent with the company's handling of similar situations in the past, regardless of race, gender, age, etc. of the employee being discharged.

'You want an audit trail. You want to document everything,' Osteryoung says. 'You can't just say, ‘I've tried to talk to you 16 times already.' There are a litany of things you need to do.'

How to Fire an Employee: Hold a Termination Meeting

Even under the best circumstances, an employee discharge can be a difficult and stressful situation for the employee and the managers involved.  'More often than not the problem is that entrepreneurs wait too long to fire an employee,' Osteryoung says. 'If you have a problem employee, they don't get better. They can affect the morale of your whole workforce because others are thinking, ‘Why aren't you doing something about this problem employee?' It's like a cancer. The sooner you surgically remove it, the better.' 

By following the steps below, managers can reduce their anxiety about conducting an employee termination and can help the employee deal with the termination in a healthy way.

Prepare for a termination meeting. A termination meeting should be carefully planned in order to minimize potential legal liability, protect employees and company property, and reduce emotional distress to the employee being discharged, experts say.  Issues to consider include:

  • Why hold a meeting? A termination meeting should be held face-to-face. Firing an employee via e-mail or text or over the phone is likely to anger the employee and contribute to feelings that they are being treated unfairly, Cooper says. By meeting in person, you are showing the employee respect and treating them the way you would want to be treated.
  • Who should attend? Generally, at least two company representatives should be present. The employee should not be permitted to bring a lawyer, co-worker, or family member to a termination meeting. 'Always have a witness, preferably other management or someone at a higher level than the employee,' Cooper says.
  • Where will the meeting be held?  It is best to conduct the meeting in a private, neutral location, such as a conference room. If the office is a big, open area, then try to schedule the meeting after hours to provide the employee some privacy, Cooper says. The company representatives should be seated by the door so that, if the employee becomes hostile, he or she cannot block the exit, experts advise.
  • What will be said during the meeting?  A script should be prepared before the meeting so that the meeting can be kept short, not more than 5 to 10 minutes. 'Keep it factual,' Cooper recommends. 'The one who will be emotional is the employee.' The message should be simple: the employee is being terminated because they have failed to meet performance expectations or address other problems that you had already outlined with them.
  • Are special security measures needed?  In extreme situations, it may be appropriate to have security personnel standing by, depending upon how the employee is likely to react. At a minimum, have the employee's passwords, accounts, access to buildings, computers or other company assets disabled before the meeting to prevent the employee from doing damage to the business after they are fired.
  • How will logistical matters be handled? Make sure to address how the employee's final paycheck will be delivered, how company property should be returned, and how long benefits will be continued.
  • Will severance pay be offered in exchange for a release of claims?  A company that does not have a severance plan subject to the Employee Retirement Security Income Act (ERISA) may want to consider offering the employee severance pay.  Generally, severance should only be awarded if the employee agrees to sign a separation agreement that releases the employee from any claims against the company, Cooper says. 'If you're just paying severance out of the blue and you don't get a signed release of claims, you have no protection,' she says. She advises against issuing severance unless it is a risky termination because that sets a precedent for other employees to expect severance if they are fired. 

How to Fire an Employee: Follow Up After the Firing

The terminating managers should attempt to keep the meeting professional, brief yet complete, under control, and humane.  You may want the employee to be escorted back to their office after the meeting to collect personal belongings and then be escorted out of the building.

One of the most important things to do in the termination meeting is to treat the employee with dignity and respect.  This can be demonstrated by showing sensitivity to the employee's reactions, wishing the employee success in future endeavors, and being willing to speak with the employee after the meeting to answer questions about his or her transition out of the company. The terminating managers should also write down what was said at the meeting, in the event of a lawsuit.

Employee discharges don't end with the termination meeting.  Several tasks have to be effectively managed after the termination, including:

  • Informing remaining employees on a need-to-know basis about the termination
  • Handling reference requests appropriately, consistently, and in a way that will reduce the potential for lawsuits
  • Dealing with claims for unemployment insurance benefits or other benefits so as not to trigger further problems for the organization

These post-termination activities should be handled with the same degree of planning and care as the actions before and during the termination meeting. 'Once you let an employee go, you immediately have to have a staff meeting with those who need to know,' Osteryoung says. 'Tell the staff briefly what happened and why. You need to stop the rumor mill very quickly. But you don't want to provide too many specifics.'