Rehiring the Fired: The IRS Does It; Should You?

If your company fired a worker for misconduct or performance problems, would there ever be a circumstance that would warrant rehiring that person?

The IRS seems to think so.

From January 2010 to July 2013, the IRS rehired more than 300 ex-staffers who had been fired for problems ranging from fraud to tax delinquency to accessing taxpayer records without authorization. And according to a December 2014 review by the Treasury Inspector General for Tax Administration office, several of those rehires were involved in new conduct and performance issues after they returned to the agency. 

In April, the U.S. House of Representatives passed the IRS Workforce Act (H.R. 3724), a bill introduced by Rep. Kristi Noem, R-S.D., that would prohibit the IRS from rehiring former employees who were previously fired. The bill now moves to the Senate, although the White House has said it opposes the legislation.

Situations That May Warrant Rehiring

Most HR experts and employment attorneys say there are circumstances that justify the rehiring of terminated workers, but only in exceptional situations. They say the most common instance when a company rehires is after it rebounds from a restructuring or downsizing that forced layoffs.

“Employers are often open to rehiring talented and productive employees who were let go in those processes,” said April Boyer, partner in K&L Gates’ labor, employment and workplace safety practice in Miami, Fla.

In the opinion of Sonya Rosenberg, an attorney with Neal Gerber & Eisenberg in Chicago, that’s the only circumstance where she has seen success in rehiring a worker whose employment was terminated.

“Under these kinds of circumstances, an individual may be grateful to have his or her position back and have an understanding of the reasoning for the initial decision,” she said. “They may return with a renewed commitment and even an increased sense of loyalty.”

In addition, there may be legal considerations that warrant the rehiring of someone who was fired. In a union setting, for example, it might make sense to rehire a fired worker to settle a grievance or prevent arbitration, said Christina Stoneburner, an attorney with Fox Rothschild in Roseland, N.J.

“By agreeing to return the person to work rather than proceed to arbitration, you may be able to have them come back under much better conditions than would be awarded by an arbitrator,” Stoneburner said. “For example, the employee might be returned without any back pay.”

Risks of Hiring Those Fired for Cause

Rehiring someone who was let go for cause, employment attorneys say, is almost always fraught with risk.

“Rehiring an employee who has been fired for cause is anathema to the old saying ‘Hire slow and fire fast,’ ” said Eric Meyer, a partner in Philadelphia-based Dilworth Paxson LLP’s labor and employment group. “The inherent danger is that your business is re-employing someone whom you previously determined was not fit to work for you. That could lead to any number of undesirable outcomes.”

Lowered employee morale is one key concern, Stoneburner said.

“If the employee was a chronic underperformer, chances are at least some of that person’s co-workers had to pick up the slack for that person,” she said. “In a lot of cases, they’re relieved when the person is finally fired. Bringing that person back will likely make those people unhappy. And if they see someone who was a bad performer get rehired, they may ask why they should bother to do a good job when you can do a bad job and still stay employed.”

When it comes to rehiring someone who was fired for misconduct, Stoneburner said, how can you know the same behavior won’t resurface?

“If you terminated an employee for lying in an investigation or on their application, how do you trust that employee going forward?” she asked. “If you bring back that person, how do you discipline anyone else in the future for a similar infraction? By hiring them back, you are tacitly admitting that either you were wrong or that your policies are really not that important to you.”

When assessing the risks of rehiring terminated employees, Boyer said, the key thing to consider is the reason for the termination in the first place.

“The employer must review the employee’s personnel file for performance, behavior and absentee issues and consider any separation agreement,” she said. “Rehiring policies should be reviewed for restrictions on rehiring. You should confer with the employee’s prior supervisors to assess any other risks. The candidate then should be carefully interviewed, including asking questions to assess why the person wants to return to the company.”

Legal Risks to Hiring the Fired

The legal risks to hiring someone who was terminated also depend, in part, on the reason the employee was fired, Meyer said.

“For example, was the employee fired for violating a drug or alcohol policy?” he asked. “Rehiring that employee could create employer obligations under the Americans with Disabilities Act. Was the employee fired for violating the anti-harassment policy? If so, the legal exposure under Title VII [of the Civil Rights Act of 1964]—as well as state and local equivalents—increases exponentially.”

Stoneburner noted that the rehired employee may return to bolster an existing legal claim or to create a new one.

“There is a risk that the employee uses this opportunity to ‘get dirt’ on the employer,” she said. “Employees may try to set up conversations and raise complaints that were never raised previously, or have access to e-mails and other documents that the employee may give to his or her counsel. Employees may also take steps to undermine an employer by deleting files or destroying documents, including documentation of the employee’s past performance issues.”

Finally, Boyer said, giving a fired employee preferential treatment over other job candidates could cause a company to run afoul of employment laws prohibiting discrimination in hiring decisions on the basis of a protected characteristic.

Dana Wilkie is an online editor/manager for SHRM.