Many small employers and, especially, their CEOs believe "employment at will" allows them to fire a worker for just about any reason. The truth isn't that simple.
"I have fired people from my company for cause, but I've also fired people who I think just don't get what we're about," said the CEO of a 60-person consulting firm in Ohio. "Frankly, I don't lose a minute of sleep when I fire someone who I think isn't working out, for whatever reason. Of course, I drive my HR person nuts when I do that."
That CEO has never been sued by a former employee, which, according to employment attorneys and legal experts, means he has been very lucky.
"There are limits, such as you can't fire people for discriminatory reasons," said David Weisenfeld, legal editor of the website XpertHR. You also can't fire them for exercising their rights under the Family and Medical Leave Act, the Fair Labor Standards Act, or many other federal and state employment statutes, he added. "In many states, you can't fire someone for off-duty conduct, as long as they're not bringing it into the office."
Reasons You Can’t Fire Employees
Other exceptions can result from collective bargaining agreements or special protections afforded to employees called to active military duty, added Betsy Carroll, Los Angeles-based counsel in the Employment Services Group of law firm Davis Wright Tremaine. When trying to determine whether you can fire someone without cause, "there's a lot of gray," she said.
Much of that gray results from the fact that labor laws vary so widely from jurisdiction to jurisdiction, explained Susan Warner, SHRM-SCP, an attorney and faculty member at Villanova University's College of Professional Studies in Villanova, Pa. Generally, she said, exceptions to employment at will break down into three areas:
- Public Policy: These "represent a broad set of circumstances and vary from state to state," Warner said. A good example is workers' compensation. Since it's a type of public policy, many states prohibit employers from terminating an employee just because he or she filed a workers' compensation claim.
- Express or Implied Contracts: In some states, such as New Jersey, policies described in an employee handbook may be considered implied contracts. In others, such as Pennsylvania, the handbook may be seen as just a set of guidelines, as opposed to binding policies.
- Good Faith: Recognized in 11 states, including California, this exception usually says that in certain situations employers can only dismiss employees for just cause or that they can't dismiss employees for reasons motivated by malice or made in bad faith.
Avoiding Legal Entanglements
By this point, it's probably clear that you should check with an attorney before firing anyone, if only to make sure you're acting within the law of the state in question. But attorneys and HR advisors both emphasize that an erstwhile employee can still sue you, even if you're on firm legal ground.
"Before firing someone under at-will circumstances, consider the fact that it's not uncommon to receive a retaliation claim, a discrimination claim or a similar action," said Carroll. "Those put the employer on the defensive." In court or agency proceedings, arguing that your action was based mainly on the employee's at-will employment "isn't going to get you very far," she said.
Most people expect there to be some kind of justification for putting an individual out of his or her job, Carroll observed, whether it has to do with the person's performance, the company's financial situation or another workplace issue entirely. If you can't articulate and document a reason, "it's easy for a judge and jury to fill in the blanks, whether they're correct or not," and rule against you.
Even if proceedings go your way, defending a wrongful termination action can incur significant costs, noted Paul Belliveau, SHRM-SCP, a human capital advisor in Bedford, N.H.
Unwittingly, some employers make themselves easy targets, he said. Depending on the circumstances, ex-employees could get an advocacy group such as the American Civil Liberties Union behind them or could attract the attention of attorneys willing to pursue their case pro bono because they see the potential for a class-action suit.
For example, a number of small business owners told SHRM Online that they had the right to fire someone for keeping a swastika desk flag in his or her cubicle. Most considered the idea a no-brainer. Lorraine Allen, regional director for America's Small Business Development Center at the College of New Jersey in Ewing, N.J., offered some explanation: If companies have a written policy that precludes promoting beliefs, they're probably on safe ground, she said. However, she added, "the policy can't single out a particular belief. It has to be fair and equitable to everyone."
Carroll went further. She believes that displaying a swastika would "probably be grounds for recourse because it's recognized as offensive."
A trickier example is whether you can dismiss employees simply because they belong to a hate group, even if they never discuss their beliefs or activities in the workplace. Such situations would have to be examined on a case-by-case basis, and the applicable law would vary by jurisdiction, Carroll said. You'd have to consider that the employee's membership in a group may be a protected action if he or she is participating in only lawful activities, no matter how distasteful you find them. "And," she added, "their dismissal could be framed into a discrimination claim."
"Can I fire someone just because I don't like them? That's what employment at will is," said Weisenfeld. But so many caveats are attached to the idea that the original notion has been eroded.
The idea of discrimination, especially, has given employees a strong instrument to defend themselves with, Warner said. "I may say I'm firing an employee for nonperformance, but the employee can say it's really because of their gender," she said. "Essentially, discrimination has given almost everyone at least a cause of action."
Workforce Can Matter as Much as the Law
As if all of that's not enough, be sure to consider the nonlegal issues that go along with terminating someone who is employed on an at-will basis. Especially at a small business, letting an employee go is sure to impact morale and how the remaining workers view the company's leaders. If you fire someone, "your other employees are going to be wondering about their culture and their own fate," said Karen Mathews Radau, president of Small Business HR Services in Santa Clara, Calif.
Ben Yurchak, president of KnowClick, a marketing analytics firm in Bryn Mawr, Pa., agrees that firing an employee because of something like a personality clash "is just dumb," he said. "If you fire someone who's well-liked, you hurt your culture." And though he acknowledges the opposite is just as true—fire an unpopular employee and you may be doing everyone a favor—he believes "you have to filter out emotion" when making such decisions.
Communication with the workforce is also important. A manager at one small business recalled terminating a new employee just a few weeks after he was hired, even though the person was well-qualified for a role "we needed to fill desperately." A large part of the job involved creating and leading internal presentations, but once in place, the new employee resisted feedback and submitted his work without leaving managers enough time to review it.
HR quickly put the employee on a performance plan and he showed some improvement, but during one particular presentation, "his lack of effectiveness was evident" to everyone in the room, the manager said. When the employee was fired, "team members who never saw him make a presentation didn't understand why we let him go." Once colleagues filled them in, any lingering apprehension disappeared.
Ideally, no one should be surprised by a dismissal, Yurchak said. At his company, all employees participate in a 360-degree feedback program that helps keep his team members apprised of each other's performance. Workers share their goals with each other and are transparent about their progress. "There's a balance to strike," he said. "You don't want to put down a person, but you do want to raise flags." If someone's performance lags and termination becomes a possibility, "everyone sees it coming."
"You absolutely have to worry about the workforce," Belliveau said. Firing an effective, popular employee can ruin the feel of the company. To minimize any damage, "someone needs to engage the workforce and find out their mindset. Let them vent, come to grips with the situation, acknowledge their feelings and lead them across the threshold of pain."
Also, remember that "some business owners are just jerks" and may insist on firing someone because the owner doesn't get along with him or her, Belliveau added. In those cases, HR must warn the owner about the implications in terms of morale, employer reputation and added difficulty when it comes to replacing employees. "Let's look at the pros and cons and then make the decision," he suggested saying.
Protect Yourself with the Basics
With all of these dynamics in play, the best way to handle an at-will dismissal is to follow good HR practices from the beginning. For example, the Small Business Development Center's Allen suggested that the best protection against retaliatory action is to "document, document, document." Even in at-will states, you have you build a case, she said. "If a person can cry discrimination, they can take you to court."
"Employers shouldn't fire people just because they feel like it," added Warner. "They should at least have a complaint process." And, she observed, there's a difference between what's illegal and what's good, ethical HR policy. "The law is the floor and good HR policy is the ceiling," she said. "You don't have great HR only by following the law. You need procedures, training and practices."
Mark Feffer is a freelance business writer based in Philadelphia.
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