At-will employment

• Most employment agreements are at-will, meaning the employer can terminate the employee for many reasons as long as the reason does not discriminate.

In 49 states (all but Montana) and Washington D.C., employers may terminate employees at any time and for any reason, as long as that reason is not illegal, such as retaliation for protected activity or discrimination against a protected characteristic, such as gender, race, religion, age over 40, etc. There are a few exceptions to the at-will doctrine. States may, however, have additional protected categories.

This is called the at-will doctrine, and under the at-will doctrine an employer is technically free to terminate an employee based on any nondiscriminatory factor, including the color of their shirt or the sports team they cheer for. Since those characteristics aren’t legally protected, nothing is stopping an employer from using them as grounds for termination. In such cases, courts almost always side with the employer. It might sound absurd, but if an employer wants to fire an employee solely for wearing purple shoes, the law is probably on the employer’s side. Most employers, however, prefer a more logical approach.

Voluntary quit

• Employers have several matters to address when an employee voluntarily quits.
• Though not required, employers should consider conducting an exit interview with those leaving the company.

When an employee leaves an organization, a company may have several matters to address, including Consolidated Omnibus Budget Reconciliation Act (COBRA), delivering the final paycheck, and coordinating the return of company equipment. Employers might even plan a party as a “sendoff” for the departing employee.

Employers might also want to conduct an exit interview. It has been said that employees do not leave companies, employees leave managers. When an employee does choose to quit, the person may have valuable information about improvement opportunities.

Another issue is addressing the transfer of knowledge and job responsibilities. If the departing employee has been with the company for a long time, the person may possess knowledge that has been of great value to the organization “behind the scenes.” It is also possible that the individual knows certain procedures or processes better than anyone else, and the company may want to spend the last few days (or weeks) of employment trying to capture this knowledge.

In today’s economy, many employees are “knowledge workers” and training a replacement could take weeks or months. Until that person gets up to speed, employers may face a skills gap — especially if the departing employee’s specialized knowledge wasn’t captured.

The transition to a new opportunity is usually an exciting time for an employee, but it can be a challenging time for the employer who is losing a valued worker. Consider developing a checklist for departing employees, just as a company would for new employees. It may help smooth the transition.

Turnover

• If needed, a company can measure its turnover rate to address internal problems.

Turnover is a measure of a company’s loss of employees that creates job openings. Often an employer is interested in knowing what its turnover rate is and how it compares with its competitors in the industry, or other companies in the area. The higher the turnover rate, the greater the cost to the employer. Turnover costs typically consist of the following items:

• Cost to terminate, plus
• Cost per hire, plus
• Vacancy cost, plus
• Learning curve loss.

Recruiting and retaining good employees is the best way to keep both turnover rates and costs down. However, there are several industries which consistently have high turnover rates. These include construction; retail trade; professional and business services; arts, entertainment, and recreation; and accommodation and food services.

When a turnover rate looks out of the ordinary, it is time to focus on the cause of the problem, and then on such things as hiring and recruiting, employee training, formal job descriptions, exit interviews, and increased benefits, to reduce the turnover rate. Measuring the turnover rate can be a helpful tool to a company in focusing its efforts.

Exit interviews

• Exit interviews with those leaving the company are an opportunity for organizational improvement.

When an employee terminates employment, the person may have valuable information about improvement opportunities in an organization. One way to capture this information is to conduct exit interviews.

Exit interviews are conducted with those leaving the company or a particular department or area to gather information on such things as organizational management that may not always be accessible or gathered during employment tenure.

Perhaps the employee simply moved to a better opportunity, or is following a spouse who was offered a great opportunity. Or perhaps the employee was unhappy with the working conditions at the company. A company will not know unless it asks.

Wrongful termination

• An employee’s claim of wrongful termination will only hold up in court if the person can prove the termination violated a law, public policy, or right.

Many employers worry about terminating an employee based on fears that the person might file a wrongful termination claim. While these types of claims can and do occur, the employee needs to show some reason that the termination was wrongful, such as a violation of law or public policy, to prevail.

For example, an employee who was terminated shortly after taking leave under the Family and Medical Leave Act (FMLA) might claim that the termination violated the employee’s right to FMLA leave, or denied the job reinstatement required by that law. If so, the termination would have been wrong because it violated the law. The FMLA recognizes both interference claims and retaliation claims.

As another example, most state workers’ compensation laws prohibit employers from discriminating or retaliating against employees who file injury claims. Thus, if an employee is fired shortly after filing such a claim, the termination might appear to have been connected to the claim, and is therefore wrongful.

An employer may still terminate employees who have engaged in protected activity (like filing an injury claim, taking FMLA, making a discrimination complaint, making a complaint to the Occupational Safety and Health Administration (OSHA), or filing a claim for unpaid overtime. However, the employer needs to show that the termination was justified by other valid reasons.

Employers should consider that if an adverse employment action is taken about the same time that an employee engages in protected activity, the proximity will create the impression that the protected activity was a motivating factor in the termination.

A lack of documentation is often the biggest problem when the employer tries to show that the termination was justified by legitimate business concerns. For example, if an employee’s performance has been lacking but the individual’s supervisor decided to document an “average” performance rating and simply tell the employee verbally about the performance problems, a future termination for poor performance will not be supported by the company’s documentation. That is why even verbal “warnings” as a step in progressive discipline should be documented. If that termination also occurred around the same time that the employee engaged in protected activity, the company could face a wrongful termination claim if verbal warnings regarding an employee’s performance were not documented.

The point is that an employee can’t simply file a generic wrongful termination claim and expect to win. Terminations may seem unfair to an employee without being unlawful.

Downsizing

• Downsizing refers to a company’s decision to terminate employees, usually to become more viable and operate more effectively.

Downsizing involves cutting back on staff to become more viable and/or operate a business more effectively. Usually done in response to financial hardship, downsizing is a voluntary attempt to reduce expenses by trimming payroll.

The term downsizing has come to refer to a range of activities, from layoffs and hiring freezes to mergers of organizational units. Whether referred to as downsizing, reorganization, or “rightsizing,” these activities have an effect not only on the employees being let go, but also on those who remain.

In general, an employer is free to lay off or terminate employees as necessary due to business conditions, as long as the terminations are done in a non-discriminatory manner.

If an employer is large enough, and the layoffs will affect enough workers, the employer must comply with the provisions of the Worker Adjustment and Retraining (WARN) Act, and any applicable state law versions.

If the WARN Act requirements do not apply, employers are not required to give a specific amount of advanced notice for a layoff.

Layoffs

• Prompt, open, and frequent communication with employees during layoffs helps minimize effects on worker morale for those being terminated and, if applicable, for those remaining.

Companies must keep lines of communication open when layoffs are involved. Nothing feeds speculation and rumors more than a lack of adequate communication. Human resources (HR) should explain to employees the reasons for layoffs, how the layoffs will be implemented, and which jobs or departments will be affected. Allow employees the opportunity to ask questions and voice fears. Companies should also:

• Explain the new strategy. Let the remaining employees know how the layoffs and restructuring will affect the company’s profitability and future plans. Make sure employees know how people’s roles will affect the success of the strategy. Explain how work will be redistributed and how departments will be affected.
• Redefine and set goals. Redefine the company’s priorities according to the new strategy. Set realistic goals that will accomplish the priorities, and explain how progress will be measured.
• Involve employees. Layoffs and downsizing often create fear and tension in the remaining employees, which can be alleviated by involving employees in the change. Employees will have important ideas to share about the work environment. Include employees in problem solving groups and transition committees.
• Rethink and innovate. Re-engineer the business; look at things from a new perspective. Hire consultants if appropriate. If the company continues to do the same things in the same way, it may end up with the same problems that led to the first layoffs, only in a smaller size.

Effects upon employee morale

When a company begins a program of downsizing, it rarely only makes one round of cuts. Waves of cutting, restructuring, and reorganization create a tremendous amount of stress on the remaining employees. Anticipation of further cuts causes decreased productivity and poor morale.

In some cases, the employer will face increased threats of or incidents of workplace violence, or incidents of property theft. Some employees may just be looking for the axe to fall, while others may feel guilty about not being let go when coworkers had been, leaving an anxious and mistrustful group of survivors.

The remaining employees may lose respect for and allegiance to the company, and no longer be willing to trust information that comes from management.

Communicating events to the “survivors”

Prompt, open, and frequent communication with the workforce is necessary to maintain employees’ confidence in the management team, and to allay people’s apprehensions. Lack of adequate communication can create fear, confusion, mistrust, and cynicism in the workers who remain, followed by declines in efficiency and productivity.

The company should explain exactly why any workforce adjustment is needed and, in as much detail as possible, which areas or departments will be involved or how many positions will be eliminated. Also, explain whether this will be a one-time event, a series of events, or dictated by future necessity. Finally, provide plenty of opportunity for employees to ask questions and to meet with representatives of HR to find out about severance packages and services.

Plant closings

• A company should follow applicable regulations, laws, and documentation when closing its plant.

Plant closings generally refer to a permanent closure of a single office, plant, or facility or the closure of an entire business unit. These events not only have a negative effect upon the workers of the plant, but also on the community where the plant is located.

Plant closings have legal ramifications, beyond the legal hurdles which may be brought by up by the community or labor groups.

Employee records

Prior to announcing a plant closing, review all personnel records to ensure the files are up to date and contain the necessary documentation on that employee. Make sure all relevant employee reviews are included. Employee information should be available to meet future claim activities.

Be sure to include information on the employee’s supervisor and the department the person was working in. Fully document employment dates, titles, and employment status at the time of the plant closing. Include all information on the employee’s current work status, such as if that individual is on restricted duty following an accident or illness.

Establish the authenticity of the records via custody by an employer representative, so it can be verified that the information is accurate and has not been altered.

Before announcing the plant closing, have all necessary information available to inform employees about what will happen. Know:

• Whether severance packages will be offered, and to whom;
• What transfer or relocation is available;
• If benefit plans allow for continuation or conversion privileges;
• What outplacement services are available; and
• If state or local government agencies will assist in finding new employment or skill retraining.

WARN Act

• Employers covered by the WARN Act must comply with the regulations.

The Worker Adjustment and Retraining Notification (WARN) Act requires employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. Notice must be provided to:

• Affected workers or worker representatives,
• The state dislocated worker unit, and
• The appropriate unit of local government.

Employer and employee coverage

Employers are covered by the WARN Act if the company has 100 or more full-time employees, not counting employees who worked less than six of the last 12 months or those who work an average of less than 20 hours a week (state laws may cover smaller employers).

All private employers are covered, as are public and quasi-public entities that operate in a commercial context and that are separately organized from the regular government. Regular federal, state, and local government entities which provide public services are not covered.

Employees entitled to notice include hourly and salaried workers, as well as managerial and supervisory employees. Business partners are not entitled to notice.

Employment loss

• In some cases, a company can terminate an employee under the definition of “employment loss.”

The term “employment loss” means:

• An employment termination other than a discharge for cause, voluntary departure, or retirement;
• A layoff exceeding 6 months; or
• A reduction in an employee’s hours of work of more than 50 percent in each month of any six-month period.

Employment loss does not occur when an employee refuses a transfer to a different employment site within reasonable commuting distance.

Also, no employment loss occurs when an employee accepts a transfer within 30 days after it is offered, or within 30 days after the plant closing or mass layoff, whichever is later. In both cases, the transfer offer must be made before the closing or layoff, there must be no more than a six-month break in employment, and the new job must not be deemed a constructive discharge.

These transfer exceptions from the “employment loss” definition apply only if the closing or layoff results from the relocation or consolidation of part or all of the employer’s business.

Final and unclaimed paychecks

• Unless mandated by law, a company can usually wait until its regular payday to provide terminated employees with a final paycheck.
• After a holding period, unclaimed paychecks can be turned over to a state agency for unclaimed property.

Employers are not required by the Fair Labor Standards Act (FLSA) to give former employees the final paycheck immediately. Some states, however, do require immediate payment or payment within a few days after termination. The Department of Labor (DOL) suggests that if the regular payday for the last pay period an employee worked has passed and the employee has not been paid, the person should contact the DOL’s Wage and Hour Division or the state labor department.

The DOL and the Equal Employment Opportunity Commission also have mechanisms in place for the recovery of back wages. A common remedy for wage violations is an order that the employer make up the difference between what the employee was paid and the amount the person should have been paid. The amount of this sum is often referred to as “back pay.” Among other programs, back wages may be ordered in cases under the FLSA or the various federal discrimination statutes.

Unclaimed paychecks

In some cases, employees will fail to pick up a final paycheck, even after the employer has made it available. It may even happen that a mailed final check will be returned to the company as undeliverable.

Many state wage and hour laws address the payment of wages, but not an employee’s failure to collect that payment. However, this does not mean that employers get to keep the money. Typically, the employer will need to hold the check for a period of time, and later turn it over to a state agency for unclaimed property. Employers may contact the state unclaimed property agency for guidance.

Vacation, commission, and bonus pay

• In most states, company policy and the timeframe wages or pay can be calculated direct how employers handle earned but unused vacation time, commission wages, and bonuses of terminated employees.

Employees commonly believe that people must be given payment for any earned but unused vacation time upon separation of employment. In most states, however, the payout of earned vacation time is entirely at the employer’s discretion, subject only to company policy. A handful of states, however, consider earned but unused vacation to be a “wage” that must be paid out to departing employees.

In some instances, commission wages cannot be determined at the time of a sale and must be calculated based on later developments (e.g., receipt of payment, shipping of product, or delays to allow for customer returns). In that case, commission wages become due and payable when the wages are reasonably calculable, even if the employment relationship ended before those conditions were satisfied.

Bonuses are sometimes confused with commission wages. Bonuses are not based on the price of a product or service, but are usually based on reaching some established criteria. Many times, a bonus is paid to individuals who are not engaged in sales at all.

Deceased employees’ final pay

• State law may affect how employers handle a deceased employee’s final paycheck.

In the unfortunate circumstance where an employee passes away, employers may be unsure what to do with the final paycheck. In some cases, simply making out the check as usual and mailing it to the address on file will suffice. When a family member gains control of the estate, that person will be able to access the funds.

Employers may receive a request to make out the check in the name of a surviving spouse or beneficiary, and this is usually acceptable as well. In fact, the Society for Human Resource Management (SHRM) recommends canceling any checks written to the employee, and making out a new check in the name of the survivor. However, identifying the recipient may not be easy if, for example, the employee is divorced and has more than one child. Also, some states have specific statutes relating to deceased employees’ wages, and these laws can be complicated.

Some state laws indicate that employers may pay any wages or benefits due to a deceased employee to the person’s surviving spouse, provided neither spouse has instituted a divorce proceeding. If there is no surviving spouse or if either spouse has instituted a divorce proceeding, the employer may pay the last wages and other benefits to any major (older than 18) child of the deceased employee. If the employee has neither an eligible spouse nor an adult child, employers may make the check payable to the deceased employee’s estate. Some states mandate that before making the payment, employers must require the recipient to fill out a release document providing certain information in the presence of two witnesses. Within ten calendar days of making the payment, employers may be required to send an affidavit containing certain information to the state department of revenue.

If an employer pays an employee’s final wages in the same year the employee died, it must withhold social security and Medicare taxes. The final wages should be reported on the employee’s Form W-2 only as social security and Medicare wages. The payment should not be shown in Box 1, as wages due after an employee’s death are not subject to federal income tax.

If an employer pays final wages after the year of the employee’s death, as may happen with bonus or commission payments that cannot be determined until the following year, the employer should not report the payment on Form W-2, and should not withhold social security and Medicare taxes. These payments are typically reported on IRS Form 1099.

Deductions from final pay

• State laws may limit the types of deductions a company can take from a terminated employee’s final pay.

Employers commonly ask about making deductions from final pay, which may be to recover training costs, relocation expenses, missing property, or other expenses. The Fair Labor Standards Act (FLSA) does not address this (except to generally prohibit deductions for damages from exempt employee salaries) and only requires payment of minimum wage for all hours worked. However, state laws may limit the types of deductions that can be taken.

Severance pay

• In most cases, severance pay to employees upon termination is at the discretion of the employer.
• Employers should seek legal counsel regarding the terms of potential severance packages.

Severance pay is often granted to employees upon termination (if terminated for reasons other than a person’s own misconduct) and is frequently based on length of employment. There is no severance pay requirement in either federal or state laws. As a result, the amount and whether it will be paid is left to the discretion of the employer unless there is a promise or agreement to do so.

Some employers choose to offer severance to all employees as a gesture of good will, in hopes that the employee will be discouraged from filing a lawsuit (perhaps a frivolous suit). The major benefit to a severance agreement, however, is to save costs associated with litigation, discrimination claims, and so on. Employees are often happy to take the guaranteed severance package over the potential settlement in litigation, where the outcome is not guaranteed and there are attorney fees.

Most employers try to get something in return (like a release of all claims against the company) when providing a severance package. If the company doesn’t get such a release, the severance offer may be used in litigation as evidence of guilt, or may be used to subsidize the employee’s litigation costs. For example, if an employee is terminated and has been thinking of filing a discrimination claim, the offer of severance pay might be rejected, and the attempt to obtain a waiver might be presented by the employee as an attempt to “silence” the employee. For these reasons, employers should consult with legal counsel before offering a severance package.

There is no guideline on how much to offer. Employers commonly offer one or two weeks’ salary for each year of employment, but may offer more or less depending on the situation. A severance package may also include benefits other than direct payments, such as subsidized Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage for several months.

Severance pay may be subject to the Employee Retirement Income Security Act of 1974 (ERISA) depending upon terms and conditions. As a voluntary benefit, however, employers are not required to offer a severance package. Often, severance is offered as part of a waiver of age discrimination claims under the Older Workers Benefit Protection Act. These waivers are legal documents and should be drafted by an attorney.

Outplacement programs

• A company may offer outplacement programs to workers displaced by a plant closure or downsizing.

Employers may wish to offer outplacement services to employees impacted by a plant closure or downsizing. Before announcing a plant closure or mass layoff, a company should ensure everyone in human resources and management has the necessary information to inform employees on what outplacement services are available.

Third party companies can be hired to help displaced workers through the company’s workshops or one-on-one counseling with:

• Interviewing techniques,
• Resume and application writing,
• Strategies to find a new job,
• Career options,
• Increasing a person’s marketability and competitiveness, and
• Understanding today’s workforce.

If offered, counselors may provide individual assessments of a person’s job qualifications. The outplacement service can work with people on options for training, education, and in developing a timeline for individual career planning.

Unemployment

• A worker who becomes unemployed through no fault of the individual may be eligible for cash benefits from state unemployment compensation programs.

The federal-state unemployment compensation (UC) program offers the first economic line of defense against the ripple effects of unemployment. An eligible worker who becomes unemployed through no fault of the individual and meets certain other eligibility requirements can receive cash benefits.

Each state administers a separate unemployment insurance program, but all states follow the same guidelines established by federal law.

Through payments made directly to eligible, unemployed workers, UC ensures that at least a significant proportion of the necessities of life — most notably food, shelter, and clothing — can be met on a week-to-week basis while a search for work takes place.

To be eligible for benefits, jobless workers must demonstrate workforce attachment, usually measured by amount of wages and/or weeks of work, and must be able and available for work.

When an employee files a claim, the person will be asked for certain information, such as addresses and dates of former employment. To make sure a claim is not delayed, displaced workers should give complete and correct information.

It generally takes two to three weeks after filing a claim to receive the first benefit check.

Why conduct exit interviews?

• Exit interviews help a company identify opportunities for improvement and foster good relationships with departing employees.

The reasons behind exit interviews when an employee decides to leave a company include identifying areas of concern or opportunity in the organization. This can involve anything from the organization’s culture to the physical environment. For example, six months ago a person took over the shipping department. Since that time, four out of five employees from that department left the department or the company, indicating that the manager was unusually brusque in the person’s management style; the problem may well begin with the promoted person’s management skills.

Trends may also be identified. Exiting employees may indicate that the compensation is better elsewhere, and thus, the organization may want to investigate its compensation structure.

If an employee who is leaving is disgruntled, an exit interview may help to diffuse the conflict. The interview may provide the employee with an opportunity to vent the person’s frustrations with the company. If the employee believes unfair or unequal treatment has occurred, it would be in the best interest of the organization to deal with the issue before the employee seeks legal assistance.

Who to interview and who is the interviewer?

• Employers should ask a neutral party to conduct exit interviews.
• Exit interviews are useful for employers with employees who quit voluntarily, transfer within the company, or are involved in company restructuring or layoff.

Exit interviews do not have to be restricted to those who leave the company voluntarily or to employees who leave the organization—exit interviews can be applied to employees who transfer from one area to another.

Organizations may include employees involved in situations such as restructuring or layoff, to capture the individual’s views, as well as employees who are leaving on a strictly voluntary basis. Exit interviews may be voluntary or compulsory; it is up to the organization.

It’s a good idea to have a neutral party conduct the interview, such as a human resources representative. The departing employee’s supervisor is not the best candidate to perform the interview as the employee may not feel comfortable expressing the person’s view. The interviewer should be someone who was not involved in the daily supervision or guidance of the employee.

There may also be a third party involved in the interview, as long as the person is neutral. Exit interviews are not designed as opportunities to change the employee’s mind about leaving, or to discuss past employment performance.

The person conducting the interview should be someone who understands the purpose of the interview, and how the information may be used. The person should also be able to conduct the interview professionally, which means someone who can listen and make the interviewee comfortable. If the interviewee is not comfortable, the person may withhold information.

When and where should interviews be conducted?

• Exit interviews can be conducted before or soon after an employee leaves the company.
• Employers should choose a neutral place to conduct exit interviews.

Some organizations conduct exit interviews before the employee finally leaves, including it with the other administrative procedures, such as discussing severance, Consolidated Omnibus Budget Reconciliation Act (COBRA), final pay, references, and return of company property.

Other organizations prefer to conduct exit interviews soon after the employee has left. Waiting too long can risk having the employee’s focus shift to other things, and losing information. However, waiting a bit may diffuse any fears of retribution the employee may have had, allowing for more open discussion.

Interview location

Exit interviews, like performance reviews, should be conducted in a neutral place—not in places such as the employee’s work area or the supervisor’s office. The goal is to make the employees feel comfortable in an impartial environment.

Conducting the interview in a makeshift room may make interviewees think that the interview is not important. If done in the CEO’s office, the interviewees may get the idea that the employer is trying to put on a false front.

How should interviews be conducted?

• Several best practices can help a company conduct a useful exit interview, keeping the departing employee’s comfort and privacy in mind.

What information should employers gather in an exit interview? The reasons for the employee’s departure are a good place to start. From there, departing employees should be guided to indicate what the person liked or disliked during the employee’s tenure, and why. This may be company specific, but some discussion topics to consider include the following:

• Selection/Hiring process,
• Compensation/Benefits,
• Job duties and expectations,
• Training/Development opportunities,
• Advancement,
• Management and supervision,
• Organizational culture, and
• Policies/Procedures.

General questions may be asked regarding what the employees might miss about the organization or what the organization can do to make the position better for future employees. The conversation may be opened for general input on improvements the employees may see for the department or the organization as a whole. Perhaps the employees would refer colleagues to the organization, or perhaps not. Finding out why may help shed some light on good points the organization may want to highlight, and negative points that the organization may want to work on.

The employees may also be asked to provide input on the exit interview itself. Again, the setting should be conducive to making the departing employees comfortable. Employees should be told that the information will remain confidential and that the person being interviewed will remain anonymous. The employees should be treated with respect and consideration. Rushing through the process may make individuals feel that the person’s views are unimportant.

Exit interviews are best done face-to-face, and not with a survey or questionnaire. The latter may be used as a secondary method, however, if a face-to-face interview is not possible. The employees may not bother to return the questionnaire.

Conducting the interview in person provides the interviewer with more opportunity to gather in-depth information by watching for body language and other non-verbal cues, encouraging the employees to talk, or guiding the conversation to areas that may be only touched on in a survey.

The person conducting the interview should listen carefully and allow the employees to talk, and refrain from defending the organization’s stance. The interviewer should also take notes.

What to do with the information

• Employers can use information from an exit interview to improve the company and communicate with workers.

Just collecting information during an employee’s exit interview does little to improve an organization. The information should be reviewed and used. It may be compared to employee attitude surveys, consolidated with information gathered from other employees, or evaluated against current employment trends.

The information may be used in coordination with an audit of the organization’s human resources (HR) practices if elements of employee relations are identified as issues. The information may be communicated to identified, current employees, including supervisors or managers, who may benefit from it. If this is done, the anonymity of the departing employees should be respected.

The organization need not respond to every comment made during exit interviews, however. Some comments may be subjective in manner and may not be representative of an actual problem.

Avoiding claims

• A company can avoid worker claims by conducting employee terminations lawfully and with business justification.

Ensuring that terminations are conducted lawfully and with business justification in cases where employees otherwise might be protected is the best way to avoid claims. A wrongful termination claim can be costly and time-consuming, even if the company wins the case. Although employers cannot stop employees from filing claims, employers can take steps that may prevent employees from doing so. Employers can also take steps to minimize the risk of violence when terminating.

Here’s how to navigate the termination process:

1. Before terminating, gather relevant information. If a breach of conduct or other infraction has been reported, collect the facts from all parties involved before determining if an employee should be discharged. The investigation to collect the needed information should be conducted as soon as possible. Employees’ recollections of events can fade fast, and information shared between employees can taint the truth. It is particularly important to get the accused employee’s version of the facts in writing at an early date.
   When conducting interviews keep an open mind and use an investigative style. If the employee being investigated and interviewed is a non-supervisory union member, the employee has the right to have a union representative present during the initial investigatory interviews. This privilege is called Weingarten Rights.
2. Maintain employee files. Terminations are made easier if good records are kept throughout every employee’s tenure with the company. Every employee should have a personnel file. It’s important to make a note in the file whenever the employee receives a verbal or written warning. It’s equally important to include observations of the employee’s work habits, general attitude, and their personal interactions with coworkers.
   When an observation is made, include the time, date, and activity the employee is performing. For example, if a supervisor observes a worker driving a forklift in a reckless manner, the supervisor (after stopping the employee and reprimanding him) would write down, “John Smith was observed operating a forklift in a reckless manner. Excessive speed and not sounding the horn at blind spots were observed. This occurred at 10 a.m., today, March 16. Smith was given a verbal warning and told the next time there will be a written warning issued.”
   Often, when an employee suspects termination is imminent, the employee will request to see their personnel file. This is another reason to keep the file current; the employee will not be surprised at the termination if their file is full of warnings and poor performance reviews.
   Pay particular attention to employee evaluations. Sometimes supervisors are too generous in their evaluations. If the evaluations do not support the action taken it can cause serious problems if the employee challenges the termination in court.
3. Review the facts. Before making a final decision on whether to terminate, review and analyze the findings to verify that they are accurate. If a basis for discharge is found, document it and cite a specific violation of a company work policy. If more than one policy was violated, note that. This documentation must be in writing and kept in the employee’s personnel file.
   Companies are sometimes sued by a former employee on the basis of alleged discrimination or other reasons. Often, the suit is supported by the former employee noting there was nothing in the employee’s file that supports the action taken. That’s why it’s so important to document the employee’s behavior and alleged disregard for company policies and procedures.
4. Consult with HR. Supervisors should talk to their human resources (HR) department about a potential termination. Supervisors should also follow company policy on who has the final decision to terminate, how it should be handled, and where the termination should take place. Never allow a supervisor or HR staff member to perform a termination alone.
5. Treat the employee with respect. Behave in a professional manner throughout the discipline and termination process. There is no reason to ridicule or demean an employee. Doing so will only create anger or resentment. These emotions can prompt the employee to “get back” at the employer, and the employee may file a claim (even if the claim has no grounds) just to make a point. Consider how an employer would want to be treated in the same situation if the tables were turned and an employee was giving notice and quitting.
6. Follow company policies consistently. Treating employees differently or applying various levels of discipline for similar offenses under the same or similar circumstances, can lead to feelings of unfairness and build negative emotions. An investigator or judge also may infer from such differential treatment that the employer had a discriminatory or otherwise unlawful motive.
   Consistent enforcement is critical because if a termination is challenged, courts will likely require that an employer do more than point to employee misconduct. The company must show that the employee would have been terminated for that misconduct. If the policy had been ignored in the past, the company will have a greater burden in showing that the misconduct (and not some other, potentially discriminatory reason) was used to justify the termination.
7. Handle terminations in private. A termination or disciplinary hearing should never be conducted in the presence of coworkers, customers, vendors, or anyone not directly involved. In most cases, however, a second neutral party (such as an HR representative) should be present during a discipline or termination hearing. Even when terminating a remote employee in a video call it shouldn’t be handled by the supervisor alone. An HR rep should be on the call.
8. Follow standard procedure. Companies should have a detailed procedure for employee terminations. The procedure should be revised as necessary to protect the dignity of the employee being terminated and to provide for the safety of coworkers and company assets. Again, during the termination, it’s a good idea to have the employee’s supervisor or another employee present (preferably someone from the HR department). During the meeting or immediately after, recover any company property or identification from the employee. Also, during the meeting (but not before), disable the employee’s computer passwords or, lock the employee out of company emails and the computer system.
9. Consider the risk of violence. Worrying about workplace violence as a result of a termination is a concern in today’s world. Supervisors and those working in HR must consider the safest ways to terminate an employee.
   If an employer is concerned about an employee turning violent during the termination process, the employer should act to defuse any potential threats. This may include being proactive by contacting in-house security staff or a local law enforcement agency to have an officer present at the termination meeting.
   Terminating remotely is also an option. While it used to be a best practice to terminate in person, if the employee works remotely, it is fine to schedule a video meeting with the employee, supervisor, and HR representative to handle the termination virtually. This might even be a safer option if the employer anticipates an outburst or a violent reaction from the employee being terminated.

Warning signs may indicate that an employee about to be terminated poses a threat. Be on guard when an employee:

• Expresses real (or perceived) unequal or unfair treatment,
• Has been harassed by coworkers,
• Suddenly changes into a problem employee,
• Is frustrated, lashes out, or fights with coworkers, Shows an obsession with weapons,
• Makes direct or implied threats,
• Has a recent decline in health or hygiene,
• Exhibits signs of drug or alcohol abuse,
• Talks about financial, legal, or marital problems, and
• Experiences mental or physical ailments.

Just because an employee exhibits one (or any) of these behaviors doesn’t mean they’ll become violent if they’re terminated, but these are important factors to keep in mind when planning a termination meeting.

Alternatives

• Employers may find alternatives to downsizing that are better for the business and workers.

Alternatives to downsizing may offer better options to some employers. Employers could offer voluntary early retirement or job-sharing, or might reduce hours and implement furloughs.

Other alternatives to downsizing include:

• Business process re-engineering — Looking at long-term performance and what can be done to increase or add value.
• Downscaling — Reducing product lines to focus on core business.
• Retraining workers — Find ways to retrain or redirect workers to other priorities in the company that have a more positive effect on the revenue stream.
• Workweek adjustment/overtime reduction — Vary the number of hours employees work per week based on the workload, rather than reducing the workforce. When reducing the number of hours, check other company benefit plans to identify any impacts. For instance, a long-term reduction in hours may result in employees being considered part-time.
• Furloughs — Not quite a layoff, a furlough is usually a period of one or more weeks during which an employee is not permitted to work, with the understanding that the employee will return to full duties after a defined time period. Often, the employees can collect unemployment benefits during these weeks.
• Hiring freeze/reduction by attrition — Some organizations can accomplish the same goals of downsizing by freezing hiring and not filling any open positions. Cross training employees to do more than one job will allow for labor force flexibility.
• Negotiate wage and benefit concessions — The workforce may accept wage and benefit reductions as an alternative to layoffs. The downside of this option is that the most qualified employees may seek employment elsewhere.
• Reducing layers — Organizations may consider eliminating layers of management or operations before reductions in the blue-collar workforce.

Employer responsibilities

• A company that downsizes its workforce is still responsible for several worker benefits.

Downsizing places certain requirements upon the employer regarding continuing health coverage, vested retirement benefits, and unemployment insurance benefits. Most states do not require severance pay or other benefits to the employees who are let go. Employers will commonly agree to provide severance pay or other benefits to downsized employees as part of a negotiated separation agreement.

Employee records

As employees’ past performance may play a role in deciding who will be released, human resources (HR) needs to examine employee personnel files to ensure that the files are current and accurate. Review contents and make sure that employee evaluations and performance reviews are up to date.

Make sure that managers and supervisors use the evaluation system properly and perform proper recordkeeping.

Personnel records should be maintained in the custody of an employer representative to verify that the records are accurate and have not been altered. In the event of future claims against the company, all employee information must be available, orderly, and accurate.

Be consistent

After determining that downsizing must occur, HR should establish the criteria for releasing employees. Apply those criteria equally to all employees, making no exceptions. To do otherwise opens the organization up to charges of discrimination and other legal challenges.

Employers should monitor the age, sex, and race of the employees to be downsized. If any group appears to be affected disproportionately, the situation should be reviewed to ensure that the process was not discriminatory.

Remember that even if a practice was not intended to discriminate, actions which have an adverse impact on a protected class may be unlawful.

Legal considerations

• A company should consider worker laws that may affect its decision to downsize employees.

The following laws may affect downsizing or the aftermath.

The Worker Adjustment and Retraining Notification (WARN) Act, which requires, with certain exceptions, employers of 100 or more workers to give at least 60 days’ advance notice of a plant closing or mass layoff to:

• Affected workers or worker representatives,
• The state dislocated worker unit, and
• The appropriate local government.

The WARN Act generally covers employers with 100 or more employees, not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week. Some states also have more stringent WARN laws.

The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) requires employers with 20 or more employees to provide an opportunity to terminated employees to continue employee health benefits within 30 days of termination. The employee is responsible for paying the premiums. However, COBRA does not require the continuation of life insurance or other types of benefit plans.

The Health Insurance Portability and Accountability Act (HIPAA) limits exclusions for preexisting conditions; prohibits discrimination against employees and dependents based on a person’s health status; and allows a special opportunity to enroll in a new plan to individuals in certain circumstances. The employee has 60 days from the date of notice to accept or decline the benefits, and has at least 45 days to make payments. It is the employer’s obligation to show that the proper notice has been sent. If coverage is declined, employer’s must show that the employee affirmatively declined that coverage.

Title VII of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, religion, sex, or national origin.

The Age Discrimination in Employment Act of 1967 (ADEA) protects workers who are at least 40 years old from age-related discrimination.

The Americans with Disabilities Act (ADA) outlaws discrimination against people who are disabled.

The Fair Labor Standards Act (FLSA) governs wages and compensation of employees. Wages, compensation, and nondiscretionary bonuses earned must be paid to terminated employees.

After downsizing

• Since downsizing affects morale and productivity in remaining workers, a company should meet with employees to address concerns and explain the company’s vision going forward.

Studies have shown that following downsizing, surviving employees exhibit predictable behaviors. These can include showing a distrust of management, as well as a drop in productivity and morale. Surviving employees may see the displaced employees as victims, especially if management has been seen to treat those employees poorly or without tact.

On the other hand, where management has been seen to care for laid off workers, remaining employees may become even more committed and more loyal to the company.

Therefore, companies should strive to manage the release of employees and reduce the amount of discontent through good planning, good communication, and by assisting departed employees to become re-employed. This approach will result in the least amount of hostility in the downsized workers, help promote loyalty in the remaining employees, and minimize lawsuits.

Once the downsizing is complete, human resources and management should meet with remaining employees to discuss the future prospects of the company, assure people that jobs are secure, explain how the company will maintain profitability, and answer employee questions and concerns.

What triggers the WARN Act notice

• A company triggers the WARN Act notice regulations if it plans to close a plant or conduct a mass layoff.

In the following cases, employers trigger the Worker Adjustment and Retraining Notification (WARN) Act notice regulations.

Plant closing: A covered employer must give notice if a single site of employment (or one or more facilities or operating units within an employment site) will be shut down, and the shutdown will result in an employment loss (defined below) for 50 or more employees during any 30-day period.

Mass layoff: A covered employer must give notice if there will be a mass layoff which does not result from a plant closing, but which will result in an employment loss at a single site of employment during any 30-day period for 500 or more employees, or for 50 to 499 employees if those individuals make up at least 33 percent of the employer’s active workforce.

Neither instance includes employees who have worked less than six months in the last 12 months or employees who work an average of less than 20 hours a week for that employer.

Notice must also be provided if the cumulative number of employment losses that occur during a 90-day period reaches the threshold level of either a plant closing or mass layoff, unless the employer demonstrates that the employment losses during the 90-day period are the result of separate and distinct actions and causes.

30 days or 90 days?

• A company is required by the WARN Act to provide notice of mass layoffs within a 30-day period, but should be aware that actions over a 90-day period may be examined.

The Worker Adjustment and Retraining Notification (WARN) Act regulations refer to mass layoffs within a 30-day period. However, most employers are aware that actions over a 90-day period may be examined. This has created some confusion about how far employers must look back to determine the WARN Act notice requirements.

The “look back” period is a bit complicated. Ordinarily, it would be 30 days. However, if the company could reasonably anticipate a series of layoffs, it may be extended to 90 days. In most cases, the WARN Act looks at a 30-day period. For example, if an employer closes a plant which employs 50 workers and lays off 40 workers immediately, and then lays off the remaining 10 workers 25 days later, that is a covered plant closing (all actions occurred within 30 days).

However, the WARN Act also looks at a 90-day period. An employer is required to give advance notice if it has a series of small terminations or layoffs, none of which individually would be covered, but which add up to numbers that would require the WARN Act notice. An employer is not required to give notice only if it can show that the individual events occurred as a result of separate and distinct actions and causes and are not an attempt to evade the WARN Act.

For example, if a layoff would affect 40 employees initially, but the company can reasonably anticipate additional layoffs within 90 days (and the total will exceed the WARN Act threshold) then the company should consider all layoffs within a 90-day period as part of the same action and give notice as required.

Sale of a business

• The buyer and seller involved in the sale of a business must comply with WARN Act requirements.

In a situation involving the sale of part or all of a business, the following Worker Adjustment and Retraining Notification (WARN) Act requirements apply:

• There is always an employer responsible for giving notice.
• If the sale by a covered employer results in a covered plant closing or mass layoff, the required parties must receive at least 60 days’ notice.
• The seller is responsible for providing notice of any covered plant closing or mass layoff which occurs up to and including the date/time of the sale.
• The buyer is responsible for providing notice of any covered plant closing or mass layoff which occurs after the date/time of the sale.
• No notice is required if the sale does not result in a covered plant closing or mass layoff.
• Employees of the seller (other than employees who have worked less than 6 months in the last 12 months or employees who work an average of less than 20 hours a week) on the date/time of the sale become, for purposes of the WARN Act, employees of the buyer immediately following the sale. This provision preserves the notice rights of the employees of a business that has been sold.

Exemptions from the WARN Act

• Under certain circumstances, a company is exempt from some or all of its WARN Act requirements.

Under the Worker Adjustment and Retraining Notification (WARN) Act regulations, an employer does not need to give notice if a plant closing is the closing of a temporary facility, or if the closing or mass layoff is the result of the completion of a particular project or undertaking.

Notice is not required for strikers, or to workers who are part of the bargaining unit(s) involved in labor negotiations that led to a lockout, when the strike or lockout is equivalent to a plant closing or mass layoff. However, those non-striking employees who experience an employment loss as a direct or indirect result of a strike, and workers who are not part of the bargaining unit(s) described above, are still entitled to notice.

Notification exemptions

With three exceptions (listed below), notice must reach affected employees or worker representatives at least 60 days before a closing or layoff, regardless if it will be a single event or a series of events. Notice is also due to the state dislocated worker unit and local government at least 60 days before each separation.

The exceptions to the 60-day notice are:

1. Faltering company — applies only to plant closings. This covers companies seeking new capital or business in order to stay open, and where notice would ruin the opportunity.
2. Unforeseeable business circumstances – applies to closings and layoffs that are caused by business circumstances that were not reasonably foreseeable at the time notice would otherwise have been required.
3. Natural disaster — applies where a closing or layoff is the direct result of a natural disaster, such as a flood, earthquake, drought, or storm.

In these situations, the burden of proof is on the employer that conditions have been met. The employer must give as much notice as possible, and notices must include a brief statement of the reason for reducing the notice period.

Who must receive notice

• Under the WARN Act, covered employers must give notice to the representative or bargaining agency of affected employees and to individual workers.

The employer subject to the Worker Adjustment and Retraining Notification (WARN) Act requirements must give written notice to the representative or bargaining agency of affected employees and to unrepresented individual workers who may reasonably be expected to experience an employment loss. This includes employees who may lose employment due to “bumping,” or displacement by other workers, to the extent that the employer can identify those employees when notice is given.

If an employer cannot identify employees who may lose a job through bumping, the employer must provide notice to the incumbents in the jobs that are being eliminated. Employees who have worked less than 6 months in the last 12 months and employees who work an average of less than 20 hours a week are due notice, even though those individuals are not counted for WARN Act trigger levels.

The employer must also provide notice to the state dislocated worker unit and to the chief elected official of the unit of local government in which the employment site is located. Contacts for state dislocated worker units can be found on the Department of Labor website (listed as “Rapid Response Coordinators”).

Form and content of notice

• A company covered by the WARN Act is required to give notice in writing and must comply with other notice requirements of the Act.

While no particular form of notice is required to comply with the Worker Adjustment and Retraining Notification (WARN) Act, all notices must be in writing. The method of delivery must ensure receipt 60 days before a closing or layoff. Notice must be specific.

The content of the notices is listed in 20 CFR 639.7 of the WARN Act final regulations. As used in this section, the term “date” refers to a specific date or to a 14-day period during which a separation or separations are expected to occur. Additional notice is required when the date(s) or 14-day period(s) for a planned plant closing or mass layoff is extended beyond the date(s) or 14-day period(s) announced in the original notice.

Notice to each representative of affected employees must contain:

• The name and address of the employment site where the plant closing or mass layoff will occur, and the name and telephone number of a company official to contact for further information;
• A statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect;
• The expected date of the first separation and the anticipated schedule for making separations; and
• The job titles of positions to be affected and the names of the workers currently holding affected jobs.

The notice may include additional information useful to the employees, such as information on available dislocated worker assistance, and, if the planned action is expected to be temporary, the estimated duration, if known.

Notice to each affected employee who does not have a representative is to be written in language understandable to the employees and is to contain:

• A statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect;
• The expected date when the plant closing or mass layoff will commence and the expected date when the individual employee will be separated;
• An indication whether or not bumping rights exist; and
• The name and telephone number of a company official to contact for further information.

The notice may include additional information useful to the employees such as information on available dislocated worker assistance, and, if the planned action is expected to be temporary, the estimated duration, if known.

The notices separately provided to the state dislocated worker unit and to the chief elected official of the unit of local government are to contain:

• The name and address of the employment site where the plant closing or mass layoff will occur, and the name and telephone number of a company official to contact for further information;
• A statement as to whether the planned action is expected to be permanent or temporary and, if the entire plant is to be closed, a statement to that effect;
• The expected date of the first separation, and the anticipated schedule for making separations;
• The job titles of positions to be affected, and the number of affected employees in each job classification;
• An indication as to whether or not bumping rights exist;
• The name of each union representing affected employees, and the name and address of the chief elected officer of each union.

The notice may include additional information useful to the employees such as a statement of whether the planned action is expected to be temporary and, if so, its expected duration.

As an alternative to the notices outlined above, an employer may give notice to the state dislocated worker unit and to the unit of local government by providing workers with a written notice stating the name of address of the employment site where the plant closing or mass layoff will occur; the name and telephone number of a company official to contact for further information; the expected date of the first separation; and the number of affected employees.

The employer is required to maintain the other information listed above on-site and readily accessible to the state dislocated worker unit and to the unit of general local government. Should this information not be available when requested, it will be deemed a failure to give required notice.