FAQs ABOUT EMPLOYEE TERMINATIONS: HOW TO MINIMIZE LITIGATION RISKS

by Employment Law Attorney Leslie Lockard
The Law Office of Leslie Lockard, P.C.
Norwood Corporate Center
1500 Providence Highway, Suite 33
Norwood, MA 02062
(781) 551-0800
Llockard@leslielockard.com
www.leslielockard.com

Inevitably, some employees will need to be involuntarily terminated because of misconduct, unsatisfactory job performance or unreliable attendance. There are numerous claims that a terminated employee can bring against an employer, such as unlawful discrimination, retaliation, breach of contract, termination in violation of public policy, defamation, intentional infliction of emotional distress and many more. Even employees fired for legitimate business reasons may bring such claims, either because they are genuinely convinced that they were terminated for an unlawful reason, or to seek revenge and unwarranted compensation. In order to protect your company from such claims being filed, or to maximize the likelihood that such a claim will be dismissed if filed, many considerations should be taken into account.

I. TO AVOID LITIGATION BY TERMINATED EMPLOYEES, MAKE SURE PROPER POLICIES AND PROCEDURES ARE IN PLACE

To protect your company against litigation by terminated employees, be sure that your company does not follow policies or procedures which invite litigation.

• Employee Handbook – Have your employee handbook reviewed regularly by an employment law attorney to ensure that it does not contain ill-advised language which would invite employees-at-will (who can be terminated at any time for any lawful reason) to claim that the handbook constitutes an implied contract of employment, protecting them from the usual broad scope of the employment-at-will rule. For example, strong disclaimer language stating that the employee is an employee-at-will, and the handbook should not be deemed a contract, should be put on a separate page at the front of the handbook. Similarly, the section of the handbook which describes conduct which can lead to discipline and/or termination needs to be carefully worded to avoid an interpretation that the listed offenses are the only possible grounds for termination. In addition, if the handbook has a section describing step-by-step disciplinary procedures, such as written and oral warnings, the language should be very carefully drafted to avoid the suggestion that the employer has committed itself to follow these disciplinary steps before termination. Current Massachusetts appellate case law is surprisingly broad with respect to interpreting employee handbooks as constituting implied contracts, giving employees rights against termination. If a section of the handbook could be said to create a reasonable expectation on the part of the employee that a particular described policy or procedure will be followed, that may be sufficient to create an enforceable employment contract right. Therefore, it is critical that the language of your employee handbook is very carefully written, with the assistance of an employment law attorney.

• Offer Letters – You should also have your offer letters reviewed by an employment law attorney to make sure that they do not contain terminology which could support a claim that the employee is not an employee-at-will. Here again, Massachusetts case law has been surprisingly broad. Anything which could be read to suggest that the employee is being offered employment for a particular period of time or for at least a year, can cause problems. Even very innocent sounding language, such as saying that “you will be paid $60,000 per year” has been interpreted by courts as suggesting that the employee was going to be retained for at least a year.

• Policies and Procedures to Promote Consistent Application of Workplace Rules – Make sure that your supervisors are trained to follow consistent policies and procedures with regard to workplace discipline, attendance policies and the like. If two employees supervised by different supervisors receive different discipline for the same offense, such a scenario invites a discrimination claim. For example, if a white employee walks off the job and is permitted to return to work by one supervisor, and then an African-American employee happens to be terminated by a different supervisor after walking off the job several months later, the African-American employee might well reasonably assume that he was treated differently because of his race, since African-Americans have unfortunately historically received a good deal of unequal treatment in the workplace. Even if a protected employee does not genuinely believe that he was fired for a discriminatory reason, it gives a vengeful employee an opportunity to bring a claim. Consistent application of workplace rules by all supervisors minimizes this risk.

• All Terminations Should Probably be Approved by the HR Department – Supervisors probably should not be permitted to fire employees on the spot, or to decide on termination on their own. There are way too many considerations that need to be taken into account which only an experienced HR person, and not a supervisor, would know.

• Employment Evaluations – Be sure that your employment evaluation procedures are adequate so that problems with an employee’s performance or attendance are documented in employment evaluations. One of the first pieces of evidence an employee will use in a suit alleging wrongful or discriminatory termination is evaluations which show no problems with an employee’s performance. Written employee evaluation should not be done in a cursory manner, without documenting actual problems with employee performance. It is advisable to have all evaluations reviewed by an HR person before the evaluation is discussed with the employee. Particularly if the employee is one who is known to have performance problems of some kind, be sure that the employee’s written evaluations reflect the problems which exist. You want to avoid such situations as the employee being able to say that his employment evaluations were all excellent until he was fired soon after doing some type of protected activity, such as taking FMLA leave or making a sexual harassment complaint. In the latter case, such a scenario would likely be sufficient to earn the employee a probable cause finding at the MCAD. Even if the employer is finally able to establish that the termination was motivated by legitimate performance concerns, the employer will need to incur the expense of going through depositions and a trial.

Even if you know that the employee is being fired for perfectly legitimate business reasons, the surrounding circumstances still need to be carefully considered before going forward with the termination. The situation must be carefully considered to determine whether the surrounding circumstances present a substantial risk that the employee will genuinely believe that he is being fired for an unlawful reason, or that he will see an opening to file a claim, even if he knows otherwise. For example, a client of mine planned to fire a female employee for legitimate performance reasons. They planned to advise her of her termination at 4:45 on Friday afternoon. However, at 4:30 that afternoon, the employee came to her supervisor and said that she wanted to inform the company that she had just learned that she was pregnant. If the employee had been fired 15 minutes after advising the employer she was pregnant, the obvious inference would be that she was fired because she was pregnant. If a termination takes place soon after the employee engages in a protected activity, such a scenario may well be sufficient to get the employee a probable cause finding at the MCAD, and to defeat dismissal motions if the claims are filed in court.

You therefore need to carefully consider whether any of the following circumstances are present. If so, it would be advisable to consult your employment attorney for advice how to deal with the situation in such a way as to minimize the likelihood of litigation. Among the questions to ask yourself are as follows:

1. Is the employee a member of a protected group, an employee who could make a claim that his/her termination was based on race, color, national origin, age, sex, sexual preference, disability, religion, creed or military service? If so, is there anything in the surrounding circumstances which could suggest that the employee was fired because of his membership in that protected group?

2. Has the employee made or assisted in some way in a complaint of unlawful discrimination or harassment? For example, has the employee given a statement which supported another employee’s claim of sexual harassment?

3. Has the employee recently made an OSHA or workplace safety complaint, or assisted in an OSHA investigation?

4. Has the employee recently made a complaint, either internally or to a state or federal government agency, that he has not been correctly compensated, including claims that improper deductions were taken from his pay or that he did not receive overtime pay due him?

5. Has the employee engaged in activity which could be considered protected concerted activity? Even in non-unionized workplaces, if an employee has made some type of complaint or sought improvement of workplace terms and conditions on behalf of at least one other employee other than himself, that could be considered protected concerted activity.

6. Has the employee recently taken any type of statutorily protected leave, which could provide basis for a claim that he was fired in retaliation for taking such leave? For example, has the employee taken workers’ compensation leave? FMLA or Small Necessities Leave Act leave? Maternity leave? Disability leave? Leave to serve on a jury?

7. Has the employee recently taken military leave? Employees who would otherwise be at-will employees are protected from termination without just cause for one year after service in the U.S. Armed Forces that lasts 181 days or more. Employees who return from military leave lasting 30 to 180 days cannot be terminated without just cause for six months.

8. Has the employee engaged in any type of conduct which could support a claim that he was fired for being a whistleblower? For example, has he made a claim that the employer is engaged in some type of fraud or criminal activity? If you are a medical employer, are there any circumstances which would qualify for protection under the state health care whistleblower statute? If the employee did not actually make such a claim, did he threaten to do so or participate in an investigation or hearing by a government agency?

9. Was the information which led to the employee’s termination gathered by means which could support a breach of privacy claim? For example, was the employee’s email read without prior notice that employee email is company property, and subject to company review at any time? Was the employee’s activity videotaped or audio taped, or were his desk or possessions searched? All of these scenarios could present potential liability problems, and consultation with an employment law attorney is advisable before proceeding to termination.

10. Is there anything in offer letters or other related written materials given to the employee which could suggest that he was not an employee-at-will, or that he could not be fired under the circumstances? Were any oral promises made which would so suggest?

11. Is there any language in the employee handbook which would suggest that he would not be fired under the circumstances, such as language which could have created in him a reasonable expectation that he would receive warnings before being fired, etc.

12. Is there anything in the company’s recent history which would support a claim that this employee is being treated more harshly than another employee under the same circumstances, particularly if this employee is a member of a protected group?

13. If the employee is being terminated for poor attendance, be sure that the time taken for FMLA or SNLA leave is not counted against the employee in any way. Moreover, leave taken because of a disability should not be counted against the employee unless the amount of leave meets the high threshold of constituting an “undue burden” for the employer.

It is always advisable to document the reasons for the termination. Particularly if you decide that the company needs to proceed with termination, notwithstanding some recent potentially protected activity, it is critical to create good, contemporaneous documentation of the reasons for the termination. In addition, it is advisable to gather and retain underlying documentation which evidences the reasons for the employee’s termination. For example, if the employee is being terminated for poor work performance, retain copies of some of the secretary’s work which was loaded with errors, or a copy of the supervisor’s memo to the subordinate, criticizing him for numerous errors that appeared in a report he compiled. Such documentation, compiled before anyone knew that a claim would be filed, can be extremely helpful in getting a claim dismissed at the Massachusetts Commission Against Discrimination at the probable cause stage. Moreover, such documentation may be helpful in persuading a Department of Unemployment Assistance investigator that the employee is not entitled to unemployment benefits, in cases in which the company chooses to contest the employee’s claim for benefits.

IV. PLANNING TO CARRY OUT EMPLOYEE TERMINATIONS

Before informing the employee of his termination, it is advisable to plan how the decision will be handled, and what will be said to the employee. Among the things that should be considered are as follows:

• Are you going to give the employee the opportunity to resign rather than be fired?

• Are you going to try to create some goodwill in the departing employee by giving severance benefits?

• If you provide severance benefits, are you going to require the employee to sign a release of all claims in exchange for such benefits? Remember that if the employee is 40 years old or older, there is a federal statute which requires employers of 20 or more employees to follow a number of procedures in obtaining the release in order for the release to be enforceable. For example, for a release to be enforceable, you need to give in exchange for the release something of value to which the employee would not otherwise have been entitled, such as increased severance pay beyond that the employee would otherwise have received under existing policies. Be sure to have your release reviewed by an employment law attorney to be sure that it contains all the legally required provisions for enforceability. It may be advisable to follow these release procedures if the employee belongs to another protected group, even if he is not 40 or over.

• Decide who will inform the employee of his termination. It is often advisable to have two people present, perhaps the Human Resources Director and the employee’s supervisor, so that there will be another witness should the employee claim, for example, that he was told that he was being fired because he was “too old”. If you should have any suspicion that the employee may become enraged or violent when informed of the decision, you may want to arrange to have security personnel available nearby.

• Decide beforehand what you will say to the employee you are terminating.

• DO: Try to describe the reasons for the decision in a way that will minimize the likelihood that the employee will become angry or seek to bring claims against the company. Do try to soften the blow as early as possible in the discussion by mentioning any benefits that the company will provide to the employee, such as severance pay and COBRA benefits. In most cases of involuntarily termination, the employee will be entitled to unemployment benefits. The main exceptions are if the employee is discharged for deliberate misconduct in willful disregard of the employer’s interest, or for a knowing violation of a reasonable and uniformly enforced workplace policy. These exceptions, however, are generally interpreted generously in favor of the employee. Since the employee is generally going to be entitled to benefits anyway, it may be an advisable goodwill measure to advise the employee that the employer will not contest an application for unemployment benefits, which will provide the employee with income while seeking another position.

• DO NOT: Lie about the reasons for the termination. You should phrase the reasons as tactfully as possible, but do not lie about the actual reasons, even to try to soften the blow or save the employee’s feelings. In a discrimination case, if the employer is found to have lied about the reasons for the termination, that is considered sufficient evidence to support a decision that the actual motive for the termination was unlawfully discriminatory. Evidence that the employer lied about the reason for the decision will generally be sufficient for an employee to obtain a probable cause finding from the MCAD, or to defeat dismissal motions filed in court.

• In general, you should try to make the explanation of the reasons for the termination brief, and do not phrase it in such a way that the matter seems open to the employee for debate or for lengthy explanations from you.

• Decide whether to relieve the employee of his duties right away. That is often the best way to proceed, giving the employee pay in lieu of notice. An employee who is told that he will be terminated in one week will likely be unproductive during that week, and may adversely affect morale by discussing the alleged unfairness of the decision with other employees. There have been extreme cases when disgruntled employees did such things as erasing company computer memory and sending out bogus letters on company letterhead to company customers stating that the company is about to go out of business. Moreover, angry employees who remain on the job after being informed of the decision to terminate may avail themselves of a “five-finger, self-help” type of severance plan.

• Avoid defamation by conduct. A decision of our Supreme Judicial Court, Phelan v. May Department Stores, indicates that an employer can be found liable for defamation based on the way it treats the employee even if the employer makes neither an oral or written statement about the employee, which is usually required for a defamation claim. In the Phelan case, the employer was conducting an investigation of alleged accounting irregularities which Mr. Phelan was suspected of committing. The employer first interviewed Phelan, and then assigned a store security officer to stay with him all day long, escorting him to the men’s room and the cafeteria, purportedly to prevent him from influencing or intimidating his subordinates, who were being questioned as part of the investigation. Phelan was escorted out of the building at the end of the day by a company executive, and his employment was subsequently terminated. Phelan argued that this conduct was defamatory, because it conveyed the impression that he was guilty of criminal wrongdoing. Although the court decided that the employee in this particular case could not prevail, because he had not offered evidence that any co-worker made such an inference from this conduct, the language of the decision indicates that an employer could potentially be held liable for defamation by conduct alone. The court explicitly recognized for the first time that a defamatory communication can be found based on physical conduct of an employer, even in the absence of a written or spoken communication. The court stated that in this case, the security officer’s actions in escorting Phelan around the office did not necessarily convey that he had engaged in criminal wrongdoing. They noted that there was “no chasing, grabbing, restraining or searching such as would have conveyed a clear and commonly understood meaning”. You would therefore want to avoid publicly “chasing, grabbing, restraining or searching” an employee.

• Employers also need to be careful not to treat employees who are being terminated, who are members of a protected group, in a less favorable way than other employees. In the case of Coney v. Trustees of Health and Hospitals of the City of Boston, the employer laid off 7 employees, 5 African-American women and 2 white employees. After being informed of the layoff, the 5 African-American women were escorted to their offices by security guards, told to clean out their offices immediately, and were not allowed to say goodbye to any of their co-workers or explain why they were leaving. The two white employees were not treated this way. The five women very reasonably believed that they had been treated this way because they were black, and that an impression had been created among their co-workers that they had done something wrong. The MCAD found that unlawful discrimination had occurred, and awarded the women $125,000 in emotional distress damages.

• Employers also need to avoid conduct which could be deemed actionable “false imprisonment”. Holding an employee in an office, or at the workplace, without his consent, particularly for substantial periods of time while he is being guarded by a security guard, could give rise to a claim for false imprisonment.

Under state law, involuntarily terminated employees must be given their final paycheck on the day of their termination. This final paycheck must include compensation for any accrued but unused vacation time, and for any commissions which have become due and payable as of that time, according to the employer’s policies. Employers are required to have a vacation policy which is phrased in such a way that it is clear, as of any particular date on which an employee might leave his employment, exactly how much accrued unused vacation he has.

Do not take setoffs from the employee’s final paycheck. With very limited exceptions, which should be approved beforehand by an employment law attorney, do not take setoffs from the employee’s final paycheck. This is so even if the employee has failed to return a company laptop or some other valuable piece of equipment. In general, the Attorney General’s office views taking a setoff from an employee’s paycheck as a form of denial of rightful compensation for work performed. Such conduct can give rise to severe penalties, including even criminal penalties. Despite the inconvenience, the employer is much safer in giving the employee his full final paycheck, and suing the employee, if necessary, for the value of the item retained or lost. (However, if you are providing severance pay, you can likely require the employee to return all company property before the severance payment will be made.)

Determine what company property the employee has before the termination meeting, and make arrangements during the meeting to get these items back from the employee. Also, remember to arrange to change locks, or computer or other types of access codes, where indicated.

Under state law, employers are required to give departing employees a notice of their unemployment rights. (This is so even if you believe the employee is not entitled to unemployment benefits.) A copy of the latest version of the notice employers are required to give is attached.

If COBRA benefits are applicable, remember to provide employees with the required notice of COBRA rights. Although it is not absolutely required that this be given to the employee on the day of termination, it may be a good idea to do so to make sure that this step is taken.

If the employee is subject to a non-competition, non-disclosure or a non-solicitation agreement, some of the provisions of which continue after the termination of his employment, it is wise to remind the employee of these agreements, and provide him with duplicate copies.

VI. AFTER THE EMPLOYEE IS TERMINATED

In general, it is safest to inform only those with a need to know of the reasons for the employee’s termination. Providing too much information to too many people could support a breach of privacy claim. Moreover, be careful about the truth of what you convey. For example, if you suspected, but did not have clear proof, that an employee was stealing, you might fire the employee for failing to follow the proper procedures for documenting payments the employee received (assuming that the employee in fact failed to follow such procedures). It would not be advisable in such a case to advise others at the company – or outside the company – that the employee was fired for stealing, as this could potentially support a claim for defamation.

In responding to inquiries from prospective employers who seek references from you about the terminated employee, be careful that any unfavorable information you convey is true. In the above cited example, you would not want to tell a prospective employer that the employee was fired for stealing, unless you have good evidence that that was indeed the case. There is Massachusetts case law stating that employers do have the right, and perhaps even a duty, to convey unfavorable employment reference information to a prospective employer. However, an employer who conveys false defamatory information, or who is reckless or negligent as to whether the information conveyed is true or false, can be held liable for defamation.

Because departing employees are often asked on employment applications to name their previous direct supervisor, rather than the previous HR Director, it is advisable to have a policy requiring supervisors to refer any reference requests to the Human Resource Director. The Human Resource Director will be much better able to avoid statements which could support defamation or breach of privacy claims.

If you give a letter of reference for a terminated employee, which employers sometimes agree to do in return for having an employee resign, be careful not to overpraise the employee. You could certainly speak favorably about the aspects of the employee’s performance which were satisfactory. However, you should not speak favorably about the aspects of the employee’s performance which were not satisfactory. If the employee were to bring a claim alleging that he was forced to resign, your letter speaking favorably about the unfavorable aspects of his performance which actually led to his termination would be used as evidence against the company. Also, if the employee was fired for serious misconduct, such as violence, unlawful workplace harassment or stealing, it is probably inadvisable to write a letter of recommendation for the employee. If the employee were to repeat such misconduct at the new workplace, your company could potentially be sued.

THIS MEMORANDUM IS FOR GENERAL INFORMATION ONLY, AND IS NOT INTENDED TO PROVIDE LEGAL ADVICE AS TO ANY PARTICULAR SITUATION. EMPLOYMENT LAWS ARE CONSTANTLY SUBJECT TO CHANGE. QUESTIONS ABOUT PARTICULAR SITUATIONS SHOULD BE DIRECTED TO A KNOWLEDGEABLE EMPLOYMENT ATTORNEY.

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