Termination

Termination
Authored by Andrew Wampler

Wilson 1bca35f096d56ee718c45bfa7080d4cdc0dac51aa6b2e653b2ea8ce1b527da5a

Introduction to termination

Perhaps no situation carries as much potential liability for an employer as the termination of an employee. In order to reduce the risk as much as possible, employers must implement procedures that require employee terminations be handled in a consistent and professional manner. As a general rule, Virginia follows the employment at will doctrine. This means the employer may discharge the employee at any time, with or without cause. The employee may also, in turn, quit his/her employment at any time, with or without notice. 

There are, however, exceptions imposed by federal and state law, and employment contracts (including collective bargaining agreements). Thus, it is important for the employer to keep these exceptions in mind and maintain prior, consistent documentation to support the termination should the employee later challenge the termination decision.

There are a number of circumstances that can lead employers to consider termination. Poor performance is a common problem. In that case, the employer should give notice and a reasonable time to correct the problem. The employer should offer goals for improvement and may also want to provide additional training and support to help meet the established goals. The employer should follow up with the employee to see whether the goals have been met.  If the employee has not reached the goal, then the employer may elect to terminate the employee in accordance with the notice that has been previously provided. The employer should be consistent when dealing with notice and improvement goals. It is also important to ensure there are no illegal or improper motivating factors in the employee performance improvement, discipline, or termination.

If the employee has displayed gross misconduct, such as harassment, theft, violence, or insubordination, the employer may elect to act immediately without notice or a performance improvement plan. If an explicit policy has been covered in orientation or the handbook, then the employee has been put on notice. The employee should act in accordance with the policy. 

An employer also should remain mindful that, in exercising its management authority, two questions always arise in this context:


  1. Can I terminate this person (legal analysis)?

     

  2. Should I terminate this person (business culture analysis)? 

Exceptions to the employment at will doctrine

There are several exceptions to the employment at will doctrine. Various federal anti-discrimination statutes protect employees from being discharged on the basis of race, color, sex, national origin, religion, age, disability, or military status. Employees working under a written employment agreement or a union contract may also be protected from discharge other than for good cause as defined by the particular agreement.

A variety of federal statutes protect employees from being terminated on the basis of race, color, religion, sex, national origin, age, disability, pregnancy, and union activity. Most federal anti-discrimination and employment laws also prohibit retaliation against employees by their employers for exercising their rights to seek protection under these laws.

Protected statuses

Title VII of the Civil Rights Act of 1964, amended by the Civil Rights Act of 1991 (Title VII) applies to both private and public employers with 15 or more employees, labor organizations, and employment agencies, but not to certain bona fide private membership clubs. Among other protections, Title VII prohibits an employer from discharging an employee on the basis of race, color, religion, national origin, or sex (including pregnancy, childbirth, or related medical conditions). See Discrimination in employment for a more detailed discussion of Title VII.

 

Pregnancy discrimination 

The Pregnancy Discrimination Act (PDA) also applies to both private and public employers with 15 or more employees, labor organizations, and employment agencies.  The PDA prohibits employers from discharging or otherwise discriminating against employees on the basis of pregnancy. The law requires pregnant women to be treated the same as men or non-pregnant women whose ability or inability to work is due to a non-pregnancy related illness or disability. The PDA does not, however, require better treatment for pregnant women.

 

Age discrimination 

Employer coverage under the Age Discrimination in Employment Act (ADEA) is similar to that under Title VII, except the ADEA only applies to employers with 20 or more employees. 

The ADEA, as amended, prohibits an employer from discriminating against an individual with respect to discharge and other terms, conditions, and privileges of employment on the basis of the individual’s age, provided that the individual is age 40 or older. See Discrimination in employment for a detailed discussion of the ADEA.

 

Disability protection

The Americans with Disabilities Act (ADA) applies to employers who have 15 or more employees. The ADA generally prohibits discrimination and harassment in any aspect of employment, including discharge, applications, testing, hiring, assignments, evaluations, disciplinary actions, compensation, promotions, leave, and benefits. See Disabilities and reasonable accommodation for a detailed discussion of the ADA.

 

Family and medical leave 

The Family and Medical Leave Act (FMLA) applies to any employers who have 50 or more employees. Under the FMLA the employee is entitled to up to 12 weeks of unpaid leave for the birth or adoption of a child, the employee’s own serious health condition, or to care for a spouse, parent, or child with a serious health condition. An employer may not discharge the employee for exercising their right to leave under the FMLA. See Family and medical leave for a detailed discussion of the FMLA.

 

Protected activities

The National Labor Relations Act (NLRA) prohibits discrimination, including discriminatory discharge, based on the employee’s exercise of protected concerted activity (including but not limited to union activity).

 

Benefits

The Employee Retirement Income Security Act (ERISA) governs all employee benefit plans unless specifically exempted. ERISA prohibits discrimination against employees (benefit plan participants), including discriminatory termination, who exercise rights under ERISA.

 

Jury duty

An employer may not discharge, discipline, or otherwise penalize an employee who is absent from their employment for the purpose of attending a judicial proceeding in response to a subpoena, summons for jury duty, or other court order or process that requires the attendance of the employee at the judicial proceeding. 

 

Labor organization membership

An employer may not, as a condition of employment or continuance of employment, require that an employee join a labor organization. Nor may an employer require the employee to refrain from such membership. This law is more commonly known as the “right to work” law.

 

Garnishment

No employer may terminate an employee because their earnings have been subjected to garnishment for indebtedness, even where more than one summons of garnishment may be served upon such employer with respect to the debt.

 

OSHA hazardous chemicals

An employer may not discharge an employee for requesting information regarding hazardous chemicals, filing a complaint relating to the employer’s use of hazardous chemicals under either the VOSH program or the Public Employee Hazardous Chemical Protection and Right to Know Act of 1988, or otherwise reporting or participating in an action under either of these laws.

 

Employment contract

An employee who has entered into a written employment agreement that specifically provides a definite duration of employment or limits the circumstances under which his/her employment may be terminated may bring a claim for breach of contract, claiming that the discharge violated the terms of the contract. In these situations, the employee commonly asserts that the employer did not have good cause (as defined by the contract) to terminate their employment.

Note:                                                                        

A more complete list is located in Discrimination in employment.

Employee initiated exits

With respect to the employee who resigns, employers should conduct an “exit interview” with the employee, especially if the employee is one that the employer valued.  The interview may provide insight to enable the employer to improve its operations or correct an unknown problem in the workforce. 

The employer should also be aware that it may have obligations regarding notice on continuing healthcare insurance or retirement benefits, discussed herein, even for employees that voluntarily resign.

 

Sample Exit Interview Form

Communicating the decision to terminate

When an employer is terminating an employee, it is a good idea for the individual who will be communicating the news of the termination to prepare a careful outline or script for the discussion in advance.  A second management employee should also be present to take notes and act as a witness.  Immediately after the meeting, that individual should review the outline or script and make notes on how (if at all) the meeting differed from the outline or the notes.  Often, disputes arise over what was said at such meetings.  Good documentation of the termination meeting is an extremely helpful tool for resolving such disputes.

The following are tips for employers to create a smooth termination process:


  • Briefly review the employee’s employment history with the employee, commenting on specific problems that have occurred and the attempts to correct these problems.

     

  • Inform the employee within the first few minutes that he/she is being terminated.

     

  • Explain the decision clearly and concisely.

     

  • Avoid counseling the employee.

     

  • Make certain the explanation given for the termination is truthful.  As stated previously, the termination may give rise to a lawsuit.  In some cases, an employer’s failure to state the true reason for the termination or stating reasons inconsistent with reasons later stated has been considered evidence of bad faith or discrimination.  Careful consideration should be given to any communication regarding the reason for the termination.  Where the termination involves a complicated matter, employers may wish to seek legal counsel concerning the drafting of a separation notice.

     

  • Explain fully any benefits, including COBRA and unemployment compensation, which the employee may be entitled to receive.  If the employee is not entitled to certain benefits, explain the reasons for this.

     

  • Allow the employee the opportunity to respond.  Pay close attention to what the employee says, but do not argue with the employee or otherwise attempt to justify the decision.

     

  • Establish the process for the return of company property (such as materials, documents, tools, and information) in the employee’s possession.

     

  • Establish the procedure to retrieve any identification cards, delete passwords, and change locks and related security matters.  Anticipate whether physical security preparations are needed.

     

  • Remind the employee of any non-competition, non-solicitation, or confidentiality requirements that may apply.

     

  • Ensure that the employee physically leaves with as much dignity as possible.  In the case of a termination, give specific thought to transportation arrangements if the employee is impaired or added security measures if the employer has reason to worry about potential workplace violence.

Terminating an employee is a delicate undertaking even in the best circumstances.  It is important that the employee understand the reasons for the discharge.  Ideally, a representative of human resources should be present at the meeting in which the termination decision is communicated.  There should always be at least two people present representing the employer. 

The termination meeting should be short and to the point.  The meeting is not a dialogue on the decision.  The meeting is intended to communicate the fact of the decision.  The news of the decision to terminate should be conveyed unemotionally and candidly.  The employer should not try to soften the blow by complimenting the employee on other areas of performance, as this sends mixed messages to the employee.  The employee should be treated with dignity and respect at all times. 

Under all circumstances, emotion and anger must be avoided.  Do not engage.  Be respectful at all times.  Be brief.  

Lowering legal risk

The option of resignation

Where the termination is a mixture of disciplinary issues and poor performance, the employer may want to consider offering the employee the option of converting the termination into a resignation.  This option may diffuse some of the anger that often arises with terminations and maybe a helpful way to mitigate the risk of a lawsuit.  Where, however, the termination is based solely on misconduct, the employer may not want to offer the choice of a resignation. 

 

Separation agreements and employee releases

If the employer believes the employee may file a claim upon termination, or if a major dispute between the employer and employee exists at the time of termination, it may be in the employer’s best interest to enter into a separation agreement that contains a release of all actual and potential claims from the employee.  In a separation and release agreement, the employer agrees to provide some additional consideration (usually in the form of monetary compensation) in exchange for the employee’s agreement to release the employer from any claims the employee might have that arose during the employee’s employment.  Employers should note, however, that any such release cannot limit the employee’s right, if applicable, to challenge the validity of the release in a legal proceeding under the ADEA or the Older Workers’ Benefit Protection Act of 1990  (OWBPA).  Additionally, the employer may not prevent the employee from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission (EEOC) or any similar state or local fair employment practices or human rights enforcement agency, provided the employee does not receive any monetary recovery for such filing.

The challenge with separation and release agreements is that the employer does not want to encourage the employee into thinking that there is vulnerability or weakness with the employer’s decision or that there might be more money available.  Separation and release agreements are wonderful things but obtaining them with involuntary terminations can be tricky.  The agreements themselves should always be prepared by the employer’s counsel.

 

Influencing the flow of information

Despite the best efforts of the employer, more likely than not, some employment terminations will lead to litigation or a charge of discrimination.  In these instances, the employer is encouraged to take control of information about the termination.

Often, the former employee, upset with his/her termination, consults counsel with very little paperwork and acting as the sole source of information.  Most plaintiffs’ attorneys are empathetic to their clients and want to help.  Frequently, the former employee’s attorney develops an initial bias arising from the employee’s version of the facts. The employer can take steps to avoid this if it believes the employee is likely to consult counsel after termination.  In such cases, the employee may consider sending the former employee a written reason for the termination.  Such a letter can include a description of the facts that led the employer to the decision.  In some cases, this exercise may assist the former employee’s counsel to see that the employer has been careful and thoughtful about the termination decision.  It may also raise doubt in the mind of the attorney as whether the claim is worthwhile.  If an employer chooses to put the reasons for termination in writing, however, it should do so with extreme caution.  The reason must be truthful, accurate, and capable of being proven.  In addition, the writing should go only to the employee to avoid claims of defamation.

 

Sample Separation Agreement and Release for Employees Age 40 and Older



Sample Separation Agreement and Release for Employees Under Age 40



Sample Separation Checklist

Reasons for termination

As an at will employment state, Virginia does not subject employers to liability for wrongful discharge. Virginia does, however, recognize a few exceptions to the employment at will doctrine. As discussed in Discrimination in employment, various federal statutes and the Virginia Human Rights Act (VHRA) protect employees from being discharged on the basis of:


  • race

     

  • color

     

  • national origin

     

  • sex

     

  • pregnancy

     

  • religion

     

  • age

     

  • disability

     

  • military status

     

  • union activity. 

Employees working under a written employment agreement or a union contract may also be protected from discharge other than for good cause as defined by the particular agreement.  Employers should be certain that there are no agreements that govern the employment relationship.

Terminating employees for economic reasons

Downsizings, rightsizings, reductions in force (RIFs), and even just regular layoffs would seem to be simple undertakings.  The conduct or misconduct of the employee is irrelevant.  The supervisor’s assessment of the employee’s job performance is irrelevant.  The termination is simply because of a lack of business.

Short of a complete shutdown of the business, however, economic terminations necessarily involve the selection of certain employees over others to continue to work, which can result in a claim of illegal discrimination.  As described more fully in Discrimination in employment, claims of “disparate treatment” involve an allegation that the employer’s decision to terminate an employee was motivated by hostility towards a protected characteristic of the employee (such as race, gender, disability).  By contrast, claims of “disparate impact,” involve an allegation the employer’s actions had an adverse impact to a protected group and that, statistically, this group ended up being affected more substantially than then workforce as a whole even though the employer harbored no negative motivation towards that protected group.

Seniority, as the basis for the employer’s layoff selection, is generally a safe criterion.  Employers should note, however, that using seniority as a selection factor may not always avoid a disparate impact claim, especially if the recent hires have been predominantly from a protected class.  Employers that must reduce 10% or more of their workforce should consult counsel, despite the expense.  Given the risk of claims of illegal discrimination flowing from layoffs, seemingly simple actions could have larger consequences.  For instance, well intended separation packages with weekly severance benefits may actually constitute welfare benefit plans governed by the Employee Retirement Income Security Act (ERISA). See Benefits for more information.  In addition, there are certain legal requirements that any separation agreement must meet in order for a release of claims to be effective. 

 

Plant closings and mass layoffs

In some cases involving substantial economic termination, an employer may need to notify its affected employees under the federal Worker Adjustment and Retraining Notification Act (WARN). 

WARN generally applies to employers who:


  • have 100 or more full time employees and who are laying off at least 50 employees at one location

     

  • employ 100 or more employees who together work more than 4,000 hours per week and the employer is a private for-profit business or a non-profit organization.

For the purposes of determining how many employees an employer has, the employer should exclude those employees who have worked less than six months and those who work less than 20 hours per week.

A “covered” employer must provide notice 60 days before it:


  • closes a facility and the closure affects at least 50 employees

     

  • lays off 500 or more employees at one location during a 30-day period

     

  • lays off 50 to 499 employees at one location and the layoff accounts for one-third of the employer’s workforce at such location

     

  • announces a temporary layoff of less than six months, for 500 or more employees at one location or 50 to 499 employees who account for one-third of the employer’s workforce at one location, and the employer decides to extend the layoff beyond six months

     

  • reduces 50 or more employees’ hours by 50% or more in each month for six months.

Post termination obligations

Benefits 

With any former employee, regardless of whether he/she resigned or was terminated, the employer should ensure that it complies with its obligations to provide the former employee with a chance to continue health insurance benefits - often referred to as COBRA rights. (See  Health insurance for more information.)  Failure to comply with these obligations may result in the employer becoming responsible for the employee’s healthcare expenses.  The employer should always contact its health insurance carrier or administrator to determine whether it must extend COBRA rights and obtain the correct paperwork to be sent to the employee.  If the paperwork is not delivered in person, it should be sent by certified mail, return receipt requested to the former employee.  (Employers should place the returned green card in the former employee’s personnel file.) 

The employer should also take similar steps with any retirement plans the employer might have provided as a benefit to the employment.  Work with the administrator of the retirement plan to make certain that the correct paperwork is mailed and keep a copy of all notices sent.

 

Compensation

Under Virginia law, upon termination, an employee must be paid all wages or salaries due for work performed prior to the termination, on or before the date on which he/she would have been paid for such work had his/her employment not terminated. For instance, if an employee is terminated on June 7th and the next regular pay date for this work is on June 15th, the employer may either pay the final paycheck on June 7th or on the next regular pay date of June 15th.

Other than for payroll, wages, or withholding taxes, an employer may not deduct or withhold any part of the former employee’s wages or salaries without a signed authorization from the employee. For instance, the employer may not deduct - as a setoff or counterclaim - any money allegedly due to the employer as compensation for damages caused to the employer’s property by the employee. Instead, the employer must pay the compensation and then ask for repayment. If the former employee declines to pay for the damage, the employer’s only real option is to sue the former employee. 

 

References

Although employers are not obligated to provide references for former employees, Virginia law attempts to protect those employers who chose to do so. Specifically, an employer who discloses information about a former employee’s job performance or work record to a prospective employer is presumed to be acting in good faith and, unless lack of good faith is shown by clear and convincing evidence, is immune from civil liability for such disclosure or its consequences.

Even though Virginia law offers some protection to an employer that provides true information to a prospective employer from defamation claims, employers should only provide references that confirm employment and the start and end dates of such employment. The risk that arises to employers from giving references does not justify the benefit in providing them. Additionally, employers should be consistent in how they handle reference requests. Giving references for some former employees but not others might be cited as evidence of illegal discrimination.