How To Minimize Employer Liability For Personnel Decisions

06/02/2011
By Karen Folster Lesperance

With unemployment at near record high rates, there has been a marked increase in the number of recently terminated employees who are at least contemplating lawsuits and/or human rights complaints against their former employers.

Employers, already faced with difficult economic times and having to make tough decisions to keep afloat, also must be concerned with the potential liability they may face as a result of their personnel decisions. While no one can prevent a disgruntled former employee from bringing a complaint or an action, there are certain steps that employers can take to reduce the risk and minimize their exposure.

Know the law. If an employee has an employment contract that promises employment for a defined term, the terms of the agreement generally provide for termination under stated conditions, such as for just cause or upon written notice given at least a specified number of days prior to the date of termination. If termination occurs in any way that is contrary to the terms of the contract, the employee may have an action for breach of contract.

Where no such contract exists, the employee is deemed an "at will" employee and may be fired at any time, for any reason or for no reason, so long as it is not an unlawful reason. An unlawful reason for terminating an employee is generally one that is motivated by discrimination on the basis of membership in a protected class – race, gender, ethnicity, age, or disability. Note that gender discrimination also encompasses such situations as sexual harassment, pregnancy discrimination and discrimination against mothers, and "gender stereotyping" (i.e., the failure to act in accordance with perceived notions of masculinity or femininity).

This does not mean that an employer cannot fire a member of a "protected class." An employee claiming unlawful termination must be able to show that his or her membership in a protected class was a primary motivating factor in the decision to terminate. If the employer has a legitimate reason for terminating the employee that has nothing to do with discrimination, then the termination is lawful unless the employee can show that the so-called "legitimate" reason was just a pre-text for discrimination.

Employers contemplating firing an employee that is known to be a member of a protected class should be extra diligent in utilizing the safeguards described below, particularly with respect to documenting the reasons for the termination.

Institute Personnel Policies and Enforce Them Uniformly. Employers should have personnel policies that govern such issues as employee discipline and performance reviews and evaluations. In an ideal world, an employee manual or handbook will set forth a code of conduct and clear expectations for workplace behavior and performance, and formal written reviews of all employees will be conducted on at least an annual basis. Where this is not possible or practical, however, the employer should, at the very least, have regular and recurrent discussions with employees about overall performance, and should be uniform with all employees in the manner in which these discussions are conducted.

Document Events Contemporaneously. Whether or not there is a formal system in place for performance reviews, any serious issues with performance or conduct should be documented in writing and kept in an employee personnel file. Any verbal discussions about substantive performance or behavior issues should be held in the presence of a witness, if possible, and should be reduced to writing as soon after the discussion as possible.

Have an Anti-Discrimination/Anti-Harassment Policy With Clear Complaint Procedures. An employer can protect itself from liability for the actions of its employees toward co-employees by issuing an anti-discrimination/anti-harassment policy that has a clear procedure for employees to follow if they feel they have been the victim of discrimination or harassment. At least two individuals should be identified to receive complaints (so that in the event that one of them is the alleged harasser, the employee has another option). The existence of a policy and a complaint procedure is a complete defense for the employer if an action is brought by an employee that did not utilize the complaint procedure.

Get a Release. Wherever possible, enter into a signed termination agreement with a departing employee that contains a release clause. By signing such an agreement, the departing employee waives the right to bring a claim for unlawful termination. There must be consideration for the agreement – i.e., the employer must give the employee something in exchange for the release, typically severance pay or continuation of health benefits for some period of time, but a few weeks severance may be well worth the peace of mind when the legal fees associated with defending a wrongful termination action are taken into consideration.

Call a Lawyer. If you suspect that there may be problems or complaints from an employee you are contemplating terminating, or if you need assistance drafting a termination agreement with a release clause or just need advice as to whether your personnel decision might expose you to potential liability, consult with an experienced employment attorney. The lawyers at McCabe & Mack LLP are always available to help you with this, and all your legal needs.