Tips For Avoiding A Lawsuit When Letting An Employee Go

by Chris Kellett, Attorney Principal

There’s no question: business owners today have a lot on their plates. Between adopting new technology, managing vast amounts of data, watching budgets, and balancing human resources – many of the businesspeople I’ve worked with find themselves both short on time and in “reaction mode” when difficult circumstances with an employee arise.

This is where legal trouble can occur.

Terminating an employee is one of the most sensitive areas for business owners to navigate, and is a common place for lawsuits to erupt. Even frivolous lawsuits with no merit can take months or years to resolve, at tremendous cost. Recently, I helped a client solve a personnel problem quickly, without the stress or expense of litigation.

I advised him to take a proactive approach that would help avoid more costly problems later. If you find yourself dealing with personnel problems and want to mitigate your risk of being sued, think ahead and follow these important steps:

  • Establish an employment agreement. This first step establishes up-front that you are an at-will employer and retain the right to terminate employment at any time.
  • Maintain an employee handbook. A good handbook will explain policies and procedures clearly to employees, and help to ensure that the expectations are communicated equally to everyone.
  • Conduct performance reviews. These regular interactions with employees provide opportunities to clarify how their performance and behavior meets expectations – or doesn’t. They also provide important supporting documentation for firing decisions.
  • Perform write-ups and progressive discipline. When an employee consistently violates company policies or does not meet performance expectations, a formal write-up is a clear way to communicate the problem. Having a progressive discipline policy in place will provide clear guidance for the appropriate disciplinary steps to take over time.
  • Maintain personnel files. Make sure you keep a personnel file that documents everything in one place and accurately captures a record of poor behavior and disciplinary actions.
  • Offer a separation package. When you’ve followed all of the above steps, and termination is still the best choice, investing in a severance package in exchange for a full release of all claims can provide for a more peaceful parting. While it’s less expensive to simply terminate the employee, a severance avoids the possibility of being sued and paying an unknown amount in attorneys’ fees and potential settlement or judgment. Moreover, the employer averts the negative publicity that may come with a lawsuit.

Lawsuits are a frightening prospect for any business owner, regardless of whether they are legitimate or not. If you find yourself in need of legal advice, the attorneys at Carmody MacDonald have been helping business owners solve their legal challenges since 1981. Contact us if you need help.

Chris Kellett focuses his practice on helping small to medium sized businesses, such as franchisees, restaurateurs, supply vendors, and contractors resolve their legal problems in a timely and cost-effective manner. He can be reached at [email protected] or by calling 314.854.8635.

This column is for informational purposes only. Nothing herein should be treated as legal advice or as creating an attorney-client relationship. Read our full Legal Disclaimer.