Most U.S. states have an at-will employment policy. This means that you as a business owner or employer may fire someone for a good reason, a bad reason or no reason at all — as long as your reason isn’t illegal. While this does provide more freedom for employers, it is not a free pass to fire someone without regard for how it is handled.
What’s the issue here?
If you as an employer discipline or terminate an employee and do you it badly, you create risk for yourself. A former employee could potentially sue you for discrimination, wrongful termination or a similar claim.
In at-will states, you can terminate someone’s employment for almost any reason as long as it isn’t illegal. If you can’t prove just cause, the employee can file for and get unemployment compensation. More concerning, the person can claim you released them from their job because of their protected class status. Those characteristics could include being over the age of 40, being a certain race or sex, or having a disability.
Generally, as HR professionals, we want to be able to prove that an employee has earned the right to be terminated. There should be some level of just cause when they broke company rules, were insubordinate, etc. We use that information to defend an unemployment compensation claim or discrimination claim.
What are my risks?
While no recent legislative changes have modified how unemployment compensation is handled, the U.S. Equal Employment Opportunity Commission (EEOC) under the current administration has become more proactive in addressing such issues. Employers should be even more mindful of these kinds of HR issues than they perhaps were in the past.
Most frequently, we see the biggest problems arise when an employer discharges someone who is in a protected class (e.g. they are disabled or practice a certain religion) and chooses to fire them at will. In such cases, the employee can come back and successfully say there was not just cause so they have a right to unemployment compensation. They can use that judgment to file a claim with the EEOC. From there, the EEOC hears those claims and if the employee is successful, the employer could be obligated to settle with the individual (in the form of money and/or the offer of getting their job back), or the EEOC gives the employee a “right to sue” notice so the person can potentially find an attorney and take the issue to federal court.
How can I limit my risks?
There are ways to protect yourself from risk or potential losses before an actual termination takes place or becomes necessary. A process of progressive discipline is a prudent, widely used method to follow. With progressive discipline, you follow steps to help document and show evidence of the employee’s bad behavior or failure to follow policy.
For example, if someone does something wrong, you first talk to them about the issue, giving them a verbal warning. If the problem persists, you may follow with a written warning. If this warning is not heeded, termination might be justified and necessary. Normally, the state wants you to walk through a progressive process so employees are warned and understand that if they continue down this road, they could lose their job.
If you can show just cause for terminating an employee, you as an employer are improving your chances that a terminated employee is unable to collect unemployment compensation and sue you.
What’s the bottom line?
Firing an employee comes with risk, and while a state employment at-will doctrine may lead an employer to believe they can fire someone for no reason, there are potential consequences if progressive discipline is ignored. Considering a progressive discipline process based on a just-cause standard is a recommended part of a company’s HR policies. When a policy is developed, it must be part of the company handbook, where you document just-cause offenses. HR professionals, such as those at a PEO, can walk you through the ins and outs of this policy development.
If you have any questions about this issue, contact me, Mike Yoder, at 317-585-1688.