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The Art of the Firing

One of the biggest problems that I see with small businesses is that they hire too quickly and fire too slowly.  It is important to identify the people who do not belong in your organization and then systematically go about replacing them.  In this article I will look at the practical aspects of how to fire somebody and what you need to do to protect yourself.

The first and most important thing to do is to make sure that the employee you are terminating has been properly warned.  If it comes to them as a complete surprise, like a bolt from the blue, then you have not done your job properly.  That’s not to say that you telegraph your actions and encourage them to look for a job on your time but that you have looked for ways to improve their performance.

There are two important components to this.  Firstly, you owe it to yourself and the employee to be clear about your performance expectations and to try to improve them in the areas where they are deficient and where they are not doing the job that you require of them.  Secondly, it is important to have a file that properly supports your decision to terminate them because they may well turn into a litigant as a result of their termination. 

It follows that all communications about performance inadequacies must be in writing, including any threat of dismissal.  It causes no end of problems when management has been dissatisfied with an employee’s performance but has never told them.  This is made even worse when the last performance appraisal (if such a thing exists) speaks of them in glowing terms.  It is similarly damaging if a performance discussion has been held with an employee but nothing has been put in writing.  For more on this see the article ‘A Verbal Warning Isn’t Worth the Paper It Is Written On’.

Get a Release

Every employee is a potential litigant, especially in bad times.   In good times they go across the street and get a job, in bad times they go to the EEOC and sue you. It is always a good idea to try to get a release.  A release is only valid if there is consideration, and you will not be able to get a valid release from somebody unless you are paying the something over and above their entitlement.

This is more likely to be the case in layoffs than in terminations for poor performance, but the principle is that it is worth paying out an amount that is large enough to make sure that the employee will not sue but not so large that it causes a headache for the employer.  The way that I have done this is to look at each case and identify whether I think that the employee is likely to retaliate.  If I think they are then I offer a severance package that is large enough to make them think before turning it aside and suing me. 

This has worked pretty well for me, thought here was one instance where things didn’t go so smoothly.  I was doing a layoff of about 15 people and decided that I would offer them 1 week’s severance for each year worked and get the appropriate release so that I knew that I was done with it.  The format was that I paid the severance as a salary continuation to preserve cash flow and make sure that I had some teeth to my non-compete if the terminated employees tried to steal customers from me.

One of the people being terminated was a sales person who had been with the company for 8 years.  To compensate for lost commissions his severance was not simply based on his salary, and we offered to pay the salary continuation for 12 weeks in return for a release.  This was a very volatile individual who we suspected of having ties to organized crime in his spare time, and he reacted very negatively.  He wanted the full amount paid out immediately and refused to sign the non-compete part of the release. 

We therefore terminated him without giving him any severance and he went to the EEOC, got a Right to Sue letter and found a lawyer to represent him.  Unfortunately for him, there were a number of issues with his employment, and he was the lead harasser in a hostile work environment lawsuit that we were engaged in at the time.  As everything emerged, his lawyer became less and less interested in the case, and ultimately, 12 months after he was laid off, he settled for less money than we had offered him under the original deal…and got it much later.

The form of the release is something that you should get from your lawyer ahead of time, and it should include discrimination of all types (age, sex, race, religion, sexual orientation, etc.).  The ex-employee has a certain number of days in which they can reject it, and obviously no payment should be made until the rescission period has ended.

Practical Firing Tips

When firing somebody it is always a good idea to have a witness.  You should go into the meeting prepared with a letter and a release which you hand to the employee.  You have the elements of surprise and shock on your side, and it is best to keep the interview as short as possible. 

Most employees don’t ask many questions at the firing interview, and it is better not to get into the reasons why you decided to fire them.  It is better simply to say something like “I am sorry to have to tell you that we have decided to terminate your employment and these are the financial arrangements”.  Say nothing about why they are being fired and if they ask, simply respond “I don’t think we need to get into that”.  The decision has been made and these are the financial arrangements”.

During the interview you should terminate their access to your computer network and not let them go back to their desk unaccompanied.  There are few things worse than having a terminated employee wandering around the office potentially poisoning the environment.  Obviously, you want to let them take all their personal effects with them, and you should have a box available so that they can go back to their desk accompanied by somebody else you trust and pack up their things.

As far as the firing itself is concerned, a lot of employers like to do the termination on a Friday morning because it gives the other employees the weekend to get over it.  Personally I prefer to do it on a Tuesday afternoon because more employees are around then and it gives me the opportunity to tell people why this happened and to do any damage control that is necessary. 

In the case of layoffs involving more than one person, it is especially important to communicate and let the employees know that this is not the start of ‘death by a thousand cuts’.  In the case of large layoffs, I have always held a company meeting within 24 hours of the layoffs to explain the thinking and to share the plans going forward with the remaining employees.