RSM Resources

Terminating an employee can be thorny. A 2006 survey by the Society for Human Resource Management (SHRM) found that former employees from businesses of all sizes had sued more than half of the responding companies in the past five years. A third of the suits alleged wrongful termination, and about half charged discrimination, according to the survey.

Savvy midsized businesses are prepared to avoid or counter potential legal troubles arising from a termination, including claims of defamation, emotional distress and invasion of privacy. They take the time to document the exact reasons for pursuing each termination. In the event of litigation, proper documentation supporting the rationale for the decision, and evidence of a routine termination process, can greatly reduce the likelihood of an unfavorable judgment against the employer.

In most successful termination cases, records clearly document substandard performance that led to the discharge. Those records note every way the employee failed to satisfy the employer’s expectations. Where such documentation does not exist, the employer must be satisfied that it can justify the termination to a judge or jury, or else rethink the decision to terminate.

Performance reviews protect both parties

A performance review can give an employee a fair chance to turn around poor conduct. A supervisor can use the performance review to remind the employee what the company expects from him or her and warn that continued subpar performance could lead to dismissal. Total honesty is a must; sugarcoating a bad situation often only prolongs the inevitable. Lay your cards on the table and establish clear, measurable goals for the employee to achieve. Many employees welcome such honest feedback as a wake-up call to salvage their careers.

Performance reviews enable you to obtain signed agreement on written job goals,giving you complete documentation on file. This written process also forces you to analyze exactly what poor performance means. The review can bring any misunderstandings about job duties, as well as personal problems that affect performance, to the surface. Sometimes these issues are temporary.

Include the employee when you analyze the problem. Let him or her complete a self-evaluation. If he or she acknowledges a problem, you are one step closer to resolving it. If the employee does not acknowledge any problem, you have additional ammunition if termination becomes necessary — and additional documentation should the employee proceed with a lawsuit.

Still,the most important reason for fully documenting performance reviews with a troubled employee is to protect your company in the event that you later fire the employee. With documentation, the employee can’t make a case that you didn’t warn him or her or provide an opportunity to improve.

A comprehensive performance-review policy is a good idea even for companies that don’t have poor performers. Basic to this procedure: Establish a personnel file for each new employee upon hiring, including a completed job application, resume and job description. Keep the file current with copies of regular performance reviews and other evidence of performance, good or otherwise.

Performance reviews and employee probationary periods

Job reviews are a must for employees who are not living up to expectations. They’re also valuable tools for staying in touch with all employees. Human-resource experts typically recommend performance reviews for all employees every six months. Conduct them more frequently for any unsatisfactory employee, perhaps monthly. As part of the process,employers should create a dated memo for the person’s file whenever performance problems arise between reviews. Disputes between employees, missed assignments and similar problems all require written documentation. This resource helps you provide a better evaluation and serves as evidence that protects your position.

If you can’t cover your bases, wait

Terminating an employee in haste or on fuzzy evidence can cause more problems in the long run than the ones you think you’re solving. In such cases,it’s generally better to try to turn the employee around than go through the painful firing-hiring process — unless the person has committed acts that are clear grounds for immediate termination, such as impropriety, gross incompetence or theft.

Ask yourself who is really at fault in the situation. Perhaps the employee has had little or no control over his or her performance. Sometimes job assignments are poorly defined. This is just one of the reasons formal job descriptions are so important in hiring. Yet lack of adequate support and communication are often the real reasons behind poor performance.

Create a logical progression

To help manage the process of dealing with poorly performing employees, employers should develop a warning system. The plan should outline a logical sequence of events, including possible sanctions for poor performance. Such a system should also easily adapt to varying circumstances. For example, you might devise a process that gently reminds an employee of company policy on a certain issue the first time such a warning is warranted. The second time, the system spells out a sterner warning, perhaps a written reprimand outlining past performance and noting the prior warning. The third time, the company puts the employee on probation, with a thorough accounting of employee performance and a clear understanding that violating the probation will result in dismissal.

Warnings must carry weight behind them, or employees won’t take them seriously. Probationary periods should have an established time limit. Probationary warnings should make clear what you expect in the way of performance improvement and over what time frame.

A clean exit

According to SHRM, terminated employees who participate in formal exit interviews are much less likely to pursue legal action. As a rule, your first objective should be to conduct an exit interview with the employee. Be clear and concise to avoid any confusion. Major topics to discuss during the exit interview should include:

• Will the employee receive severance pay or assistance in hunting for a new job?
• How long will company health insurance benefits last? What will they cost? Are they convertible?
• Will the employee be eligible for unemployment benefits?

The exit interview is also a good opportunity to collect company property such as keys to the office, laptops or cell phones.

Make a checklist of points to discuss with the employee during an exit interview. Be candid about the reason for the termination and have someone else present to witness and document what was said and the employee’s reaction to it.