Pitfalls to Avoid in Employee Termination - Part 2 - Human Resources
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Pitfalls to Avoid in Employee Termination - Part 2

By John Boggs, ESQ.

Article Date: 11-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Compliant, consistent procedures on performance reviews, disciplinary action and layoffs can prevent disgruntled feelings – which in turn can prevent lawsuits.

In the four or five weeks since Part 1 of this article on protecting your dealership from employee termination lawsuits was published, about 8,000 more employee discrimination lawsuits will have been filed against U.S. employers.

It's critical to keep up your guard during employee termination. Here is a review of the points covered in Part 1: 

1. Avoid hiring high-risk employees.

The best prevention is thorough background and reference checks. Where many dealerships fall short is in following their process 100 percent of the time. The question to ask yourself is, “How do I force compliance with our hiring process?"

2. Think of your employee handbook testifying in court.
Handbooks that are out of date or not distributed to employees in a timely (and documented) manner can be deadly in court.

3. Job description does not support performance review.
Do you cringe at the thought that the job description of a terminated employee will be scrutinized in court because it is incomplete, out of date, or inconsistent with other employees performing a similar function? Look for an independent source of dealership job descriptions.

Here are the final three pitfalls to avoid in employee termination:

4. Performance Reviews that Avoid Difficult Conversations
As Chart 1 shows, benefits consulting firm Watson Wyatt Worldwide found that in a survey of 4,000 employees and managers that there is a major disconnect between how managers, high-performing employees, and poor-performing employees each view the effectiveness of a performance review.

Three-quarters of all managers think they are doing a good job of linking the review to the company goals, where only a third of the poor-performing employees share that view.

Therefore, when that poor-performing employee is terminated, their first reaction might be “Unfair! My manager never told me my work performance wasn't what the company wanted."

A performance review is your company's official statement on how satisfactorily an employee performs his or her required duties. If an employee is terminated for performance reasons, there had better be a history of performance reviews that reflect poor performance.

A performance review that avoids a frank discussion geared toward areas for improvement and does not clearly call out unacceptable performance issues is unfair to employees and a potential risk for employers. As Chart 2 shows, Watson Wyatt's survey also found that only 30 percent of poor-performing employees believe that their manager helps them improve their job performance. A “chip on the shoulder" employee is much more likely to file a lawsuit after termination.

A review full of "happy talk" that misses fact-based observations of substandard performance will be a gold mine for your terminated employee in a courtroom.

Recommended Action: The organization needs a standardized performance evaluation system that is based on job-related objective criteria as specified in the job description.

Recommended Action: Supervisors need to be trained on how to conduct consistent evaluations and give constructive feedback to employees.

Recommended Action: A fail-safe process is needed to ensure that all employees sign an acknowledgement that they received and reviewed the performance appraisal.

[Note: HotlinkHR's forced compliance system links content from the job description to the performance review, enforces the regular review of all employees' performance, and requires employees' electronic signatures on their reviews.]

5. Inconsistent and Poorly Documented Disciplinary Action

"That's not fair. Joey did the same thing and didn't get in trouble." The familiar playground refrain of inconsistent enforcement of rules, and of inconsistent punishment for breaking rules or not meeting expectations, is the central and often the winning argument in employee discrimination lawsuits.

There are two primary reasons for employee discipline:
1. Performance deficiency – the employee follows the rules but doesn't perform to the expectation of the position.
2. Company Policy Violations – the employee may perform well, but doesn't follow company policies and rules.

If an employee perceives unfair disciplinary treatment, whether for reasons 1 or 2, he or she is likely to become disgruntled, resulting in a further drop in performance. Often there is a second and more damaging impact, as the wronged employee becomes a vocal anti-company voice to other employees.

It is critical to have bulletproof documentation in the company files before any termination for disciplinary reasons.

Recommended Action: Be aware if the employee is a member of a protected class, which can be defined by age, race, gender, or disability. If so, review the intended disciplinary action to evaluate if it could be interpreted as discriminatory activity.

Recommended Action: For performance deficiency, build your case. Do you feel comfortable that an outside investigator, examining written evidence, will find that the employee did not meet the standard of performance and that you have treated others in similar situations with the same level of discipline?

Recommended Action: For rules violation, build your case. When there is a rules violation, be sure you have a written record of an investigation, signed under penalty of perjury. This should include interviewing the employee in question, with a witness present and a signed statement plus a wrap-up memo.

Recommended Action: There are many legal considerations with discipline. Be sure that you have consulted an employment attorney on the particular situation or similar situations.

[Note: HotlinkHR forces compliance with many elements of the disciplinary process, including linking disciplinary statements to company policies and requiring signatures on prepared documents.]

6. Botched Employee Termination

In the past, employers often tried to "buy off" employees who were being terminated by essentially swapping a sweet severance package for the former employee's signature on an agreement not to sue. This is often not possible economically, because of tight financial conditions of companies. It is also compounded when large numbers of employees are laid off at one time.

This puts the pressure on terminations to be managed within the company by a forced compliance process, so that the termination can withstand a legal challenge.

There are many legal considerations to employee termination: The first consideration is human. How a termination is handled on a personal level can make a huge difference in whether the former employee files a lawsuit. Treat employees with fairness and dignity during the termination process, and they are less likely to want to "get even" with the company.

Common lawsuits filed by terminated employees are based on accusations of:
  • Discrimination against a protected class, such as age, race or gender
  • Underpayment of wages and benefits
  • Inadequate warning that a position was about to be eliminated
Recommended Action: Ensure that the termination process complies with all laws, such as the Older Workers Benefit Protection Act, which allows 45 days for workers over age 40 to sign a severance agreement and requires employers to disclose information about the ages and job classifications of other employees who were retained or terminated.

Recommended Action: Conduct workforce analyses in advance of mass layoffs to ensure that no minority group is disproportionately affected by job termination.

Recommended Action: Ensure that company termination procedures are in place, including documentation and review of termination decisions by higher-level management.

Recommended Action: Consult an attorney prior to any termination action.

[Note: HotlinkHR forces compliance with a termination process established by the company and compliant with the law, including creation of the necessary documentation and recording of electronic signatures.]

Lawsuits Can Occur Long After Termination

Don't breathe a sigh of relief too soon after a termination. EEOC guidelines allow 180 days for a laid-off employee to file a grievance; many state equal employment agencies have a window of 300 days.

The best defense is a human resource process that is legally compliant and consistently applied throughout the entire organization. Where compliance can be enforced by an automated system, the management burden is minimized, employees are treated consistently and appropriately, and business risk is minimized.
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Article Categories:  Human Resources