How to Terminate an Employee Without Hurting Your Business and its Reputation

Terminating employees can be one of the hardest parts of running a business, but unfortunately, it is a part of life.

Terminating employees can be one of the hardest parts of running a business, but unfortunately, it is a part of life. While we can’t really help executives and managers make it less awkward, there are steps you can take to reduce the risk that the termination will harm your business down the road and part of it is empathy and dignity.

Startup CEO Offers Lesson in What Not to Do

A mortgage lender startup recently made national headlines when the CEO of the company fired hundreds of workers via a Zoom call. According to media reports, other workers found out they had been terminated when they saw a severance payment in their bank accounts. 

The company, Better.com, faced backlash from both its employees and the public. After receiving negative press coverage, the startup subsequently issued a statement on its blog, apologizing for the way the layoffs were handled.  “I want to apologize for the way I handled the layoffs last week,” CEO Vishal Garg wrote. “I failed to show the appropriate amount of respect and appreciation for the individuals who were affected and for their contributions to Better. I own the decision to do the layoffs, but in communicating it, I blundered the execution. In doing so, I embarrassed you.”

Terminating an Employee the “Right” Way

The incident has understandably raised questions about how to terminate an employee without opening yourself up to legal and reputational risks. While terminations are a necessary part of every business, there are steps employers can take to reduce the fallouts, including: 

• Stick to the facts. Clearly explain the reason for the termination and provide written documentation. This is the best way to avoid a potential lawsuit, particularly when an employee is terminated due to misconduct or poor performance.
• Consistent policy enforcement. Treat employees the same and consistently enforce clear policies and procedures. No employee should be surprised by their dismissal. This can be accomplished by well-communicated progressive discipline that leads to the final meeting, which should be kept short and simple. 
• Consider your statutory obligations. Many states, including New York and New Jersey, have laws in place that may be triggered by mass layoffs. For instance, New Jersey’s Worker Adjustment and Retraining Notification (WARN) Act currently requires employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. 
• Remain positive. Treat the employee with dignity and respect, and consider thanking the employee for his or her contributions. If the employee becomes emotional or confrontational, try to defuse the situation.
• Think long term. Determine if the employee has any continuing obligations such as a covenant to not compete or a confidentiality agreement. Be sure to provide a copy of the agreement to the employee during the exit interview.
• Cover your bases. Arrange for least one other member of management or human resources to attend the meeting as a witness. An HR member can also explain outstanding issues regarding final paychecks, severance payments, health insurance, etc.
• Show empathy. While remote layoffs have become more prevalent in response to the COVID-19 pandemic, it is still advisable to “meet” one-on-one and in-person with impacted employees. For employees located in a physical workplace, it is often best to conduct the exit interview in a private location, at either the start or end of the workday. This will help alleviate the employee’s potential embarrassment when later retrieving personal belongings from his or her office.
• Consider offering a separation package. Companies that offer separation packages mitigate their risks. Separation packages also show that the company sympathizes with the employee’s loss of employment and shows respect for the person’s dignity. 
• Have an exit strategy in place. Once the meeting ends, direct the employee to collect his or her personal belongings and immediately leave the premises. Depending on the circumstances, you may wish to walk the employee back to his or her office and supervise the process. 
• Consider your remaining employees. Because staff reductions can hurt morale and increase anxiety, it is also important to consider how you will address the termination with your remaining staff members. 
• Protect your property. Prepare a list of all company property that should be returned upon termination, including keys, credit cards, software, laptop computers, cell phones, etc. Arrange for all of these items to be returned, including any items the employee may have at home.

Key Takeaway

While firing an employee is never fun, companies can make it less painful for everyone involved by having clear policies and procedures in place. Working with experienced counsel can also help ensure that you understand your obligations and take any necessary steps you reduce your legal risks.

If you have questions, please contact us

For assistance with any needs your company may have regarding such employment disputes please contact me, Arianna Mouré, at 201-896-4100.