Firing an Employee? How to Correctly Terminate a Worker: Laws & Tips

Legal Requirements

Before terminating any employee, employers must comply with all applicable federal and state laws. Depending on the jurisdiction, specific protocols may apply. For example, an employer may need to provide advance written notice or comply with at-will employment exceptions that limit termination rights.

Employers must also be aware of statutes that provide special protections to certain classes of employees, such as those with disabilities or those covered by collective bargaining agreements. If an employee is in a protected class, additional steps may be required to ensure the termination is lawful.

Tips for a Smooth Termination Process

When terminating an employee, employers should keep these tips in mind:

• Document everything: Before the meeting, ensure that performance issues and prior conversations are properly documented. This protects the company and provides a clear record if questions arise later.
• Be understanding and compassionate: The termination process is stressful for the employee involved. Take the time to be respectful throughout.
• Provide support: Offer the employee any necessary support, such as COBRA information, final paycheck details, or referrals to outplacement services.
• Maintain confidentiality: Do not discuss the termination with other employees or third parties.
• Keep it brief: Nothing you say will make the employee feel better about the situation. Reference prior conversations, provide required information, and conclude the meeting.

Conclusion

Firing an employee is a necessary part of running a successful business. Employers who understand their legal obligations, document performance issues, and conduct the termination meeting with empathy and efficiency can avoid wrongful termination claims and ensure a professional separation. The goal is to meet legal requirements while treating the departing employee with respect.

For more on employment law topics, visit the Employment Law practice area.

Video Transcript

In this video, you get answers to these questions:

• What Are the Legal Requirements for Terminating an Employee?
• Who Is Responsible for Firing an Employee?
• What Should You Do When Firing an Employee?
• How Does “At Will” Relate to Firing an Employee?
• Do Employers Have to Give a Reason for Firing Employees?
• Can Employees Fire a Manager?
• Can Terminated Employees Request Personnel Files?
• Will a Terminated Employee Receive Back Pay?
• Can Fired Employees Collect Unemployment?
• How Do You Know What Kind of Severance Package to Offer to a Terminated Employee?
• How Should You Approach a Termination Meeting with an Employee?
• What Are the Steps Involved in the Termination Process?
• How Do You Handle the HR and Administrative Aspects of Firing an Employee?
• How Do You Handle an Employee Who Refuses to Leave After Being Fired?
• How Can You Avoid Potential Legal Repercussions from Firing an Employee?
• How Can You Ensure a Smooth Transition for the Responsibilities of the Terminated Employee?
• What Is Wrongful Termination?

Are you firing an employee? How do you correctly terminate a worker? And what laws and tips should you know before firing an employee? That is what I am talking about today. I am Aaron Hall, an attorney for business owners and entrepreneurial companies. One of the worst parts of running a business is having to let somebody go—having to fire an employee.

This might be somebody who has been with you for a long time, and maybe due to circumstances in the business, you just can’t continue to afford them, but more often. It is somebody who has been working for you for a short period of time, and they are just not working out. Often, it is not because they can’t do the job; it is because their values are different from the company’s values

To use a simple example, maybe the company values diligence or efficiency, or professionalism, and the employee is not reflecting those values in his or her job. So what do you do about this? That is what I am talking about today, and we will talk through some of the frequently asked questions related to firing employees, like, how do you do it without violating their legal rights? What are some best practices, and what are some common mistakes that business owners make when going through the process of firing an employee? And I think, perhaps, most helpful for some business owners is, how do you do it so that it is not so stressful and painful and agonizing?

If you don’t yet have the Seven Common Legal Mistakes Made by New Businesses, that is a free cheat sheet that I give out to business owners. You can download it at aaronhall.com/free. There is a link in the description below. Not only will you get that free PDF, but you will also get some private videos where I explain each one of those seven common pitfalls and how to avoid them.

There is no cost for this. It is just a public service that I am making available to business owners throughout the country and throughout the world. I am trying to help you with education, so you are empowered to run a more successful company and avoid all the problems that go with many companies, and making legal mistakes or having other challenges along the way. I am a big believer in entrepreneurism, and helping entrepreneurs not only makes a difference in your lives but also in your family’s lives, your employees’ lives, and those around you whose lives you make a difference in every day.

What Are the Legal Requirements for Terminating an Employee?

First, you can’t fire an employee for a discriminatory purpose. There are federal discrimination laws, there are state discrimination laws, and the bottom line is that you can’t fire somebody for one of those reasons. What are some common examples? Well, age, ethnicity, family status, national origin, etc. There is a whole list of them, and sometimes the state list is different from the federal list, so you need to follow both. The second possible requirement for firing an employee is if you have hired them under an employment contract, your termination of the employee needs to comply with that contract. Now, most employees are not hired with a contract. They are what’s often called at-will, which, at least in Minnesota, you can fire an employee at will, or the employee can leave at will. In other words, there is no justification or excuse needed. You can just say it is not working out. You will need to check with your local laws if you have questions about your particular state.

Who Is Responsible for Firing an Employee?

Usually, employee firing is handled by that employee’s supervisor, and often somebody from HR also attends in order to be a second witness to any surprises that may occur. And then also the HR person often has some basic information that is being provided to the employee. For example, if the employee has health insurance and qualifies for COBRA or other benefit information that needs to be given to the employees at the time of the employee termination.

What Should You Do When Firing an Employee?

Let’s talk about some best practices here. Ideally, before firing an employee, you have documented the problems that led to the firing and met with the employee about those problems, and then documented that you met with the employee. The best scenario for a termination is where you say to the employee, for the reasons that we have previously discussed, the company has decided to let you go. In other words, you don’t want to have to rehash “here are all the reasons.” You should have given the employee notice in advance opportunity to correct the behavior, and then, ultimately, you are just referencing that when you let the employee go. Also, nothing you say is going to make the employee feel better about the situation. Best practices are to make it quick and have it be done. Don’t apologize. Don’t say, “Well, you had a lot of great strengths,” and this and that and the other thing, because it is just awkward, and the employee is in pain, and nothing you say is going to be received with perhaps the positivity in which you meant it. So make it quick, reference what happened in the past, give the employee the information that is needed, and have the termination process be done. My goal was always to have it be less than five minutes. Of course, the employee might have comments or questions, and in those cases, it may go longer than five minutes.

How Does “At Will” Relate to Firing an Employee?

The concept of at-will is this. If an employee is hired under a contract, they have to be terminated as provided in the terms of the contract. But if they are not hired under a contract, they are what we call often—at least in Minnesota—at-will. The concept of at-will means that at-will of the employee, the employee can leave, and at the will of the employer, the employer can terminate the employee. In other words, you don’t need reasons. You don’t need justification. There doesn’t have to bend some sort of breach of a contract or any sort of wrongdoing. The easy way to think about at-will is this. If the law permits an employer or an employee to end the relationship at-will, then either one at any time can let the other know it is not working out. And so I have decided to end this employment relationship. That is the concept of at-will. Now in some states, I believe there needs to be some sort of justification. Well, I can tell you for sure in Minnesota, and I believe the prevailing view, is that at-will ending of employment is fine as long as it s not a discriminatory reason. In other words, you can’t say, “I am letting you go because I don’t like your religion.” Obviously, that would be a violation of the employee’s rights.

Do Employers Have to Give a Reason for Firing Employees?

This is an issue of state law, and in Minnesota the answer is no. There is no reason that needs to be given. You can have a reason, and that reason should be based on the employee’s behavior and performance. It should not be based on some sort of discriminatory purpose. For example, you can’t say, “Hey, I found out about your sexual orientation. We’re letting you go.” That is an example of what would not be permitted.

Can Employees Fire a Manager?

Well, this is kind of an interesting question. How do managers get fired? Well, obviously, they are fired by somebody who works in the company, and it is going to be somebody who is above the manager. Maybe it is an officer of the company, like a president. The president is an employee of the company, and typically a manager is fired by an officer or some other higher-level person in management. Those people are employees of the company. So yes, managers can be fired by employees of the company. They usually are. In other words, if an employee reports to a manager, can that employee fire the manager? No. The company can determine who is terminated, and that determination goes in layers of authority from the shareholders and board of directors, officers, and mid-level management on down to the frontline employee.

Can Terminated Employees Request Personnel Files?

Yes. First off, you can always request it, but under Minnesota State Law, and many states have this, employees have a right to their personnel file. They have a right to know what has been put in there, and often employees who leave will request a copy of the personnel file. Sometimes they are requesting it for a lawyer in preparation for a lawsuit. So a company should be very careful about what they put in a personnel file. Sometimes a state statute governs what needs to go into a personnel file, so that is the kind of thing you should ask your local employment or business attorney. What do you need to be putting in employees’ personnel files?

Will a Terminated Employee Receive Back Pay?

Yes. Employees typically have a right to their wages through the moment of termination. So if the employees are paid every two weeks, for example, and three days before payroll is run, the employees let go. Does the employee get paid through the date of termination? Yes. By the way, every state has different laws on employment rights, and so it is important for a business owner with employees to work with a business attorney or another attorney who is experienced in employment law and can guide how to handle these delicate situations, especially terminations with employees.

Can Fired Employees Collect Unemployment?

Generally, yes, unemployment insurance or unemployment benefits are generally available for employees who are terminated by the company. Generally speaking, though, if the employee resigns, they are not, eligible for unemployment benefits. There are also some circumstances where the employee does something so egregious that the law says the employee does not qualify for unemployment benefits. One of the reasons this matters is because employers pay unemployment benefits, and so employers aren’t happy if they have to let somebody go, and now they are also paying money for unemployment benefits. Now, the law is what it is. Employers can’t get around that, but sometimes employers will challenge whether an employee is entitled to unemployment benefits. And that is because the employer ends up having to pay something for that.

How Do You Know What Kind of Severance Package to Offer to a Terminated Employee?

As a business owner, how do you know what kind of severance package to offer a terminated employee? Well, there is some different views on this and best practices. Generally, what I have seen is that unless there is a standard practice in the company of offering some sort of severance or a policy that requires severance after a certain number of years. The general rule is that there is no severance paid out. The exception to that is if the manager or the company is concerned that there could be some sort of legal claim or issue with this person. Then, the company may pay severance, which is a dollar amount, in exchange for the employee releasing any claims the employee might have against the company.

It is also typical for any severance package to include a release of claims. The idea here is, “Look, let’s have a clean separation and in exchange for both parties,” amicably separating and probably some sort of compensation to the employee under severance or a severance package. Both parties are releasing claims, or at least the employee is releasing any claims that it would have against the company. The idea here is the company doesn’t want to pay out severance to an employee and have that employee turn around and sue for something. They want to know. All right, we are separating on good terms and we are both going our separate ways.

How Should You Approach a Termination Meeting with an Employee?

Well, first off, if there are legal issues, you probably want to consult with an employment attorney or your business attorney to make sure that you are handling difficult situations properly. Difficult situations might include substance abuse, or the employee not showing up but having made statements that the reason might relate to health issues. These are difficult because, under the law, the employee’s substance abuse or health issues may be protected rights, and you may not be able to terminate that employee under state and federal law. So handling that, as well as other difficult circumstances, can be done best after consulting with an attorney.

All right. What about practical things? Well, first, make it short and sweet. You don’t want to be in that meeting for a long time. Nothing you say will make the employee feel better. And ideally, you are referencing at that meeting the reasons you previously discussed with the employee that the employment relationship was having issues. You don’t want to have to go through a big long list at the termination meeting. You want to say, “For the reasons that we have previously discussed, this isn’t working. The company is letting you go. Here’s some information you need.” And that might be a packet of information prepared by your HR department, which basically says what are their rights under the law, maybe COBRA rights, etc.

What Are the Steps Involved in the Termination Process?

Well, the best practices are this. When there are problems with an employee, you document those problems. When you talk with the employee, you document those conversations. You make sure that you have had at least two, ideally, more conversations with the employee about the problems prior to a termination that gives the employee an option to change behavior and keep the job. And you want to make sure it is really clear to the employee. “There are certain expectations for the role, and you are not fulfilling those expectations, and here is how you can fulfill those expectations.” Then, at the termination meeting, you meet with the employee. You explain for the reasons we previously discussed that we are letting you go. “Here is the information that you are required to have by law. Do you have any questions?” The meeting is done. If there are concerns and issues, you would want to make sure that at least an HR person is there, perhaps, even a business attorney or employment attorney.

How Do You Handle the HR and Administrative Aspects of Firing an Employee?

Well, first, you are going to want to make sure that you have proper documentation of the employee’s problems and conversations you have had with the employee about those. You also want to identify whether are there any legal issues that would prevent you from terminating the employee that you can get answered by your employment attorney, and for some of the reasons I have discussed. Next, you want to identify whether there are any documents you need to hand out to the employee at the time of termination. You might also consider whether to use a severance agreement. A severance agreement or separation agreement simply says, “Look, the parties are agreeing to separate. They are waiving any legal claims. They are walking away.” And there are going to be other provisions in there as well. Typical provisions might be the employees giving back any company property. If the employee has access to any confidential information, they won’t use that any longer. They will destroy it or give it back. There might also be some sort of compensation included.

How Do You Handle an Employee Who Refuses to Leave After Being Fired?

I have never had this happen before. Usually, the employees are embarrassed, and they want to get out of there. I have had some employees do some unusual things. For example, yell, walk out, and make a scene in front of customers or other employees. I have also seen where they will do some odd kind of intimidating things. With most of that, you just let it go. But if they won’t leave, the best practice is to contact either security or law enforcement to have them removed. You don’t want to get into a pushing match or a tussle because now you are probably dealing with claims of assault. Now, you might win those claims because you were just trying to get them off the property, and you were, in your mind, maybe you were doing something reasonable. And maybe they were unreasonable, and the court may rule in your favor, but you don’t even want to have to defend yourself. So the best practice is never to use physical force to remove somebody unless it is required to protect the health or life of someone else. Obviously, if they grab somebody and they are choking them, intervene. But those are pretty, outrageous, and unusual circumstances.

How Can You Avoid Potential Legal Repercussions from Firing an Employee?

Obviously, firing in accordance with the law is the important first step, but sometimes you want to go the extra step, and the best way to do that is a separation agreement or a severance agreement. It basically says we are agreeing to separate, and the parties are waiving all claims they would have against each other. Primarily, the employee is waiving any right to sue in exchange for some financial payment.

How Can You Ensure a Smooth Transition for the Responsibilities of the Terminated Employee?

This is tricky because ideally, you would have the new employee trained in by the one that is being fired, and you would have all those responsibilities handed off. But it is a delicate situation because sometimes, when employees find out that they are being terminated, they will depart in a way that causes chaos for the company and prevent the company from a smooth transition.

So often, the best practice is to have a review with the employee prior to termination, and at that review, you are discussing all the employees’ open tasks and projects and what needs to be done next on them. And by documenting that, and by the way, you can request that in writing prior to the meeting so that you just review it during the meeting. But by doing that, you at least have a list provided by the employee that you are about to fire off what you need to attend to next to ensure a smooth transition for projects and tasks and customers and clients. Ideally, as well, you would have some sort of training for the new person coming into that role. You want to be very honest, but you also want to be diplomatic and not, have an awkward situation where somebody feels there is one employee is being trained in to replace someone else, and that employee has not been notified that they are being terminated.

By the way, some employees are great. They may know it is not working. I will tell you this, for example, I have seen many scenarios where it wasn’t working out, and the employee and employer were both professional, and they were able to work on a smooth transition. Maybe the employee worked a few more days, wrapped up some loose ends, and ensured a smooth transition. That is ideal. Sometimes, you can discuss having that option with an employee. It really depends on the employee and the person’s attitude and track record within the company.

I have seen many difficult terminations of employees, and I have seen many great ones. So hopefully, the tips here and the best practices are helpful for you in making that process smoother, quicker, and less painful. But keep in mind, because employment laws vary state by state, it is best to work with an employment attorney. If you have any concerns about whether the termination of the employee would be unlawful.

What Is Wrongful Termination?

Often that question is asked by an employee who then goes through and lists a bunch of things that they feel were unfair. For example, the boss said I was a jerk. The boss said, I had a bad attitude and I didn’t have a bad attitude. The boss says I did this, that, or the other thing, and I didn’t do that. The general rule in Minnesota and most states is that you can be fired for any reason that is not discriminatory or it is not a reason prohibited by law. So if you had a bad attitude, if you didn’t get something done on time, those are typically reasons when you can be terminated in what’s called an at-will state. In other words, the employer can terminate you at will without any reason or justification. And if the employer has a performance-based justification, that is even more reason why the employer can let you go, and there is no wrongful termination. That wasn’t illegal to have the employee terminated for a legitimate performance problem.

Conclusion

If you have questions about this today, you are welcome to put those questions in the comment section below. If you would like to subscribe so you can get future videos like this that are educational and help you as a business owner take your company to the next level and avoid legal pitfalls, feel free to subscribe to the channel here on YouTube.

If you like this video, you are welcome to give it a thumbs up, and if you haven’t already downloaded the free PDF that I give out, Seven Common Legal Mistakes Made by New Businesses and how to avoid them, you can get that at aaronhall.com/free. You will also get some bonuses, some videos from me that aren’t available online, talking about those specific seven pitfalls and how you can avoid them in your company. In our next video, I will be talking about where to begin when starting a lawsuit. What does it take to start a lawsuit? What are the steps that are involved? What are some tips and considerations? So if you would like to get that video, you can just click subscribe, click the notification icon if you would like to be notified when that comes out.