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Business Law Update
March 2008

  Mistakes to Avoid When Letting Staff Go
by Stephen Furnari & Eric Scher

It is hard to open a newspaper these days and avoid stories about the instability in today's job market. Figures for the year ended December 31, 2007 the Department of Labor's Bureau of Labor Statistics show that mass layoffs increased approximately a 6% from 2006. However, that figure only reflects those who claimed unemployment insurance from employers who cut 50 or more employees at a time. To make matters worse, employers don't seem to be hiring; the unemployment rate now stands at 4.9%, up from 4.4% at the end of the first quarter. As companies adjust for what may be uncertain times that may lie ahead, lay-offs are obviously one measure that companies may take to cut costs. Unfortunately, letting staff go is one of the most unpleasant and, sometimes, unavoidable parts of being a business owner.

No one enjoys the termination process. Firing an employee can be a painful, difficult, and a potentially costly task. Not only do you lose your investment of time, money, training and experience, but you can put yourself at risk for being sued. The highly emotional nature of the process can turn any well-intentioned words or actions into fuel for wrongful discharge suits and personal resentment.

The best way to make sure that you're not setting your company up for a lawsuit is to handle the entire termination process effectively and without ambiguity. In short, plan. The following are seven tips for implementing a mess-free termination:
  • Avoid Small Talk. Starting the meeting off with questions about the family or last night's game delays the bad news only momentarily. It also sets an awkward tone for the not-so-small topic coming up next. Since this is a final decision and not a discussion, all you really need is 10-15 minutes. Come prepared with a speech or an index card with bullet points listing key points that you want to make clear. Friendly chatter only makes the news more painful - keep it short, keep it professional.

  • Avoid Surprises. Whether it's staff reduction or poor performance, the employee should have been prepared by the time the final decision has been made. If it's a performance issue, termination should be the final resort. For every meeting with or about an employee, there should be notes describing your efforts. It would be a good idea for these documents and any performance evaluations administered by the company to be signed by the employee. This provides proof that the employee was given recommendations and reviews, and in essence, guidelines for expected improvement. With proof of fair warning, it makes it difficult for a fired employee to argue unwarranted discharge. "Managers need to prepare well before they meet with the employee," explains Susan Herman, author of Hiring Right: A Practical Guide. "They need to look at the employee's overall job performance accurately and carefully, and make sure the company's personnel policies are in good shape. A team of managers should be involved in the decision." Another form of "documentation" is having another manager or supervisor there with you at the meeting. In the case of a lawsuit, you have a witness. You also demonstrate consensus in the decision. If not addressed quickly, one employee's termination can alarm the rest. The grapevine can exaggerate news in a heartbeat, so be sure to communicate the reasons quickly and positively. You don't want to cause any feelings of insecurity among your staff.

  • Don't avoid the matter. Time is money, and while the employee is sitting at the desk being a lousy performer, your company is absorbing the costs of paying for his salary and benefits, as well as any related overhead costs. This would only be compounded with the severance pay, continued benefits, outplacement help, etc. that your company may offer when he actually does leave.

  • Consider Timing. Generally, it is not recommended that you fire someone first thing in the morning, or on a Friday when a weekend would give the employee time to become angry and resentful. A mid-morning meeting gives him the chance to vent over lunch with his co-workers, while a late-afternoon meeting would let him slip out without having to work amidst whispers of gossip in the office. Use your best judgment.

  • Avoid Patronizing Sympathy or Cold Professionalism. Offering comfort by saying, "I know how you feel" or "I feel awful" will most likely hurt your employee more than it will make you feel better about yourself. As stated before, cut out the fluff - it is only insulting in a situation like this. However, mistaking cold indifference for professionalism would not help either. The best thing you can do is to simply offer an explanation and sympathy in a manner that shows you still respect him. In the case of protest or argument, be patient, hear whatever he has to say, and firmly repeat your reasons, decision, and sympathy. Don't concede or show hesitation.

  • Don't Offer Help at the End. Again, be careful not to say things that will only provide you temporary relief from your guilt. Unless it is company policy to contribute to outplacement services yourself, or unless you really, truly desire to make a commitment to help, it will only be an empty offer that drags out what will soon be a non-existent employment relationship. Not only would you be insulting him, but this ambiguity could give him a basis for legal or other appeals.

  • Don't End the Meeting Open-Ended. Provide a clear time period for departure. Bring the final paycheck. Provide him with contact information of the person who handles these arrangements. For true finality, offer severance pay, commissions, or outplacement in return for a signed waiver of their legal rights. Check with your company to find out the time limit employees have to consider these offers.
To maintain perspective, picture yourself on the other side of the desk. Imagine how you'd want to be treated.



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