How To Terminate An Employee Fairly (Checklist Included)

Employment separations are an inevitable aspect of working life. Some 47.2% of the workforce parted ways with their employer in 2021, either voluntarily or due to discharge and layoffs. And those people in the dreaded "involuntary terminations" category will have faced a difficult conversation with their employer about the reasons for their exit. 

As it's probably a conversation they'll remember for the rest of their lives, this places a massive weight on the shoulders of HR professionals to choose their words with care! They must handle termination of employment discussions with the perfect blend of professionalism, sensitivity, and understanding—for the employee's sake and the company's reputation. 

This guide breaks down exactly how to terminate an employee swiftly and empathetically. We'll walk you through the eight steps to employee dismissal and provide an employment termination checklist to stay on track!

What Are The Main Reasons To Terminate An Employee?

So, how do you know when an employer-employee relationship has run its course? Acceptable reasons to terminate an employee commonly fit into two buckets: 

1. Benefits To The Company 

Each employee has a cost associated with them. This includes their salary, paid time off, company benefits, and other associated costs. So, it might make financial sense to part ways with an employee if they're not meeting the expectations of their role or if their skill set is no longer required. 

2. Benefits To Co-Workers 

In other cases, an employee might be causing problems with their co-workers or clients. Co-worker benefits might include harassment, discrimination, or gross misconduct. By letting them go, you're sending out a signal to the rest of your staff that you value their contribution to the company and will not tolerate this behavior. 

Here are some specific reasons to terminate an employee: 

• Criminal behavior: If your employee is engaged in illegal activity within or outside the organization. 
• Misconduct: If they violate company policy or fail to demonstrate your company's core values, such as respect or integrity. 
• Poor performance: When the employee consistently fails to meet performance targets despite efforts to support them. 
• Attendance or tardiness: If employees have received adequate warnings about being late to work, yet they still fail to arrive on time. 
• Bad attitude: Poor behavior has wide-reaching implications and can negatively impact employee engagement and motivation. 
• Company restructuring: An employee's role is sadly redundant in future-facing organizations.

How Does At-Will Employment Impact Employee Termination?

At-will employment allows employers to terminate employees without warning or reason. On the flip side, employees can also depart from their job immediately without giving notice to their employers. This offers exceptional flexibility but is also risky for both parties. 

However, HR professionals must understand that there are several situations where at-will employment exceptions apply. The National Conference of State Legislatures explains these exceptions below, but please note that they're state-dependent. To stay protected, we advise you to obtain legal counsel before proceeding with termination. 

Employment Contracts 

Any employee who holds an employment contract or is covered under a collective bargaining agreement may have additional rights than typical at-will employees. Therefore, it's essential to consult relevant documentation before terminating an employee to check if this applies. 

Implied Employment Contracts 

Although difficult to prove, 41 states and the District of Columbia recognize implied contracts. Even without an explicit labor contract, an employer may suggest employment through an offer letter, employee handbook, or other company policies and procedures. 

Sometimes a verbal announcement such as "You have a job for life here!" can be enough to create an implied contract. In either case, the burden of proof lies with the employee if they wish to sue for wrongful termination. 

Implied Covenant Of Good Faith And Fair Dealing 

This covenant protects employees if their employer attempts to dismiss them to avoid fulfilling duties. This might include paying for retirement, healthcare, or commission-based work. 

Example: Jack Smith has worked for the same company his entire life and is due to retire next month. His employer lets him go three weeks short of his retirement date under the misconception they won't have to pay into his retirement fund. 

Public Policy 

Employers must not discharge employees for exercising rights afforded to them by state or federal statutes. The American Law Institute's Restatement (Third) of Employment Law highlights four relevant categories within the public policy exception:

1. Refusal to perform an act prohibited by state law: Like committing perjury on behalf of an employer at a trial. 
2. Reporting a violation of the law: An example would be whistleblowing or reporting illegal money laundering activities. 
3. Engaging in acts that are in the public's interest: Including performing jury duty or joining the National Guard. 
4. Exercising a statutory right: Filing any claim that falls within state compensation laws. 

Promissory Estoppel 

This law may prevent an employer from completing the employee termination process, or require them to pay damages if an employee can prove any of the following: 

• The employer made a clear promise of employment.
• The employee relied on this promise.
• The employee's reliance was reasonable and foreseeable.
• The employee was injured as a result of the employer withdrawing this promise. 

Example: Annie is a single mother of three who receives a written offer of employment from an employer in a different state. She gives notice on her previous job, relocates her family, and puts down a rental deposit on new accommodation. In addition, Annie pays childcare fees upfront for her youngest child and registers at a local school for her two older children. But the day before she starts employment, the employer withdraws the job offer.

As a result of the reasonable changes Annie made to start her new job, she could be awarded reliance damages or expectation damages in court.

Illegal Discrimination 

Federal and state discrimination statutes prevent employers from terminating employees due to reasons including: 

• Race
• Religion 
• Citizenship 
• Disability 
• Gender 
• Age 
• Physical health 
• Sexual orientation 

However, there is a distinction between terminating someone unlawfully because they're a member of a protected class and terminating someone lawfully even though they're a member of a protected class. 

Example: Company X may discharge Andy for posting negative posts about his employer on social media, even though Andy has a disability.

How To Terminate An Employee

Now that you know whether your reasons to terminate an employee are lawful, the next step is managing the process so it goes as smoothly as possible. 

1. Establish Your Termination Policy

You must distribute your employee handbook to every employee during onboarding, and this should include a section on your termination policy. Clarify any fireable offenses within this section, so there's no room for confusion or misinterpretation. 

Example: if a breach of safety rules is a fireable offense at an industrial company, you might clarify that this includes failure to wear PPE, dangerous driving, choosing to smoke on-site, or not using machinery guards. 

Ask every employee to read and sign to acknowledge they have read and understood the content. Remember to update your employee handbook regularly to reflect the necessary changes. For example, if you've recently switched to a remote or hybrid model, ensure your handbook defines expectations for your new work structure. An ex-employee could hit you with a wrongful termination lawsuit if your policy isn't current or relevant. 

2. Start Documenting Offenses

Employee termination meetings must be based on hard facts and evidence to avoid getting into situations where the employee could claim discrimination or wrongful termination. Start documenting any relevant incidents as soon as you suspect an employee is not up to scratch. If the employee challenges their termination, these are your records to fall back on.

Documentation should include the following: 

• The date, time, and location of the incident.
• Any witnesses to the incident (including their names and contact details.)
• In the words of the person who saw it, a complete account of what happened.
• The employee's version of events if they dispute what happened.
• The disciplinary action you took due to the incident (including the date and time.)

Some offenses, such as theft, fraud, or sexual harassment, will be immediately fireable. In these cases, it's likely the police will become involved, and you will need more time to start documenting offenses. However, if the employee denies the allegations, you must provide evidence supporting your decision to terminate their employment.

3. Consider A Formal Performance Improvement Plan 

An employee may exhibit exemplary behavior but fall behind in their performance reviews. Perhaps they haven't hit their sales targets two quarters in a row or struggled with adapting to a remote-based role. 

In performance-related issues, HR leaders must always do everything they can to support struggling employees. After all, substandard performance feedback can be related to circumstances outside the employee's control, such as a lack of training or a managerial change.

Leadership keynote speaker Mike Ashie explains, "If you are terminating an employee based on behavior or performance, then I would hope you've had many meetings or discussions with the employee and you've done your absolute best to help the employee with their shortcomings."

A formal performance improvement plan (PIP) should be your first port of call, and it should give your employee a genuine opportunity to iron out their issues and succeed in their role. Hold a meeting to outline:

• Your expectations going forward, including specific goals you require them to meet.
• The additional resources you'll supply, for example, training or access to a mentor. 
• The dates they must hit specific milestones.
• The consequences of not meeting the PIP goals, including employment termination.

4. Choose The Right Time And Place 

Let's face it; no one wants their employer to fire them in the middle of the day in an open-plan office. Although termination conversations are always challenging, individual face-to-face meetings (or via Zoom for distributed teams) are the most courteous way to part ways. They also minimize confusion, trauma, and humiliation for employees. But when is the right time to schedule this? 

The end of the business day is good, as this tends to be quieter, and there are fewer people to watch as your terminated employee clears personal belongings from their desk. If you choose this time, there's no need to send a message at 9 am requesting their presence at 5 pm. Providing them with too much time to dwell has two consequences: 

1. Your employee will spend the entire day of termination worrying about the meeting.
2. It gives them a chance to start doing damage if they still have access to company property. 

And the best day for termination? One school of thought suggests that terminating someone's employment on a Monday gives them the rest of the week to proactively seek new work rather than hitting a mental slump over the weekend. On the other hand, scheduling their final day of employment as a Friday may cause less disruption to the rest of your team.

Whichever day or time you pick, choose wisely. How you decide to break the news can profoundly impact your ex-employee and current team members.

5. Have A Straightforward Conversation With The Terminated Employee

Ditch the small talk and jump straight to the point of your conversation to focus your employee's minds on what's happening rather than confusing them with details about an upcoming company picnic or the latest office gossip. 

Next up, stick to the facts. Remember, no termination of employment discussion should ever be a surprise. If you've managed the situation effectively up to this point, then your employee will be expecting the conversation. They might not like what they hear, but the actual words shouldn't come as a shock.

Finally, be compassionate, but don't be the shoulder to cry on. Your role in this process is to provide clarity and information about the next steps. Stay firm and don't sugarcoat the situation, so there's no temptation for the employee to humiliate themselves by trying to win you over. 

Mitch Chailland, President of Canal HR, also recommends that "your tone and demeanor should be professional since this is a business decision and should not be a time to unload your grievances with the employee."

Don't say: 

• "I understand exactly how you feel."
• "This is difficult for me."
• "You're just not as skilled as Bob." 
• "You must have known this was coming?"

Do say: 

"Lucia, today is your last day of employment for Company X. We're severing your employment at-will. Here's your termination letter and COBRA notification. I'll ask you to read this, sign it, and ask me if you have any questions. After that, we'll collect company property and you can call me later if you have any follow-up questions." 

Or…

"Stanley, today is your last day as an employee of Company X. We provided performance targets for you to hit and listed specific dates for these in your Performance Improvement Plan. As you haven't reached these targets on time, I'm providing you with your termination letter and COBRA notification. I'll ask you to read this, sign it, and ask me if you have any questions. After that, we'll collect company property, and you can call me later if you have any follow-up questions." 

But how should you conclude your meeting? 

Karolina Kijowska, Head of People at PhotoAiD, advises, "To avoid negative fallouts, thank them for their contribution and commitment during their time in the company." 

6. Recognize And Respond To Their Emotions 

Even with multiple warnings, some employees struggle with the notion that you're firing them and may express deep emotion. If you're worried about your safety during a termination meeting, have security staff on standby. 

There are four typical reactions to termination news. Your job is to actively listen to your employee to determine how they feel so you can respond appropriately to their feelings. Keep the discussion on track so you can focus on providing information and the next steps. 

• Shock: Acknowledge that they might feel shocked but firmly repeat the main message. 
• Denial: Repeat the message multiple times (as needed) to ensure the employee understands this is real. 
• Anger: Stand firm but don't get pulled into defending your position. Move on to offering the information your employee needs. 
• Grief: Offer tissues, but gently focus on the future. Allow the employee a few minutes of recovery time before collecting personal items from their desk. 

7. Ensure You Fulfill Legal Post-Termination Requirements

Provide your employees with an official termination letter and all the necessary paperwork they require so they know what's happening with their final paycheck, insurance, and other benefits you might offer. Your list should include the following termination documents: 

• COBRA information: You must provide your employee with a notice of their right to continue their health insurance under the Consolidated Omnibus Budget Reconciliation Act (COBRA). The notice should be given within 44 days of the qualifying event, such as the termination of employment.
• Final paycheck: Check state and federal law to see when final paychecks are due. Some states like Colorado or Massachusetts require that employees receive their last wages immediately, while states like Kentucky give you up to 14 days or the next scheduled payday (whichever is later). 
• Unused vacation: Check company policy and state law to see if you have to pay out unused vacation days.
• Outstanding expenses: If your employee has unpaid business expenses, now is the time to reimburse them.

8. Make Necessary Adjustments In Your HR And Company Systems

Disgruntled ex-employees with access to physical and digital company property can cause chaos and damage your employer reputation. Make immediate arrangements to: 

• Remove their access to electronic communication, company files, and any software platforms they might have used for work. 
• Reassign any ongoing projects they were working on and redistribute their workload to other employees.
• Recover physical items like company computers, office keys, equipment, uniforms, or company vehicles. 
• Change access to door codes or alarm systems.
• Update your HR management system with the relevant employee records.

Did you know that Nectar integrates with several popular HRIS tools? When you deactivate an employee in your HRIS, Nectar will sync that information and deactivate that user.

Download Nectar's Free Employee Termination Checklist

In an ideal world, companies wouldn't need to terminate employees. There are numerous ways that HR leaders can build a rewarding company culture where employees feel driven to succeed in their roles. Nectar provides all the tools you need to recognize your employees' efforts and reward them for their fantastic work. 

But for those times when termination is inevitable, we also provide a handy employee termination checklist to keep you firmly on the side of compassion and compliance. Copy this checklist into your Google Drive account to get a deep dive into what needs to go into terminating an employee.