What local small-business owners should know before terminating an employee

Over the past few weeks, many large companies, including UPS, Amazon, Ford, and Microsoft, have been laying off employees. Some are blaming a slow economy. Others are blaming AI.

Regardless, tens of thousands of workers have lost their jobs.

However, according to a recent report from payroll company Paychex, small-business hiring has remained relatively steady over the past year. But this could easily change too.

Regardless, employee terminations happen and if not done the right way, it could cause headaches for the employee and legal problems for the employer.

“Once you make a misstep, you can’t undo it,” said Robin Bond, an attorney with the consulting firm Transition Strategies LLC in Chesterbrook.

Terminations should never be a surprise. Many experts say it’s important to communicate problems to an employee often and warn them as early as possible.

Employees need to be told when there’s a problem and then given an opportunity to correct it, said Bond.

When somebody understands the reason for their termination (“even if they don’t agree with it”), they’re less likely to take legal action, said Eva Zelson, a labor attorney with Zeff Law Firm in Philadelphia.

“Ideally if someone is terminated for poor work performance, it shouldn’t come as a surprise,” Nelson said. “There should have been multiple conversations documented about the issues and how the person could improve.”

As an employer, it’s critical to document all of your actions because documentation is your best protection. It should be done as events occur, not after the fact, and in a way that maintains professionalism.

This could be as simple as writing a note to the employee saying, “‘We talked about this behavior and how we want to address it moving forward,’” Bond said. Documentation should be respectful and not a personal attack, she added.

“When you personally attack someone, you’re kind of throwing down a gauntlet — and that gets people to run to lawyers," Bond said.

What happens if you forget to document an incident or a conversation? There’s still time to go back and write a note. But Bond warned that this could be problematic.

“It can look suspicious if documentation is created later after an employee has threatened a lawsuit, so do your best to capture the conversation as soon as you can,” she said. ”Even a text or email can suffice — just make sure it captures what was discussed.”

To avoid rising emotions or saying things that shouldn’t be said, both attorneys advise keeping termination meetings brief. More than one person from the company should attend, including someone from human resources.

“More eyes and ears just witnessing the conversation will better support both the employer and employee,” Zelson said. “Understand that this is a bad day for this person. The employee shouldn’t be put in the situation of trying to comfort the person firing them.”

At these meetings, Bond said, less is more.

“You’re not there to debate whether or not you’re going to terminate someone,” she said.

Some of my clients resist offering severance, particularly if the employee is being terminated for behavior or very poor performance. Regardless, I always advise them to offer something.

It’s not just a means to placate or to avoid potential legal issues. In most cases it’s just the right thing to do.

“If you just fire somebody [and offer] nothing, then what’s the deterrent to suing you? There is no deterrent,” said Bond. “It’s so expensive if you get into litigation — definitely more than a reasonable severance package would be.”

Additionally, both attorneys strongly recommend having employment practices insurance, which can protect an employer against claims of wrongful termination, discrimination, harassment, retaliation, or other infractions.

Even well-intentioned employers can be sued. Defense costs alone can reach tens or hundreds of thousands of dollars — even if the employer ultimately wins.

Both attorneys strongly urge consulting with a lawyer before taking action — to ensure compliance with laws, structure agreements properly, and avoid costly mistakes.

Throughout the year it’s important to take a few hours with a labor attorney and go over your policies to make sure they’re up to date and in compliance with state and federal laws. This will ensure that your termination package, notice, and release paperwork are all legally correct.

Some attorneys offer templates to complete when an incident happens, which can keep documentation consistent.

“Laws change a lot,” said Zelson. “Philadelphia has paid sick time, salary transparency, and you can’t ask about prior pay. Take a lawyer’s time each year to make sure you’re in compliance.”

“It’s better to plan and start with your first step being down the right path,” Bond said.