How To Fire An Employee the Right Way

If you are reading this article, you likely need to learn how to fire an employee because it is just not working out. While this is never a pleasant situation to be in, it’s one that should be handled with care. Whether it be for performance, insubordination, inability to follow rules, or a combination of the three, this article will guide you through how to fire someone in the easiest, most legally sound way possible. Please note that this article contains general information only, so you should consult your own legal professional before making any decisions.

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We will go over the following regarding how to fire an employee:

• Can I Fire An Employee?
• Do I Have to Provide Severance Pay?
• Compiling Termination Paperwork
• The Termination Meeting: Breaking the News
• What to Do After the Termination
• Red Flag Situations & FAQs for Small Business Owners
• Post Mortem – Getting Ahead for Next Time

Can I Fire An Employee?

The short answer to this question is, generally, yes. Every state except Montana has “at-will” employment. At-will means that, regardless of reason, an employer can terminate an employee without cause (and vice versa – an employee can walk out without providing a reason).

However, you cannot terminate an employee for an illegal reason, such as race, pregnancy, or age, which would be discriminatory.

Even though employment is generally at-will, an employee can still sue you for discrimination or perceived wrongful termination. The more documentation you have showing that you didn’t fire the employee for illegal reasons, the better off you’ll be and the easier it will be to defend yourself if the employee later asks for his personnel file or hires a lawyer.

What If I Have No Paperwork on the Employee?

If your employee is caught doing something illegal, such as bringing illicit drugs into the workplace, attacking another employee, or stealing, you can fire him or her without the need for paperwork.

In other situations, if you have not collected any paperwork on the employee, that doesn’t prevent you from firing him or her. At-will employment can still protect you (as long as you are not in Montana). Especially if you have cause for firing the employee, such as witnessed behavior infractions, repeated tardiness, or poor customer service, then you should be in the clear.

That being said, not having documentation makes it more difficult to defend your position if an employee sues you for discrimination or wrongful termination. If you have no documentation, it may be a good idea to hold off for a few weeks on terminating the employee until you have gathered some documentation. For instance, you could place the employee on a probationary period and document any infractions going forward. A few weeks later, you’ll have the paperwork that you need.

What If My Employee is a Protected Class Member (e.g. a minority or over age 40)?

If your employee is in a protected class, you can still terminate the employee. That employee, like any other employee, is at-will.

However, because there are laws around discrimination, it’s even more important to make sure you document problems with the employee’s performance. If the employee is the only member of his or her class at your business, be extra thorough so that the reason for the termination is crystal clear to any independent person. Try to think if any reasonable person would look at the situation and see that termination was the only solution.

The protected classes are as follows:

• Race
• Color
• Religion
• National Origin
• Age (especially over 40)
• Sex, which now includes gender, gender presentation, and sexual orientation
• Pregnancy
• Citizenship
• Familial status
• Disabilities
• Veteran status
• Genetic information

But what if I have both issues – no paperwork and an employee in a protected class?

We would strongly advise you to consult your attorney here. This is extremely litigious territory, and an attorney can best advise you. For help finding a business attorney, click here.

A best practice is to continually document the employee’s performance and infractions in his or her personnel file and make all attempts to coach your employee to success. Then, after you’ve exhausted that and have cause for termination, proceed as normal.

Once you are in a legally sound position to terminate an employee, you can decide whether to provide severance, compile termination paperwork, and take the next steps that we go through below.

Do I Have to Provide Severance Pay to a Terminated Employee?

No. You are not legally required to provide severance pay to an employee that you terminate.

If you do decide to pay severance, the best practice is to make severance conditional on the employee signing a termination agreement which states that they have been lawfully terminated. It is best to have an attorney draft a termination agreement template for you. This can ease your mind that this entire situation is over.

Although not legally required, severance may be most useful in two situations:

1. A salaried/management employee is being let go in a tenuous situation that might not be his or her fault
2. A salaried/management employee is being let go after many years with your company (at least 3)

If your employee is in a shift/hourly/part-time position, then severance generally isn’t provided unless something else is at play, such as the employee belonging to a protected class.

To expand, severance is essentially the cost of what you want to give someone in thanks for their service, but also to ease your mind that this employee will ‘go away’ upon termination, with no lingering problems for your business.

Examples of severance policies:

• 4 weeks pay for every year with the company
• Flat amount such as 10-15% of their salary for every year of service

Compiling Termination Paperwork

As mentioned above, it’s a good idea to compile as much documentation as you can before firing an employee. This way, if your employee sues for terminating for wrongful reasons, you have some documents to back you up. Below, we get into more detail about the type of paperwork you should try to gather.

Termination Tables by Business Type

Termination paperwork and what is needed can be separated by the two general types of employees:

1. Hourly/shift employees
2. Salaried/office employees

If you have an hourly/shift employee:

Suggested Documentation for Firing an Hourly/Shift Employee

*I.e. Protected class, incidents where 2 sides to the story, etc…

If you have a salaried/office employee:

Suggested Documentation for Firing a Salaried/Office Employee

*I.e. Protected class, incidents where 2 sides to the story, etc…

The paperwork mentioned in the tables above can be further broken down into two categories:

1. Paperwork you should gather before firing the employee; and
2. Paperwork you should bring to the termination meeting with you

Next, we go into more detail on each.

Paperwork Before Termination

If you are in a situation where an employee should be terminated, there ideally should be ample evidence of this issue in the employee’s personnel file or paperwork. Documentation could include items similar to the following list below and should be put into the employee’s personnel file in advance of your action; this is because an employee, after termination, can ask for his personnel file and is entitled to it by law. Feel free to reference our table above.

If you are like most small business owners, you might have none of the below. That’s ok. We address that here.

Documentation might include any or all of the following:

• Documentation of meetings for infractions or performance issues (including dates and times)
• Documentation of verbal warnings for any infractions/ performance issues
• Written warnings for any infractions or performance issues
• Printed out emails supporting any of these problems
• Documentation of any company policy, such as maternity leave, that the employee did not comply with
• A timeline of the events showing decline in performance
• A timeline of, for example, the three strikes (i.e. the 3 dates the employee was grossly tardy, which is now why s/he is being fired)
• A signed employee handbook or policy statement outlining his/her understanding of the rules (if you don’t have this- don’t worry- the other items above are plenty!)

Next, the second set of paperwork:

Paperwork You Need for the Termination Meeting

For the termination meeting with the employee, you might need the following paperwork; feel free to reference our table above:

• 2 copies of the termination letter (one for your records and one for the employee)
• 2 copies of the termination agreement (Consult your attorney to compose one; this is where severance should be outlined if there is any. While there are templates on the internet, it is prudent to have an agreement by your attorney who knows you best & whose job it is to protect you and your business.)
• 1 copy of COBRA paperwork for the employee (if you offer employee health insurance- there should be a link on your provider’s site or ask your broker to email it to you)
• You may need other paperwork depending on your state, which is addressed here.
• If you are doing a layoff, you will need to provide unemployment paperwork, which is unique to each state. Please check your state’s government website for more details.

The Termination Meeting: Breaking the News

Before you break the news to the employee, you will need to be aware of the following issues:

1. Check your state for paycheck laws and what needs to be present at the meeting
2. Check the employee’s age; if the employee is over 40, your termination agreement will need to have special clauses and have a certain timeline in order to be aligned with federal law.

Now that you have arrived at the day you are ready to terminate, you will need to find a trustworthy witness who can join in your termination meeting.

If you have a COO or a second in command, that is best for this situation. Do not leave this person in the dark; tell him or her what will be happening and that he or she is expected to escort the terminated employee out. If the individual is uncomfortable with the responsibility, find someone else ASAP and ask them for their confidentiality.

Go to a private conference room or meeting room for the termination meeting, with all the documents needed in front of you (print your speech if you need to). Ask your witness to get Johnny and bring him to the meeting room. There is no need to say why the meeting is taking place; if Johnny asks, your witness can just say “I don’t know.”

Termination Speech Template

As soon as the door is closed and Johnny is seated, break the news. Ideally, especially if this is your first termination, you should practice what you will say ahead of time. Keep it simple, to the point, and avoid using adjectives, apologies, or disclaimers in your wording. Here’s a sample of a Termination Speech Template:

Johnny, we are having this meeting to tell you that your employment is being terminated. I am sure this news is upsetting; however, we need to go over some paperwork with you.

Here we have your official termination letter and a termination agreement for you to sign. If you sign the agreement, you are entitled to severance. This agreement and letter also outline your benefits and how you will get the rest of your pay you are owed through today. Please take the time you need to look it over right now, and you are welcome to take it with you. If you have questions, you are welcome to email myself (or your HR person if you have one) or we can set up a time for a call this week. The deadline for signing is also in these documents. If you do not sign the paperwork, unfortunately, the severance will be unavailable.

Johnny, it is time for you to leave our premises. Tommy here (your witness) is going to provide you a box and will help you clear your things quickly and escort you out. He will also be taking your keys and any other company property you have on hand.

(then stand up to signal for the meeting to be over)

What Might Happen at the Termination Meeting

Things that might happen during the termination meeting and what to do:

• If Johnny interrupts you, ask him to wait until you are finished because this information is important.
• If Johnny gets angry and decides to storm out, have your witness attempt to ask him back into the room. If he refuses to come back in, tell him you will be FedExing him his paperwork today, and he is no longer allowed back into the building.
• If Johnny starts to cry, that is a very normal reaction. Be respectful, and ask if he needs a tissue or a moment. Do not apologize though or qualify the termination with hugs, apologies, or excuses. Stick to the script as best as possible.
• If Johnny refuses to leave, or the situation escalates, call your building’s security or 911.
• If Johnny asks for more details on why he is being fired, you can simply ask him to leave. However, if you have clear, undeniable documentation of why, feel free to verbally tell him why (i.e. you were over an hour late four times on 4/4, 5/7, 7/8, and today).

The biggest thing to keep in mind is that you need to get the paperwork to the employee and get the employee off premises. Having a debate with the employee about the why’s should not be done at this moment- tempers are high, and nothing good will come from impulsive reactions.

Remember, thanks to at-will employment, you do not owe the employee an explanation. If you would like to have a conversation in the following days once tempers have cooled and termination papers have been signed, that is up to you, and it is advisable to consult your attorney prior to doing so.

What to Do After the Termination

After the meeting is over and the employee has left the premises, we suggest doing the following:

1. Call your team into a conference or lunch room and tell them quickly what happened. There is no need to say why; saying that Johnny no longer works here as of today is plenty.
   Although you might think this might cause current employees stress and questions about their own job security, it is better to not fuel the rumor mill. Most terminations, especially for behavior or performance, though upsetting, are not a surprise to anyone.
   If you can, have something positive to add at the end of the meeting such as a compliment to the team or a big win with a client. Try to end on a good note, and assure your team that they are in a good organization.
2. Ensure that IT has shut down all of Johnny’s accesses and accounts. If possible, have IT do this while the termination meeting is occurring, if you can trust their confidentiality and are able to stick to the timeline. Make sure Johnny’s email is forwarding to another employee or has an autoresponder.
3. Figure out who is taking over Johnny’s work. Do clients need to know that he no longer works at your business? Craft a simple email announcing the organizational change in a positive way to clients, vendors, or employees who missed the team meeting.
4. Clean Johnny’s cube or office space within a week to avoid the “ghost” issue. It makes current team members uncomfortable. If there are still personal things in there, put them in a box and email Johnny a time and place to come pick them up in a secure location.
5. Perhaps within a week, treat your team to lunch, an afternoon coffee, or a happy hour. Having an event like this may seem a bit fake, but showing people you care after what might have been a big shock can help assuage any doubts that employees may have about their own job security.

Red Flag Situations & FAQs for Small Business Owners

Disclaimer: We spend hours researching and writing our articles and strive to provide accurate, up-to-date content. However, our research is meant to aid your own, and we are not acting as licensed professionals. We recommend that you consult with your own lawyer, accountant, or other licensed professional for relevant business decisions. Click here to read our full disclaimer.

Is your gut telling you that you should check on something before you terminate? Then, read our red flag situations below. As always, it is advisable to consult your attorney prior to terminating an employee if you are in one of the below situations.

I don’t like my employee and neither does the team. Isn’t that enough?

Technically, yes, you can terminate an employee you don’t like thanks to the at-will employment clause present in all states (except Montana). However, ensure that your employee is not a victim of discrimination – do you just not like her because she is different? Is her difference related to a protected class (e.g. race or religion)? If so, terminating the employee simply because you don’t like her could amount to illegal discrimination. If the employee isn’t performing well or has behavioral or other problems, do your best to document performance and behavior before firing the employee.

If you don’t like an employee, it could be that the hire was a mistake. Read about how to find great employees so that this mistake does not happen again.

My two employees keep fighting. It’s one or the other, I can’t afford to lose both. Since they both have been on each other’s nerves, it is ok to terminate just the one employee and not the other?

Technically, yes, thanks to the at-will law in the 49 states except Montana. Again, ensure that the employee is not a victim of discrimination. It would be best to terminate the employee who has the weaker performance or is in worse standing behaviorally.

Other options aside from termination would include:

• Having one person change teams, job, shifts, etc…
• Involve other managers on how to resolve this – there may be something you don’t know as the business owner
• Mediation between the two parties with documentable actions

Post Mortem – Getting Ahead For Next Time

Once the employee has been terminated, you get a chance to reflect. If you didn’t have sufficient paperwork on hand this time around, now is the time to get your house in order so you’re ready if you ever need to terminate another employee.

Here are some things you may need:

1. Create an Employee Handbook
   Why? – Sets clear rules & expectations and helps your employees understand they are at-will.
2. Create job descriptions for each role
   Why? – Sets clear expectations on what success is.
3. Create a Performance Review system
   Why? – Employees get feedback on their performance, are given a proper chance to improve, and those who are doing great can also have a system for reward.
4. Create a documentation process for employee infractions/Progressive Discipline Policy
   Why? – It provides a framework for disciplining poorly performing employees.

It’s a good idea to make templates or customizable versions of the paperwork you used for this termination to save time the next time around.

The Bottom Line

Termination is never a pleasant topic. However, there is a right way how to fire an employee and a wrong way, and this article can help get you through a tough situation when you need to fire an employee. Remember that many small business owners confront this issue, and you will get through this.

Be sure to check out Indeed when you’re hiring a replacement for your terminated employee. Click here for a free $50 credit.