Difficult employee terminations should be handled with care.

Published: May 01, 1995, By MacArthur, Malcolm D.

One of the toughest jobs an employer sometimes has to face is the handling of difficult employee terminations. Because of the potential legal pitfalls, terminating employees must be accomplished with great care.

Any suggestion of discrimination could lead to a lawsuit under the Civil Rights Act of 1991, which provides for jury trials to determine compensatory and punitive damages.

Even in the absence of unlawful discrimination, there is a risk that employees may successfully sue on the basis of wrongful termination.

Under traditional American rule courts have held that in the absence of a contract provision or statutory exception, you are free to terminate an employee for good cause, bad cause or no cause at all.

This concept, known as the employment-at-will doctrine, is in effect in Washington DC and 49 states.

Nowadays, however, this doctrine will not get you very far.

In recent years, there has been a rapidly growing body of employment statutes and case decisions identifying a host of reasons why an at-will employee can't be terminated.

They include such reasons as, "the discharge would be contrary to public policy and sound morality," it was an "abusive discharge," or the discharge violated "an implied covenant of good faith and fair dealing."

Another disturbing legal development is that traditional tort theories, such as fraud and defamation, have been extended to these claims.

If you are announcing or explaining that an employee has been terminated, you have to be careful not to make excessive derogatory statements about the employee.

While the defenses of truth and a qualified privilege of employers to comment on employee performance in the course of discipline may provide some shield, excessive communication or demonstrated malice could establish an actionable tort claim.

One of the most dangerous applications of these new legal theories is when they are combined with claims for violation of employment practices that are prohibited by statute.

For example, a terminated female employee pressing a sex discrimination claim under Title VII of the Civil Rights Act might decide to introduce abusive-discharge theories and try to recover punitive damages from a jury for emotional distress.

In such a case, there is no legal cap on the damages, and juries are generally free to award any amount they believe to be appropriate.

In a somewhat similar case involving sexual harassment, an employee of a law firm recently received a $6 million jury award.

Similarly, an older worker feeling unfairly pressured into retirement might enter a complaint under the Age Discrimination Employment Act, contending that the employer breached an implied promise not to deal arbitrarily with employees.

As a California department store recently learned, that combination can produce liabilities exceeding $2 million in damages and attorney fees.

As this judicial trend continues, you must pay increased attention to your role as an employer.

Hiring, discipline and discharge policies and practices must be reviewed and evaluated, and your management team should be offered training to minimize exposure that can result from difficult terminations.

A knowledgeable management team can do much to avoid the cost of defending litigation and the risk of an adverse judgment.

And if any doubt exists about the legal propriety of terminating an employee, consult legal counsel.

Following these suggestions should diminish the prospect of litigation resulting from terminations.

[] Before deciding to terminate an employee, be sure the documentary record of his/her performance is complete, the company policies have been followed and the employee has been made aware that he/she is likely to be terminated.

[] Don't terminate an at-will employee for refusing to violate the public policy of your state or for acting in concert with public policy.

[] Include a paragraph disclaiming the creation, of an employment contract in your employment-application form and employee handbook.

[] Offer instructions to those in your company who conduct employment interviews. Make sure they avoid generalizations or promises of future raises, additional benefits and predicted lengths of employment.

[] Review your employee handbook and personal policies for compliance with applicable federal law and state law. Add an introductory sentence to your employee handbook stating that your company reserves the right to change or modify all of its provisions without prior notice to employees.

[] Use the same system of progressive discipline for all employees except upper-level management personnel.

[] Appraise your performance-evaluation systems and teach those making evaluations how to provide honest and objective evaluations based on job-related criteria.

[] Juries will generally consider the fundamental fairness of your action in terminating the employee. If the employee wasn't made aware of your expectations and your sense that they weren't being met, and if you don't give the employee an opportunity to turn the situation around, there's a chance the jury may hold you liable.

[] Be sure to be particularly careful about terminating an employee for misconduct.

[] Conduct exit interviews with all employees, whether they leave voluntarily or involuntarily. Often these interviews can produce insights into undetected problems in your association's policy and provisions.

Malcolm D. MacArthur is legal counsel to the Flexible Packaging Association, other trade groups and corporation.