Chapter 18Terminating Individual Employees

Terminating an Employee 1

• For an employee, the loss of a job can be life-altering, affecting his ability to care for himself and his family, damaging career prospects, and damaging self-esteem.

• For an employer, the undertaking is stressful, sometimes dangerous, and apt to prompt legal actions.

• Terminations are more likely than any other human resource action to result in legal claims.

Terminating an Employee 2

• The legal standards governing termination differ greatly for public sector employees or unionized employees, and private sector employees.

• Most of this chapter deals with private sector, non-union employees, the standard for which may be called “employment at will with exceptions”.

• For unionized and public sector employees, the more stringent standard of “just cause/due process” controls.

• Legal standards differ for terminations of individual employees, than for terminations of groups of employees because of downsizings and the like.

Constructive Discharge 1

• Disputes over whether an employee quit or was fired are common.

• If the employee truly resigned, he/she cannot sue for wrongful termination.

• But employers cannot avoid the legal consequences of terminations by effectively, but not officially, discharging employees (essentially, forcing them out).– A quit is a termination when an employer creates

intolerable working conditions with the intention of forcing an employee to quit - a constructive discharge.

– The quit is construed as a termination if, under the circumstances, a reasonable person would have felt compelled to quit.

Constructive Discharge 2

• To determine whether an employee who resigned was constructively discharged, a court considers:– demotions – cuts in salary – reductions in job responsibilities– reassignment to menial or degrading work– reassignment to work under a younger

supervisor– badgering, harassment, and humiliation

calculated to encourage resignation– offers of early retirement on terms less

favorable than the employee’s former status

Just the Facts

• A long-time employee received a negative performance appraisal after some other employees and a customer had complained about him. The employee was presented with the choice of either retiring with a severance package or being evaluated under a 30-day performance improvement plan. The plan would include an assessment of his performance, leadership, support for peers and managers, teamwork, and customer satisfaction. He was also told that if his supervisor received even one complaint about him during this 30-day period, he would be terminated without severance pay. The employee was given 30 days to consider the offer. After 25 days, he took the severance package. Subsequently, the employee sued his former employer for wrongful termination. Was he constructively discharged?

– Saville v. IBM, 2006 U.S. App. LEXIS 15839 (10th Cir.); cert. denied, 127 S. Ct. 1143 (2007)

Termination Standards

• Employment at will– Existed prior to 1937– There was no such thing as wrongful termination.

• Employment at will with exceptions – An employer may terminate an employee for any

reason except prohibited reasons (exceptions) developed by statute or common law since 1937.

– Applies to a significant majority of the workforce• Just cause/due process

– Employers bear the burden of proving that terminations were proper and based on good reasons.

– Applies to about 20% of workforce

Impermissible Grounds for Termination

• Legal protections for wrongful discharge may be categorized as arising from these grounds:– Constitutional – Statutory – Common law

• contractual • tort claims

• Some protections are available only to public sector employees, union employees, or employees with individual employment contracts.

Elements of a Claim –Breach of an Implied Contract

• A specific promise was made.• The promise was made frequently and

consistently.• The source of the promise was someone with

authority to offer it.• The promise was communicated to the employee.• The promise was not highly conditional.• The employer’s entire “course of conduct” was

consistent with the promise.• There was an exhaustive listing of dischargeable

offenses in a handbook.• A change to a less-protective policy was not

communicated to employees.• There was no effective disclaimer.

Dillon v. Champion Jogbra

• Facts: Linda Dillon appealed from a grant of summary judgment to Champion on her wrongful termination claim, contending that her at-will employment status was modified by the firm’s employee handbook and practices. Although the manual contains a “no contract” disclaimer, a progressive discipline system was adopted which established an implied contract. Less than 2 months after she was promoted to a new position, she was terminated without any effort to correct or improve her performance, in violation of the implied contract.

• Issue: Whether an implied contract exists, and whether the employer fired the employee in breach of that implied contract.

• Held: Because the employment manual was ambiguous, material questions of fact exist, so that summary judgment was improper. Case reversed and remanded for trial.

Effect of Disclaimers

• Disclaimers in an employment context are written statements in employment documents that deny that statements in those documents create any contractual rights binding on the employer.

• Recommended: To maintain employment at will, employers should incorporate disclaimers into employee handbooks and other documents defining the employment relationship.

• Disclaimers should be communicated to employees and employees should acknowledge receipt in writing.

Public Policy Exception to Employment at Will 1

• Under this exception, employers are liable in tort for wrongful discharge when they terminate employees for taking actions that public policy requires or commends.

• Allowing the terminations to stand would offend and undermine public policy.

• This type of wrongful discharge claim is recognized in about 43 states.

Elements of a Claim -Public Policy Exception

• Plaintiffs must show:1. The existence of a clear public

policy relevant to their conduct (clarity element);

2. That discouraging the conduct in which they engaged would jeopardize this public policy (jeopardy element);

3. That engaging in conduct supportive of public policy resulted in termination (causation element).

• If Plaintiff establishes these elements, the employer must show that there was an overriding justification for the termination.

Public Policy Exception to Employment at Will 2

• Four kinds of the public policy exception are recognized: termination for:

1) refusing to commit an illegal act,2) exercising a legal right,3) performing a public duty, and 4) reporting illegal activity (i.e.,

whistleblowing). • Rule: Employers must not terminate

employees for refusing to commit an illegal act, exercising a legal right, performing an important public duty, or reporting illegal activities of employers and their agents.

Whistleblower Protection Statutes 1

• Most states have whistleblower protection laws, although some apply only to public-sector employees.

• Some whistleblowers are protected under laws that pertain to specific safety-sensitive industries (including aviation and nuclear power).

• A variety of federal environmental laws incorporate whistleblower protections for employees reporting environmental violations by their employers.

Whistleblower Protection Statutes 2

• Federal government employees are covered by the federal Whistleblower Protection Act (WPA).

• The WPA prohibits taking or failing to take a personnel action because an employee or applicant has disclosed information that is reasonably believed to show:– 1) A violation of a law, rule, or regulation; or – 2) Gross mismanagement, gross waste of

funds, abuse of authority, or a substantial and specific danger to public health or safety.

WHISTLEBLOWER PROTECTION UNDER

SARBANES-OXLEY

• Publicly traded company may not take adverse employment action against employee providing information or assisting in proceedings regarding– Mail, wire, bank, or securities fraud– Violation of SEC rule or regulation– Federal law protecting shareholders against

fraud

Whistleblowers under SOX

• Entitled to – Reinstatement with all rights– Compensatory damages including back pay

with interest– Special damages, such as attorneys fees and

expert witness fees

Off Duty Conduct Laws

• Most employees believe that their personal lives off the job are none of their employer’s business, and should not affect their employment status.

• This view is not shared by their employers.• About half of the states have off-duty conduct

laws, but these are generally limited to protecting employees’ off-duty use of tobacco and other lawful products.

Elements of a Claim –Discriminatory Termination 1

• Plaintiffs must show:1. The protected class characteristic(s)

relevant to the case.2. Prior to termination, the employee had

been meeting the employer’s legitimate performance expectations.

3. The employee was terminated (formally or constructively).

4. The employer sought a replacement or hired one with contrasting class characteristics, or

5. A similarly situated person with different protected class characteristics engaged in similar conduct, but was not terminated.

Elements of a Claim –Discriminatory Termination 2

• If Plaintiff proves a prima facie case, the employer must prove a nondiscriminatory reason for the termination.

• If the employer proves a nondiscriminatory reason, plaintiff must show that the articulated rationale is pretext and that the decision was more likely motivated by discrimination.

Just Cause/Due Process

• Most employees are governed by the doctrine of “employment at will with exceptions”.

• The stronger standard is “just cause /due process”.

• Generally, terminations of employees who are unionized, work for government agencies, reside in Montana, or have contracts of employment must meet a just cause/due process standard.

• Under this standard, employers bear the burden of showing that they had good reasons for their termination decisions and followed reasonable procedures.

Unionized Employees

• The legal status of unionized employees derives from language in labor agreements that limits discipline and discharge to situations in which there is “just cause.”

• Almost all labor agreements include grievance and arbitration procedures to challenge discipline and discharge decisions.

• Determinations as to whether unionized employees have been terminated for just cause are made by arbitrators rather than courts.– Arbitrators are typically given broad authority.– If an arbitrator decides that a discharge was

not for just cause, he/she can overturn the decision or modify it.

Factors Determining “Just Cause”

• Arbitrators consider these factors:– Was there a rule or standard prohibiting the

behavior that was engaged in by the employee?

– Was the rule or standard clearly communicated to employees?

– Is the rule or standard a reasonable one?– Has the rule or standard been consistently

enforced?– Was the employee afforded due process?– Is there sufficient proof that a rule was

violated?– Was progressive discipline applied?– Was the discipline commensurate with the

offense?– Are there any factors calling for imposition of a

lesser penalty?

Public Employees 1

• Most governmental bodies have civil service laws, designed to insure that employment decisions are not based on politics, but on merit.

• Teachers and professors in public schools and universities sometimes enjoy the protection of tenure laws, designed to protect the central purposes of academic life:– to raise questions,– express controversial ideas,– and pursue the truth wherever it leads.

Public Employees 2

• Public employees are protected from wrongful termination by: – The due process rights in property and

liberty afforded by the 5th and 14th Amendments to the U.S. Constitution, and

– The freedoms of speech, religion and association afforded by the 1st Amendment to the U.S. Constitution.

Public Employees 3

• In general, public employers are responsible for affording their employees due process, both pre-termination and post-termination.

• Prior to termination, a hearing must be held that provides public employees with – notice of the charges against them, – explanation of the evidence, and – opportunity to present their side of the

story. • Following termination, a more elaborate

hearing with opportunities to confront witnesses and present evidence is required (if requested by terminated employees).

Public Employees 4

• Constitutional protection on free speech grounds is afforded only to a public employee who is speaking as a citizen on matters of public concern, not as an employee.

• Public employers must respect the constitutional rights of their employees to freedoms of religion, speech, and association.

• Termination or other disciplinary action should be imposed only when the exercise of these rights clearly interferes with an employee’s ability to do his job or with accomplishment of the public agency’s mission.

Montana Wrongful Discharge Law

• The Montana Wrongful Discharge From Employment Act (WDEA) eliminated employment at will in Montana.

• The Act provides that a discharge is wrongful if:

1. It was in retaliation for an employee’s refusal to violate public policy or for reporting a violation of public policy.

2. The discharge was not for good cause, and the employee had completed the employer’s probationary period.

3. The employer violated the express provisions of its own written personnel policy.

Handling Terminations 1

• Employers should consider alternatives to termination, including retraining, transferring, demoting, suspending, and signing last-chance agreements.

• The option of resignation is best pursued when there are growing concerns about the performance or conduct of an employee, but a termination is not yet imminent.

• Resignations should be documented in writing and stipulate the voluntary nature of the resignation.

• Employees should be placed on administrative leave if circumstances warrant their removal prior to completion of an investigation or proper review of a termination decision.

Handling Terminations 2

• The reasons for termination decisions and the process followed should be solidly documented.

• These materials should be in writing, should be produced prior to the termination decision, and should support the decision to terminate.

• Employers should provide employees with a clear and succinct statement of the reason(s) for their termination.

• Employers should generally avoid making public statements about terminated employees and the reason for their termination.

• Discharges should be handled in a reasonable, dignified manner.

Handling Terminations 2

• Unless there are compelling security concerns, terminated employees should be allowed a reasonable amount of time to clear out their offices and take care of other business, rather than be ushered out of the workplace.

• Final wages should be paid quickly and within any period provided for under state law.

• Unless termination is for gross misconduct, terminated employees should be notified of their right to health insurance coverage under COBRA.

• Employers should consider offering severance pay in exchange for releases of legal claims related to terminations.

• For employees over 40, compliance with ADEA is required.