Small business owners are accustomed to having grace under fire when it comes to running their business. But it is just as necessary that they demonstrate grace when firing an employee.
Due to harsh economic conditions, some sectors of the American economy had to resort to layoffs in the first half of 2022, and there are signs that more companies could be downsizing in the months ahead. However, even in the best economic times, informing workers that their services are no longer required is simply a part of doing business.
Dismissals may be inevitable, but the way you handle them can say a lot about your company’s culture and how you treat people. Firing with grace can maintain morale and trust among remaining employees while minimizing the likelihood of retaliatory action by the dismissed worker.
Top Reasons for Firing Employees
It is an understatement to say that the economy is sending mixed messages. On the one hand, we are dealing with decades-high inflation, rising labor costs, and supply chain disruptions that have spooked the job market and led to layoffs in startups and tech companies. On the other hand, economists point out that, overall, about 400,000 jobs per month have been added to the economy, bringing the United States close to full employment.
Although employers must sometimes lay off workers for economic reasons, they are more often tasked with firing a single problematic employee. In one survey, nearly half of the respondents said they had been laid off—but only about one-third said they had been fired. The top reasons cited by employers for firing workers include the following:
These reasons differ from the reasons employees gave for being fired—a list topped by “personality conflicts,” “my boss was a jerk,” and “office politics.”
It goes without saying that you and an employee you intend to fire will not be on the same page. But it is worth keeping the following information in mind as you prepare to tactfully navigate the potential minefield of letting a worker go.
Get Your Legal Ducks in a Row
Meeting with an employee and telling them that their services are no longer needed is a very personal affair. But before you get to that stage, you should prepare to protect yourself legally.
In every state except Montana, employment is considered to be “at will.” This type of employment means that you do not need cause to fire an employee—you can terminate them at any time and for any reason, except an illegal reason (such as discrimination or relatiation), or for no reason at all.
But aside from illegal reasons for firing someone, at-will employment may not be absolute. There are exceptions to the at-will rule. For example, the at-will rule can be modified by contract. Employment contracts for higher-level employees often allow termination only for cause. Firing an employee for a reason not listed in their contract could be considered a breach of contract and could lead to a lawsuit. Your employee handbook should clearly specify your firing policies. Review the handbook prior to the firing process to ensure that you are following company policy. Prepare to have a representative from human resources (HR) on hand to witness the firing so they can confirm that you acted ethically and legally.
If you have any questions about the legality of firing a worker, consult with an employment lawyer. As bad as a problematic employee might be, a lawsuit might be even worse, so you should carefully consider the firing process. In addition, your reason for terminating an employee may be legitimate, but you could make subsequent mistakes—like illegally withholding wages or not providing continuation of health coverage—that create legal exposure.
Again, consult with a lawyer if necessary about issues such as when wages are due to a terminated employee, COBRA group health plan rules, and unemployment options. A lawyer can help you draft a termination document that puts the terms and conditions of the worker’s dismissal in writing.
Have a Plan
Firing rarely occurs in a vacuum. When a worker is let go, it is usually the result of a cumulative chain of events.
You should have an internal process for documenting worker missteps. Some problems can be fixed, which may require looking in the mirror: are you not providing the right training and support for an employee to thrive? Having a paper trail of performance reviews, written warnings, and similar documentation can help you spot trends and identify areas for improvement.
Despite your best efforts to bring an underperforming team member up to speed, firing a worker may be necessary. Once you have made the decision to fire someone, do not drag it out until they make another slipup. Firing a worker on the spot and in front of others, however, is not the way to go.
Walk yourself through the process ahead of time and know what you are going to say. Although you may not expect a fiery exit, prepare for the worst just in case. Take stock of and secure company property (including computer files and intellectual property) that the employee may possess or have access to and make a list of what needs to be returned. If the employee does not take the news well, remove any opportunity they may have to sabotage the company on the way out. Do not assume that you will need to involve security—conversely, do not assume that you will not.
Tips for a Graceful Firing
Firing, no less than hiring, is a skill. While letting somebody go may never get any easier, it is something that you can get better at over time. Here are some tips for gracefully and compassionately firing an employee:
Our business lawyers cannot make firing someone any easier, but we can help you ensure that it is done legally. We can also represent you in employment disputes and advise you on due diligence in the hiring process. To discuss an employment-related legal issue with our team, please contact us.