How To Minimize Risk When Terminating Employees
Firing an employee is never fun. It’s emotional, stressful, and, if done poorly, can open the door to lawsuits or government investigations. Still, terminations are an inevitable part of running a business. The key is knowing how to handle them in a way that is both humane and legally sound.
The Myth of At-Will Employment
In most of the US, the default employment relationship is ‘at-will.’ That means employers can terminate an employee for any lawful reason, or no reason at all, without notice. But as Amit Bindra of the Prinz Law Firm explains, that promise of simplicity often comes with strings attached:
“At-will employment is not a blank check. Anti-discrimination laws, retaliation protections, and public policy exceptions all limit when and how you can actually terminate someone.”
Bindra’s point reflects the reality that ‘lawful reason’ has a narrower meaning than many employers assume. Decisions based even partly on protected characteristics, such as age, disability, or race, can invite costly discrimination claims. Retaliation claims, meanwhile, are among the most common issues employers face.
Courts and agencies frequently side with employees when termination appears pretextual. The safest course is to combine clear communication of expectations with progressive discipline, so that an employee is never blindsided. Employers should document their decision-making process and ensure that performance, conduct, or legitimate business needs drive termination decisions.
Building a Strong Documentation Trail
One of the strongest defenses an employer can have is a well-documented personnel file. Performance reviews, written warnings, and consistent application of policies can all be invaluable in litigation.
Documentation does more than defend against lawsuits. It also builds internal credibility. Supervisors who keep accurate records show employees that feedback is consistent and fair. It can help avoid disputes before they escalate by giving employees a roadmap for improvement. Employers should train managers on how to write objective, fact-based notes, avoiding personal opinions or vague descriptors like ‘bad attitude,’ that rarely stand up in court.
“In litigation, documented action, timely communicated to the employee, is the most persuasive evidence,” notes Charles Krugel of the Law Offices of Charles Krugel.
This doesn’t mean managers should fill files with paper for paper’s sake. It means documenting meaningful performance issues, goals that were set, whether employees had a fair chance to improve, and how similar situations were handled in the past. Consistency is crucial. If two employees commit the same violation but only one is terminated, a court or agency may view the decision as discriminatory.
Should You Offer Severance?
Terminations raise another thorny question: whether to offer severance. Severance packages can provide a cushion for employees and a sense of goodwill, but they can also protect employers by securing a release of claims.
Severance agreements are also an opportunity to reinforce other business protections. Many employers include confidentiality clauses, reaffirm non-compete or non-solicitation agreements, and set ground rules for how company property, such as laptops or client data, must be returned. These terms reduce ongoing risk while providing closure to the employment relationship.
“If you’re paying severance, you should be getting something in return, usually a waiver and release of claims,” advises Helen Bloch of the Law Offices of Helen Bloch, P.C.
Common components of a severance agreement include a lump-sum payment, extended health insurance, or even outplacement services. In exchange, the employee typically agrees not to sue, disparage the company, or reapply for employment. But these agreements aren’t one-size-fits-all. Employers must comply with laws like the Older Workers Benefit Protection Act when seeking waivers from employees over 40. States may impose additional rules about enforceability. Getting legal counsel to review agreements before offering them is a best practice.
Conducting the Termination Meeting
The termination meeting is often the most stressful part of the process for both sides. Employers want to deliver the news clearly while reducing tension and avoiding missteps that could spark litigation.
Preparation is everything. Employers should decide in advance who will speak, what will be said, and how to respond to likely questions. Scripts may feel uncomfortable, but they help ensure consistency. Employees deserve directness and dignity, which is why experts caution against vague explanations like ‘we’re going in a different direction.’ Instead, tie the reason to documented performance or business needs.
“Tell the employee the real reason for the termination. Don’t sugarcoat it, but also avoid inflammatory language,” suggests Max Barack of the Garfinkel Group, LLC.
Best practices include having two company representatives present, choosing the time and place carefully, staying concise, and managing logistics like final paychecks and company property. Employers should also cut off access to company systems during or immediately after the meeting to protect intellectual property and confidential data.
The Aftermath
Once the employee has left, employers should focus on communication with the remaining team. Transparency builds trust, but so does discretion. Share only what is necessary and avoid discussing details of the termination.
The period after a termination can be fragile for morale. Remaining employees may fear more cuts or speculate about hidden reasons. Employers should reassure staff about the stability of the business while maintaining privacy. Leaders can also use the moment to restate company values, emphasizing fairness and respect for all employees even in difficult circumstances.
Employers should also decide how to respond to future reference requests. Many companies adopt a ‘neutral reference’ policy, confirming only dates of employment and position. This limits the risk of defamation or inconsistent statements. Finally, gather all documentation in one secure place. Good documentation can be the difference between quickly resolving a dispute and becoming bogged down in costly litigation.
The Bottom Line
Terminations will always be hard. The end of the employment relationship is as important as the beginning. Handling it poorly can lead to lawsuits, reputational damage, and lost productivity. Handling it well can protect both the company and its people. By preparing carefully, documenting consistently, and communicating thoughtfully, employers can minimize legal risk and preserve workplace morale.