Electing Termination as a Business Owner
This post continues a previous discussion concerning layoffs. Many companies tend to layoff an employee when in fact, they should be electing termination. Confusing the two can lead to costly litigation and tarnish the image and reputation of the company to competitors and employees alike. Reaching the decision to terminate an employee can be difficult, but with careful planning, this decision can result in a smooth transition. Here are important items to keep in mind throughout the entire termination process.
Termination is directly related to an employee’s work performance; a layoff is a method companies utilize to save bottom line expenses and permanently remove positions. If an employee is not achieving the desired requirements of the job, performance evaluations should be brought to the employee’s attention and options discussed to address the lack of performance. Providing the employee an opportunity to address their job performance, allows them to prove their worth to the company or provide proof that the company made the correct decision to consider termination.
To terminate an employee properly, create a written action plan that targets the specific problem areas and provides an opportunity for the employee to address the area. This will lessen the company’s liability and preserve the image of producing exemplary employees. Review employee performance evaluations, attendance sheets, disciplinary action reports, upward assessments, and peer reviews to assist in creating an action plan.
Improperly laying-off an employee misconstrues the former employee to future employers. The candidate is not viewed as terminated, which would raise questions and concerns, but as a capable candidate with quality performance, which is clearly not the case. The consequence is how other companies view the competency of the company and the quality of the company’s work product.
Providing Severance Packages
Texas is an “at will” state, but should the company provide written contract terms that specify the employee receive a severance package, the employee is entitled to receive the severance package regardless of poor performance. Severance packages can be offered in exchange for an agreement not to sue the company or in return for the services rendered by the employee. The Fair Labor Standards Act (FLSA) has no requirements specifying company’s offer severance packages to terminated employees.
Extended Insurance Coverage
For a limited period after termination, the employee has the right to continue receiving health insurance coverage from the company. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, allows terminated employees to receive a temporary extension of healthcare coverage for their families and themselves from their employer.
Issuing the Final Paycheck
The Texas Payday Law stipulates that terminated employees receive their final paycheck within six (6) calendar days of termination or discharge. It is important to be aware of this particular law if the company distributes paychecks on a bi-weekly basis. In the event that an employee is terminated between the payday cycle than special provisions should be made to ensure the terminated employee is paid within the six (6) day period.
Avoid wrongful termination by consulting the company attorney to ensure that the employee’s Equal Employment Opportunity (EEO) and Age Discrimination in Employment Act (ADEA) rights are not in violation. These include discrimination of race, ethnicity, religion, age, color, disability, and/or veteran status and the termination of an employee over the age of 40 solely due to their age. Keep in mind the laws created to protect specific types of employees as well. These include:
- The Employee Retirement Income Security Act (ERISA) sets minimum standards in regards to pension plans
- Family and Medical Leave Act (FMLA) protects employees jobs during specified medical and family leave and allows for continued health coverage
- The National Labor Relations Act (NLRA) allows employees to participate in unions, collective bargaining, and voice concerns for the welfare of workers
- The Occupational Safety and Health Administration (OSHA) sets industry standards regarding safe work environments
- The Older Workers Benefit Protection Act (OWBPA) safeguards older employees work benefits from age discrimination
- The Sarbanes-Oxley Act (SOX) protects whistleblowers
- The Uniformed Services Employment and reemployment Rights Act (USERRA) protects members of the uniformed services from discrimination
- The Workers Adjustment and Retraining Notification Act (WARN) protects employees and their families by requiring employers to provide notice of a layoff decision
In conclusion, the business justification for terminating an employee should be well documented. Providing evidence of the measures the company took to retain the employee by offering opportunities to address the areas of low performance will serve to show the commitment the company has to its employees. However, when preventative measures fail, the ability to terminate an employee having followed written action plans to address the issues up to that point, provides the company a legal cushion knowing they did what the law required.
FILIPPOV LAW GROUP, PLLC provides sophisticated legal services and business advice to individuals and businesses of all sizes, ranging from start-ups to Fortune 500 companies. Our attorneys are experienced in negotiating, drafting and reviewing employment contracts and other commercial agreements with an eye towards the client’s best interest. If you need to consider your legal options, call us at (832) 305-5529 or email our managing member firstname.lastname@example.org. For questions concerning your businesses employee layoffs, contact a business attorney at Filippov Law Group, PLLC by calling (832) 305-5529.
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