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Ending the Employment Relationship

“Is it ever appropriate to advise someone via text or email that their employment is being terminated?” was the question posed to a career advice column. The response was “This is not the best approach. Pick up the phone. If the circumstances are extraordinary and the employee cannot be reached, send a registered letter.”

Whether people leave voluntarily or involuntarily, it is important that they leave with dignity and respect. They will feel positively about their experience and perhaps refer others to your organization or even return to work for you again in the future.

Types of Terminations

A voluntary termination is one that an employee initiates, such as retirement or resignation. Reasons that employees resign include a new job, relocation, and returning to school.

It is advisable to request a letter of resignation to document the reason the employee is leaving. When the employee puts his or her reason in writing, it shows that it was the employee’s decision and helps the employer if an unemployment claim or other legal challenge is filed.

If you’re an at-will employer, however, beware of putting any condition on a voluntary termination. It could violate your at-will policy. Legal advice should always be obtained.

Avoid putting statements such as the following in an employee handbook, for instance. They could be interpreted as conditions on voluntary terminations:

    Any employee who voluntarily resigns is required to provide advance written notice of no less than two weeks. Failure to provide such notice may result in the employee not being eligible for rehire.

    If you want to end your employment, we ask that you notify us at least two weeks before your intended last day. Notice should be given in writing to your supervisor. The two-week notification period should be used for transition of work assignments.

Rather than compel the employee to provide notice, request it. Consider the following:

    If you voluntarily terminate your employment, you may choose to provide a notification period to allow for the transition of work assignments and to help us prepare the necessary documents for your termination.

    Retirement is a type of voluntary termination. To assure that there is ample time to prepare for any necessary benefits, you may choose to provide a notification period prior to your retirement.

An involuntary termination is one that the organization initiates, such as termination for cause, which can be a step in a corrective action process, or layoff, which is generally a reduction in the workforce resulting from a loss of business or a merger/acquisition.

Other circumstances can also result in an involuntary termination, such as the end of a temporary assignment, the expiration of a leave of absence in accordance with company policy and/or legal requirements, or other administrative actions. The company is technically initiating these actions, but they are not for cause or a reduction in force.

Sometimes organizations will allow an employee to resign in lieu of a termination for cause, or will categorize a termination as a resignation by mutual agreement. Negotiating what would otherwise be a for-cause negotiation has some risk, and you’d be wise to get legal guidance. For example, if men are allowed to resign in lieu of termination because they ask to do so more frequently than women ask, it could be a practice that results in adverse impact for women; it might appear that women are being terminated more frequently than men. Offer it to everyone or don’t offer it at all. If you have a sound reason for terminating someone for cause, do so.

When an employer finds that it is necessary to reduce its workforce, it should take the following actions into consideration:

    Conduct an adverse impact analysis under attorney-client privilege to ensure that there is no indication of potential discrimination. This is important if some employees are being chosen for layoff and others in the same department or unit are being retained.

    Offer either a severance package or pay in lieu of notice, depending on industry and geographic standards. The practice of pay in lieu of notice occurs when an organization finds it necessary to release employees without providing advance notice of the layoff.

    Offer outplacement.

Legal Landscape

In addition to the antidiscrimination laws discussed in Chapter 3 (The Legal Landscape of Employee Rights), there are additional laws to consider when terminating employees.

Worker Adjustment and Retraining Notification Act (WARN), 1988

The Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs.

    A plant closing is a temporary or permanent shutdown of a single employment site that results in an employment loss during any 30-day period for 50 or more full-time employees.

    A mass-layoff is a reduction in force during any 30-day period that results in the employment loss at a single employment site for either 50 or more employees if they compose 33 percent of the workforce, or 500 or more full-time employees.

WARN requires that notice also be given to employees’ representatives, the local chief elected official, and the state dislocated worker unit.

Generally, WARN covers employers with 100 or more employees, not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week.

The Department of Labor’s (DOL) Employment and Training Administration (ETA) administers WARN at the federal level, and some states have plant closure laws of their own. A State Dislocated Worker Unit Coordinator can provide more information on notice requirements in a specific area.

    For additional information and to find a link to the States Dislocated Worker Unit Coordinator, visit www.doleta.gov/layoff/rapid_coord.cfm.

Employee Retirement Income Security Act of 1974 (ERISA)

The organization should consider whether to address severance pay in exchange for a release of claims on an ad hoc basis or by means of an established severance plan subject to the Employee Retirement Income Security Act (ERISA) of 1974.

    See Chapter 20 (The Legal Landscape of Employee Benefits) for more about ERISA.

    For additional information, visit www.dol.gov/dol/topic/retirement/erisa.htm.

Older Workers Benefit Protection Act of 1900 (OWBPA)

The Older Workers Benefit Protection Act of 1990 (OWBPA) amended the Age Discrimination in Employment Act (ADEA) to specifically prohibit employers from denying benefits to older employees. An employer may ask an employee to waive his or her rights or claims in connection with an exit incentive program or other employment termination program. However, the ADEA, as amended by OWBPA, sets out specific minimum standards that must be met in order for a waiver to be considered knowing and voluntary and, therefore, valid. Among other requirements, a valid ADEA waiver must:

1.    Be in writing and be understandable.

2.    Specifically refer to ADEA rights or claims.

3.    Not waive rights or claims that may arise in the future.

4.    Be in exchange for valuable consideration.

5.    Advise the individual in writing to consult an attorney before signing the waiver.

6.    Provide the individual at least 21 days to consider the agreement and at least seven days to revoke the agreement after signing it.

If an employer requests an ADEA waiver in connection with an exit incentive program or other employment termination program that impacts two or more employees, the minimum requirements for a valid waiver are more extensive. It is important to seek legal advice.

    For additional information on Waivers and Claims under the ADEA, visit www.eeoc.gov/federal/digest/xi-6-3.cfm.

    The OWBPA is also discussed in Chapter 20 (The Legal Landscape of Employee Benefits).

Consolidated Omnibus Budget Reconciliation Act (COBRA), 1985

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families (qualified beneficiaries) who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances (qualifying events). Individuals who elect to continue their benefits under COBRA may be required to pay the actual cost of the plan (employer and employee contributions) plus a 2-percent administration fee.

A qualified beneficiary generally is an individual, covered by a group health plan on the day before a qualifying event, who is an employee, an employee’s spouse, or an employee’s dependent child. In certain cases, retirees may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary.

The length of time an employee can continue coverage under COBRA depends on the type of qualifying event.

Qualifying Events for Employees, Spouses, and Dependent Children	Length of Continuation
Termination of employment for gross misconduct	0
Voluntary or involuntary termination of employment for reasons other than gross misconduct	18 months
Reduction in the number of hours of employment	18 months
Employee is disabled when terminated or when hours are reduced	29 months
Divorce or legal separation from, or death of the covered employee	36 months
Loss of dependent child status	36 months

COBRA coverage ends when:

    The employee or dependent fails to pay premiums on a timely basis.

    Medical insurance is obtained from a new employer, or coverage is gained under Medicare.

    The employer goes out of business or ceases to maintain a group health plan.

When employees become eligible for coverage under COBRA, they must be notified of their rights under COBRA and the provisions of the law. COBRA information must also be contained in the plan’s summary plan description. Employers have a responsibility to notify the plan administrator of the employee’s death, termination of employment or reduction in hours, or Medicare entitlement.

When the plan administrator is notified that a qualifying event has happened, it must in turn notify each qualified beneficiary of the right to choose continuation coverage.

COBRA allows at least 60 days from the date the election notice is provided to inform the plan administrator that the qualified beneficiary wants to elect continuation coverage.

The covered employee or a family member has the responsibility to inform the plan administrator of a divorce, legal separation, disability, or a child losing dependent status under the plan. If covered individuals change their marital status, or their spouses have changed addresses, they should notify the plan administrator.

    For additional information, visit www.dol.gov/dol/topic/health-plans/cobra.htm#doltopics and www.dol.gov/ebsa/newsroom/fscobra.html.

Terminations for Cause

If it is necessary to terminate an employee for cause, consider the following:

    Have there been violations of policies, practices, or guidelines? Are they serious?

    How has the company dealt with similar violations in the past?

    Have the parties in question been involved with policy violations in the past?

    How long have these employees been employed by the company?

    What is their performance history?

    Are there federal, state, or local laws that require specific action in this particular case?

    Are there any other mitigating circumstances?

    If claims have been made, such as claims of harassment or discrimination, have they been thoroughly investigated and has the evidence been examined?

Corroborating evidence, such as statements from witnesses who can confirm or deny facts based on firsthand experience or observation, directly confirms a disputed allegation.

Circumstantial evidence consists of things an individual has said or done in other situations, which make it more likely than not that the fact(s) in the dispute actually happened. It is not necessarily about the specific allegations. In reviewing evidence, keep in mind that:

    A fact is information that has been seen, heard, read, or otherwise directly observed.

    An inference is an opinion or conclusion drawn from a fact or facts.

Documentary evidence provides background information which will help you verify facts and identify additional individuals who may have information. Documentary evidence includes, but is not necessarily limited to:

    Letters.

    Payroll records.

    Computer/system records.

    Memos.

    Security tapes.

    Calendars/planners.

    Expense reports.

    Emails.

    Voice mails.

    Time records.

Consider the alternatives, such as:

    Disciplinary or corrective action in accordance with your company’s policy, such as a counseling, warning, or suspension.

    Performance improvement, including training, education, or reassignment.

    Intervention, including EAP referrals, coaching, or counseling.

Will the employee be a willing participant if performance improvement or intervention is recommended?

    Appendix: Manager’s Termination Checklist.

Employers should be prepared in advance to¹:

    Block computer system access.

    Change passwords.

    Remove the employee’s name as a signatory to any business-related document.

    Collect keys, identification badges, and company property.

    Obtain adequate personal security if the situation becomes hostile.

Termination Notifications

Notification of the termination decision should be planned with care. The employee’s direct supervisor and a human resources representative should attend a termination meeting to avoid disagreements about what was communicated. Hold the meeting in a neutral, private setting. Select seats so that an angry or violent employee will not be able to block the exit.

Plan in advance what to say in a termination meeting. Essential topics to cover are:

    That a decision has been made to terminate employment.

    The reason(s) and key facts supporting the decision.

    The effective date of separation.

    Separation package and benefits.

    A review of the policy and procedures for giving references.

    A review of applicable post-termination restrictions, such as non-compete or nondisclosure agreements.

    What will happen immediately following the meeting (for example, cleaning out the employee’s office, returning company property, escort from the building).

    Other exit activities such as an exit interview survey or outplacement meetings.

    Whom to contact about post-termination issues.

Layoffs

Layoffs are, unfortunately, a fact of corporate life. Companies get acquired and positions become redundant. Business softens and the organization must find ways to reduce costs, including making reductions in staff. Affected employees are not at fault. They are just in an unfortunate situation. Here are some pointers to assure that when layoff decisions must be made, the employees losing their jobs are treated fairly and respectfully:

    Overcommunicate and be open and honest. Let all employees know the timing of the layoffs. Affected employees should be advised of any severance benefits they will receive.

    Treat everyone equitably. Use objective criteria to determine which positions will be eliminated. Avoid using subjective criteria (such as constructing a negative performance review prior to the layoff) to justify including someone in the layoff.

    Help people find jobs. Outplacement assistance goes a long way, not just in aiding the employees find new jobs, but in maintaining a positive culture and reputation.

Give as much notice as possible. Time is the best asset for an employee losing a job. Don’t hide behind confidentiality concerns as an excuse for little or no notice. If you have legitimate concerns regarding a particular employee, address that concern separately, but don’t let others who will be affected suffer.²

When considering layoffs, remember that positions are being eliminated, not people. Don’t be tempted to call a termination for cause a layoff. If the person’s position is vital to your organization, you can’t leave it unfilled. You may also be vulnerable to outside challenges. Follow your performance management or corrective discipline processes if you have to deal with an employee having performance or workplace behavior issues.

Outprocessing and Exit Interviews

It is important that the employment relationship end with the same degree of care as when it began. Processes should be in place to ensure a smooth transition out of the organization. Appropriate administrative functions, such as security, IT, accounting, and so forth, should be notified in order to make arrangements for the return of company property and cancellation of access to the organization’s systems (telephone, computer, security).

Outprocessing meetings with the employee usually include:

    Review of eligibility for benefits continuation and conversion including all necessary forms to ensure they are properly completed.

    Return of all property, such as credit cards, identification and building access cards, keys, computers, and other electronic equipment.

    An opportunity to review and comment on the employee’s job-related experiences.

Many employers provide an exit interview assessment form that gives the employee an opportunity to share opinions and ideas about their employment experience. Some organizations conduct post-termination surveys three to six months after termination as a way to follow up and gain additional insights.

    See Chapter 13 (Strategic Retention) for more information on using exit interview data to develop employee retention strategies.

Any data gathered from exit interviews should be summarized with the intent of looking for trends, not individual complaints. For example, looking at exit interviews quarterly—to determine if there is turnover in a particular location or to evaluate if a significant percentage of exiting employees mention they would have liked to have had more training—will give your organization something to improve. It is sometimes tempting to take one person’s comments and run with them, but it is advisable to wait until you have more data before making changes.

Maintaining a Relationship With Former Employees

Employee terminations may be the end of the formal employment relationship, but they need not be the end of all contact with the employees. It is beneficial for employers to keep the lines of communication open with employees who leave. Valued former employees can be a source of recruitment and referrals, and they may choose to return. Retired employees and those considering retirement might be retained if provided with the right incentives. Flexible scheduling arrangements that have been particularly successful for older workers include³:

    Part-time.

    Casual or on-call programs.

    Phased retirement, which features reduced hours over a period of time.

    Rehearsal retirement, which provides the opportunity to work part-time and offering non-paid hours to volunteer organizations.

    Job sharing. This can be beneficial to the organization if it partners an older adult with a younger trainee and allows for the transfer of knowledge.

Turnover

Some turnover can be positive for an organization—for example, when an employee realizes that your culture isn’t a good fit for him/her and makes the choice to resign. This provides you with the opportunity to fill this position with someone who does fit and who will, hopefully, stay a little bit longer. Turnover provides your organization with the opportunity to bring in people with different talents, ideas, and strengths that are needed to move you ahead in your marketplace. However, turnover can have a negative impact on your organization, so it needs to be carefully managed.

    See Chapter 13 (Strategic Retention).

When looking at turnover data, consider evaluating more than just the percentages. You may want to look at:

    How many high-potential employees left who you wanted to keep?

    How many employees left whose departure didn’t hurt your organization?

    How many employees left for reasons that, if you’d known about them, you could have been able to address and perhaps keep them? (This is controllable turnover.)

    How many employees left for reasons you couldn’t do anything about? (This is uncontrollable turnover.)

    How many employees left within the first six months of employment? (This may indicate something is wrong with your selection process.)

The better you understand your turnover, the better chance your organization will have to make changes that are necessary to retrain the talented people you’ve worked so hard to hire and develop.

Discussion Questions

1.    What steps does your organization take to stay in touch with valued employees who have left the organization?

2.    What type of outplacement services do you offer? Under what circumstances are they offered? Do you offer different levels of service for various circumstances or types of employees?

3.    What types of monetary compensation, such as severance, do you offer employees who are involuntarily terminated? If you offer a severance package, do you do so on an ad hoc basis or by means of an established severance plan subject ERISA?

4.    What processes does your organization have in place to ensure a smooth transition out of the organization? What steps do you take to make sure there is a transition of any work assignments? As part of the process, do any face-to-face interviews take place with the employee to discuss their experiences?

5.    If your organization conducts exit interviews (either in person or as a written survey) and/or post-termination surveys, how do you use the information obtained?