When an employee is deemed underperforming, the decision to terminate them may appear to be the simplest and most direct course of action. However, employers must approach such decisions with caution, especially when lacking solid documentation of the employee’s performance issues and no history of prior warnings.
Without these safeguards, businesses may inadvertently expose themselves to significant legal and financial risks, even under the protection of the “at-will” employment doctrine.
Understanding the “At-Will” Employment Doctrine
The “at-will” employment doctrine, which applies in most U.S. states, allows employers to terminate employees for any lawful reason, or no reason at all, without prior notice. Similarly, employees may leave their jobs at their own discretion without obligation.
While this doctrine provides businesses considerable flexibility in managing their workforce, it does not provide immunity from legal claims challenging the circumstances or motives behind an employee’s termination.
The Legal Risks of Terminating Without Documentation
In the absence of objective, documented evidence to justify a termination, employers could face the following challenges:
>Allegations of Discrimination: An employee might claim they were terminated due to factors such as race, gender, religion, age, disability, or other protected characteristics, rather than their alleged underperformance.
Example: A company terminated a 58-year-old employee for “poor performance” without any pre-existing documentation or warnings. The employee sued, alleging age discrimination. In the absence of records showing objective performance issues, the court ruled in favor of the former employee, awarding them damages.
>Retaliation Claims: A termination might expose the business to claims that the employee was being retaliated against for engaging in protected activities, such as filing a harassment complaint or reporting illegal activity. Without documentation showing that poor performance predated the protected activity, the employee might prevail in court.
Example: A sales manager filed a complaint accusing their supervisor of harassment. Two weeks later, the manager was terminated for “lack of productivity.” Because the company had not documented productivity concerns prior to the complaint, the court found the termination was retaliatory and ordered significant damages.
>Breach of Implied Contract: Lack of documentation and a history of inconsistent disciplinary practices can create the perception of an implied contract. Courts may accept evidence that the business established an expectation of progressive discipline, evaluations, or conversations regarding poor performance. If termination occurs abruptly without following these informal practices, it could be construed as a breach of implied contract.
Example: An employee at a marketing agency was terminated without prior warnings or reviews. Witnesses testified that the company usually followed progressive discipline steps for similar situations, such as verbal warnings followed by written notices. The court deemed the termination invalid due to the company’s failure to adhere to its customary practices, costing significant settlement fees.
Why Documentation Is Crucial
Proper documentation is the cornerstone of a solid defense in employment-related lawsuits. To mitigate legal risks, employers should implement a performance management process that emphasizes fair and transparent procedures. Documentation should include:
– Performance reviews: Detailed and regular evaluations assessing the employee’s strengths, weaknesses, and areas for improvement.
– Written warnings: Notices outlining specific deficiencies and corrective actions required.
– Records of coaching or meetings: Evidence of prior conversations addressing performance concerns or behavioral issues.
– Time and attendance records: Any data regarding infractions, tardiness, or absenteeism.
Common Pitfalls That Could Open Businesses to Costly Litigation
Many businesses have suffered from costly legal disputes due to insufficient documentation or failure to follow proper processes. Here are additional scenarios to demonstrate the risks:
>Equal Treatment Among Employees: If one employee is terminated for performance issues without documentation, but others with similar performance are retained and disciplined more leniently, this can lead to claims of favoritism or bias.
Example: A company fired a minority employee for missing deadlines, but others who committed similar infractions were only given feedback or warnings. The terminated employee filed a discrimination lawsuit, arguing racial bias, and the company’s lack of documentation to differentiate the treatment led to a costly settlement.
>Ambiguous Termination Reasons: Inconsistent or vague reasoning for termination can weaken the employer’s defense. If an employee’s personnel file does not reflect valid concerns, claims like wrongful termination or retaliation can gain traction.
Example: A factory worker was abruptly terminated for “disrupting the workplace,” but no prior reports or warnings existed about such behavior. The worker successfully argued the termination was retaliatory after raising safety concerns, resulting in penalties for the employer.
>Failure to Follow Internal Policies: If an employer deviates from its own policies for addressing performance issues or terminating employees, this inconsistency can also be grounds for litigation.
Example: An HR policy mandated three written warnings before termination, but an employer fired a sales representative after one informal conversation. The court ruled that the termination violated the company’s own procedures, resulting in damages awarded to the employee.
Marzano Human Resources Consulting
Marzano Human Resources Consulting works with businesses on developing a performance management program that increases employee engagement and also mitigates risk to the company. This includes guidance on the proper documentation needed for a sound progessive discipline process.
Reach out to us for a no-cost initial consultation.