Termination of employment is, of course, the final remedy in discipline and needs to be done with extreme care. Termination of employment may also occur because of poor job performance or because of a downturn in business requiring layoffs or a reduction-in-force (RIF).
Given that the response to a decision to terminate employment, regardless of why the termination of employment happened, is often met with a charge of illegal discrimination or another legal objection, the employer needs to be certain that the facts upon which it is relying are accurate and that it has carefully considered the points made by the employee and has valid reasons for not agreeing with the employee’s contentions. The employer needs to satisfy itself that termination is consistent with its past practices and will not be viewed as excessive or peculiar given prior action or inaction by the employer. The employer also needs to understand the potential legal risks that exist with termination. Is a class protected from illegal discrimination implicated? Is there an employment contract, written or implied through a series of writings? Is the termination part of a larger RIF that might implicate Colorado and federal statutes?
As a general rule, Colorado follows the employment-at-will doctrine. This doctrine means the employer may discharge the employee at any time, with or without cause. The employee may also, in turn, quit his/her employment at any time, with or without notice. There are, however, some circumstances in which the employment-at-will doctrine may be limited by federal or state law, employment contracts, or collective bargaining agreements. Thus, it is important for the employer to keep these exceptions in mind and maintain prior, consistent documentation supporting the termination should the employee later challenge the termination decision.
With respect to the employee who quits, if possible, it is recommended that the employer try to have “an exit interview” with the employee, especially if the employee is one that the employer valued. The interview offers a chance to learn information that might allow the employer to improve something within its operation or learn if there is a problem in the workforce about which the employer did not know. The employer should also remember that even with the employee who quits, there may be obligations regarding notice on continuing healthcare insurance or retirement benefits.
In those instances where it is the employer that is terminating the employment, prior to the meeting when the news of termination is to be announced, the individual who will be communicating the news of the termination should prepare a careful outline of the points he/she wishes to state or even a script. Immediately after the meeting, that individual should review the outline or script and make notes on how the meeting differed from the outline or the notes. It is very common for a dispute to arise over what was said at such meetings, and testimony identifying the written outline or script prepared in advance and the notes immediately after the meeting are extremely helpful for resolving such disputes about what was and was not said during the meeting.
The following are tips for employers to create a smooth termination process:
Terminating an employee is a delicate undertaking even in the best circumstances. It is important that the employee understand the reasons for the discharge. Ideally, a representative of human resources should be present at the meeting in which the employee’s manager communicates the discharge decision. There should always be at least two people present representing the employer.
The termination meeting should be short and to the point. The meeting is not a dialogue on the decision. The meeting is intended to communicate the fact of the decision. The news of the decision to terminate should be conveyed unemotionally and candidly. The employer should not try to soften the blow by complimenting the employee on other areas of performance, as this sends mixed messages to the employee. The employee should be treated with dignity and respect at all times. The representative of the employer should stick to the outline or script as closely as possible – verbatim if it can be done.
Under all circumstances, emotion and anger must be avoided. Do not engage. Be respectful at all times. Be brief.
Where the termination is a mixture of disciplinary issues and poor performance, the employer may want to consider offering the employee the option of converting the termination into a resignation. This step diffuses somewhat the anger that arises with terminations and is helpful in controlling claims of illegal discrimination, for instance, one could say, “the employee quit work – he/she wasn’t fired.” Where, however, the termination is based solely on misconduct, the employer may not want to offer the choice of a resignation. Termination of employment is a powerful tool for communicating to co-workers what the employer values.
If the employer believes the employee may file a claim upon termination or if a major dispute between the employer and employee exists at the time of termination, it may be in the employer’s best interest to enter into a separation agreement that contains a release of all actual and potential claims from the employee. In a separation and release agreement, the employer agrees to provide some additional consideration (usually in the form of monetary compensation) in exchange for the employee’s agreement to release the employer from any claims the employee might have that arose during the employee’s employment.
The challenge with this option is that the employer does not want to encourage the employee into thinking that there is vulnerability or weakness with the employer’s decision or that there might be more money available. Separation and release agreements are wonderful things but obtaining them with involuntary terminations can be tricky. The agreements themselves should always be prepared by the employer’s counsel.
Despite the best efforts of the employer, extensive communications with the employee, or substantial efforts to improve the situation, there will be employment terminations that are certain to lead to litigation or a charge of discrimination. In these instances, the employer is encouraged to take control of information about the termination.
The ex-employee, upset with his/her termination, may consult counsel and often does so with very little paperwork, acting as the sole source of information for counsel. Most counsel are empathetic to their clients and want to help. Even when the initial commitment by counsel is only to contact the employer and investigate the situation, a counsel’s initial bias arises from the employee’s version of the facts.
The employer has the chance to modify this pattern when the employer thinks consultation with counsel is likely to happen after the termination. While the oral information provided at the termination meeting should be very short and to the point, the employer should consider providing a letter or written explanation to the employee that reviews in considerable detail the full chronology of facts that led the employer to the decision. This document should include the personnel file, emails, letters, and all other documents that support the decision of the employer. When the employee first meets with counsel, counsel will ask if he/she has anything in writing from the employer. Then, when the employee pulls out the employer’s letter (with an inch or so of supporting documents for counsel to read), counsel will immediately see that the employer has been careful and thoughtful about this decision and start to question the employee about the information provided by the employer, raising doubt on the part of the counsel about whether the claim is worthwhile.
There are a number of exceptions to the employment-at-will doctrine, both under state and federal law. As discussed in Discrimination, various federal and Colorado anti-discrimination statutes protect employees from being discharged on the basis of:
In addition, despite the employment-at-will doctrine, employers can potentially be held liable for a number of torts, including:
Downsizings, rightsizings, reductions in force (RIFs) and even just the regular layoff would seem to be simple undertakings. The conduct or misconduct of the employee is irrelevant. The supervisor’s assessment of the employee’s job performance is irrelevant. The termination is simply because of a lack of business.
Short of a complete shutdown of the business, however, the economic termination involves choosing some employees over others to continue to work and this choosing can also result in a claim of illegal discrimination. In Discrimination, there is a discussion of the difference between cases of discrimination arising from “disparate treatment” vs. “disparate impact.” With claims of “disparate treatment,” the allegation is that the employer’s decision to terminate employment (or some other action causing adverse employment action) was motivated by hostility or animus (that is, a display of animosity) towards the characteristic of the employee that the statutes are protecting, for instance race, gender, disability, etc. With claims of “disparate treatment,” the allegation is that although there was no animus or intent to cause harm the actions of the employer resulted in an adverse impact to a protected group and that, statistically, this group ended up being affected more substantially than the workforce as a whole.
Use of seniority as the basis for choosing whom to retain and whom to let go is generally safe criteria, but not always, especially if the recent hires have been predominantly from a protected class, for instance, gender or national origin. If the employer is in a position where it is having to let go 10% or more of its workforce, the employer is encouraged to consult counsel, which is of course, exactly when the employer is least able to afford consultation with counsel. Layoffs are complicated and run the risks of creating claims of illegal discrimination. Seemingly simple actions could have larger consequences. For instance, well intended separation packages with weekly severance benefits may actually be welfare benefit plans governed by the Employee Retirement Income Security Act (ERISA) (see Benefits).
In some cases of substantial economic termination, an employer may need to notify its affected employees under the federal Worker Adjustment and Retraining Notification (WARN) Act. The WARN Act generally applies to employers who:
The act does not apply to those employees who have worked less than six months and those who work less than 20 hours per week.
A covered employer must provide notice 60 days before it:
An employment loss in this context means either:
Additionally, employment losses for two or more groups at a single site of employment during a rolling 90-day period, each of which is insufficient to constitute a mass layoff or plant closing itself, but together exceed the minimum number, will be considered a plant closing or mass layoff unless the employer demonstrates that the employment losses are the result of separate and distinct causes.
The 60-day notice required by the WARN Act may be reduced in the following circumstances:
Under these circumstances, an employer is still required to give as much advance notice as it reasonably can.
With any employee who stops working, whether he/she has quit or been fired, the employer should be absolutely certain that it has completed any obligations it might have to provide the former employee with a chance to continue health insurance benefits (often referred to as COBRA rights - see Health insurance continuation coverage). A potential consequence of not fulfilling this obligation is that the employer might become responsible for the employee’s healthcare expenses. The employer should always contact its health insurance carrier or administrator to obtain the correct paperwork to be sent to the employee. If the paperwork is not delivered in person, it should be sent by certified mail, return receipt requested to the former employee (place the returned green card in the personnel file).
The employer should also take similar steps with any retirement plans that were provided as a benefit to the employment. Work with the administrator of the retirement plan to make certain that the correct paperwork is mailed and keep a copy of the notices sent.
Under Colorado law, when an employee is terminated, he/she should receive payment for all wages or compensation earned as of that date; if the employer’s accounting unit is not operational at that time, wages are due not more than six hours after the start of the accounting unit’s next workday. If the employee resigns, wages are due on the next payday. Wages and compensation include:
Severance pay and compensation due to employees under profit sharing or pension plans are not considered wages or compensation for purposes of the law.
An employer does have the right to make certain deductions from compensation due to the employee. For instance, employers can deduct:
Special rules apply to many of these deductions so employers should ensure that they are abiding by the law relevant to each deduction before making such deductions from an employee’s final paycheck.
Effective August 9, 2022, Colorado employers are required to provide notice to an employee, within 10 days after the employment terminates, before deducting from wages or compensation any amount of money or property the employee failed to return or repay upon termination of employment and pay the employee the deducted amount within 14 days after the employee returns or repays the money or property if the employee did so within 14 days after notice is provided.
Failure to pay wages at termination may result in liability for the wages due, and possibly penalties, and, in certain cases, attorney fees.
Colorado law protects employers who provide references for current or former employees. Specifically, an employer who discloses information about a former employee’s job performance or work record to a prospective employer is immune from civil liability for the disclosure and any consequences of the disclosure. This immunity does not apply if the employee is able to show that the information disclosed by the current or former employer was false, and the employer knew or reasonably should have known that it was false. Any employer providing a reference is required to send a copy of the reference to the employee’s last known address upon request, or provide a copy to an employee who shows and asks for it in person during normal business hours.
Even though Colorado law offers some protection to an employer that provides true information to a prospective employer from defamation claims, it is strongly recommended that employers provide only references that confirm the fact of employment and the start and end dates of employment. The risk that arises to employers from giving references does not justify the benefit in providing them; nor can the employer approach the subject on an impromptu basis. Giving references for some but not others might be cited as evidence of illegal discrimination.