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.”
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 what are the potential legal risks that exist with the 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 reduction in force that might implicate Illinois and federal statutes?
As a general rule, Illinois 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 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.
Handling and employee-initiated exit
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 work force 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 health care insurance or retirement benefits, discussed below.
How to communicate the decision to terminate
In instances where the employer is the one terminating the employment, the individual who will be communicating the news of the termination should prepare a thorough outline, or even a script, of the points he or she wishes to convey during the termination meeting. This outline should be prepared prior to the meeting in which the termination is to be announced.
Immediately after the meeting, that individual should review the outline and make notes on how the meeting differed from the outline or the notes. It is very common for a dispute to arise during such meetings, and testimony identifying the written outline prepared in advance, and the notes immediately after the meeting, are extremely helpful for resolving future disputes regarding what was and was not said during the meeting. Tips for creating a smooth termination process:
- Briefly review of the employee’s employment history with the employee, commenting on specific problems that have occurred and the attempts to correct these problems.
- Inform the employee with in the first few minutes that he or she is being terminated.
- Explain the decision clearly and concisely.
- Avoid counseling the employee.
- It is possible to say too little or too much, so careful consideration should be given to any communication regarding the reason for the termination.
- Make certain the explanation given for the termination is truthful.
- It is essential that the reason for termination provided to the employee is completely accurate should a lawsuit be filed.
- In some cases, failure to state the true reason for the termination, or stating a reason inconsistent with reasons later stated, has been considered evidence of bad faith or discrimination.
- Where the termination involves a complicated matter, it may be wise to seek legal advice concerning the drafting of the separation notice.
- Fully explain any benefits, including COBRA and unemployment compensation, that the employee may be entitled to receive. If the employee is not entitled to certain benefits, explain the reasons for this.
- Allow the employee the opportunity to respond. Pay close attention to what the employee says, but do not argue with the employee or otherwise attempt to justify the decision.
- Establish the process for the return of any materials, documents, tools, information, etc. that may be in the personal possession of the employee.
- Establish the procedure to retrieve IDs, delete passwords, and change locks and related security matters. Anticipate whether physical security preparations are needed.
- Remind the employee of any non-competition, non-solicitation, or confidentiality requirements that may apply.
- Ensure the employee physically leaves with as much dignity as possible. Give specific thought to transportation arrangements if the terminated employee is impaired. Additionally, plan for added security measures if the employer has reason to worry about potential workplace violence.
As to the issue of post-employment work restrictions, employers should bear in mind that Illinois law now prohibits employers from requiring that employees who earn less than the applicable minimum wage or $13.00 per hour (whichever is higher) enter into restrictive covenant agreements with the employer. Employers that have these types of contracts are facing increasing scrutiny.
Terminating an employee is a delicate undertaking even in the best circumstances. It is important that the employee understands 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.
Lowering legal risk
The option of resignation
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 a helpful in controlling claims of illegal discrimination. 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.
Separation agreements and employee releases
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 employer’s counsel should always prepare the agreements themselves.
Influencing the flow of information
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 with the Illinois Department of Human Rights. In these instances, the employer is encouraged to take control of information about the termination.
The ex-employee, upset with his or 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, e-mails, letters, and all other documents that support the decision of the employer. When the employee first meets with counsel, counsel will ask if he or she has anything in writing from the employer. Then, when the employee pulls out the employer’s letter (with supporting documents for counsel to read), the 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 doubts on the part of the counsel about whether the claim is worthwhile.
Exceptions to the employment-at-will doctrine
While there are several exceptions to the employment-at-will doctrine, Illinois has held to the employment-at-will doctrine and has, for the most part, refused to subject employers to liability for wrongful discharge. Exceptions to the employment-at-will doctrine are as follows:
- national origin
- arrest record
- military status/record
- union activity
- genetic information.
Employees working under a written employment agreement or a union contract may also be protected from discharge other than for good cause as defined by the particular agreement. Employers should be certain that there are no agreements that govern the employment relationship. Unlike some other states, Illinois also recognizes the tort of “retaliatory termination.” Such a tort requires the employee to have been terminated. To succeed on this claim, an employee must show that he or she was terminated in violation of “public policy.” The nuances of what constitutes “public policy” requires consultation with an experienced labor and employment attorney.
Terminations for economic reasons
Downsizings, rightsizings, reductions in force, and even just a 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 shut-down of the business, however, the economic termination involves choosing some employees over others to continue to work, and this choosing can result in a claim of illegal discrimination. 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, which include race, gender, disability, among many others.
With claims of “disparate impact,” 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 work force as a whole. Use of seniority as the basis for choosing whom to retain and whom to let go is generally a safe criteria, but not always, especially if the recent hires have been predominantly from a protected class. If the employer is in a position where it is having to let go 10% or more of its work force, the employer is encouraged to consult counsel, which is of course, exactly when the employer is least able to afford consultation with counsel.
Lay-offs 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 Employee Retirement Income Security Act (ERISA).
Plant closings and mass layoffs
In some cases of substantial economic termination, an employer may need to notify its affected employees under the federal Worker Adjustment and Restraining Notification (WARN) Act. The WARN Act generally applies to employers who:
- have 100 or more full-time employees and who are laying off at least 50 employees at one location
- employ 100 or more employees who together work more than 4,000 hours per week and the employer is a private for-profit business or a non-profit organization.
For the purposes of determining how many employees an employer has, the employer should exclude 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:
- closes a facility and the closure affects at least 50 employees
- lays off 500 or more employees at one location during a 30-day period
- lays off 50 to 499 employees at one location and the lay off accounts for one-third of the employer’s workforce at such location
- announces a temporary layoff of less than 6 months, for 500 or more employees at one location or 50 to 499 employees who account for one-third of the employer’s workforce at one location, and the employer decides to extend the layoff beyond 6 months
- reduces 50 or more employees’ hours by 50% or more in each month for 6 months.
Post termination obligations
With any employee who stops working, whether he or 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. A potential consequence of not fulfilling this obligation is that the employer may become responsible for the employee’s health care expenses. The employer should always contact its health insurance carrier or administrator to obtain the correct paperwork to be sent to the employee(s). If the paperwork is not delivered in person, it should be sent by certified mail with return receipt requested to the former employer (place the returned green card in the personnel file).
The employer should also take similar steps with any retirement plans the employer might have 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 all notices sent.
Under Illinois law, an employee leaving employment, even a terminated employee, must be paid in full no later than the next day on which the employee would have been paid.
If the employer and employee have a written agreement in which the employee agreed that a loan or advance could be repaid out of future earnings or wages, then the employer can repay itself the loan from compensation that might be owed by an employee who has quit or been fired. If there is no written agreement, the employer must pay the compensation and then ask for the repayment. If the former employee declines to repay the loan or advance, the employer’s only real option is to sue the former employee.
Illinois law also requires that employees receive final compensation for any accrued but unused vacation time at the time of separation.
Employees' right to review personnel file
Upon written request from an employee or former employee, the employer must provide the employee or former employee with an opportunity to review and copy the employee’s personnel file, if the employer has a personnel file for that employee. The reviews and copying must take place at the location where the personnel files are maintained and during normal office hours unless, at the employer’s discretion, a more convenient time and location for the employee are arranged. Keep in mind that it is legally acceptable, easier, and more practical simply to copy the file and mail it to the employee rather than have him or her return to the worksite.