Terminating an At-Will Employee: 5 Steps to Protect your Company

Most employers and employees are aware that the relationship between them is characterized as “at-will” meaning that either the employer or the employee can terminate the relationship at any time and for any reason (or no reason), as long as it is not illegal. Most employers, I would venture to say, find the termination process to be difficult and unpleasant. However, if the employer takes certain steps before and during the actual termination conversation, the overall process can be smoother than anticipated.

  1. Document, document, document.

    When the management team becomes aware of circumstances in the workplace that may lead to the decision to terminate, begin to document the employee’s problematic actions as well as any communication from management to the employee. It need not always be a formal disciplinary notice; an email may be sufficient. If there’s a discussion between the supervisor and employee, document what was said and add that to the employee’s personnel file. Of course, if there was formal discipline, ensure that the employee has a clear understanding of the issues and the steps he or she needs to take, and memorialize that information in writing. Having this work done prior to a termination will make it much easier for an employer to move forward at the right time.

  2. Determine the reason for termination.

    It’s critical that an employer has legitimate and legal reasons for terminating an at-will employee. Is the termination due to poor performance or violation of company policies? Is it based on the employee’s past comments or actions at or about the workplace? Is the employee’s position being eliminated? Does the employee ask for workplace accommodations? Have they complained to HR on a number of occasions? Carefully consider the circumstances to ensure that terminating the employee is not seen as a quick fix that might result in legal problems later.

  3. There are only two exceptions to the principle of at-will employment. First, the relationship may not be severed if there is an employment contract that complies with the provisions of Section 23-1501 of the Arizona Revised Statutes, the Employment Protection Act. This section requires compliance with the terms of a written and signed contract between the employer and employee that specifies either the length of time of employment or provides restrictions on the rights of either party to terminate it.

    The second exception to at-will employment exists where employment is terminated in violation of a federal, state or local statute, such as for a discriminatory or retaliatory purpose, or in response to the employee’s exercise of his or her legal rights, such as missing work to vote, serve on a jury, or serve in the armed forces. If you might have a situation like this, please consult legal counsel before moving forward.

  4. Consider whether the employee falls into a “protected class”

    . As it becomes clearer that the employer will need to terminate an employee, it makes good business sense to consider all circumstances and anticipate potential issues that may arise. Federal and state laws provide protection against discrimination on the basis of an employee’s age, race, national origin, religion, disability, sex, and other factors. If the employee does fall into one of these “protected classes,” which is very likely the case, that’s not necessarily a barrier to termination, it simply means that the employer must be certain that the termination is based on factors unrelated to the employee’s protected status. Comprehensive documentation regarding the reasons for termination is critical in a situation like this.

  5. Protect the company’s legitimate interests.

     Before termination, consider potential scenarios that may cause damage to the company. Does the employee possess company equipment or property that must be returned? Are there restrictive covenants already in place that must be followed? Does the employee hold confidential information or trade secrets that must be protected? Take steps ahead of time to make sure that the employee’s access to electronic data is disabled immediately after termination and that all of the employee’s electronic records are preserved. This may be especially important if the employee raises a legal claim based on the termination.

  6. A separation agreement may be a good idea if the employee held a position of authority or had access to sensitive information. If a severance payment is being offered, an agreement is critical to ensure that the employee does not violate the agreed-upon terms for receiving the payment, such as non-compete or non-solicitation provisions. Further, if the employee falls into a protected class, it may be wise to require the employee to sign a release that protects the employer from potential litigation in exchange for the severance.

  7. Treat the employee with respect.

     Please remember, as the termination process progresses, to treat the employee with respect. Although the employer and members of management may have been through a few difficult weeks or months dealing with an employee that was not performing well, it is possible that the employee has been through a difficult time as well.

The goal for a termination meeting should be to part with the employee on the best terms possible. This meeting may be a complete surprise to an employee who believes he or she has been complying with corrective measures, or who was unaware of the severity of the situation. Allow the employee to defend his or her position, but leave no doubt about the company’s decision to terminate employment. Giving the employee a carefully drafted letter stating the company’s decision, but not a laundry list of reasons for the termination, may be helpful.

Remember to pay the employee’s final wages within seven working days of termination or at the end of the next regular pay period, whichever is sooner. Handing the employee a check for this amount, plus any incentive or vacation pay that is due upon termination according to your company’s policies, at the termination meeting may ease their pain of having just been fired.

Planning ahead is the most beneficial step an employer can take to protect itself from legal liability. If you are facing a difficult termination decision and are unsure whether or how to proceed, follow the above steps, and please schedule a consultation so we can determine the best plan of action for your specific circumstances.


By Wendy M. Anderson, Esq.
Law Office of Wendy Anderson, PLLC
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