Minimize Problems With Employee Terminations

Cynthia Umphrey
May 20, 2009 — 1,998 views  
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Many of our clients have found it necessary to reduce staff (or even staff pay or benefits) to weather this rocky 2009.  While they are no doubt doing this to reduce expenses, in my experience, there is one thing well worth spending money on as part of this plan, namely, a competent employment attorney.  Why is this?

Even in good times with a strong job market businesses need to be cautious when terminating employees.  Throughout my career I have coached all of my clients to consult us about a proposed termination to avoid as many problems as possible.  This advance consultation is even more critical now, since an employee who cannot find a satisfactory new job tends to be much more willing to come after you.

You are likely aware that there are many laws protecting the rights of employees.  This is especially true of employees that fall into certain "protected categories" due to their age, disability, pregnancy status, etc.  If your clients run afoul of these laws, or even appear to do so, they are setting themselves up for a costly lawsuit.  Good legal advice up front can never guarantee that your client will not be sued, but will go a long way toward preventing suits and better position the client to quickly win in court if the worst should occur.  Such advice can also give tactical guidance on how to handle terminations and reductions in force in order to minimize backlash and morale issues.  Employment lawyers have pretty much seen it all, so why not take advantage of their experience?

Also, let's say a client needs to terminate an employee who has signed a non-competition agreement or wants such an agreement from an employee who is leaving.  A properly drafted severance agreement will help protect the business from being diverted to a competitor by the departing employee.  This is a very hot topic currently as we are seeing many more employees trying to evade these agreements now than we ever have in the past.

Non-disparagement clauses and cooperation clauses backed up by forfeiture provisions can all help to limit angry employees from trashing your clients' business' reputations and can make for a smoother transition.  These are legally enforceable if properly handled.  Other issues include the advisability of providing a letter of reference and what should and should not be said in such a letter.  In short, spending some money up front to make sure the client protects itself and  much as possible when dealing with workforce issues can be a huge money, customer and reputation saver in the end.  Employee terminations and downsizing can be almost like a divorce.  Do you know anyone who ever got a great divorce result with no attorney?

As a lawyer working with business owners, and as the Learning Chair for the Detroit Chapter of the Entrepreneurs' Organization, I would love to hear how you are advising your clients with any workforce issues.

Cynthia Umphrey