How to fire an employee the right way

No one enjoys the process of firing employees—whether you’re the one doing the terminating or the one getting the bad news. But the hard truth is that sometimes it’s necessary to keep your business running as smoothly as possible. While it’s not pleasant to think about, it’s important for you to know how to fire an employee without risking legal issues, or even earning a reputation as an unfair boss. 

Don’t make firing employees a surprise  

Homebase Senior HR Generalist Becks Palia said when you’re learning how to fire an employee, the most important factor to keep in mind is that if the employee is a poor performer and you have to deliver the news, it should never come as a surprise. 

“You might have to terminate someone for gross misconduct, and that’s different, but in terms of an employee’s performance issues you would ideally already have had several documented conversations with them and they should kind of know when it’s coming,” she said. 

There are technically no legal issues with terminating employees without taking steps to improve their performance, but experts say it’s a poor business practice in regards to how to fire someone. Conduct regular performance reviews, and if you notice an employee struggling, set up a performance improvement plan. 

“If you have a verbal conversation with someone about an issue, send them an email afterward outlining what you discussed and what the expectations are moving forward to show that you did take steps to address it and try to help them improve,” Palia said. “Oftentimes that will help and termination won’t be necessary.” 

If you are laying off an employee due to a business model change or lack of resources, make sure to give them as much notice as possible so they can start the job search process as soon as possible. 

Document everything 

Human resources professionals stress that documentation is very important, from your policies, to improvement attempts, to the actual termination meeting.

“Having an employee handbook with policies in place is an important way to protect your company from wrongful termination lawsuits,” Palia said. “This way you’re able to refer to the handbook and show an employee how they were not following the policies of your business. Don’t forget, this only works if the employee reads the handbook! Be sure to have all new hires read the handbook and sign a statement acknowledging that they understand its policies.” 

Tip: Homebase HR Pro will help you optimize your handbook, with our custom handbook builder and access to free handbook templates. 

Make sure to also document your employee’s performance and behavior. For example, keeping well-documented timesheet records is very important if employees have attendance issues (you can use Homebase’s timesheet templates to avoid common mistakes). 

Additionally, keep records of all performance reviews and document every performance conversation you have with the employee before the termination to show that steps were taken to mitigate the situation and those steps didn’t work. 

Be consistent, don’t discriminate 

Every state—except for Montana—follows the “at-will employment” law, meaning technically firing employees for any reason is legal. However, there are exceptions to this rule, including firing for discriminatory reasons. 

“If you terminate someone and they feel like they are being discriminated against, they can file a lawsuit for wrongful termination,” Palia said. “Be sure to treat everyone fairly. Let’s say you let an employee slide on an issue, and then a few months later another employee does the same thing and you terminate them immediately. That could be seen as discrimination. 

“Even if you’re following your handbook policy in the second situation, why did you treat the first employee differently? The only time this may be acceptable is if the first employee has a disability and you’re providing a reasonable accommodation.” 

Discrimination laws vary by state, so make sure to learn what the protected classes are depending on where you live. However, it is federally illegal to discriminate against an employee based on the following: 

• Race
• Color
• Religion
• Sex (including pregnancy, sexual orientation, or gender identity)
• National origin
• Age (40 or older)
• Disability
• Genetic information (including family medical history)

Don’t retaliate

Retaliation is another legal risk you might face when firing employees, as it is illegal to fire “whistleblower” employees who file any sort of complaint against your business. Doing so can trigger an expensive lawsuit. 

In fact, the Equal Employment Opportunity Commission (EEOC) says it’s the “most frequently alleged basis of discrimination in the federal sector and the most common discrimination finding,” accounting for almost 54% of wrongful termination charges in 2019. 

There are additional state laws about retaliation. But according to the EEOC, it is illegal to retaliate against employees for: 

• Filing or being a witness in a complaint, charge, investigation, or lawsuit
• Communicating a case of discrimination or harassment to a supervisor
• Answering questions as part of a harassment investigation
• Refusing to follow orders that result in discrimination 
• Resisting sexual advances or intervening to protect others 
• Requesting disability or religious accommodation
• Attempting to uncover potentially discriminatory wages 

If you have a whistleblower employee who also happens to break policy and you have cause to terminate them, documentation is very important. 

“If an employee who made a complaint against you in the past does something that warrants termination, this is where documentation again comes into play,” Palia said. “Depending on timing and the situation, terminating the employee can still be risky, but documentation will help reduce that risk.  ” 

Consult HR on how to terminate an employee

You don’t need permission to fire an employee from your HR department if you have one. However, they definitely need to be in the loop, so speak with them before you schedule your meeting with the employee. 

Your HR expert can help you fill in any blanks you might not have caught, like if there are any legal issues to consider, or even anything going on in the employee’s life that might make it seem wrong to fire them at that point in time. They also need to take care of bookkeeping aspects like final paychecks, documents, and more. 

If you don’t have an HR manager on staff at your small business, there are HR consultants, labor attorneys, and other services that can advise you. At Homebase we offer HR Pro services that give you live access to certified HR experts who can help answer your questions on how to fire employees the right way. 

Conduct a graceful face-to-face meeting 

When it’s time to deliver the news to the affected employee, never do so in an email, phone call, or text message. It’s best to schedule a face-to-face meeting. Experts also say it’s a good idea to have someone else accompany the employee and you to the meeting. 

“It’s not a good feeling to be fired. The employee could get upset, or it could turn into a, ‘he said, she said’ situation,” Palia said. “Having a witness there to corroborate what was discussed is a great way to have the extra backup should the employee try to file a lawsuit.” 

Still, Palia added that it may not make sense based on your business. Consider your relationship with the employee and use your best judgment here. 

Be direct and specific with your employee about why you are terminating them. Come to the meeting with proof. Bring the documentation of their performance improvement plan and evidence that they did not follow through. 

During the meeting, it’s also important to iterate what health insurance benefits might be available to them, like COBRA, and what will happen to other benefits like unused vacation time. There are also certain forms your state may require you to complete. Learn what those are and have them ready. 

You should also let your employee know that they can file for unemployment. If they do, you will receive a notification. Those payments will be charged to your employer tax account, so your state tax rates will most likely increase. 

Know your state’s final paycheck laws 

Each state has a law regarding when you need to provide the employee’s final paycheck after you terminate them. Some states also require you to pay out unused PTO. Take a look at your state labor law guide to learn more about what you need to provide and when. 

Determining how to fire an employee also comes with case-by-case consideration. As long as you cover your bases and conduct the process correctly, your business will likely be protected. 

And if you need help answering any questions on firing employees, consider signing up for Homebase and taking advantage of all the benefits HR Pro has to offer.