Timing Issues in Employee Terminations

Deciding whether an employee should be terminated is a difficult decision, involving not only whether it is the right thing to do, but also whether it is the right time to do it.

The appropriate personnel documentation to support a termination should be developed and shared with the employee well before the termination decision is actually made.  Effective documentation should demonstrate three key elements of fair treatment of the employee:

  • that the employee was informed of expectations for acceptable performance;
  • that the employee was advised that his performance had fallen below expectations and had become unacceptable;
  • and that the employee was given an opportunity to correct deficiencies and advised that a failure to do so could result in employee discipline or termination.

Even though the employment relationship may be “at will,” lack of appropriate documentation will make the employer more vulnerable to discrimination claims.

Events that occur just before the termination create additional timing considerations.  Has the employee recently complained about matters that involve legal issues, such as sexual harassment?  Does the employee have an active workers compensation claim?  Did the employee recently request accommodation for a disability?  Has the employee just requested, or just returned from, family and medical leave?

Affirmative answers to these sorts of questions could support a post-termination claim of retaliation against the employee for exercising a legal right.

A third issue of timing, particularly relevant at this time of year, is whether the termination is occurring shortly before the employee will become vested in a bonus plan or other benefit.  Connecticut courts have recognized a legal principle called the implied covenant of good faith and fair dealing, which prohibits an employer, even in an at-will employment relationship, from acting in bad faith to deprive an employee of a benefit that the employee had a right to receive or a reasonable expectation of receiving.

A recent decision in the Connecticut Superior Court at Stamford in the case of Gradwell v. BL Companies, Inc. provides an example of a fact pattern that supported a claim of violation of the implied covenant.  The employer had an incentive bonus plan that required a participant to be employed on the last day of the year in order to receive a bonus.  The Plaintiff, intending to resign, gave a two-week notice as required by company policy, with a resignation date in early January in order to qualify for the year-end bonus.  However, the employer made December 23 the Plaintiff’s last day of work, and did not pay the year-end bonus.

The Plaintiff sued, alleging that his last day of work was changed for the purpose of depriving him of his bonus, in violation of the implied covenant of good faith and fair dealing.  The Court held that these allegations were sufficient to state a claim and denied the employer’s motion to dismiss.

Employers would be wise to have a termination checklist.  The checklist should be a reminder of the basics, such as return of company property, calculation of final pay, and cancellation or conversion of insurance benefits.  But the checklist should also include a review of the documentation and timing of the termination, to avoid creating unnecessary issues and to be properly prepared to respond if necessary to post-termination litigation.