Terminating Employees

Interestingly, the original version of the ADEA excluded from coverage employees who were 70 years old or older, as well as employees who were under the age of 40. Accordingly, employers could force employees to retire at age 70 under the original version of the ADEA without facing liability. However, the ADEA was amended in 1986 to remove the exclusion for employees who were 70 years old or older. Thus, with the exception
of employees in safety-sensitive positions (e.g., pilots, firefighters and police officers), employers generally may not force an employee to retire due to age.

Despite this well-settled law, some employers mistakenly believe that they can force an older employee to retire. Perhaps this confusion stems from the original version of the ADEA, or maybe it is because the prohibition against age discrimination is not intuitive.

Indeed, unlike other protected traits that have no bearing on one's ability to perform the job in question (e.g., race, gender and national origin), there sometimes is a correlation between advanced age and a diminution in the skills required to perform a job. For example, very few 95-year-olds could perform a job that required the regular lifting of 100-pound boxes. Whatever the reason for employers' mistaken belief that forced retirement is legal, the fact remains that it is not, and each employee must be evaluated based on his/her ability to perform the position without regard to his/her age.

For the foregoing reasons, the word “retirement” should never be mentioned to an employee. This does not mean that an employer may not terminate an employee for poor performance just because the employer suspects that such poor performance is related to the employee's advanced age. To the contrary, the underlying reason for the employee's inability to perform the job in this context (whether it is advanced age, laziness, or the wrong skill set) is irrelevant. It simply means that if the employer desires to terminate the employee, it must do so based on legitimate and non-discriminatory reasons unrelated to the employee's age. Whether the employee decides to retire or move on to another job after being terminated is the employee's decision (not the employer's), and any suggestion by the employer that the employee should choose retirement can be used by the employee to argue that the true reason for the involuntary termination was illegal age discrimination.

2: Paying a Separating Employee Something Extra Without Requiring a Waiver and Release

Whether it is advisable to pay a separating employee something extra in exchange for a waiver and release of claims against the employer depends on a number of factors, such as the strength of the potential claims that the employee would be waiving, and the likelihood that the employee will file suit. That said, an employer should never pay separating employees money to which they are not otherwise entitled without requiring the execution of a waiver and release.

While the wisdom of this advice might be obvious to some, it is not uncommon in my experience to see an employer gratuitously pay a couple of weeks' pay to a separating employee without requiring the employee to execute a waiver and release. As you might guess, this mistake typically comes to my attention because the separating employee is threatening the employer with legal claims after depositing the employer's gratuitous severance payment, given further credence to the first rule of employment law: No good deed goes unpunished.

While employers sometimes voluntarily provide severance to separating employees at the time of separation, others contractually obligate themselves to provide severance (without a corresponding duty on the part of the employee to provide a release) through poor drafting of employment agreements. For example, the employer promises in an employment agreement at the beginning of the employment relationship to pay the employee severance under certain circumstances (typically, termination without “cause” prior to the end of the employment term), but fails to condition payment on the employee's execution of a waiver and release agreement. This arrangement permits the terminated employee to accept the severance and then sue the employer for other forms of relief under applicable law.

Whatever the circumstances may be, an employer should always condition the payment of something to which a separating employee is not otherwise entitled on the execution of a valid waiver and release agreement. In doing so, the employer ensures that its generosity will not be repaid with a lawsuit brought by the separating employee (and funded, in part, by the employer's own severance payment).

3: Poor Drafting of Termination Letters

As a general rule, an employer may terminate an employee for a good reason, a bad reason, or no reason, just not for an illegal reason. Moreover, in most (but not all) states, an employer is not required to provide an employee with the reason for his or her termination. Although there are different schools of thought on the subject, in light of the broad latitude given to employers in most states, I typically recommend including the reason(s) for the employee's termination in the termination letter. In my experience, the termination of an employee without providing a reason usually strikes an employee as fundamentally unfair and increases the likelihood that the employee will seek advice from an attorney (which, in turn, increases the likelihood of a lawsuit being filed by the terminated employee).

In drafting termination letters, the most common mistake that employers make is not including all of the reasons for the employee's termination. This does not mean that the termination letter should be long and detailed. To the contrary, it should be short and use broad terms that encompass all of the reasons for the employee's termination without including unnecessary detail. In order to understand the rationale behind this recommended approach, a brief discussion of the employee's burden of proof in attempting to defeat an employer's motion for summary judgment is required.

In the absence of “direct evidence” of discrimination (typically, in the form of an admission by the employer that it considered a protected trait when making the termination decision, which is rare), an employee seeking to avoid the entry of summary judgment in favor of the employer usually needs to show that the employer's proffered reason for the termination decision is pretextual (i.e., false). Although there are many ways for a employee to carry his or her burden of proof on this issue, one of the most common ways is to submit evidence of shifting explanations for the termination decision provided by the employer to the employee. Thus, it is critical that the termination letter is consistent with all of the reasons on which the employer may seek to rely in its defense of a lawsuit.

For example, assume that a customer service representative is on a performance improvement plan based solely on his failure to achieve certain productivity targets (e.g., number of calls per hour). Further assume that the same employee has an argument with a customer during which the employee uses profanity. Although the altercation with the customer alone would not have been a terminable offense, the employer decides to terminate the employee due to both the altercation and the employee's failure to achieve productive targets.

However, the employer advises the employee in the termination letter that he was being terminated “due to an altercation with a customer.” The employee sues the employer for race discrimination and, in response to the employer's motion for summary judgment, submits evidence of two white employees who were not terminated despite using profanity during an altercation with a customer. The employer responds that, unlike the plaintiff, the two white employees were not on a performance improvement plan at the time of the altercation, and the employer argues that it terminated the plaintiff because he had an altercation while on a performance improvement plan. The plaintiff counters that the only reason provided by the employer in the termination letter was the “altercation with a customer,” and the plaintiff contends that the termination letter supports his position that the employer's proffered basis for distinguishing the discipline of the white employees (i.e., the fact that they were not on a performance improvement plan) is a pretext for race discrimination. The court denies the employer's motion for summary judgment and allows the case to be decided by a jury.

In the above-described hypothetical, the employer should have drafted a short termination letter that encompassed all of the reasons for the termination. For example, the employer could have simply stated that the employee was terminated for “poor performance,” which is broad enough to include both the failure to achieve productivity standards and the altercation with the customer. The employer also could have been more specific, so long as it included all of the reasons for the decision (e.g., the employee was terminated for “failing to achieve productivity targets and using profanity during an altercation with a customer). Whichever route you choose, make sure that the language of the letter is consistent with all of the reasons on which you intend to rely if the termination results in litigation.

Conclusion

This article is intended to highlight a few common mistakes made by employers, but there is no substitute for discussing the legal implications of a proposed employment action with an employment law expert. It is well worth paying for one or two tenths of an hour of your counsel's time to talk through a proposed termination decision before pulling the trigger.

William (Bill) Wortel, a member of this newsletter's Board of Editors, has represented management in a variety of litigation at the administrative level, in state and federal courts and in the U.S. Court of Appeals.

After 15 years of litigating employment claims and counseling employers, I have found myself repeatedly confronted with different employers making the same mistakes. This article discusses three of the most common errors made by employers, all of which can be easily avoided.

1: Offering an Older Employee a 'Retirement' Package

Well-intentioned employers sometimes are tempted to characterize a performance-based, involuntary termination of an older employee as a “retirement.” However, the mere mention of the word “retirement” in connection with a termination decision, even when offering an enhanced severance package, can lead to liability under the Age Discrimination in Employment Act (ADEA).

Interestingly, the original version of the ADEA excluded from coverage employees who were 70 years old or older, as well as employees who were under the age of 40. Accordingly, employers could force employees to retire at age 70 under the original version of the ADEA without facing liability. However, the ADEA was amended in 1986 to remove the exclusion for employees who were 70 years old or older. Thus, with the exception
of employees in safety-sensitive positions (e.g., pilots, firefighters and police officers), employers generally may not force an employee to retire due to age.

Despite this well-settled law, some employers mistakenly believe that they can force an older employee to retire. Perhaps this confusion stems from the original version of the ADEA, or maybe it is because the prohibition against age discrimination is not intuitive.

Indeed, unlike other protected traits that have no bearing on one's ability to perform the job in question (e.g., race, gender and national origin), there sometimes is a correlation between advanced age and a diminution in the skills required to perform a job. For example, very few 95-year-olds could perform a job that required the regular lifting of 100-pound boxes. Whatever the reason for employers' mistaken belief that forced retirement is legal, the fact remains that it is not, and each employee must be evaluated based on his/her ability to perform the position without regard to his/her age.

For the foregoing reasons, the word “retirement” should never be mentioned to an employee. This does not mean that an employer may not terminate an employee for poor performance just because the employer suspects that such poor performance is related to the employee's advanced age. To the contrary, the underlying reason for the employee's inability to perform the job in this context (whether it is advanced age, laziness, or the wrong skill set) is irrelevant. It simply means that if the employer desires to terminate the employee, it must do so based on legitimate and non-discriminatory reasons unrelated to the employee's age. Whether the employee decides to retire or move on to another job after being terminated is the employee's decision (not the employer's), and any suggestion by the employer that the employee should choose retirement can be used by the employee to argue that the true reason for the involuntary termination was illegal age discrimination.

2: Paying a Separating Employee Something Extra Without Requiring a Waiver and Release

Whether it is advisable to pay a separating employee something extra in exchange for a waiver and release of claims against the employer depends on a number of factors, such as the strength of the potential claims that the employee would be waiving, and the likelihood that the employee will file suit. That said, an employer should never pay separating employees money to which they are not otherwise entitled without requiring the execution of a waiver and release.

While the wisdom of this advice might be obvious to some, it is not uncommon in my experience to see an employer gratuitously pay a couple of weeks' pay to a separating employee without requiring the employee to execute a waiver and release. As you might guess, this mistake typically comes to my attention because the separating employee is threatening the employer with legal claims after depositing the employer's gratuitous severance payment, given further credence to the first rule of employment law: No good deed goes unpunished.

While employers sometimes voluntarily provide severance to separating employees at the time of separation, others contractually obligate themselves to provide severance (without a corresponding duty on the part of the employee to provide a release) through poor drafting of employment agreements. For example, the employer promises in an employment agreement at the beginning of the employment relationship to pay the employee severance under certain circumstances (typically, termination without “cause” prior to the end of the employment term), but fails to condition payment on the employee's execution of a waiver and release agreement. This arrangement permits the terminated employee to accept the severance and then sue the employer for other forms of relief under applicable law.

Whatever the circumstances may be, an employer should always condition the payment of something to which a separating employee is not otherwise entitled on the execution of a valid waiver and release agreement. In doing so, the employer ensures that its generosity will not be repaid with a lawsuit brought by the separating employee (and funded, in part, by the employer's own severance payment).

3: Poor Drafting of Termination Letters

As a general rule, an employer may terminate an employee for a good reason, a bad reason, or no reason, just not for an illegal reason. Moreover, in most (but not all) states, an employer is not required to provide an employee with the reason for his or her termination. Although there are different schools of thought on the subject, in light of the broad latitude given to employers in most states, I typically recommend including the reason(s) for the employee's termination in the termination letter. In my experience, the termination of an employee without providing a reason usually strikes an employee as fundamentally unfair and increases the likelihood that the employee will seek advice from an attorney (which, in turn, increases the likelihood of a lawsuit being filed by the terminated employee).

In drafting termination letters, the most common mistake that employers make is not including all of the reasons for the employee's termination. This does not mean that the termination letter should be long and detailed. To the contrary, it should be short and use broad terms that encompass all of the reasons for the employee's termination without including unnecessary detail. In order to understand the rationale behind this recommended approach, a brief discussion of the employee's burden of proof in attempting to defeat an employer's motion for summary judgment is required.

In the absence of “direct evidence” of discrimination (typically, in the form of an admission by the employer that it considered a protected trait when making the termination decision, which is rare), an employee seeking to avoid the entry of summary judgment in favor of the employer usually needs to show that the employer's proffered reason for the termination decision is pretextual (i.e., false). Although there are many ways for a employee to carry his or her burden of proof on this issue, one of the most common ways is to submit evidence of shifting explanations for the termination decision provided by the employer to the employee. Thus, it is critical that the termination letter is consistent with all of the reasons on which the employer may seek to rely in its defense of a lawsuit.

For example, assume that a customer service representative is on a performance improvement plan based solely on his failure to achieve certain productivity targets (e.g., number of calls per hour). Further assume that the same employee has an argument with a customer during which the employee uses profanity. Although the altercation with the customer alone would not have been a terminable offense, the employer decides to terminate the employee due to both the altercation and the employee's failure to achieve productive targets.

However, the employer advises the employee in the termination letter that he was being terminated “due to an altercation with a customer.” The employee sues the employer for race discrimination and, in response to the employer's motion for summary judgment, submits evidence of two white employees who were not terminated despite using profanity during an altercation with a customer. The employer responds that, unlike the plaintiff, the two white employees were not on a performance improvement plan at the time of the altercation, and the employer argues that it terminated the plaintiff because he had an altercation while on a performance improvement plan. The plaintiff counters that the only reason provided by the employer in the termination letter was the “altercation with a customer,” and the plaintiff contends that the termination letter supports his position that the employer's proffered basis for distinguishing the discipline of the white employees (i.e., the fact that they were not on a performance improvement plan) is a pretext for race discrimination. The court denies the employer's motion for summary judgment and allows the case to be decided by a jury.

In the above-described hypothetical, the employer should have drafted a short termination letter that encompassed all of the reasons for the termination. For example, the employer could have simply stated that the employee was terminated for “poor performance,” which is broad enough to include both the failure to achieve productivity standards and the altercation with the customer. The employer also could have been more specific, so long as it included all of the reasons for the decision (e.g., the employee was terminated for “failing to achieve productivity targets and using profanity during an altercation with a customer). Whichever route you choose, make sure that the language of the letter is consistent with all of the reasons on which you intend to rely if the termination results in litigation.

Conclusion

This article is intended to highlight a few common mistakes made by employers, but there is no substitute for discussing the legal implications of a proposed employment action with an employment law expert. It is well worth paying for one or two tenths of an hour of your counsel's time to talk through a proposed termination decision before pulling the trigger.

William (Bill) Wortel, a member of this newsletter's Board of Editors, has represented management in a variety of litigation at the administrative level, in state and federal courts and in the U.S. Court of Appeals.