Discipline And Discharge, The Right Way

I. INTRODUCTION

While Hollywood has always brought us the image of the boss as a heartless thug - scaring employees for the fun of it and randomly firing even the best employees for minor transgressions - the reality is that disciplining or terminating an employee, even for the most serious and legitimate reasons, is always difficult. Any disciplinary action places the manager and employee in a contentious relationship. Termination places significant hardships on both the company and the employee.

The rise in employer/employee litigation has further added to the burdens of employers who need to deal with the problem employee. Fear of discrimination suits or other employee claims factors heavily into the employer's decision to take action. Even where discipline is clearly warranted and the basis for a suit weak, some employers still choose to avoid a potential suit by failing to act against the errant employee.

Employers do not have to endure difficult employees situations due to fear. Handled correctly, employee discipline can result in a better employee and, therefore, a better - and more productive - work environment. Even if an employer needs to terminate an employee, the employer who handles the situation correctly can do so with a minimum of legal risk. Doing so, however, requires an understanding of the laws governing the employer/employee relationship. It also requires insight into why employees sue and how juries decide cases.

II. THE LAW GOVERNING THE EMPLOYMENT RELATIONSHIP

1. The "At-Will" Relationship

Absent a contract between the employer and employee (such as a collective bargaining agreement), employees in Pennsylvania hold their jobs "at-will." At-will employment permits an employer to terminate an employee at any time and for any reason, or no reason at all, with or without notice, so long as the reason is not illegal. In order words, under most circumstances, it is legally permissible to arbitrarily terminate employees without cause and without warning. At-will employment thus affords an employer the latitude to make sound business judgments regarding its workforce without worrying that it must keep unnecessary or unproductive employees.

At-will employment has its limits, however. Employers cannot discipline or terminate employees for reasons which violate public policy or which evidence discriminatory animus. Also, handled improperly, otherwise legal discipline and discharge situations can form the basis for a suit against the employer.

2. The Public Policy Exception to At-Will Employment

The public policy exception protects an employee from discipline or termination because s/he reported the company's wrongful or illegal acts (i.e., acted as a "whistleblower"). It also protects an employee who is disciplined or terminated for exercising a legal right, such as the right to apply for and collect workers' compensation or report discrimination.

Not every act motivated by public interest qualifies an employee for protection as a matter of public policy. The employee must engage in activity of great societal importance, and must actually "go public" about a company's illegal activity. If the employee meets these criteria, however, even an at-will employee can bring a successful lawsuit against an employer who disciplines or terminates the employee because of the whistleblowing activity.

3. Discrimination

Federal law and the Pennsylvania Human Relations Act prohibit an employer from discriminating against an employee because of the employee's color, race, gender, age, national origin, ancestry, religion, or disability. However, absent a discriminatory purpose, an employer may still discipline or terminate an employee who falls into one of these "protected" classes.

4. Actual and Implied Contracts

If an employee has a contract with an employer governing the employment relationship, then the employee is no longer "at-will." The relationship is instead governed by the express terms of the contract. An employee can only receive discipline or lose his or her job for reasons specified in the contract. Collective bargaining agreements and executive agreements are common employer/employee contracts.

An employee "contract" can also arise from circumstances which "imply" the existence of one. An implied contract claim usually arises because the employee asserts that the employer made a promise for specified employment terms (e.g. length of service), either verbally or in an employee handbook. Although the general rule in Pennsylvania is that an employee handbook can only form the basis of an implied contract if it is proven that the employer had that intent, a Pennsylvania employer should include a clear disclaimer in its handbook stating that it does not constitute a contract of employment.

5. Emotional Distress Claims

Many employees sue their employers for intentional and/or negligent infliction of emotional distress. Intentional infliction of emotional distress means that the employer's conduct was so atrocious and intolerable that it caused the employee emotional distress. Negligent infliction of emotional distress means that the employer's conduct was so careless that it inflicted a physical injury upon the employee, which injury caused the employee to suffer emotional distress. However, even if these claims are proven, they are sometimes barred by the Pennsylvania Worker's Compensation Act which can, in most circumstances, provide the exclusive remedy to an employee injured at work.

While difficult to prove, emotional distress claims arise frequently, since they can result in large financial gains for the successful plaintiff/employee.

6. Privacy Issues and Defamation

An at-will employee may also sue an employer for invasion of privacy. Although uncommon, the "intrusion upon seclusion" form of invasion of privacy in the employment setting usually arises in the context of drug testing or employee surveillance. It requires a balancing of an employer's justification for the invasion and of the manner in which it was carried out, against the employee's privacy interests and whether the intrusion would be considered highly offensive to the reasonable person.

A more common form of privacy claim in the employment context is "false light" invasion of privacy. Analogous to defamation, "false light" claims can arise any time an employer makes false statements about an employee to another employee or to persons outside the company and when the employer terminates the employee. A communication must be both false (cast the employee in a "false light") and tend to harm the victim's reputation.

An employer has an absolute right to issue warning letters and negative performance evaluations and to forward this information to the people within the company who reasonably need to know; this conduct does not constitute false light invasion of privacy or defamation. The information in these communications must, however, be truthful or reasonably believed to be truthful.

7. Negligent Hiring, Supervision, and Retention

III. STEPS TO EFFECTIVE EMPLOYEE DISCIPLINE

Listed below are steps the prudent employer can take when dealing with a discipline or discharge situation. Followed zealously, these suggestions will help minimize the potential for an employee lawsuit and maximize the employer's chances for a successful defense.

1. Terminate Employees Only For Apparent Cause.

While "at-will" employment is the rule in Pennsylvania, a prudent company should nevertheless discipline or terminate employees only for apparent good cause, i.e., some explanation that a "reasonable" person would find acceptable. Few actions induce a jury to question a company's motivations more than when an employer disciplines or terminates an employee for apparently no good reason. Conversely, a clearly articulated, well-reasoned explanation for a company's actions allows a juror to see things from the company's perspective. Even if the juror does not necessarily agree with the company's actions, s/he can comfortably conclude that discriminatory animus did not play a part.

As a practical matter, you should question any supervisor who proposes to terminate an employee without a clearly documented business justification for doing so. A company makes an enormous investment in finding and training its employees. A supervisor's unexplained desire to waste that investment should make you wonder whether the supervisor is trying to cover something up, such as discriminatory conduct. It is certain to make the jury wonder.

2. Establish An Anti-Harassment, Anti-Discrimination Policy

An employer sometimes hesitates to terminate a difficult or under-performing employee for fear of being sued for harassment or discrimination. The adoption and enforcement of a strong anti-harassment, anti-discrimination policy helps minimize this risk. While such a policy is not an absolute shield to a discrimination claim, it is nevertheless an essential part of the defense. In fact, the United States Supreme Court has ruled that companies without a sex discrimination policy may not avail themselves of certain defenses if sued for sex discrimination.

Any anti-harassment, anti-discrimination policy must be well-publicized, both in writing and through repeated training of all employees. If employees do not know what is prohibited and how to report inappropriate conduct, there is little likelihood that appropriate conduct will prevail. There is also little chance that the right people will learn of problems in time to take effective remedial action. Conversely, an employee who fails to utilize a well-publicized policy about which he or she received training will find it difficult to impute liability to the company, since he or she never gave the company a chance to correct the problem.

A company must also commit itself to enforcing its policy consistently against anyone who violates it. Failing to adequately discipline a senior-level executive or company rainmaker sends a number of wrong messages. Top performers will think that the policy does not apply to them, which will only encourage improper acts. The employees will become less likely to report harassment, making it harder to identify before it gets out of hand. And the jury will find it difficult if not impossible to side with a company that values the bottom line over the rights of the individuals working for it.

3. Investigate Discrimination and Harassment Complaints Quickly and Thoroughly

A prompt and thorough investigation of a complaint (or even a rumor), establishes a company's good faith efforts to eliminate discrimination in the workplace. The judge or jury will often reward these efforts. In fact, some state and federal courts have ruled that a prompt and thorough investigation may insulate a company from liability even if the conclusion of the investigation is erroneous. In other words, a faulty investigation undertaken in good faith may do more for a company's defense than an accurate investigation performed reluctantly.

To take advantage of this defense, a company should have an investigation plan in place before any claims are made. Ideally, the investigation team will consist of at least one male and one female, so involved parties can speak to the person with whom they feel most comfortable. The investigators should also be outside the alleged harasser's chain-of-command. This will eliminate claims of bias or cover-up if the employee does not agree with the investigation's findings or the discipline imposed.

It is imperative that the people performing an investigation receive training in how to perform an investigation correctly. Difficult decisions affecting the lives and careers of those involved will be based on the investigator's findings. And investigation notes are often discoverable in litigation. The plaintiff's attorney will certainly amplify any mistakes. Adequate training will help eliminate these potential problems.

4. Formally Follow-Up On Employees Who Have Complained of Discrimination or Harassment

Increasingly, employees are claiming that their employers retaliated against them for reporting company or supervisor misdeeds, i.e. "whistle blowing." These claims often arise after an employee has been disciplined for actual violations of company policy, which may or may not be tied to the alleged improper company conduct. The employee claims the supervisor would not have imposed discipline had the employee not reported the errant conduct. The supervisor's motivation for imposing legitimate discipline becomes the issue, making the claims difficult to defend. Excessive fear of retaliation claims can even freeze a company into inaction against an employee who is clearly deserving of disciplinary action.

Information and follow-up can effectively combat retaliation claims. When an employee complains of company or supervisor wrongdoing in good faith, the company should inform the employee that no one may take any adverse action against her/him for making the claim. S/he should report any retaliation immediately. The employee's supervisors should be warned that their disciplinary actions regarding the employee will be reviewed scrupulously. Then, approximately one or two months after the employee's complaint, a company representative should have a short, but formal, meeting with the employee to ask whether there has been any retaliatory action. Follow up on any "yes" responses. Document any "no" responses. This follow-up meeting will make it difficult for an employee to later claim that actions taken for performance deficiencies were "really" retaliation.

The best defense to a retaliation claim, however, is consistency in discipline. If the supervisor and others have imposed the same discipline in the past for similar infractions, the aggrieved employee will find it difficult to show how retaliation played a part in the disciplinary action. For this reason, review of disciplinary decisions by the Human Resources Department is an excellent procedure to have in place.

5. Use A Progressive Discipline Policy

Nothing trumpets a company's fair treatment of its employees louder than a strong, faithfully executed, progressive discipline policy. Employees are given opportunities to correct problem behavior before the employer takes drastic action. Used properly, progressive discipline policies virtually eliminate the employee's ability to claim ignorance in response to the company's defense that it disciplined the employee for cause not for discriminatory animus. And an employee disciplined or terminated after repeated warnings will have a hard time convincing anyone that an employer's real motivation was illegal.

A progressive discipline policy is a double-edged sword, however. Absent extraordinary circumstances, failing to follow a progressive discipline policy is the surest way to get a jury interested in the employee's case. It is natural for an already suspicious jury to believe that the company must be hiding something if it failed to follow its own disciplinary policy. Accordingly, whether simple or elaborate, the company must have a total commitment to following its progressive discipline policy, or it should not have a policy at all.

6. Give Balanced, Honest Performance Evaluations

Lop-sided performance reviews are the bane of every management-side employment attorney. It is virtually impossible to explain away a series of positive evaluations when arguing that the employee was disciplined or terminated for performance deficiencies, not discriminatory animus. After all, how fair is it to gloss over an employee's performance problems at the annual review and then terminate the employee for those same problems? According to a jury, not very. And the jury is left to question the company's "real" motivation for its actions.

The problem is compounded in a layoff, where the company cannot even point to a series of performance problems leading up to the questioned discipline. The jury is again left to wonder why a particular employee, evaluated positively all those years, was chosen for layoff instead of his or her contemporaries, who just happens to fit into a particular gender/racial/ethnic/age category.

To combat this problem, managers must receive training on how to evaluate employees properly. Managers must include weaknesses, as well as strengths, in the yearly evaluation. Employees must learn that criticism in a yearly review presents an opportunity to improve. Then, if improvement is not seen over the course of time, the discipline imposed is seen by the employee and the judge or jury in its appropriate context.

7. Perform Exit Interviews for All Departing Employees

An exit interview is a prime opportunity for the company to learn of problems the employee may have been reluctant to verbalize earlier. Exit interviews also give the company one last opportunity to document that the employee denied the existence of any problems the company should know about (e.g. harassment, retaliation). If the employee does raise a problematic issue at the exit interview (such as a discrimination claim), the company can investigate before the employee leaves. If the claim is valid, the company can make appropriate efforts to retain the employee. Even if the employee still leaves, his or her damages may be minimized or even eliminated.

While an employee's denial of any "problems" at the exit interview will not prevent the employee from later bringing a wrongful discharge suit, it will make the claim ring rather hollow. It will also allow the company to show that it gave the employee every possible opportunity to report improper workplace conduct which the employee repeatedly ignored. Under these circumstances, the judge or jury is more likely to question the employee's motivations for the suit.

8. Be Consistent

It should go without saying that acting in a manner inconsistent with written policies, or contrary to similar situations, will call a company's motivations into question immediately. It is for this reason that an employee handbook should never contain a policy that management is not fully dedicated to abiding by and enforcing. Moreover, discipline for infractions of written (or unwritten) policies should always be apparently and provably fair. They establish the precedent by which later discipline is measured. It is difficult to argue that the company properly terminated an employee for some disciplinary issue when another employee received a verbal warning for the same infraction a year earlier.

9. Document Everything

Documents have a real impact on juries. They evidence the fact that an employer took an issue seriously. Documents are also more effective than live testimony in combating an employee's memory regarding whether and when events occurred. Therefore, once an employee's performance becomes an issue, the company should document any efforts made to correct it. Even casual discussions with the employee about the problem should be memorialized.

Memos regarding discussions with the employee do not have to be lengthy (or even grammatically correct). On-going, or particularly serious, problems merit formal memos or letters to the employee, with a copy to the employee's file. In later stages of the disciplinary process, you should have the employee sign that s/he received the writing, even if s/he does not agree with it.

Regardless of how formal you make the documentation, a review of the employee's file should show clearly that the employee was made aware of the problem and given a chance to correct it before stronger discipline was imposed. (This assumes, of course, the conduct was not so egregious that it warranted immediate dismissal.) With this sort of documentation in hand, the company can very effectively combat an employee's claim that disciplinary action was the result of discriminatory animus.

10. Use Your Common Sense

CHECKLISTS FOR EFFECTIVE EMPLOYEE DISCIPLINE AND DISCHARGE

STEPS OF EFFECTIVE DISCIPLINE

1. Identify the problem in terms of desired and actual behavior, using only sensory and provable facts
2. Analyze the problem in terms of the business reasons why it must be solved, what step of correction action should be administered for this occasion, and the consequences the employee will face if the problem isn't solved
3. Discuss the problem with the employee; gain agreement as to the facts; gain acknowledgment that a problem exists; gain commitment to solve problems
4. Determine a solution to the problem and gain commitment to implement solution
5. Document the factual evidence and the employee's agreements and commitments
6. Follow-up to make sure employee is implementing the solution, adjusting or developing a new solution when necessary
7. Recognize success
8. Reinforce maintenance of acceptable behavior

THE EMPLOYEE CONFERENCE PROCESS

1. Describe the problem with its factual evidence

• ask employee if any conflicting facts exist
• ask employee if s/he agrees with your facts

Note: if employee adds facts of which you were not aware or says anything which raises doubt concerning your facts, suspend the meeting and do more investigation

1. Obtain agreement from employee that problem exists and must be solved

• if employee agrees, then discuss possible solutions
• if employee refuses to agree that a problem exists, ask why and suspend for further investigation or analysis, if necessary

1. Describe impact on the business and ask for agreement that problem exists and must be solved

• if employee agrees, then discuss possible solutions
• if employee refuses to agree, ask why and

1. Describe consequences of not solving problem and ask for agreement that problem exists and must be solved

• if employee agrees, then discuss possible solutions
• if employee refuses to agree, mandate that the problem be solved

REVIEWING THE PROPOSED TERMINATION

1. Determine whether there is a valid, job related, reason for termination.
2. If the termination is due to a specific incident, make sure it has been properly investigated and documented before the termination.
3. Ensure that the employee was immediately made aware that the behavior prompting the termination was unacceptable.
4. Review the employee's overall work record, including those documents not necessarily kept in the employee's personnel file (i.e. medical records).
5. Determine the existence of extenuating circumstances.
6. Look, actually look, for evidence of sexual, racial, or other types of harassment or retaliation.
7. Determine whether the termination recommendation is consistent with prior actions where the facts are similar.
8. Have the recommendation reviewed by an individual familiar with the employment discrimination laws, as a backstop to bad decisions made in the heat of the moment.
9. Ensure that the employee has received all benefits conferred upon her/him by company policy, e.g. progressive discipline.

HANDLING THE TERMINATION MEETING

1. Have someone else present (preferably of the employee's sex)
2. Conduct the termination meeting towards the end of the day
3. Give a clear, rational, explanation for the termination.
4. Don't make any promises about the future.
5. Acknowledge the employee's concerns, but don't debate them or validate them (e.g. "You're right, you don't deserve this.")
6. Maintain full confidentiality
7. Don't be confrontational, no matter how "hot" the employee gets
8. All explanations must be made in relation to a valid, job related, requirement (e.g. the guy who is always late returning from lunch because he is having an extramarital affair is terminated for chronic lateness, not the affair)
9. Document everything
10. Make the meeting(s) short, honest, and short

REMEMBER: The employee who gets terminated without surprise and with her/his dignity intact is the least likely to be a problem in the future.

STANDARD OF CONDUCT AND PERFORMANCE FOR SUPERVISORS

1. Treat all employees as adults
2. See problems developing and try to head them off
3. Help employees develop solutions to problems
4. Encourage employees to implement solutions
5. Recognize success
6. Reinforce good performance, conduct or attendance
7. Be consistent
8. Be understanding
9. Be persistent
10. Be thorough
11. Be involved
12. Do not compromise standards