Acceptable Reasons for Termination

It’s your business: Why can’t you simply fire employees as you see fit?

Employees can easily file for unfair termination with the Equal Employment Opportunity Commission (EEOC), in the event of getting fired. This means you should tread carefully when considering firing someone. Even if the issue, in your eyes, is obvious incompetence or persistently obnoxious behavior, the employee can always file a complaint claiming discrimination based on race, sex, religion, age, or political beliefs.

In this environment, the employer has to prove that the firing was based on specific behavior and not antipathy toward a group or class of people. Legally, this is described as firing “for cause.” In general, there are a half-dozen categories of acceptable reasons for termination:

1. Incompetence, including lack of productivity or poor quality of work
2. Insubordination and related issues such as dishonesty or breaking company rules
3. Attendance issues, such as frequent absences or chronic tardiness
4. Theft or other criminal behavior including revealing trade secrets
5. Sexual harassment and other discriminatory behavior in the workplace
6. Physical violence or threats against other employees

All of these behaviors are impediments to the proper functioning of your business. The first three can directly impact your business effectiveness, reduce profits, and hurt morale in the workplace. The second set of three pose risks to the health, safety, and reputation of your employees, customers, and the business in general.

You can and should fire employees whose behavior fits in these categories. You just need to do it the right way—following established processes for communicating your concerns and documenting every step you take along the way.

What’s an “At Will” Employment Relationship?

“At will” means the employer has the right to fire an employee at any time for any reason. Businesses in every state except Montana are free to adopt at will employment policies. This means that the people you hire are presumed to be working at your discretion, unless you offer a contract. Under at will employment, the length of employees’ tenure at your business is not specified, so they can leave—and you can terminate them—at any time. You can also make this fact explicit by issuing an employee handbook that describes your company’s at will policy.

Obviously, at will employment provides business owners with much more flexibility compared to a formal contract. This is particularly true with respect to layoffs made out of economic necessity.

But when it comes to individual terminations, there may not be that much of a practical difference. As Susan Heathfield explains in “What Is At Will Employment?,” at will employment “does not mean that employers can arbitrarily fire employees without good faith communication, fairness, and non-discriminatory practices. In fact, courts are increasingly finding for employees in litigation.”

In addition to discrimination complaints mentioned earlier, there are also three common law exceptions to at will employment:

• Public policy exceptions protect employees from being fired for exercising a basic right, such as applying for worker’s compensation they are entitled to or taking time off to serve in the National Guard.
• Implied contracts could be invoked if you or the person serving as the employee’s supervisor says something along the lines of “don’t worry, your job is secure.”
• Implied covenants of good faith and fair dealing could apply if an employer were to fire a salesperson just before a large commission was payable.

In fact, lawsuits based on numbers two and three above rarely go against the employer. The mere possibility of litigation means that at will employers will most likely choose to fire only for good cause, and to follow all other recommended termination processes that the situation requires.