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Employee termination is the process by which an organization ends an individual’s employment against his or her will. Termination may occur for “cause,” examples of which include poor job performance, lack of “fit” with the organization, inability to perform job responsibilities, conflict with managers or other employees, or misconduct. Many instances of an employment separation, however, can be attributed to developments over which the fired employee has no control, such as restructuring, downsizing, relocation, or acquisition.

 It is important for small businesses, perhaps even more so than for large ones, to terminate employees when such action is warranted. Small firms cannot afford to keep unproductive employees because of the effect their poor performance can have on the company’s results, as well as on the motivation level of more talented workers. If you fail to purge chronic poor performers, the best performers will either believe that you condone lackluster performance, or assume that you don’t know the difference. Being the best, they will only want to associate with the best.

When firing is necessary, small businesses must handle the situation properly to avoid numerous possible pitfalls, including a reduction in morale and productivity among remaining employees, a decline in the company’s public image, and difficulty in recruiting new employees. A business analyst advised, “Do it the right way, and there’s no lasting negative effect on the company or the person who is exiting. Do it the wrong way, and the fired employee may have a very difficult time finding a new job and you and your company may end up in court.” There are numerous steps a business can take to reduce the negative impacts of employee termination.

Behavior-related Termination

Behavior-related dismissals involve termination of an employer-worker relationship by the employer as a result of the actions of the employee. Common behaviors that lead to terminations, in rough order of prevalence include absenteeism and tardiness, unsatisfactory performance; lack of qualifications or ability; changed job requirements; and gross misconduct, which might involve drug abuse, stealing, or other breaches of the company or public policy.

The term “Behavior-related” distinguishes this type of termination from trait-related dismissals, which are based on immutable characteristics of the employee, such as the color of skin or physical disability. Trait-related terminations may be legal if the employer can prove that the trait keeps the employee from performing a job satisfactorily. However, they are uncommon.

Employers are generally allowed by the law to terminate workers based on any type of behavior they deem unacceptable (or, technically, for no reason at all). However, laws and court decisions have protected some types of behavior when the employer’s retaliatory action is deemed: 1) a violation of public policy; 2) a violation of an implied contract between the employer and the employee, or 3) an act of bad faith. An act of bad faith is vaguely defined and is simply a recognition of an employer’s duty to treat employees fairly. For example, it might be considered illegal for a company to fire a worker because he refused to engage in an activity that a reasonable person would consider excessively dangerous or hazardous.

One illustration of a public policy violation would be a company that fired a worker because she refused to engage in an unlawful act, such as falsifying public financial documents or giving false testimony in court. Another public policy violation would be the firing of an employee because he exercised a statutory right, such as voting in an election or worshipping at a church. The third type of infraction in this category would be the dismissal of an employee for reasons stemming from her exercising a right to perform an important public obligation.

Violations of implied contracts occur when a company dismisses a worker despite the existence of an insinuated promise. For example, if an employer conveys to a worker that he will receive long-term employment in an effort to get the employee to take a job, it could be liable if it fired the worker without what the courts deem just cause or due process. Implied contracts often emanate from interviews, policy manuals, or long-term patterns of behavior by the employer in a relationship with an employee.

Even when an employer acts in good faith and does not violate the public trust or an implied contract, it can be legally liable for dismissing a worker for other reasons. Specifically, a business may be found liable if it cannot prove that: 1) its decision to dismiss an employee is not founded on bias against a protected minority, or 2) the firing does not produce inequitable results. Suppose, for instance, that a company decided to fire all managers who did not have a college degree. Doing so, however, resulted in the dismissal of a disproportionate number of legally protected minorities from its workforce. The company could be held liable if it could not show that having a college degree was necessary to effectively execute the duties of the position.

Steps in a Behavioral-related Termination

Partially because of the legal risks inherent in dismissing employees, most companies terminate workers for behavior-related causes only after administering a progressive disciplinary and counseling process. Besides legal reasons, studies show that most companies try to correct behavior out of a perceived moral obligation to the employee. Furthermore, many employers benefit economically from correcting employee behavior, rather than terminating workers, because of the high costs of employee turnover.

Correctional efforts do not always succeed, however. In instances when termination does prove necessary, business experts cite several basic steps that employers can take to ease the blow for the targeted employee, minimize damage to workplace morale and community standing, and shield themselves from legal liability. The steps include:

  • Develop clear, written policies for termination and follow them unswervingly. These policies should be readily accessible to employees in an employee handbook.
  • Document reasons for termination over time, in quantifiable  terms where possible 
  • Conduct the termination meeting with the employee in a professional manner. The company representative conducting the meeting should be trained in dealing with the wide array of emotions – anger, denial, shock, etc. – that typically appear during such times.
  • Give credit for positive contributions. Many experts contend that the shock of termination can be eased somewhat if they hear positive feedback about some aspect of their work performance. Even in a termination-based performance, prompted by the fact that acquired skills were not adequate for a particular situation, the person’s assets and liabilities can still be acknowledged.

Prepare an information package for the terminated employee that outlines all elements of any severance package, including benefits and assistance options. Depending on laws and company policies, the company may provide severance pay, unemployment compensation, compensation for earned vacation days, career and placement counseling, ongoing health insurance, or other post-termination benefits.

  • Craft considerate severance payout policies: The method of severance payout can be a major factor in easing (or increasing) an employee’s bitterness about termination. 

Preserve an environment that enables the terminated employee to leave with dignity. We should have no trouble arguing for compassionate termination policies that reduce stress on families, mitigate financial hardships and decrease the chances that discharged employees will suffer debilitating emotional crises. Employees who have witnessed termination with dignity will be more inclined to like the firm and support its goals and mission.


  • Notify others that are impacted by the dismissal in a timely manner. This includes other employees, affected clients, and other entities with which your company has a business relationship.


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Bernard Taiwo
I am Management strategist, Editor and Publisher.

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