19 November 2014

A Checklist for Employers Before Letting an Employee Go


Meriel Schindler
Partner | UK

Understand All Rights and Obligations
 

Employees have different rights and obligations depending on their contracts and matters such as their length of employment.

Check the employee’s contract (and related documents, including incentive plans and share schemes) for details about notice period, post-termination restrictions and payments due on termination.

Aside from what’s written into the contract, generally employees who have been employed for 2 years or longer have more legal rights than those who have been employed for a shorter period. However, even those with short service do still have rights, such as not to suffer discrimination or as whistleblowers. Make sure you understand all relevant rights and obligations.

Review All Relevant Background

As well as looking at the employee’s contractual documents, a thorough review of their personnel history, before starting a termination process, allows the employer to make an informed termination decision with managed risk.

For example, is there documentation to support the termination, including showing the reason for it and the employer’s attempt to tackle issues such as performance or misconduct with performance improvement plans and/or warnings? If not, then in some cases (especially for employees with 2 years’ employment or more) consider if it is necessary to delay the termination to create such a record. Alternatively, consider a negotiated exit (see ‘A Negotiated Exit’ below).

A review of the record will also reveal whether there are matters such as outstanding grievances or a history of health issues that ought to be taken into consideration.

Forensic Analysis

If it is suspected that the employee has misappropriated company information or engaged in inappropriate use of the company’s computers or systems (eg internet use or messaging) consider whether to ‘shadow’ or monitor the employee’s computer and whether a forensic analysis should be conducted. A company policy should be in place stating that employees do not have an expectation of privacy in respect of company devices and systems. Also consider basic ‘Google’ or social media searches if concerned about an employee’s activities; it is often surprising how much is revealed. Sometimes you may need to hire an independent expert to retrieve data from your systems. If employees use their own electronic devices, consider whether and how you can remove company confidential information from them.

Pre-Termination Procedure

In most cases it will be necessary to consult formally with the employee about a proposed dismissal before the decision to dismiss is taken and communicated. Sometimes other action, for example an investigation into complaints, will also be necessary. Depending on the circumstances, it might also be necessary to consider whether to suspend the employee for a limited period and whether there is a contractual right to do so.

Consultation might sound like an onerous burden, but in fact it can usually be undertaken quickly and often eases the pain of the dismissal that follows. If there is no consultation – i.e. an employee is presented with a fait accompli (and/or there is a written record to this effect) – this might render the termination unlawful, irrespective of the merits of the underlying reason for it.

That said, a consultation process is not always necessary or appropriate (for example for low risk employees with short service) but in all cases it is important to deliver a clear message, and have a clear record, about the reason for termination.

Ideally meetings should be attended by two employer representatives: one to conduct the meeting according to a well crafted script / agenda; the other to take notes and act as a witness.

In most cases, the decision to dismiss, and reason for it, should be confirmed in writing to the employee.

Decide whether you want (and have the right to require) the employee to work their notice, go on garden leave or leave their employment immediately (with a payment in lieu of notice where appropriate). Be aware that a breach of contract by the employer at this stage may jeopardise the enforceability of post-termination restrictions.

Papertrails

Create good papertrails (eg recording all consultation steps and a legitimate reason to dismiss). Avoid creating bad papertrails (eg showing that dismissal is for an unlawful reason or is a fait accompli before any necessary consultation has happened).

Most records, including ‘confidential’ e-mails between managers and HR, are ultimately discloseable if litigation ensues. The only exception is confidential communications with solicitors to take advice, which are privileged from disclosure. Take advantage of this privilege.

Access to Information, Property and People

Consider the extent to which the employee has access to confidential information, property (including systems and financial resources) and/or business contacts, and when is the appropriate time to sever this access. Be mindful that doing so too early might lead to a claim that the decision to dismiss was a fait accompli, so a judgment call needs to be made on the commercial risk and how severing of access can be best explained.

Always prepare (and, if appropriate, agree with the employee) a communication strategy surrounding the employee (see ‘Keep it Confidential’ below) and, on termination, reclaim company property and update social media connections. When seeking to reclaim property (including confidential documents) consider where it might be stored by the employee, in what format and how it should be returned or destroyed.

Keep it Confidential

It is usually in the employer’s best interest to keep details relating to employee terminations strictly confidential. Only those who must know about the termination should be privy to this information. As appropriate, prepare communications in advance for distribution at the relevant time to staff and/or clients, the media and/or regulatory bodies; however, exercise due care in determining the content and deployment to avoid claims of, for example, defamation or breach of confidentiality.

Foreign Law Issues

If the employee is a foreign individual, consider at an early stage additional issues such as whether the employee has foreign law rights in relation to the dismissal and the effect of the dismissal on their immigration and tax status.

A Negotiated Exit

Often it is better to negotiate an exit than to formally dismiss. Negotiations must be handled with the same level of care as formal dismissal procedures, and should normally involve the parties entering into a formal settlement agreement. A well-drafted settlement agreement is a good means of mitigating commercial and litigation risks. There will usually be a price attached to this.

Post-Termination Restrictions

Consider whether existing contractual post-termination restrictions (eg non competition, non solicitation, non-dealing and non-disclosure of confidential information) are adequate. At the very least, departing employees should be reminded in writing of their obligations. If new or extended obligations are considered desirable, consider including these in any settlement agreement.

Given the nuanced and sometimes complex nature of employment laws, and the potential for litigation, commercial and reputational risk, employers are well-advised to seek employment law advice at an early stage (ideally before the creation of any relevant written records).

NOTE: This checklist is intended to serve as a guideline of general best practices in England and Wales, which may need to be tailored depending on the employee’s seniority and other circumstances.

Meriel Schindler Partner | London

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