On her list of “5 Scary Small-Business Mistakes,” Suzanne Lucas — who calls herself the Evil HR Lady — cautions entrepreneurs not to make false assumptions about their employees.
“Plenty of small businesses have been completely destroyed by a lawsuit when an employer thought the law didn’t apply because the company was too small or because the owner assumed employees would never ‘betray’ the company by suing,” Lucas writes.
Don’t make this mistake yourself, particularly if you need to fire a new employee who just isn’t working out. The terminated worker may have an ax to grind and decide to vent his or her anger by dragging you into court.
To protect yourself from legal liability, it’s important to act quickly and decisively. Here are some tips for firing a new hire while minimizing the risks and costs to your company.
- Terminate the employee as soon as possible. It is natural for new employees to require an adjustment period and some training. But it’s tough, if not impossible, to teach an employee to act intelligently, adopt a positive attitude, or possess a strong work ethic. If an employee fundamentally is not a good fit, don’t waste time and money investing in him or her further.
- Implement a trial period. Many employees are on probation during the first 90 days of work. As Aftermarket Insider [PDF] points out, it is easier to fire an employee during a trial period then after he or she has been with the company for a longer period. While employees still could make a wrongful termination claim if they’re fired while still on probation, probation is generally understood to be a time when an employee’s skills are tested and, as Lawyers.com reports, employees typically have no rights to fight or appeal a termination during or immediately after probation. Some benefits, including health insurance and 401(k) matching, often don’t kick in until the employee has been with the company for a few weeks or months. You can avoid the expenses associated with these benefits if you end the employment relationship early.
- Document everything. If an employee files a wrongful termination lawsuit, you will need documentation of the mistakes or problems that led to the termination. Don’t be lax in recording missteps just because the employee is new and learning. If the employee arrives late, has a bad attitude, or commits errors, write down what happened and keep this information in his or her personnel file.
- Understand the labor laws. Federal law does not require an employer to immediately pay an employee a last paycheck upon being terminated, but some states do. You are required to pay a terminated employee any outstanding balance owed by the regular payday for the last period the employee worked. State laws may also prohibit withholding any funds from an employee’s final paycheck for employee loans, tuition payments, prepaid leave or unpaid debts, even if the employee has signed an authorization allowing for withholding. If you’re ever in doubt about your legal responsibilities, consult an attorney.
- Pay for accrued benefits, if required. In some states, such as Ohio, an employer must pay an employee for unused vacation time or paid time off — unless the employer has a policy providing for the forfeit of these payments upon discharge. Although it is best to terminate a new hire who isn’t working out before these benefits kick in (see #1), you should comply with your state’s laws and your company policies for unpaid benefits.