Employer’s primer to mitigating risks when terminating employee - by Scott Regan

Like all employers, developers and construction companies will likely confront the necessity of severing an employment relationship, whether because of an employee’s poor performance, misconduct, or numerous other reasons. How employers treat their employment relationships–and the termination of such relationships–can significantly impact their potential legal liability, regardless of the basis for an adverse employment action. 

In Massachusetts, employment relationships are presumed to be at-will. At-will employment relationships are terminable by either the employer or employee without notice, for almost any lawful reason, or for no reason at all. Though this is beyond the scope of this article, an employer and an employee may agree to modify the at-will nature of the employment relationship, including adding additional rights and obligations. However, an employer cannot fire an employee for an unlawful reason including, but not limited to, an employee’s race, gender, age, disability, and/or for other reasons prohibited by law or public policy. 

Despite employers’ broad latitude to fire at-will employees, employers should be aware that employment terminations often lead to aggrieved former employees bringing legal claims against their former employers and, potentially, individual officers and/or other employees. In Massachusetts, claimants generally have (i) six years to bring breach of contract claims; (ii) three years for claims under Massachusetts’ wage and hour laws; and (iii) 300 days for discrimination claims. Consequently, employers can be subjected to litigation long after the underlying employment separation(s). 

Unfortunately, even baseless legal claims can force employers into expensive and disruptive litigation. Employers should take steps to mitigate their potential liability. Employers should have – and sometimes must legally have – well-developed employment policies and practices. Under certain scenarios, however, employee handbooks, policies, and/or representations may create unintended contractual obligations between the employer and its employees. Accordingly, employers should consider working with an experienced employment law attorney to develop and implement enforceable policies that are tailored to the employer’s specific goals and operations. 

In addition, employers may consider taking some of the following steps to mitigate their risks: 

•Enforcing their employment policies and practices reasonably and uniformly. Thus, if an employer disciplines one employee for being late for his/her shift, then the employer should similarly discipline other offenders; 

• Objectively investigating claims of employee misconduct, preparing investigatory reports concerning the investigations, and responding appropriately. When confronted with a legal claim, having contemporaneous and accurate records is sometimes required by law, and may be beneficial to an employer’s defense;

• Maintaining true and accurate employment records, including payroll records;

• Being respectful, but honest, when telling an employee why he/she is being let go. An employee who is not given a reason for the adverse employment action may be more inclined to conclude that the employment termination was for an unlawful reason. In certain circumstances, an employer’s failure to provide a reason may be held against the employer in a legal proceeding; 

• Timely paying departing employees all their earned wages, including accrued and unused vacation time, at the time of their discharge, in accordance with Massachusetts’ onerous wage and hour laws. See G.L. c. 149, § 148. Employers are strongly encouraged to consult with an attorney regarding the numerous requirements imposed by such laws, including the potential ramifications for an employer’s failure to comply; 

• Providing the required documentation to departing employees, including the, “How to file for unemployment insurance benefits” pamphlet, regardless of whether the employer thinks an individual qualifies for unemployment benefits; and

•Entering into severance or separation agreements with all departing employees. Generally, these types of agreements offer departing employees money in exchange for releasing the former employer (and potentially others) from liability for various legal claims. Though employers may not be enthused by the prospect of paying additional monies to departing employees – particularly if the employee was a bad fit for the company – such agreements should protect employers from subsequent legal action concerning released claims. An employer considering this option should consult with an attorney to prepare an appropriate and enforceable release. 

Though there is no way for employers to eliminate every negative consequence associated with terminating employees, all employers benefit from understanding the laws that expose their livelihoods to legal risks. Though beyond the scope of this article, employers should consider whether it makes sense to have written agreements to further protect their businesses, such as confidentiality agreements, non-competition agreements, and/or non-solicitation agreements.

Scott Regan is a litigation attorney focusing in labor & employment at Fletcher Tilton PC, Worcester, Mass.