HRMN 408 WEEK 5: FMLA, Employment-At-Will, and Termination
CHAPTER 4
• Decision to Terminate
• Termination Procedures
• Final Pay and Accrued Leave
• Termination for Cause
• Severance Payments and Releases
• Constructive Discharge
• Retaliation
• Whistle-Blower Regulations
• Abusive Discharge
• Defamation Liability
• Intentional Infliction of Emotional Distress
• Employee Due Process
• Downsizing and Mass Layoffs
Terminating the Relationship
C o p y r i g h t 2 0 1 7 . S o c i e t y F o r H u m a n R e s o u r c e M a n a g e m e n t .
A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .
EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 11/17/2022 4:51 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS AN: 1697333 ; Charles Fleischer.; The SHRM Essential Guide to Employment Law : A Handbook for HR Professionals, Managers, Businesses, and Organizations Account: s4264928.main.eds
Book: The SHRM Essential Guide to Employment Law : A Handbook for HR Professionals, Managers, Businesses, and Organizations
Link: https://eds-p-ebscohost-com.ezproxy.umgc.edu/eds/ebookviewer/ebook?sid=d5f44963-560d-4476-837a- f054da5da4f9%40redis&ppid=pp_59&vid=0&format=EB
Author: Charles Fleischer Date: 2017
The SHRM Essential Guide to Employment Law60
DECISION TO TERMINATE Under the employment-at-will doctrine, recognized in almost all states, employers can fire employees for any reason or for no reason at all (just not an illegal reason). But it rarely makes sense to do so. Instead, the decision to fire should be for a well-documented reason tied directly to the employer’s business needs.
When an employer exercises its business judgment in terminat- ing an at-will employee, courts have no right to substitute their own judgment and second-guess the employer’s decision. But if the employer cannot explain and support a business-related reason for the termination, such as poor performance or repeated miscon- duct, the fired employee, and the Equal Employment Opportunity Commission (EEOC), may assume the decision was improperly motivated, such as by discriminatory animus.
Even with a good business reason, it still may not be in the employer’s interest to fire. An involuntary termination will likely disrupt the workplace, possibly having a negative impact on morale. And if the departing employee is not bound by a noncompete agree- ment (discussed in Chapter 19), he or she may take valued custom- ers or clients. Worse, disgruntled former employees with time on their hands may decide to sue or complain to the EEOC. (If you have never had to answer written interrogatories propounded by your former employee’s attorney, produce box loads of personnel records, or suffer through depositions of half your workforce, you are in for an unpleasant surprise.) There is also the risk that a fired employee will become a whistle-blower or even resort to sabotage or violence. Consider, finally, the effect of a termination on your unemployment insurance rate. In short, getting rid of a troublesome employee may cause more harm than good.
Finally, such decisions should rarely be made on the spot. Even in the face of egregious misconduct, a temporary suspension usu- ally works best, allowing tempers to cool and providing time for a thoughtful, rather than a heat-of-the-moment, decision and time to consult with HR or outside counsel.
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Terminating the Relationship 61
Answering the following questions will help guide the decision to fire:
• Does the company have a good, business-related, well-doc- umented reason to terminate that it can clearly articulate if challenged?
• Is the employee at will, or is he or she protected by an employ- ment contract or a collective bargaining agreement?
• If there is a contract, is the firing permitted by the contract, and have all required preliminary steps been taken?
• Is the employee in a protected status, such as on Family and Medical Leave Act (FMLA) leave?
• Has the employee recently complained about working conditions, discrimination, or other matters, such that firing him or her could be considered retaliatory?
TERMINATION PROCEDURES When the decision has been made to terminate an employee, the actual process should be carefully planned. A face-to-face ter- mination meeting is generally recommended as more respectful than a phone call or an email. A face-to-face meeting also allows the employee to vent and allows management an opportunity to observe and assess the employee’s reaction.
The meeting should take place behind closed doors and away from other employees. Scheduling the meeting for before or after normal working hours means fewer fellow employees will be pres- ent and may spare the employee some embarrassment.
Normally, two representatives of management will be pres- ent—one to conduct the meeting and the other to observe. This arrangement also conveys to the employee that the decision to terminate is firm. The speaker should prepare in advance what he or she is going to say. Ideally, a lengthy explanation of the reasons for the decision should be unnecessary, since there will be a history of previous counseling or discipline. However, the speaker should be truthful and specific about the performance or behavioral issues
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The SHRM Essential Guide to Employment Law62
that warrant termination. A vague reference to the employee’s not being a “good fit” or that “things are just not working out” will leave the employee uncertain and suspicious of the real reason.
The employee may argue that the company is mistaken on its facts or that the reason given does not justify termination. Presumably, the company has already considered these matters in reaching its decision. In any event, this is not the time to engage in a debate with the employee. The response to the employee’s objections should be brief and clear: “I’m sorry, Bob, but the decision is final.”
Management also needs to consider the following: • whether a severance payment should be offered in exchange for a release of claims
• if security personnel should be available to escort the employee from the worksite and provide ongoing security
• whether state law requires immediate delivery of a final paycheck • whether to inform the employee that he or she is prohibited from returning to the employer’s premises and will be consid- ered a trespasser if he or she returns
ALERT! Giving a false or ambiguous reason for termination may seem less painful, but it can
make defending an unemployment insurance claim or a suit for abusive discharge or
discrimination more difficult.
When an employee voluntarily quits, the employee should nor- mally be interviewed by a senior member of management just before departure. The employee should be asked about the reasons for quitting. Often the employer can gain valuable insight at this juncture into morale or other problems such as a hostile sexual or racial environment.
The following matters, as applicable, should be accomplished during the termination meeting or exit interview:
• Collect keys, security passcards, ID badges, cellphones, laptops, and other property belonging to the employer.
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Terminating the Relationship 63
• Confirm the employee’s current address and phone number. • Instruct the employee to remove all personal belongings. • Inform the employee as to when a final paycheck will be avail- able and determine the employee’s wishes as to whether the check should be mailed or held for pickup.
• Provide any notices required by state law, such as a notice regard- ing the availability of unemployment insurance benefits.
• Remind the employee of any continuing confidentiality, non- compete, and nonsolicitation obligations.
• Remind the employee of the employer’s policy on references.
Immediately after the termination meeting or exit interview, the interviewers should prepare a file memo summarizing the inter- view, including any reasons given by the employee for a voluntary quit. If not previously accomplished, the employee’s access to the company’s computer network should be terminated. This is also a good time to change other employees’ passwords, since employees often know each other’s passwords.
Promptly after the interview, the employer should (as applica- ble) do the following:
• Notify human resources and payroll of the employee’s status change and request a final paycheck.
• Give a COBRA notice to the employee. • Provide the employee with notice of any conversion privileges available under health, life, disability, or other insurance plans maintained by the employer.
• Provide notice of any rights or obligations regarding retirement plan participation and benefits.
• Terminate any signature authority the employee has over employer bank accounts or other financial accounts.
• Notify insurers and retirement plan managers of the employee’s status change.
• Notify affected employees of the termination (without discuss- ing the reason).
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The SHRM Essential Guide to Employment Law64
• Notify others of the termination, such as security personnel, customers, vendors, and financial institutions, with whom the employee had contact (again, without discussing the reason).
• Notify persons receiving garnishment or withholding order payments from the employee’s wages of the employee’s status change.
• Arrange for issuance of a final Form W-2 at year’s end (or within 30 days if the employee requests it sooner).
FINAL PAY AND ACCRUED LEAVE A departing employee is entitled to be paid at the agreed rate for all work actually performed up to the time of termination. The employer cannot withhold wages on the ground that the employee failed to give two weeks’ or some other specified notice before quitting. Nor can the employer dock the wages of a fired employee on the theory that the employee’s work quality was unacceptable (but see the discussion of the faithless servant doc- trine in Chapter 19).
State law also specifies when a departing employee must be paid. In some states, the final paycheck does not need to be issued until the next regular payday. In others, the departing employee must be paid immediately or within a few days of termination, depend- ing on the circumstances of termination.
The employer may deduct from the employee’s paycheck any claims the employer has against the employee, so long as the employee has agreed in writing to the deduction. Suppose, for example, that the employee borrowed money from the company, to be repaid out of future paychecks. Or suppose the employer advanced unearned leave on the understanding that, in the event of an early termination, the employee would make reimbursement out of final wages. In these examples, an appropriate setoff against the employee’s paycheck is permitted. However, the employer should not deduct the amount of a disputed claim or any other amount not agreed to by the employee, since doing so may vio-
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Terminating the Relationship 65
late wage and hour laws. Nor should any deductions reduce the employee’s pay below the minimum wage.
Is a terminating employee entitled to have his or her accrued but unused leave cashed out on termination? In many states the employer may adopt a policy of not cashing out accrued leave, or cashing it out only under certain circumstances. For example, the employee handbook might say that accrued leave is not cashed out if the employee quits without giving specified advance notice, or if the employee is fired for cause. Absent such a policy, however, state law may treat accrued leave as part of the employee’s compensa- tion and require that it be cashed out.
The question of cashing out accrued leave is limited to vaca- tion or paid-time-off accruals. Other forms of paid leave—such as sick leave and bereavement leave—are normally not cashed out on termination.
Garden Leave Many companies have a policy requiring employees to give at least two weeks’ advance notice of quitting. Of course, if an employee quits without giving the notice, he or she cannot be forced to work for the two-week period. (A policy of forfeiting accrued leave for failure to give the requisite notice, if permitted by state law, may well reduce instances of abrupt termination.) But what if the employee does give two weeks’ notice? Must the employer keep the employee on for the entire notice period?
At-will employees may be fired at any time without cause. So in theory, on receipt of two weeks’ notice, the employer could in turn fire the employee immediately. Doing so, however, will undermine the employer’s notice requirement by discouraging other employ- ees from complying. A better policy is to place the employee on so-called garden leave—keeping the employee on the payroll for the full two weeks, but relieving him or her of all duties and telling him or her not to report to work. Figure 4.1 contains a suggested hand- book provision for garden leave.
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The SHRM Essential Guide to Employment Law66
FIGURE 4.1: GARDEN LEAVE PROVISION
Upon giving or receiving notice of termination, the company reserves the right to relieve the employee of all duties and place him or her on garden leave during the notice period.
TERMINATION FOR CAUSE Sometimes an employer is willing to give up the right to termi- nate an employee at will and offer job security in the form of an employment contract. For example, the labor market may be tight, and the employer may be having trouble attracting qualified candi- dates, a particular position may just be difficult to fill, or a desirable candidate may be of interest to the competition.
One way to promise job security is to offer employment for a specified period of time as long as the employee’s performance remains satisfactory or to agree that employment can be termi- nated only for cause or good cause. When an employer makes such an offer to a prospective employee, and the employee accepts the offer and begins work, the employer is bound by the arrangement. The employee is no longer at will, and he or she cannot be dismissed except as stated in the contract.
ALERT! An employer may unintentionally be limited to terminating only for cause as a
result of statements inadvertently made in the employee handbook. (See Chapter
3 for tips on drafting employee handbooks to reduce this risk.)
What does cause or good cause mean in this context? The par- ties to a contractual arrangement are free to spell out in their contract exactly what they mean by the term. For example, if the employee needs a particular license to work (such as a plumb- ing license), suspension or revocation of the license might be listed as a cause for termination. Convictions for certain types of crimes, insubordination, drunkenness, and physical assaults on customers or fellow employees might also be on the list. There
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Terminating the Relationship 67
may also be explicit do’s and don’ts set out in an employee handbook or job description.
The employment relationship itself implies certain duties on the part of the employee, including a duty to show up for work in reasonably fit condition, a duty to have and exercise reason- able skill in performing the job, a duty of loyalty and honesty, and a duty to refrain from insubordinate and threatening behav- ior. A substantial breach of any of these implied duties is cause for termination.
In the absence of a definition or clear indication of the mean- ing of cause in a contract of employment or an employee hand- book, the courts have defined the term along the following lines: “Fair and honest reasons, regulated by good faith on the part of the employer, that are not trivial, arbitrary, or capri- cious, unrelated to business needs, goals, or pretextual. A rea- soned conclusion, in short, supported by substantial evidence gathered through an adequate investigation that includes notice of the claimed misconduct and a chance for the employee to respond.”
In a Wyoming case, the court adopted a definition similar to the above. The court went on to say that, in determining whether an employer had cause for termination, the question is not, “Did the employee in fact commit the act leading to termination?” Rather, the question is, “Was the factual basis on which the employer concluded a dischargeable act had been committed reached honestly, after an appropriate investigation and for reasons that are not arbitrary or pretextual?” In other words, the courts are not going to second-guess an employ- er’s business judgment so long as the decision to terminate is reached honestly and fairly.
ALERT! If the employer is unionized, the definition of cause is in the collective bargaining agree-
ment and termination procedures may be different.
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SEVERANCE PAYMENTS AND RELEASES Some employment contracts, particularly those with higher-paid executives, provide for severance payments on termination. The payment may be conditioned on the employee’s being termi- nated without cause or quitting with good reason, or it may be triggered by a change in ownership or control of the company. The payment should also be conditioned on the employee’s sign- ing a general release of claims. (Severance payments to high-level executives are sometimes called golden parachutes.) Absent such a contractual obligation, employers are not required to pay sev- erance, even to long-time, faithful employees.
In a reduction-in-force termination, the employer might nev- ertheless pay severance voluntarily as a reward for many years of service or to maintain morale among remaining employees. In an effort to reduce labor costs, an employer might also use an offer of severance as an incentive for employees to voluntarily quit or retire.
An employer’s offer of severance is typically accompanied by a request that the employee release any claims he or she might have against the employer. A release in these circumstances would be unenforceable if the employee derives no additional benefit beyond what he or she is already entitled to, so the severance serves as consideration in exchange for the release.
A release is typically broadly worded to cover any possible claims that might arise out of the employment relationship and its termination, including claims under federal and state discrim- ination laws, possible violations of mandatory leave laws, defa- mation, and invasion of privacy. To be effective under the Age Discrimination in Employment Act (ADEA), the release must comply with detailed statutory requirements, including giving the employee 21 days to consider the release and an additional seven days after signing to change his or her mind. When the release is part of an exit incentive package offered to a number of employees, the 21 days extends to 45, and the employer must
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Terminating the Relationship 69
provide additional information about the ages and job categories of employees who are and who are not being offered the exit incentive. (See Chapter 16 for more on age discrimination and the ADEA.)
Certain provisions should not be included in releases, would be unenforceable if included, and might even be considered retal- iatory. For example, the employee should not be asked to waive his or her right to file a charge with the EEOC, state or local human rights agencies, or the National Labor Relations Board. Nor should a release prohibit the employee of a public company from filing a whistle-blower complaint with the Securities and Exchange Commission (SEC). Employees of U.S. government contractors and federal grant recipients have a right to report waste, fraud, and abuse. A nondisparagement provision (by which the employee agrees not to make negative statements about his or her employer) or a confidentiality provision may be so broadly worded as to interfere with these statutory rights.
A release should specify how the severance payment is to be treated and reported for tax purposes. Since the payment is nor- mally in consideration of the employee’s previous work, it will be treated as wages subject to withholding and payroll taxes and reported as W-2 income. But in limited circumstances, when a claim of discrimination or other law violation has actually been made, the parties may agree that a portion of the severance is in settlement of an emotional distress claim—a taxable payment reported on Form 1099, but not subject to withholding or pay- roll taxes.
ALERT! Depending on how they are structured, severance payments could be deemed nonqual-
ified deferred compensation under Internal Revenue Code §409A, triggering unintended
tax consequences for the departing employee and a claim of misrepresentation or breach
of contract against the employer. (Nonqualified deferred compensation plans are dis-
cussed in Chapter 9.)
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CONSTRUCTIVE DISCHARGE When the law looks behind the form of a transaction to discov- er its true substance, it uses the strange term constructive. In a constructive discharge, it may appear that the employee quit, but because of the underlying circumstances, the law concludes that he or she was fired.
Take, for example, employees who are told that unless they quit, they will be fired. It is easy to see why the law would view that as an involuntary termination. An employer’s request for a resignation will be treated the same way.
But the concept of constructive discharge goes beyond the quit-or-be-fired scenario. When an employer permits working conditions to become so intolerable that a reasonable person would quit, an employee who actually does quit rather than suffer the conditions will be deemed to have been fired. To illustrate, suppose serious safety hazards exist at the workplace that the employer knows about but refuses to fix. Or suppose a minority employee is subjected to severe and pervasive racial harassment by supervisors and fellow employees.
Under certain circumstances, a change in title or duties could amount to a constructive discharge. For example, the president of a company, whose contract specifies that he or she is the chief executive officer, might be able to claim constructive discharge on being required to report to the newly appointed chair or being stripped of some of his or her executive authority, even though the president’s salary remains the same.
The point of a constructive discharge is that an employer will be held liable to the same extent as if it had directly fired the employee. If there was a contract of employment and insuffi- cient grounds for termination, the employer will be answerable for breach of contract. And in the racial harassment example given above, the employer can be charged with illegal racial discrimination.
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Terminating the Relationship 71
ALERT! Employer liability for harassment is not dependent on the employee actually quitting.
Merely subjecting an employee to severe and pervasive harassment can constitute illegal
discrimination. (See Chapter 15 for more on harassment.)
RETALIATION Most federal and state laws that grant statutory rights to employees go on to prohibit employers from retaliating against their employees for exercising those rights. Examples of rights include the following:
• federal and state nondiscrimination laws • federal and state wage and hour laws • employee benefit plans governed by the Employee Retirement Income Security Act
• federal labor laws • federal and state workplace safety laws • federal and state protected leave laws • state workers’ compensation laws • whistle-blower laws, such as the False Claims Act that encourages employees to report government fraud
• federal corporate ethics laws, such as the Sarbanes-Oxley Act
These statutes effectively modify the at-will employment rela- tionship by prohibiting an employer from terminating or other- wise retaliating against an employee, despite the employee’s at-will status.
Retaliation claims sometimes become the tail wagging the dog. In the discrimination arena, for example, an employee may have a weak or improbable claim of race or sex discrimination, but when the employee complains, the employer responds by firing the employee. In effect, the employer has converted a weak discrim- ination claim that the employee would probably have lost into a strong claim of retaliation that the employee will likely win.
While the acts constituting retaliation must be sufficiently adverse to dissuade a reasonable employee from pursuing a claim
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of discrimination, they do not need to be employment-related. That is, the retaliation need not involve firing, demotion, undesir- able transfer, or similar job-related punishment, so long as it would likely discourage the ordinary employee from exercising his or her legal rights. As the Supreme Court said in Burlington Northern & Santa Fe Railway Co. v. White, “An employer can effectively retal- iate against an employee by taking actions not directly related to his employment or by causing him harm outside the workplace.”
CASE STUDY: RETALIATION In a federal appeals court case, a father and son were both employed by the same organization. When the father complained of discrimination, the employer retaliated by firing the son. The court said that form of retaliation is also illegal under federal nondiscrimination laws, pointing out that to retaliate against a man by hurting a member of his family is an ancient method of revenge and is not unknown in the field of labor relations.
WHISTLE-BLOWER REGULATIONS Persons who go public with violations of law by their employers, particularly violations involving fraud against the government, are known as whistle-blowers. In the absence of specific statutory pro- tections, whistle-blowers may find themselves out of a job with little right to complain. A number of jurisdictions have decided, however, that whistle-blowers should receive some limited protection.
A Civil War-era federal statute known as the False Claims Act per- mits anyone who learns about fraud against the U.S. government to file a lawsuit in the name of the government. For example, suppose a computer company that has a contract to provide programming services to the U.S. Department of Treasury overbills for time spent in writing a software program. If a disgruntled company employee learns of the overbilling and files suit against the company under the False Claims Act, a provision of the act prohibits the company
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from firing or otherwise retaliating against the employee. The act provides the employee with an incentive to sue by allowing him or her to collect a percentage of any recovery from the suit.
Some states have enacted their own whistle-blower laws protect- ing employees who disclose fraud at the state level.
The Dodd-Frank Act authorizes the SEC to pay rewards to indi- viduals who provide original information that leads to successful SEC enforcement action. Employees of public companies who vol- untarily provide information of securities violations and who are not otherwise required by law to report such violations may recover substantial whistle-blower rewards. (Press reports say that between 2011 and 2016, the SEC awarded approximately $149 million to some 41 whistle-blowers under this program.) When an employee makes such a report under the reasonable belief that the information relates to a possible securities law violation, the employer is prohib- ited from retaliating against the employee or otherwise interfering with communications between the employee and the SEC.
Employees of U.S. government contractors, subcontractors, and grantees are also protected by federal law when reporting waste, fraud, and abuse both to government officials and internally to com- pany officials. (See Chapter 22.)
ABUSIVE DISCHARGE An important variation on the retaliation theme arises when no stat- ute expressly prohibits retaliation, but when a significant, well-es- tablished public policy is involved. When a firing tends to undercut such a policy, courts may characterize the discharge as abusive or wrongful and allow the employee to recover damages against the employer despite an at-will employment relationship.
To illustrate, suppose an employee is instructed to make a delivery using the company truck. The employee points out that the truck’s safety inspection sticker has expired and that it is illegal to drive a truck with an expired sticker. In addition, brake repairs are needed for the truck to pass reinspection. The employer’s supervisor insists
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that the delivery be made anyway, and when the employee refuses, he is fired. Many states would view that as an abusive discharge, because it undercuts an important state highway safety policy.
There is no clear answer as to what public policies will override the at-will employment doctrine. The doctrine of abusive discharge has been developed (and is still developing) on a case-by-case basis as suits come before the courts. In addition, judges’ views of what is and what is not important and well-established public policy differ from state to state and over time.
One consistent theme has emerged from the cases: firing an employee for refusing to commit an illegal act or for fulfilling a duty required by law is abusive and will provide grounds for a wrongful discharge suit in most states. Another theme involves an employee’s exercise of rights granted or protected by law. For example, employ- ees covered by workers’ compensation statutes have a right to file claims for work-related injuries and cannot be fired (or otherwise disciplined) for doing so. Refusal to take a lie detector test is also not grounds for firing, since in most circumstances administering the test would be illegal.
Things become less clear when the employee is engaged in con- duct that is permitted by law or seen as socially desirable but is not necessarily protected by law.
CASE STUDY: RIGHT TO CONSULT WITH COUNSEL Suppose a dispute arises between employer and employee, and when the employee threatens to contact a lawyer for advice regarding the dispute, he or she is fired. Is the right to consult with counsel so fundamental that termination for exercising that right violates public policy?
A 1994 federal case applying Iowa law concluded that termination under those circumstances did violate Iowa public policy. An Ohio state court reached the same conclusion. But a decision by Maryland’s highest court in 2003 ruled otherwise, saying that while access to counsel may be favored, there is no violation of any clear mandate of
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Terminating the Relationship 75
Maryland public policy in firing an employee for involving counsel in an employment dispute.
Knowing how to proceed in the face of uncertain and chang- ing rules can be difficult for an employer. At the least, a prudent employer should hesitate to fire an at-will employee for engaging in an activity that is protected or encouraged by the law or that is usu- ally considered of value to society, or for refusing to engage in illegal conduct or conduct that is usually considered immoral or otherwise improper.
ALERT! In a number of states it is illegal to fire or discipline an employee for his or her lawful,
off-duty conduct. In Washington, D.C., for example, an employer cannot discriminate
against an employee who smokes (although the employer has no obligation to allow
smoke breaks during working hours).
DEFAMATION LIABILITY It may be surprising to learn that one of the more significant liabili- ties an employer faces is defamation. In fact many abusive discharge cases include claims of defamation.
To defame someone is to make a false statement of fact that injures the person’s reputation. A written defamatory statement is libelous; a spoken defamatory statement is known as slander. In order for a person to have a good claim of defamation, the false statement must be published—communicated either in writing or orally to a third person. Generally, to be defamatory the statement must be one of fact, such as, “John stole office supplies for his personal use.” Mere statements of opinion, such as, “John does not use office supplies efficiently,” are not usually defamatory.
Conduct can also amount to defamation. Suppose that after being informed of a termination, an employee is escorted off the employer’s premises by senior management. Even though the employee may feel embarrassed, that conduct alone probably
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does not constitute a defamatory publication. But suppose that instead of being escorted by management, the company uses its security guards who, in the process, search the employee and question him or her at length about suspected stealing, all in front of co-workers. That conduct could give rise to a good def- amation claim.
Privileged Statements A statement that might otherwise be defamatory can sometimes be privileged or protected by law from a claim of defamation. Privileges come in two types: absolute and conditional (sometimes called qual- ified). When a member of Congress makes a speech on the House floor, for example, the statements are absolutely privileged, meaning that he or she can never be sued for defamation, no matter how offensive the words might be. In contrast, employers that give ref- erences for former employees, that issue warnings and termination letters, and that offer candid employee evaluations are entitled only to a conditional privilege.
The employer’s privilege is conditional because it can be lost if the employer handles the communication in any of the following ways:
• issues it without any legitimate business purpose • issues it with knowledge of its falsity or with a reckless disregard for its truth or falsity
• issues it with malice, spite, or ill will toward the employee • disseminates it beyond those who have a business need to know
To illustrate, suppose an employee is terminated, finds a new posi- tion, and after starting work at the new job, the old employer con- tacts the new employer and, without being asked, relates derogatory information about the new employee. This blacklisting of a former employee will be compelling evidence of malice and will also void any privilege defense.
Unfortunately for the employer, issues of legitimate business pur- pose, malice, spite, ill will, and excessive dissemination usually turn
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on the specific facts of each case. As a result, even weak defamation claims may result in protracted and expensive court proceedings.
Job References Job references present a special problem. On the one hand, if the employer provides highly detailed information about a former employee, including factual statements and opinions that go beyond what the prospective new employer specifically asked, the employer runs a substantial risk of a defamation or an invasion-of-privacy claim. On the other hand, if the employer undertakes to provide a reference but then provides a skimpy or inaccurate one, or leaves out favorable information, a defamation claim may loom as well.
ALERT! Giving a bad reference for a former employee in retaliation for the employee’s filing a
discrimination claim is itself illegal discrimination under Title VII. (See Chapter 14.)
Rather than run these risks, some employers have adopted a neu- tral reference or no-comment policy under which they do no more than confirm dates of employment and perhaps title and salary. While such a policy may be the safest for individual employers, it has a social cost in restricting the amount of pertinent information avail- able to prospective employers. Less qualified workers may get jobs that more qualified applicants would have received had full informa- tion been available. Worse, persons who would otherwise be reject- ed because of the danger they pose to the public may not be weeded out in the application process.
A middle ground is to adopt a no-comment policy but to make an exception when the employee or former employee approves in writ- ing the content of a proposed reference letter, authorizes its issu- ance, and releases the employer from liability for issuing the letter.
Whatever policy you adopt, be sure it is communicated to all employees and that it is faithfully followed. The policy should also
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The SHRM Essential Guide to Employment Law78
identify those persons within the company who are authorized to give out reference information, and it should prohibit everyone else within the company from doing so.
Some states offer a measure of protection for employers that provide information to prospective employers about an employ- ee’s or former employee’s job performance or reason for termi- nation. In these states, by statute, mere negligence in providing an erroneous reference is not sufficient to support a defamation suit. Instead, the unhappy employee must show that the employ- er acted maliciously or intentionally in disclosing false reference information.
Compelled Self-Publication A bizarre twist on the law of defamation deserves mention. Sup- pose an employer terminates an unsatisfactory employee and tells the employee the reason for the termination. Further, suppose the employer tells no one else about the reason and, consistent with the employer’s no-comment policy, confirms only the dates of employment, job title, and salary to a prospective new employ- er. No defamation claim could possibly be brought, right?
Unfortunately, no. Some courts have adopted a doctrine known as compelled self-publication, which holds that since the employee must honestly tell a prospective employer about the reason given for the termination, the employee has no choice but to defame himself or herself and may therefore sue the former employer. Fortunately, the doctrine of compelled self-publication is not widely recognized.
ALERT! Giving a favorable but inaccurate reference may expose an employer to third-party
liability. For example, if a former employer is asked for a reference by a subse-
quent employer but fails to mention the employee’s dangerous propensities, and the
employee later causes injury or damage, the former employer may be liable for the
injury or damage.
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CASE STUDY: LIABILITY FOR MISLEADING REFERENCE An anesthesiologist in Louisiana had a drug problem. After he failed to answer a page while on duty, he was fired. When the anesthesiologist later sought hospital privileges in Washington state, his former colleague wrote a glowing letter of recommendation, saying he was an excellent anesthesiologist and was capable in all fields of anesthesiology. The letter concluded, “I highly recommend him.” No mention was made of the drug problem. After being hired by the hospital and while working under the influence of drugs, the anesthesiologist permanently injured his patient. The hospital’s insurance company paid millions to the patient and then successfully sued the former colleague who had given the misleading recommendation.
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS Another ground on which an employer can be held liable is inten- tional infliction of emotional distress. In general, if an employer (or anyone else, for that matter) acts in an extreme or outrageous way and either intentionally or recklessly causes someone else to suffer severe emotional distress, the victim of such conduct can recover damages in court. Claims for intentional infliction of emotional dis- tress are sometimes coupled with charges of harassment based on sex, race, or other protected categories.
CASE STUDY: EMPLOYER POTENTIALLY LIABLE FOR INTENTIONAL INFLICTION In a strange case involving Georgetown University in Washington, D.C., an employee of the university claimed that her supervisor placed two electrically operated noisemakers outside the supervisor’s door aimed at the employee’s workplace. According to the employee, the devices emitted an unbearably loud, static-sounding, piercing, humming, and droning noise every hour of the workday for some nine months, causing the employee extreme emotional distress. Despite her complaints, the
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The SHRM Essential Guide to Employment Law80
university did nothing. The U.S. Court of Appeals for the D.C. Circuit ruled that the employee stated a good claim for intentional infliction of emotional distress and that the case should not have been dismissed before trial.
EMPLOYEE DUE PROCESS We so often hear terms like due process, freedom of speech, freedom of the press, and freedom of information that we may be tempted to think these rights apply in all our relationships. Not so. The consti- tutional right of due process limits the ways in which the government can deal with us. Our free speech right only prevents government censorship. Federal and state freedom-of-information acts and sun- shine laws guarantee us access only to certain government informa- tion and proceedings.
Except for government employees, the employment relationship generally does not include employee due process rights. An at-will employee can be arbitrarily disciplined or fired without any right to a hearing, without any opportunity to explain or justify the suppos- edly offending conduct, and without any opportunity to confront the person who supposedly reported any offending conduct. (Of course, arbitrariness is seldom the best way to manage employees.)
There are a few limited exceptions to an employer’s ability to act out of sheer arbitrariness. An employer cannot, for example, dis- criminate on the basis of race, ethnicity, gender, or other irrelevant characteristics; an employer cannot discharge an employee in vio- lation of a protected leave law or public policy; and an employer cannot act contrary to its contractual obligations.
When an employee does have an employment contract, or when an employee is a member of a union that has a collective bargain- ing agreement, an employer’s right to discipline or discharge the employee is typically limited by the contract to for cause termina- tions. The contract may also provide a grievance procedure, leading to binding arbitration, should an employee dispute the employer’s personnel action. Even absent an employment contract, statements
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Terminating the Relationship 81
in an employee handbook dealing with disciplinary procedures may rise to the level of a contractual obligation.
Fifth Amendment The Fifth Amendment to the U.S. Constitution grants each person the right against being “compelled in any criminal case to be a wit- ness against himself.” In other words, no one may be compelled, under threat of being held in contempt of court, to answer ques- tions under oath when the answers might help convict the person of a crime. Although the amendment is limited to compelled testimo- ny in criminal cases, the Supreme Court has held that the protection applies in a range of situations in which testimony is coerced, includ- ing civil cases, grand jury proceedings, depositions, and appearances before Congress.
The privilege is limited to testimony and does not extend to com- pelled production of physical evidence such as handwriting exem- plars and blood specimens. Nor does the privilege protect documents from compelled disclosure, unless by the very act of producing the document the person is admitting the existence or possession of the document and thereby incriminating himself or herself. (The Fourth Amendment’s right against unreasonable searches and sei- zures is discussed in Chapter 18.)
Corporations and other organizations have no Fifth Amendment privilege. So if a corporation is served with a subpoena for records, it has no basis, at least under the Fifth Amendment, to resist the sub- poena and refuse to produce the records. While corporate officials can claim the privilege to protect themselves from incrimination, they cannot claim privilege to protect their corporate employer.
If employees are invited or required to testify, an employer cannot in any way encourage employees to claim the privilege, threaten them should they fail to do so, or promise rewards for doing so. This type of conduct could amount to an obstruction of justice—a serious crime that will likely get the prosecutor’s atten- tion. Employers also need to avoid indirect encouragement. This
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The SHRM Essential Guide to Employment Law82
can arise, for example, when the employer urges employees to be represented by the same attorney who represents the compa- ny, and the attorney, in turn, advises the employees to claim the privilege.
Employers are generally free, however, to require their employ- ees to testify, and to discipline them if they refuse and claim the privilege. Remember that the Fifth Amendment is designed to protect against government, not private, coercion.
ALERT! In jurisdictions in which the abusive discharge exception to the at-will employment
doctrine is unsettled, employers should be cautious in firing an employee for claiming
the privilege. It is conceivable that a court would find a public policy protecting an
employees’ Fifth Amendment rights.
DOWNSIZING AND MASS LAYOFFS Terminating an employee is among the most difficult tasks facing any employer. When a decision is made to lay off a significant por- tion of the workforce, the difficulty and the legal risks are mul- tiplied. Particularly in tough economic times, laid-off employees will have a more difficult time finding new employment, so their incentive to sue is even greater.
QUICK TIP When an exit incentive program is made available to a class or group of employees,
coupled with a severance agreement and release, the Older Workers Benefit Protection
Act requirements may be triggered. (See Chapter 16 for more details.)
While the legal risks associated with a mass layoff can never be entirely eliminated, employers can take steps to reduce their expo- sure by doing the following:
• considering other cost-saving alternatives to a layoff, such as offering wage rate or hour reductions to employees
• developing and documenting the business reasons for the layoff
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• focusing on positions, not people, to be eliminated • hiring an outside expert to help decide what positions to eliminate
• making sure that layoff decisions are not influenced in any way by discriminatory factors, such as race, gender, or age
• using an outside expert to review the unintended impact along race, gender, and age lines once tentative layoff decisions have been made
• offering severance packages, early retirement packages, or other exit incentives in exchange for a release of all claims
• following customary exit interviews and procedures for each individual being laid off
Worker Adjustment and Retraining Notification The federal Worker Adjustment and Retraining Notification Act (WARN Act) requires an employer with 100 or more employees to provide notification 60 days in advance of a planned plant clos- ing or mass layoff. In determining whether an employer meets the 100-employee floor, only full-time employees are counted, unless part-time employees in the aggregate work at least 4,000 hours per week, in which case part-time employees are counted as well.
A mass layoff for WARN Act purposes is a layoff of at least 50 employees at a single site that amounts to at least 33 percent of the employees at that site. So, if an employer has 1,000 employees at a given site and lays off 100, that would not be a mass layoff.
The 60-day notice must be given to the affected employees, to the state dislocated worker unit, and to the chief elected official of the local government where the plant closing or layoff is to occur.
The WARN Act recognizes that in some circumstances employ- ers may not be able to give the requisite notice. The act’s unfore- seeable business circumstances exception is applicable when a similarly situated employer exercising commercially reasonable business judgment would not have foreseen the closing. So long as an employer is exercising reasonable business judgment, the
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The SHRM Essential Guide to Employment Law84
employer will not be held liable under the WARN Act for failing to predict economic conditions that may affect demand for the organization’s products or services.
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