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Human Resource Management

Fifteenth Edition

Chapter 12

Internal Employee Relations

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Learning Objectives

12.1 Explain the concept of employment at will.

12.2 Describe the concept of discipline and summarize disciplinary action.

12.3 Discuss employment termination of various occupational groups.

12.4 Explain the use of ombudspersons and alternative dispute resolution.

12.5 Describe transfers, promotions, resignations, and retirements as factors involved in internal employee relations.

Internal Employee Relations Defined

Internal employee relations (I E R) comprise the human resources (H R) management activities associated with the movement of employees within the company

I E R also speaks to the relationship between employees and employers within the company

To ensure that workers with the proper skills and experience are available at all levels, constant and concerted efforts are required to maintain good internal employee relations. Internal employee relations (IER) comprise the human resources (HR) management activities associated with the movement of employees within the company and speaks to the relationship between employees and employers within the company. These activities may include the following:

Discipline

Termination

Downsizing

Demotion

Transfer

Promotion

Resignation

Retirement

Employment at Will

Employment at will is a legal doctrine that specifies that employment may be terminated by either the employer or employee for any reason

Exceptions to employment at will

Permitting employees to bring claims based on representations made in employment handbooks (implied contract)

Prohibiting terminations in violation of public policy

Terminating employment without just cause would be considered an act of bad faith and unfair dealing

Employment at will is an unwritten contract created when an employee agrees to work for an employer, but no agreement exists as to how long the employment will last. “The employment-at-will doctrine avows that, when an employee does not have a written employment contract and the term of employment is of definite duration, the employer can terminate the employee for good cause, bad cause, or no cause at all.”

Essentially at-will employees can quit any time they want and a company can terminate an at-will employee for no reason. Certainly there are numerous hiring standards to avoid such as race, religion, sex, national origin, age, and disabilities. Notwithstanding various employment standards to avoid that are based on laws, court decisions, and executive orders, approximately two of every three U.S. workers depend almost entirely on the continued goodwill of their employer. Individuals falling into this category are known as “at-will employees.”

There are three exceptions to the at will doctrine which have been established by courts of law. The first is an implied contract exception. Implied contracts can be formed through an employer’s representation of continued employment in writing or through oral statements. Written statements made in employment handbooks that specify continued employment based on continued satisfactory job performance are an example of an implied contract.

Second, employers generally cannot exercise at-will termination if such a termination violates a state’s public policy. For example, workers’ compensation programs are governed by rules in every state. Terminating an employee for filing a workers’ compensation claim after becoming injured while on the job cannot be made on at-will grounds.

Third, only a few states recognize something referred to as an implied covenant of good faith and fair dealing into the employment relationship. Terminating employment without just cause would be considered an act of bad faith and unfair dealing. It would be without just cause to terminate a long-service employee who consistently has demonstrated exceptional job performance and follows work rules.

Discipline and Disciplinary Action

Discipline: State of employee self-control and orderly conduct

Disciplinary action: Invokes penalty against employee who fails to meet established standards

Addresses employee’s wrongful behavior, not employee as a person

Should not be applied haphazardly

Not usually management’s initial response to a problem

Normally are more positive ways of convincing employees to adhere to company policies

Discipline is the state of employee self-control and orderly conduct that indicates the extent of cooperation and compliance with an organization. A necessary aspect of internal employee relations is taking disciplinary action when employee conduct goes astray.

Disciplinary action invokes a penalty against an employee who fails to meet established standards. Even though disciplinary action may be unpleasant and fraught with conflict, at times it must be done.

Effective disciplinary action addresses the employee’s wrongful behavior, not the employee as a person. Incorrectly administered disciplinary action is destructive to both the employee and the organization. Thus, disciplinary action should not be applied haphazardly. Disciplinary action is not usually management’s initial response to a problem. Normally, there are more positive ways of convincing employees to adhere to company policies that are necessary to accomplish organizational goals. However, managers must administer disciplinary action at times when company rules are violated.

The Disciplinary Action Process

The word discipline comes from the word disciple. Translated from Latin, it means to teach.

The intent, then, should be to ensure the recipient sees disciplinary action as a learning process. The purpose of disciplinary action is to alter behavior that can have a negative impact on achievement of organizational objectives, not to punish the violator. Thus, the intent of disciplinary action should be to ensure that the recipient sees disciplinary action as a learning process rather than as something that inflicts pain.

The disciplinary action process is depicted in this diagram. It is absolutely crucial that management take a proactive role in establishing and communicating rules if the organization wants to ensure that employees know what to do. After doing that, corrective action may need to be taken when an employee violates a rule. Note that the process includes feedback from the point of taking disciplinary action back to communicating rules to employees. This feedback is critical for the employee to understand whether his or her new behavior is acceptable or not.

Approaches to Disciplinary Action

Hot stove rule

Progressive disciplinary action

Disciplinary action without punishment

Several approaches to the administration of disciplinary action have been developed. Three of the most important concepts are the hot stove rule, progressive disciplinary action, and disciplinary action without punishment.

According to the hot stove rule, disciplinary action should have the following consequences, which are analogous to touching a hot stove:

Burns immediately

Provides warning

Gives consistent punishment

Burns impersonally

Progressive disciplinary action is intended to ensure that the minimum penalty appropriate to the offense is imposed. The progressive disciplinary model was developed in response to the National Labor Relations Act. The goal of progressive disciplinary action is to formally communicate problem issues to employees in a direct and timely manner so that they can improve their performance.

The process of giving a worker time off with pay to think about whether he or she wants to follow the rules and continue working for the company is called disciplinary action without punishment. The approach throws out formal punitive disciplinary action policies for situations such as chronic tardiness or a bad attitude in favor of procedures that make employees want to take personal responsibility for their actions.

The Progressive Disciplinary Approach

This figure illustrates the questions a manager must ask to determine the proper disciplinary action. This process ensures that disciplinary actions are appropriate for the severity of the violation. For repeat violations of a lesser magnitude, there is usually an escalation of disciplinary action. However, major violations, such as assaulting a supervisor or another worker, may justify immediate termination of the employee.

To assist managers in recognizing the proper level of disciplinary action, some firms have established progressive disciplinary action guidelines. Specific guidelines should always be developed to meet the unique needs of the organization. For example, the wearing of rings or jewelry for aircraft mechanics is strictly prohibited due to safety concerns. However, there would likely be no such rule in an office environment. Basically, the rules should fit the needs of the work situation.

Problems in the Administration of Disciplinary Action

Managers often avoid disciplinary action, even when it is in company’s best interest

Many supervisors may be too lenient early in disciplinary action process and too strict later

Proper time and place to administer disciplinary action is crucial

Administering disciplinary action is not a pleasant task, but it is a manager’s job to do. Although the manager is usually in the best position to take disciplinary action, many would rather avoid it. This is partly human nature, but it may also stem from breakdowns in other areas of HR management.

Occasionally, there may be lawsuits involving members of protected groups who claim that the disciplinary action was taken against them because they are members of a protected class. One of the best ways for a company to protect itself against lawsuits claiming discrimination or harassment is to ensure that it has proper, written policies barring unfair treatment of its staff and a system for ensuring that the policies are followed. Disciplinary actions should be fully documented and managers should be trained in how to avoid bias claims.

There should be consistency throughout the process to help the worker understand expectations and the consequences of inappropriate actions. The goal should always be to change behavior in a positive direction.

Finally, when the decision to take disciplinary action against a worker has been made, there is a proper time and place for the meeting, and it should almost always occur in private.

Employment Termination

Just cause: A standard for determining whether to terminate an employee based on a standard

The standard is based on whether an employee violated company policy or work rules and the severity of the violation

Termination is the most severe penalty that an organization can impose on an employee; therefore, it should be the most carefully considered form of disciplinary action. The experience of being terminated is traumatic for employees, regardless of their position in the organization. Not knowing how the terminated employee will react may also create considerable anxiety for the manager. An individual who is terminated may respond with violence or be unemotional in the matter.

Just cause is a standard for determining whether to terminate an employee and the standard is based on whether an employee violated company policy or work rules and the severity of the violation. Employers that embrace the at-will doctrine are not compelled to justify a termination decision. However, in an employment contract, just cause separates the basis for termination from that of a mass layoff because of economic reasons or exercise of at-will rights by requiring a reason for termination.

In union settings, most collective bargaining agreements require just cause for discipline and discharge. If a union files a grievance over the termination of a union member, the employer typically has the burden to show just cause existed for the termination during a labor arbitration hearing. We discuss labor arbitration later in the alternative dispute resolution section of this chapter. In the nonunion settings, just cause is protection for the employer and employee. For example, assume that a company includes a severance pay policy. In most policies, companies withhold severance pay when termination is for just cause. Just cause provides protection to employers by justifying not making severance pay whose termination is for just cause, and it provides protection to employees by justifying receipt of severance pay whose termination does not meet just cause standards.

In 1972, Professor Carroll R. Daugherty, who served as a labor arbitrator, put forth seven tests to help future arbitrators decide whether employee termination or other adverse actions in union settings, such as demotion, met just cause standards. Although established for use by arbitrators, the questions provide useful guidance for management whose companies have just cause employment provisions. Prior to making a decision to terminate an employee, management can review whether the just cause standard will likely be upheld if the termination is subsequently challenged by the former employee.

Did the company give to the employee forewarning or foreknowledge of the possible or probably disciplinary consequences of the employee’s conduct?

Was the company’s rule or managerial [sic] reasonably related to (a) the orderly, efficient, and safe operation of the company’s business and (b) the performance that the company might properly expect of the employee?

Has the company applied its rules, orders, and penalties even-handedly and without discrimination to all employees?

Was the degree of discipline administered by the company in a particular case reasonably related to (a) the seriousness of his employee’s proven offense and (b) the record of the employee in his service with the company?

Did the company, before administering discipline to an employer, make an effort to discover whether the employee did in fact violate or disobey a rule or order of management?

Was the company’s investigation conducted fairly and objectively?

At the investigation did the company “judge” obtain substantial and compelling evidence or proof that the employee was guilty as charged?

Considerations in Communicating the Termination Decision

Monday afternoons

Short meeting, non-accusatory language

Avoid discussion of reasons for termination

Have witness attend the termination meeting

Most of the time, when the decision is made to terminate a worker, the employee should not really be surprised because he or she should have been given explicit warnings and counselling prior to being fired. The worker should have been advised of specific steps needed to take to keep the job. Support should have been provided to show what needed to be done. The worker also should have been given a reasonable period of time to comply with the supervisor’s expectations.

Experts suggest that firings should be on Mondays because it lets the dismissed workers start looking for a job right away. Further, firing a worker at the end of the day leaves little chance for discussion among the remaining staff that may interrupt the workplace. Managers should try to plan the termination and not make it based on emotions. Certain steps should be followed in the termination process. In the first place, the worker’s manager normally and HR representative should personally communicate the decision and present a termination letter. Second, the firing process should be kept short, using non-accusatory language. Third, the manager should not go into the reason for the dismissal and should not answer any questions regarding the decision. In some states, when an employee is involuntarily terminated, the employer must pay all earned and unpaid wages within 24 hours after the employee demands it. To avoid any potential dispute over when a demand was made, most employers simply have the final pay check available at the termination meeting. Also, select a location where there will be no interruptions. If the employee becomes argumentative, managers may need to get up and leave once the worker has been fired. For that reason, a manager’s office is normally not used. Finally, most managers believe that it is best to have a witness because the person being fired may interpret your statements in the worst possible light.

Termination of Employees at Various Levels

Non-managerial/non-professional employees

Middle- and lower-level management and professionals

Executives

Distinct differences do exist regarding non-managerial/nonprofessional employees, executives, and middle and lower-level managers and professionals. Individuals in the category of non-managerial/nonprofessionals are neither managers nor professionally trained individuals, such as engineers or accountants. They generally include employees such as steelworkers, truck drivers, salesclerks, and wait staff. If the firm is unionized, the termination procedure is typically well defined in the labor–management agreement. When the firm is not unionized, these workers can generally be terminated more easily because they are most likely at-will employees. In most nonunion organizations, violations justifying termination are included in the firm’s employee handbook.

Typically, the most vulnerable and perhaps the most neglected groups of employees with regard to termination have been middle and lower-level managers and professionals. Employees in these jobs may lack the political clout that a terminated executive has. Although certainly not recommended, termination may have been based on something as simple as the attitude or feelings of an immediate superior on a given day.

The main concern of executives is pleasing the board of directors because hiring and firing the CEO is a board’s main responsibility. Often the reason for terminating a CEO is that the board of directors lost confidence in the executive. Executives usually have no formal appeal procedure. The reasons for termination may not be as clear as for lower-level employees.

Demotion as Alternative to Termination

Demotions may be used as alternative to discharge

Process of moving worker to lower level of duties and responsibilities, usually involving reduction in pay

Usually spelled out clearly in the labor/management agreement

Demotion is the process of moving a worker to a lower level of duties and responsibilities, which typically involves a reduction in pay. Demotion was previously discussed as a legitimate career option. In this section, demotion is addressed as a potential disciplinary action. If demotion is chosen over termination, efforts must be made to preserve the self-esteem of the employee. This can be accomplished in part by asking the person how he or she would like to handle the demotion announcement. The handling of demotions in a unionized organization is usually spelled out clearly in the labor–management agreement.

Downsizing

Also known as restructuring and rightsizing

Reverse of company growth

Suggests one-time change in organization and number of people employed

Both organizational structure and number of people in organization shrink for purpose of improving organizational performance

Organizations sometimes reduce the number of people in their employ for the purpose of improving organizational performance.

Downsizing, also known as restructuring or rightsizing, is essentially the reverse of a company growing; it suggests a one-time change in the organization and the number of people employed.

Workers should understand when they are hired what system will be used in the event of layoffs. When the firm is unionized, the layoff procedures are usually stated clearly in the labor–management agreement, and seniority is the basis for layoffs. Union-free firms usually use productivity and the needs of the organization as primary factors in the decisions. When productivity is the primary factor, management must be careful to ensure that productivity, not favoritism, is the actual basis for the layoff decision.

Negative Aspects of Downsizing (1 of 2)

Natural grieving period; desire to go back to way things used to be

Layers removed, making advancement in organization more difficult

Workers may seek better opportunities, fearing they may be in line for layoffs

During layoffs, employers and employees must realize that there is a natural grieving period and a desire to go back to the way things were. Friendships may be lost, and there is day-to-day uncertainty about the future. Opportunities for advancement are often eliminated in a downsizing and workers may feel that finding a new job is their best career move. Unfortunately, the best workers are often the first to leave the firm.

Negative Aspects of Downsizing (2 of 2)

Employee loyalty significantly reduced

Institutional memory lost

Remaining workers required to do more

When demand for products or services returns, firm may realize it has cut too deep

For workers who remain after downsizing, their level of loyalty is often much lower than it used to be. Employees also realize that important aspects of institutional memory and corporate culture have been lost along with the departed employees. To make matters worse, the employees who remain are usually faced with additional work. Even worse, when demand for the products or services returns, the company often realizes that it has cut too deeply and has to scramble for ways to get even more work done.

Worker Adjustment and Retraining Notification Act (W A R N)

Requires covered employers to give 60 days advance notice before ordering plant closing or mass layoff with at least 100 full-time employees

Penalties for W A R N notice violations include liability to each affected worker for back pay and benefits for up to 60 days

The WARN Act requires covered employers to give 60 days advance notice before a plant closing or mass layoff that will affect at least 100 full-time employees. There are severe monetary sanctions for failing to comply with the requirements of WARN, unless an unforeseeable business circumstance causes the business to close suddenly.

Outplacement

Laid-off employees are given assistance in finding employment elsewhere

Companies use outplacement to take care of employees by moving them successfully out of company

Firm tries to soften the impact of displacement

In outplacement, laid-off employees are given assistance in finding employment elsewhere. Through outplacement, the firm tries to soften the impact of displacement. Some of the services provided by outplacement include a discussion of pension options, Social Security benefits, expenses for interviews, and wage/salary negotiations. Usually career guidance is provided as well as instructions on how to conduct a self-appraisal directed toward recognizing skills, knowledge, experience, and other qualities recruiters may require in a new job. Career guidance in how to search for a job is usually available, and there is often help available in how to interview in the new employment environment.

Severance Pay

Compensation designed to assist laid-off employees as they search for new employment

No federal law requires severance

Severance pay duration often is based on years of service

Severance pay is compensation designed to assist laid-off employees as they search for new employment.

No federal law requires U.S. companies to pay severance. U.S. employees earn the least amount of severance pay worldwide, regardless of their job level or tenure. When offered, typically one to two weeks of severance pay for every year of service is provided, up to some predetermined maximum. The employee’s organizational level generally affects the amount of severance pay provided.

Ombudspersons

Complaint officer with access to top management

Hears employee complaints, investigates, and recommends appropriate action

Impartial, neutral counselor who gives employees confidential advice

Typically independent of line management and reports near or at top of organization

An ombudsperson is a complaint officer who has access to top management and who hears employee complaints, investigates, and recommends appropriate action. Ombudspersons are impartial, neutral counselors who can give employees confidential advice about problems ranging from abusive managers to allegations of illegal corporate activity. Employers use ombudspersons to help defuse problems before they become lawsuits or scandals.

Alternative Dispute Resolution

Procedure where employee and company agree problems will be addressed by agreed upon means ahead of time

Includes arbitration, mediation, mini-trials, and ombudspersons

Circuit City v. Adams: Supreme Court ruling greatly enhanced employer’s ability to enforce compulsory alternative dispute resolution agreements

Alternative dispute resolution (ADR) is a procedure whereby the employee and the company agree in advance that any problems will be addressed by an agreed-upon means. ADR is based on the use of a jury waiver. Types of ADR include arbitration, mediation, mini-trials, ombudspersons, negotiated rule-making, and neutral fact finding. The purpose of using these alternatives is to resolve conflicts between employer and employee through means that are less costly and contentious than litigation. Mediation tends to be the preferred method.

A Presidential Executive Order requires federal agencies to promote greater use of these alternative dispute resolution techniques. The Supreme Court has upheld that these alternatives are valid and made clear that they apply to the vast majority of employees. This ruling is important because it affirms an employer’s right to use and enforce compulsory arbitration agreements.

Transfers

Transfers serve several purposes:

Necessary to reorganize

Make positions available in primary promotion channels

Satisfy employees’ personal desires

Deal with personality clashes

Provide wide variety of experiences necessary before achieving promotion

Transfers are lateral movements of workers within an organization. A transfer does not and should not imply that person is being either promoted or demoted.

Transfers serve a number of purposes:

First, firms may simply need to reorganize.

A second reason for transfers is to make positions available that are used as “primary promotion channels” because of their visibility or reporting relationships.

A third reason for transfers is that the employee may want a change of location or job responsibility.

Fourth, transfers may also be an effective means of dealing with personality clashes that can’t be amicably resolved.

Finally, due to the limited number of management levels, it is becoming necessary for managers to have a wide variety of experiences in rotational assignments before becoming eligible for a promotion.

Promotion

Movement to higher level in company

One of the most emotionally charged words in human resource management

A promotion is the movement of a person to a higher-level position in the organization. An individual who receives a promotion normally receives additional financial rewards and the ego boost associated with achievement and accomplishment. Yet for every individual who gains a promotion, probably others were not selected. Considerable resentment may result.

Numerous laws, court cases, and executive orders apply when individuals are hired. These same hiring standards apply to promotion decisions. Promotion decisions should not discriminate against employees because of age, race, religion, national origin, color, sex, pregnancy, or disability.

Resignations

Certain amount of turnover is healthy

Most qualified employees are often the ones who resign

Exit interview: Means of revealing real reasons employees leave jobs; conducted before employee departs company

Post-exit questionnaire: Sent to former employees several weeks after leaving organization to determine real reason employee left

Even when an organization is totally committed to making its environment a good place to work, workers will still resign. Some employees cannot see promotional opportunities, or at least not enough of them, and will therefore move on. A certain amount of turnover is healthy for an organization and is often necessary to afford employees the opportunity to fulfill career objectives. Excessive turnover, on the other hand, is usually a reason to investigate further.

An exit interview is conducted before an employee departs the company and is intended to capture the real reason for the resignation.

60 to 80% of employees cite pay as the reason they quit their jobs, but research indicates that only 12 to 15% of employees leave for this reason alone. The rest of the time, the primary reason is something other than salary, but employees are reluctant to burn bridges because they may need a reference from their supervisor. A post-exit questionnaire is sent to former employees several weeks after they leave the organization in an effort to determine the real reasons they left the organization.

Attitude Surveys: Means of Retaining Quality Employees

Seek employee input to determine feeling about such topics as:

Work environment

Opportunities for advancement

Firm’s compensation system

Their supervisor

Training and development opportunities

Organizations often use attitude surveys to gather input from employees on topics such as the work they perform, their supervisor, the work environment, opportunities for advancement, training and development opportunities, and compensation. These surveys are usually conducted to improve management practices, enhance productivity, and increase retention. While the firm’s intent is usually sincere, many employees are reluctant to share their honest opinions, so every effort should be made to guarantee their anonymity in the process.

Offboarding

Involves exit interviews, removing access to company property, and other services involved in workers leaving the company

Numerous risks in termination process

Important to establish fair and uniform process as employees leave company

Offboarding facilitates employee departure from the company by assisting in the completion of exit tasks, including exit interviews, forms completion, the return of company property, and ensuring that employees receive the appropriate extended benefits. Topics such as the worker’s 401(k) and COBRA need to be addressed.

Retirement

Many long-term employees leave the organization through retirement

Phased retirement: Any arrangement that allows employees to move from full-time work to no paid work in stages

More likely to be used among consulting firms, educational institutions, health care, private practice, wholesale/distribution, and other similar organizations

Pension Protection Act permits limited phased retirement by allowing in-service pension plan withdrawals to begin at age 62 rather than 65

Many long-term employees leave the organization by retiring. However, many of today’s employees are not planning for a traditional retirement, in which they have an immediate and abrupt end to their working career at a specific age, such as 65. Some want t work past the normal retirement age because they are healthy and want to keep active; others must work because their retirement account has dwindled and they cannot afford to retire.

Phased retirement is any arrangement that allows people to move from full-time work to retirement in steps. A recent study found that retirees who transition from full-time work into a part-time job have better overall health and fewer major diseases than people who stop working altogether. In addition, 20 percent of employers say that phased retirement is critical to their company’s current HR strategy, and will become increasingly important in the future.