Employment Termination and Employer Risk Management

Human Resource Risk Management begins with the establishment of compliant policies and the consistent documentation and enforcement of those policies. Termination of employment presents potential risks that can understood evaluated and managed.

Most employees in Kentucky are employees at will but employment contracts, if any, may alter or expand the at -will nature of employment relationships. Terminations usually involve the most direct risk to the employer. Insurance coverages such as ELP policies may cover the cost of defense but rarely provide coverage for the underlying claim.

Pre-termination risk analysis involves reviewing documentation, anticipating particular claims and potential administrative charges, planning the termination process and evaluating mitigation of risk such as severance agreements, Alternative Dispute Resolution mechanisms (internal appeals, mediation and arbitration) and enforcement of post termination covenants such as non-competition, non-solicitation covenants and confidentiality agreements.

Post Termination, unemployment claims or administrative charges such as DOL or EEOC charges and proceedings require the employer to organize and prepare its evidence of “misconduct” and nondiscriminatory motivation but they require employees to provide a basis for his or her claim and any documentation that may support the claim.

Employers may file a “Notice of Contest” to any unemployment claim and the Claimant may be disqualified by virtue of Misconduct or excessive absenteeism. Misconduct is more than just inefficiency and involves refusal to comply with a reasonable work rule or demand. Absenteeism that is not the fault of the employee will not disqualify a Claimant. The ultimate decision of the Unemployment claim is not admissible in a subsequent procedure but the testimony given under oath may be used for impeachment in a subsequent proceeding such as a lawsuit or EEOC charge.

Employers should carefully evaluate the chances of success and any downsides of opposing Unemployment claims. Employers are entitled to participate in the UI proceedings by filing a Notice of Contest.

Severance Agreements typically require a waiver of all claims by the employee in exchange for additional consideration (money, benefits, positive references etc. ) but do not waive the right to pursue UI claims unless the employer agrees to refrain from filing a Notice of Contest.

Employer risk management also involves and analysis of any potential claims that the terminated employee may assert including FMLA and discrimination claims as well as wage claims including payment of “wages”, commissions and other benefits and an analysis of any risk associated with the improper use of employer confidential information and property.

The termination itself should be carefully scripted, controlled and documented. The intention to enforce any post termination covenants such as non competes should be may clear. General discussion for the reasons for the termination should be minimal, consistent with the at-will status of the employee.

All documentation, including any witness statements and personel records should be carefully preserved and should be available for use in defending any post termination claim or administrative charge.