I can’t say how often I have been called the first time an
entrepreneur has to fire someone. BTW, I get that call from seasoned
execs as well. Nobody likes to do it and everyone is nervous that they
will mess up in light of all the applicable rules.
One of my partners, Jonathan Keselenko,
who practices in the Employment area, developed a nice simple
termination checklist that I have found useful. One thing about this
list is that it applies to situations where the employee is an “employee
at will.” If there is an employment contract, you will also need to
review the contract to make sure you meet its requirements as well.
Here is the list, with some additions from me:
EMPLOYMENT TERMINATION CHECKLIST
- Have a good reason for the termination, and make sure that the reason is consistent with the documentation.
- Provide the employee with a truthful explanation for the decision.
For example, if the employee is being terminated for poor performance,
do not characterize the termination as a layoff.
- Don’t be gratuitously cruel. You should inform the employee of the
reason for the termination, but you do not need to convince him that you
are right or win a debate.
- Conduct the termination in a private and respectful way.
- If you any concerns about litigation, two people from the company
should be present at the termination meeting, and both should take
- Pay: be prepared to pay all compensation due, including unused but accrued vacation pay.
- Explain that the employee will receive notice about continuing group
health coverage under the Comprehensive Omnibus Budget Reconciliation
Act of 1985 (“COBRA”). Explain that all other benefits will cease as of
the termination date.
- Provide state-issued information about filing for unemployment, even if you think the employee is not eligible.
- Collect all company property from the employee. Consider having the
employee sign an acknowledgement form that he has returned everything.
- Allow the employee to collect any personal belongings before leaving the work premises.
- Block the employee’s access to the Company’s premises and electronic access to the Company’s computer systems and email.
- If the employee is listed on your company website, remove him from the site.
- Remind the employee of any restrictive covenants (by this I mean
noncompetes, nonsolicits, confidentiality and inventions agreements) and
provide an additional copy.
- Think about how you intend to communicate the employee’s departure
to customers and other employees, if at all. Who needs to know and
why? Make sure you have a legitimate business reason for the
- Think about whether you are willing to give the employee a reference.
- Inform the employee about options that may be exercised (or
restricted stock that may be repurchased by the Company). Be prepared
to repurchase restricted stock (if you intend to). The repurchase
agreement may not be “self-executing” with the result that you may have a
time frame for acting.
Dave Broadwin is a Partner with the Emerging Enterprise Center at Foley Hoag. You can find this post, as well as additional content on the Emerging Enterprise Center Blog. You can also follow Dave (@broadwin) on Twitter by clicking here.