July 20, 2018
DISCIPLINE AND DISCHARGE
A. Pre-Termination Considerations
The following items should be considered prior to the termination of an employee. Not all items will apply to all employees or all circumstances.
- Is the termination is the fault of the employee or the system? If the latter, termination may not solve the problem and may lead to litigation, lowered morale and employee and customer defection.
- Has the employee’s personnel file been reviewed and is there proper documentation supporting the termination decision, including investigation, warnings and witness statements?
- Are the company policies and procedures that were violated by the employee reasonably related to the operation of the business or the employee’s job performance?
- Has the termination process followed company policies and procedures?
- Have other employees been treated similarly under the same or similar circumstances?
- Has the employee been subjected to progressive discipline, or has a determination been made that progressive discipline is not appropriate in the particular circumstances?
- If the employee is within a protected class (e.g., over 40, female, minority, disabled, engaged in protected activity, etc.), have discriminatory motives been ruled out?
- Have any complaints made by the employee to be terminated been fully investigated and has a retaliatory motive for the recommended termination been ruled out?
- Before recommending termination have other options been considered (e.g., restructuring the job; moving the employee’s work location; a demotion, a transfer; new supervision; leave without pay; referral to an employee assistance program; voluntary resignation; or other alternatives)?
- Are there any implied, written or oral contracts with this employee governing the termination decision?
- Has the termination decision been independently reviewed and approved by the Human Resources Department or another third party?
- Has written notice of termination been prepared?
- Has a plan been adopted for informing the employee of his/her termination in a brief and dignified manner?
B. Enforcement of Policies and Procedures
In disciplining or terminating an employee, it is important to follow the procedures outlined in any applicable collective bargaining agreement. Even where the employee is at-will, the employer’s means of discipline or termination may be regulated by certain company statements -- for example, handbooks, memoranda, or employment letters. See Kinoshita v. Canadian Pacific Airlines, Inc., 68 Haw. 594 (1986).
It is important to maximize the employee’s privacy during the disciplinary/ termination session to minimize the risk of any invasion of privacy or defamation claim. For instance, the employer might want to consider conducting the session before or after the workday. The employer might also want to have one other manager (in addition to the person administering the termination) present as a witness.
Additional personnel generally should not be present unless there is good reason. A disciplinary or termination meeting should not involve negotiation or investigation. If it does, not only might the situation devolve into a “Weingarten” scenario (i.e., where the employee is not being outright terminated but is being interviewed for a possible termination), but the manager(s) involved also increase the risk of making an inadvertent comment regarding the discipline which may fuel a subsequent lawsuit. Above all else, the manager must be steadfast and consistent in the reasons for discipline. Inconsistency breeds litigation.
When documenting discipline, including termination, the employer should be careful to ensure the accuracy and completeness of all statements or representations regarding the misconduct and the reason for the disciplinary (or termination) decision.
C. Progressive Discipline
The concept of “progressive discipline” is well known to employers, both for practical reasons (the idea simply makes logical sense in most situations) and because it is established in virtually all collective bargaining agreements. Where employees are employed “at will” (generally outside the union context), they theoretically can be discharged for any (legal) reason or no reason at all, so an employer technically has no legal obligation to impose progressive discipline upon an at-will employee. In practice, however, progressive discipline is virtually essential in order for an employer to train and keep its workforce and maintain good morale.
In the collective bargaining arena, it has been said that “the degree of penalty should be in keeping with the seriousness of the offense.” See Capital Airlines, 25 Lab. Arb. Dec. (BNA) 13, 16 (Stowe 1955). Collective bargaining agreements generally require progressive discipline, meaning that less serious offenses are usually not punishable by discharge but call for some lesser penalty, such as a warning or a suspension. A discharge may be set aside where the employer had a progressive discipline system but failed to abide by it. See, e.g., Troy Dep’t of Public Works, 77 Lab. Arb. Dec. (BNA) 153 (Lewis 1981):
The imposition of a penalty in the progressive discipline system, i.e., an oral warning, a written warning, one day suspension, five days suspension, creates an expectancy. That expectancy is destroyed, not only for that employee, but for all others as well if a suspension is followed by a mere warning for a similar offense. Id. at 159.
Arbitrators, however, generally will uphold discharge for a first offense if the offense is extremely serious. See, e.g., Burger Iron Co., 92 Lab. Arb. Dec. (BNA) 1100, 1105 (Dworkin, 1987) (discharge for using or selling drugs on company property); OK Grocery Co., 92 Lab. Arb. Dec. (BNA) 441, 444 (Stoltenberg, 1989) (discharge for extorting money from fellow employees). In determining whether discharge is appropriate, arbitrators may also look to whether lesser discipline would rehabilitate the employee or whether discharge would be the only meaningful recourse. See, e.g., Int’l Tel. & Tel. Corp., 54 Lab. Arb. Dec. (BNA) 1110, 1113 (King 1970).
D. Conducting a Disciplinary or Termination Meeting
A disciplinary or termination meeting occurs after a problem has been identified and, to the extent necessary, confirmed; this meeting is not the same as an “investigatory” meeting to determine whether the problem actually exists. Thus, the disciplinary or termination meeting should not involve questioning to determine whether an incident or situation actually occurred. It also should not involve negotiation with the employee over whether the meeting is warranted/necessary or over how the supervisor has chosen to address the issue. Rather, it is a meeting to review with the employee the supervisor’s issues/concerns and chosen method for addressing those issues/concerns (e.g., stated expectations for improvement, formal performance improvement plan, disciplinary action, termination decision, etc.).
Some general considerations for supervisors in conducting a disciplinary or termination meeting include the following:
- Conduct the meeting in a location that affords privacy from other employees;
- Would it be preferable to have the meeting at the end of the employee’s workday?
- Would it be helpful to have a second person (e.g., another supervisor/manager or Human Resources) present?
- Be clear about the issues/concerns; do not avoid the real issue or sugar-coat it…
- ...but be constructive and diplomatic (tone of voice and body language can be as important as the words that are spoken).
If an employee is being disciplined or terminated for misconduct, the supervisor might want to identify the evidence of misconduct and cite to the company rule(s) that has been violated. Presenting this information to the employee may minimize the risk that he or she feels unfairly or discriminatorily treated.
In order to avoid an argument that the discipline or termination was for a “pretextual” reason, it is crucial that the reasons given for the decision – to anyone – be consistent. For example, an argument of “pretext” could be made if the supervisor gives the employee one reason for the decision (e.g., a sugar-coated reason), but then gives a different reason to the Unemployment Insurance Division or under oath in a subsequent proceeding challenging the decision. See, e.g., Hernandez v. Hughes Missile Systems Co., 362 F.3d 564, 569 (9th Cir. 2004) (“From the fact that [the employer] has provided conflicting explanations of its conduct, a jury could reasonably conclude that its most recent explanation was pretextual.” (citations omitted)).
E. Reducing Wrongful Discharge Risks
1. Seven Tests for “Just Cause”
The fundamental idea for employers is to act in a manner that is “fair.” Many studies demonstrate that juries are most persuaded by their fundamental assessment of whether a particular employment decision was “fair.” A familiar standard in the union arbitration context for judging the “fairness” of an employer’s decision is the seven-step test for “just cause.” While this technically should not apply in an at-will employment situation, where a termination need not be for “just cause,” an employer’s decision will be far better insulated from challenge if the employer can show that all seven steps have been satisfied.
The seven steps listed below are taken from Adolph M. Koven & Susan. Smith, Just Cause The Seven Tests (2nd rev. ed. 1992) and Arbitrator Daugherty’s decision in Enterprise Wire Co., 48 LA 359, 362-65 (1966):
1. Adequate notice: Did the Company give the employee forewarning or foreknowledge of the possible or probable disciplinary consequences of the employee’s conduct?
2. Reasonable rules: Was the Company’s rule or managerial order reasonably related to the orderly, efficient, and safe operation of the Company’s business?
3. Fair investigation: Did the company, before administering discipline to an employee, make an effort to discover whether the employee did in fact violate or disobey a rule or order of management?
4. Opportunity to respond: Was the Company’s investigation conducted fairly and objectively?
5. Substantial proof: At the investigation did the judge obtain substantial evidence or proof that the employee was guilty as charged?
6. Equal Treatment: Has the Company applied its rules, orders, and penalties evenhandedly and without discrimination to all employees?
7. Appropriate penalty: Was the degree of discipline administered by the company in a particular case reasonably related to (a) the seriousness of the employee’s proven offense and (b) the record of the employee in his service with the company?
2. Be Able to Establish Legitimate, Non-Discriminatory Reasons for Decisions
Problems must be documented to protect the employer against claims for wrongful discharge. When personnel files do not reflect past or existing problems, employers may have difficulty justifying to a judge or jury the legitimacy of the termination decision. Moreover, failure to take note of problems makes it more difficult to correct those problems short of termination.
If an employee engages in misconduct or is not meeting performance standards, that information, along with information regarding the employer’s response and any remedial action taken, should be placed in the employee’s file. In documenting disciplinary decisions, it is important to note certain key information, including:
- Date of the event or behavior;
- Description of the event or behavior (including an identification of all persons involved);
- Corrective action taken and the names of those involved in the corrective action;
- Statement of the consequences to the employee if the event (or another infraction) occurs again;
- Statement that the disciplinary report will be placed in the employee’s personnel file;
- Signature of the person preparing the report and the person who discusses the report with the employee;
- Signature of the employee (or a witness who attests that the employee refused to sign).
Other documents in an employee’s file, such as performance evaluations, should provide an accurate picture of the employee’s performance and any deficiencies that exist. Performance reviews pose a particular problem for employers if they are not done properly. Supervisors often give overly positive evaluations and fail to raise genuine areas of concern in order to avoid a confrontation with the employee or to avoid hurting the employee’s feelings. As a result, the reviews may not reflect reality and may actually contradict the reasons stated by an employer to justify a subsequent termination decision. As noted in an earlier section of these materials, if an employer is going to do performance reviews, it should assess its evaluation procedure to ensure, to the greatest extent possible, that evaluations are done fairly and accurately.
3. Avoid Discrimination Claims
Discipline should be enforced consistently. An employee who is guilty of misconduct and who is disciplined therefor may still have a claim against the company if other employees engaging in the same misconduct were treated less severely. The case of Curry v. Menard Inc., 270 F.3d 473 (7th Cir. 2001), illustrates the concern. In Curry, it was undisputed that Ms. Curry, an African-American cashier, had three cash discrepancies and that the store’s unwritten progressive discipline policy provided for termination after the third discrepancy. However, the court noted that “had the policy been strictly enforced, sixteen other cashiers should have been suspended or terminated in that same time period,” but they weren’t. The company maintained that Ms. Curry was fired because of a new and stricter approach implemented by a new manager. Again, however, the court noted that in the four months that the new manager worked in the store, one employee, who was not African-American, had two cash discrepancies, and another, also not African-American, had three discrepancies, but neither one was disciplined or discharged. This disparate enforcement created a viable claim for Ms. Curry, even though she had undisputedly violated company policy.
4. Avoid Retaliation/Whistleblower Claims
A manager cannot discipline an employee because the employee has engaged in “protected activity” under the civil rights laws (e.g., complaining about discrimination or harassment, participating in an internal investigation, rejecting a supervisor’s sexual advances) or because the employee has previously complained, internally or to a public body, about a violation or suspected violation of law. To help avoid claims of retaliation:
- Do not impose discipline because an employee is a “complainer”;
- Ensure that written and verbal statements do not reflect a hostility toward protected activity (i.e., a hostility toward complaints);
- If an employee has previously made a complaint or engaged in protected activity, make sure the legitimate reason for a discipline or discharge decision is well documented;
- Consider the amount of time that has passed between the complaint or protected activity and the discipline/discharge decision;
- Evaluate how the employee has been treated between the time of the complaint/protected activity and the time of the adverse action;
- Evaluate how similarly-situated employees who have not complained have been treated;
- Consider having separate investigators/decisionmakers involved in
(a) addressing the employee’s complaint, and (b) the disciplinary decision.
5. Avoid Breach of Contract/Promissory Estoppel Claims
For union employees or any employees who are employed subject to an employment contract, it is crucial that supervisors are familiar with and scrupulously follow the terms of the CBA or individual contract. Failure to do so may result in a claim (or grievance) for breach of the contract. In addition, in Hawaii, supervisors may be accused of making “promises” to employees which, if they are not kept, may be the basis for a legal claim that the employer has violated the law by breaking the promise. Following are some examples of statements that could result in promissory estoppel claims (other than statements in the hiring context, which were discussed in an earlier section of these materials): Don’t worry, I’m sure you have nothing to worry about (in this investigation). No, you don’t need a lawyer (regarding the complaint made against you).
F. Post-Termination Considerations: Employment References
Under Haw. Rev. Stat. § 663-1.95, an employer that provides to a prospective employer information or opinion about a current or former employee’s job performance is presumed to be acting in good faith and shall have a qualified immunity from civil liability for disclosing the information and for the consequences of the disclosure. The good faith presumption can be rebutted, however, by a showing that the disclosure was knowingly false or knowingly misleading.
Nevertheless, an employer may still want to consider sticking to a policy of disclosing only the employee’s last position held and dates of employment. Section 663-1.95 is only a qualified immunity from liability; it does not protect an employer from a lawsuit to determine whether a reference was “knowingly false or knowingly misleading.” Moreover, notwithstanding § 663-1.95, an employer also risks legal liability if it provides positive information without disclosing negative information.
Specifically, a negative reference invites the former employee to sue for such claims as defamation, retaliation, or tortious interference with contract. A positive but incomplete reference (if relied upon to the detriment of the prospective employer) might give rise to a claim for negligent referral.
The risk of a negligent referral claim was made clear in a landmark California court decision. In Randi W. v. Muroc Joint Unified School District, 60 Cal. Rptr. 2d 263 (Cal. 1997), the California Supreme Court stated that an employer is normally not liable for nondisclosure of information in a job reference. However, if the employer “undertake[s] to provide some information,” it is “obligated to disclose all other facts which materially qualify the limited facts disclosed.” Id. at 273. In this case, the employee was a school administrator named Robert Gadams who had previously been employed by various school districts. During these prior periods of employment,
Gadams engaged in highly inappropriate conduct such as giving massages to female students, making sexual remarks to them, and even leading a panty raid. However, when asked to provide job references for Gadams, those employers merely indicated that he had “outstanding rapport” with everyone, that he had “genuine concern” for his students, and that he was an “upbeat enthusiastic administrator who relates well to students.” Based upon these recommendations, Gadams was hired into another school district where he molested a 13-year old girl. The girl filed suit against the school districts who had issued the references, and the California could held that her negligent referral suit could proceed.
G. Separation Agreements
In some circumstances, employers may wish to consider a separation agreement with the employee who is to be terminated. Such an agreement generally involves the employer agreeing to give the employee benefits to which the employee would not otherwise be entitled in return for the employee’s agreement to give the employer a general release from all liability. The employer must ensure that the benefit it confers goes beyond any “standard” severance benefits it typically provides. Common examples of additional benefits are salary continuation for a certain amount of time, severance pay, outplacement services, or enhanced retirement benefits.
A separation agreement may be particularly appropriate if an employer perceives a significant risk that the employee will challenge his or her termination. Courts will generally enforce the employee’s release of claims, as long as the release was “knowingly and voluntarily” given. Various factors that tend to indicate that the agreement was knowing and voluntary include:
- Negotiation of the separation agreement (e.g., the employer makes an initial offer, the employee makes a counteroffer, the employer accepts);
- An express statement in the agreement of the rights that are being released (e.g., if the employee has threatened litigation on some basis, expressly state that the employee is giving up the right to go forward with that litigation on that basis);
- If the employee has consulted an attorney, a statement of that fact in the agreement (if the employee asks to see an attorney before signing the agreement, the employer should always agree);
- A statement that the employee is entering the agreement freely and understands that he or she is not obligated to do so;
- The use of plain and understandable language in the severance agreement; and
- A waiting period before the employee signs the agreement. If the agreement is intended to release any potential claims under the Age Discrimination in Employment Act (“ADEA”), the agreement must comply with the specific requirements of the Older Workers Benefit Protection Act (“OWBPA”). A waiver of ADEA claims must:
- Be part of a written agreement that is readily understandable by the employee;
- Refer specifically to claims under the ADEA;
- Not encompass future ADEA claims;
- Be given in exchange for consideration over and beyond any benefit to which the employee is already entitled;
- Provide in writing that the employee is advised to consult with counsel before signing the waiver;
- Give the employee adequate time to consider the waiver before signing it (i.e., 21 days for an individual termination or 45 days in the case of an exit incentive or other employment-termination program offered to a group of employees);
- Give the employee seven days after signing the agreement within which to revoke the waiver; and
- In cases of a group exit-incentive program, the employer must also disclose in writing (a) the groups of employees eligible for the program; (b) the program requirements; (c) any time limitations under the program; and (d) the job titles and ages of all employees eligible or selected for the program and the same information for those not eligible or selected.