Can I fire an employee for any reason?
No. Although the law gives employers a great deal of leeway in deciding whether to fire an employee, there are limits. State and federal laws prohibit employers from firing workers for certain reasons -- for example, because of the worker's race or religion, because the worker took family leave, or because the worker complained of illegal company activity. For a list of reasons for which you can never fire an employee, see Nolo's article Illegal Reasons for Firing Employees.
If the employee has an employment contract or you have made promises to the employee, then you must honor your commitment. Typically, this means you cannot fire the employee without "good cause."
Do I have to give a fired employee a severance package?
It depends. The law does not require you to give severance packages to employees whom you fire. (There is one exception: a handful of states require employers who are closing a facility or laying off a large number of workers to pay a small amount of severance.)
However, if you ever promised the employee a severance package, you should deliver on that promise. And if you ever signed a contract with an employee in which you agreed to provide a severance package, then you must honor that contract. And finally, if you paid severance in the past to other employees in the same position, you may need to continue that policy.
What do I tell prospective employers who call me for a reference for an employee whom I fired?
Sometimes, you might be willing to give a fired employee a positive reference. After all, an employee who wasn't a good fit at your business might do well elsewhere. If you can say positive things about the employee, then say them.
If, however, you are not comfortable giving a positive reference, then you shouldn't. In such a situation, less is better than more. When prospective employers call, tell them that you can only confirm dates of employment and job responsibilities and no more. You must take care not to "trash" the employee to a prospective employer, because this will leave you vulnerable to a defamation suit from the former employee.
Should we contest a fired employee's claim for unemployment?
In many cases, it isn't worth the time and trouble -- not to mention the ill will the former employee will feel toward your company, which is often a strong incentive to consider a lawsuit. Even employees who were fired for cause are often eligible for unemployment. In many states, an out-of-work employee who is fired for reasons other than misconduct is still entitled to unemployment benefits. For more information on your legal grounds for contesting an unemployment claim (and tips on when it might make sense to do so), see Nolo's article Unemployment Benefits: Contesting an Employee's Claim.
How should I tell an employee, "you're fired"?
This is one of the toughest jobs managers face. Usually, it's best to be very clear with an employee. Don't use euphemisms or beat around the bush: To avoid confusion, state clearly that the employee's job is being terminated. Once you've broken the news, give a brief explanation of your reasons. Don't go into detail or feel you have to justify the decision. For example, if you are firing an employee for ongoing performance problems, you can simply say, "As we've discussed before, your performance has not been up to the standards we require." For more information on how to plan a termination meeting and how to break the news, see Nolo's article What to Say When You Fire an Employee.
Should we ask a lawyer to review all termination decisions?
If you have any questions about whether to fire the employee, the employee has made noises about consulting a lawyer, or your company may have made some mistakes in its handling of the employee, you should absolutely talk to a lawyer before making a final decision. A lawyer can help you make sure you've considered all the angles and done all you can to protect your company from liability. For more information, see Nolo's article When Does an Employer Need an Employment Lawyer?
What are the practical items we need to take care of when an employee leaves the company?
Whether an employee quits or is fired, you will need to handle certain basic paperwork and legal requirements. For example, you'll have to cut the employee a final paycheck within the time limits set by your state's law. You'll need to get back company property, deactivate passwords and access codes, and so on. And, you'll need to provide paperwork on continuing health benefits, if the employee is entitled to COBRA continuation coverage. For a checklist of practical matters you'll need to handle for departing employees, see Nolo's article When an Employee Leaves.
Can I fire an employee for making a false complaint about our company's billing practices to a government agency?
Under most "whistleblower" laws, it depends on the employee's intent. (A whistleblower is an employee who complains of company misconduct, such as health and safety violations, shareholder fraud, or financial mismanagement.)
As long as the employee has a good faith belief that something illegal is going on, you cannot fire the employee for complaining about it. If, however, the employee knows the complaint is false and makes it simply to stir up trouble, the employee probably is not a protected whistleblower.
For More Information
For the most complete guide to your legal rights and responsibilities as an employer, get The Employer's Legal Handbook: Manage Your Employees & WOrkplace Effectively, by Fred Steingold (Nolo), which shows you how to comply with the most recent workplace laws and regulations, run a safe and fair workplace, and avoid lawsuits.
If you want some advice from a lawyer, Nolo's Lawyer Directory can help you find a local employment lawyer.