How to terminate an employee for poor performance?

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Key Takeaways

Termination for poor performance is necessary for the well-being of any organization. Founders and small business owners must not hesitate to go through this process as it can double the workload in the long run, in addition to encouraging company-wide inefficiency.
Documentation is the key to the successful conduct of the entire termination process. The main objective of any startup is generally successful conduct of business in the hopefully, profitable future, and for this, only the best hands should be at work within the startup.
With the principle of “at-will” employment in the U.S., employer-employee contracts are open-ended, meaning they can be terminated by either side without the need for a mandatory cause or notice as long as no federal, state, or local law has been violated.
However, this does not mean that termination can be entirely baseless. A properly executed termination procedure is necessary to save the employer from unnecessary legal trouble.
It is important for the employer to ensure that the termination - due to poor performance - is solely due to some kind of deficiency in the employee's performance. The reason for termination must be related to work only and not anything that can be grounds for a lawsuit against the employer for the violation of any local, state, or federal law.

Clear specification of termination ground

With the principle of “at-will” employment in the U.S., employer-employee contracts are open-ended, meaning they can be terminated by either side without the need for a mandatory cause or notice as long as no federal, state or local law has been violated. However, this does not mean that termination can be entirely baseless. A properly executed termination procedure is necessary to save the employer from legal trouble. It is important for the employer to ensure that the termination - due to poor performance - is solely due to some kind of deficiency in the employee's performance. The reason for termination must be related to work only and not to anything that could be grounds for a lawsuit against the employer for the violation of any local, state, or federal law.

Some important provisions to consider in this context are:

(a) Retaliation: It is known that an impulsive employer might end up firing someone on a whim. The employer must make sure that the termination is not retaliation on their part. For example, coming late to work on Election Day cannot be a reason for termination. That is the civic duty of the employee.

(b) Discrimination: Employees cannot be terminated on any discriminatory basis, like age, race, religion, gender, and so on. They can only be terminated if their poor work performance can be demonstrated (e.g., they’re not meeting specific targets or customer demands). Even then, it is important to consider documenting that inefficiency in a way that does not have a discriminatory basis.

(c) Sexual harassment: It is important for the employer to ensure that their business is a safe place to work for all employees. All instances of sexual harassment must be addressed immediately, and it is necessary to put a stop to them swiftly. If this is not done, then the employee can claim unemployment benefits and even frame safety violation charges. An employee cannot be fired for reporting such instances. It is their right to seek compensation if they experience sexual harassment at their workplace.

(d) Pregnancy: It is forbidden to terminate an employee for any life event, such as pregnancy. This is clearly specified by several state laws as well as by the federal “Americans with Disabilities Act (ADA)." It is the duty of the employer to provide necessary alternatives to employees who are facing a temporary medical condition like pregnancy.

(e) Whistleblower laws: Whistleblower laws provide employees the right to report anything unethical without any fear or pressure if they can prove any such violation exists. Therefore, employees have the right to seek protected status from retaliation as a "whistleblower," and whistleblowing cannot be a cause for termination.

Termination for poor performance at small business organizations

Terminating an employee can be a difficult task for all business owners. While termination should ideally be established as inevitable for poor performers, startups or small business owners simply do not have the time or resources to undergo the lengthy process of proving poor performance. Startup founders should not hesitate to schedule a termination when the time is right, but at the same time, they must make extra efforts to try to avoid a situation where termination might become inevitable in the first place. This will help with the proper utilization of available resources as well as work well for their reputation.

They can do so by:

Establishing job expectations at the outset through proper documentation. The employer must ensure that the employee they are about to hire knows everything about what is expected of them, so that they can perform efficiently, or if not, then their limitations can be known at the outset. By doing so, the candidate can be employed in the right department or, alternatively, be kindly told that your startup with its limited capacities presently has no job offering for them.
Progressive Discipline Policy is an effective tool in the hands of an employer because it is relatively easy to execute. While it may seem like a bothersome process in the beginning, it is straightforward to maintain in the long run. Besides, it can save startups and small business owners from the unnecessarily lengthy legal process that can result from a poorly conducted termination. The progressive discipline policy must be clearly specified in the employee handbook and any doubts that the employee may have regarding this must be cleared at the outset. A signed form acknowledging the receipt of this handbook must be placed in every employee’s personnel file. At a startup where there are a maximum of, say, 20 employees at work, this task is easily achievable.
A written counseling or coaching form is usually more detailed than the preceding warnings, which are verbal for the first warning and written for the second. Each employer may have a varying policy for the number of written coaching forms an employee receives, but the average generally does not exceed 3.
Probationary Employment refers to a performance evaluation after the initial 30 or 60 days of an employee joining the company. This can be a beneficial tool for startup founders since by actually seeing the employee at work, it can generally be assessed whether they are an appropriate fit for the work culture or not. Usually, by working for the first 30-60 days, an employee has been exposed sufficiently to their role, the startup’s expectations from them, the company’s policy, and so on.
The Performance Improvement Plan is an essential documentation tool and effective functional tool in the toolkit of the employer. After receiving the written coaching forms, the employee is placed under closer scrutiny for actually bringing about an improvement in their job performance. There is usually a time period for such improvement plans and that must be clearly spelled out in writing. If improvement is seen in the employee, then termination can definitely be avoided. If not, however, then termination can effectively be established as being inevitable. Startup founders can set up smaller targets and for shorter intervals of time for their performance improvement plans to ensure a quick assessment.
Involuntary termination could be a major challenge to deal with, both for the employer and the employee. To deal with this, the employer must have all records of poor performance documented, all performance improvement plans assessed and ready at hand so that there can be no complaints from the employee on the grounds of not being informed or not given an opportunity to improve.
Having an HR expert on your team is an important asset for the startup's future. While small businesses do not generally have more than 20 employees, it might still be a good idea to have an HR professional on board (or, alternatively, to outsource HR to experts). This could help in judicial engagement with only the number of employees working at the startup and dealing with processes such as termination in a hassle-free way.

Laws in the U.S. for new and small businesses

Launching a startup is an endeavor in and of itself with the hefty responsibilities it brings and the compliance with various federal, labor, and employment laws that it demands. The Wage and Hour Division (WHD) of the U.S Department of Labor (DOL) enforces comprehensive federal labor laws, collectively covering most private, state, and local government employment throughout the U.S. and its territories. The WHD has more than 200 districts, field, and area offices across the country to assist companies/businesses and employees/workers.

Some of the responsibilities of the typical startup founder include:

Paying the employees properly
Maintaining all necessary documents for recordkeeping
Adhering to certain requirements if minors are employed
Providing covered/eligible team members family or medical leave
Notifying employees of their rights in the workplace

Employee benefits upon termination

The U.S. Department of Labor guarantees certain employee benefits to eligible candidates upon termination. These benefits include healthcare benefits, unemployment benefits, Equal Employment Opportunity, and so on. The employer must be aware of and prepared to provide these benefits to eligible employees.

Healthcare benefits are available as a right to some ex-team members who might otherwise lose their health benefits but have a right to choose group health benefits provided by their group health plan for limited periods of time. Employers are required to provide certain notices to their employees, such as the Continuation of Health Coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). COBRA requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage in certain instances.
Unemployment benefits are established in the U.S. for providing short-term cash benefits to those seeking employment again. A former employee is eligible for unemployment benefits - which are funded by special taxes paid by businesses- if they are out of work through no fault of their own, such as harassment at the workplace, a pandemic-related emergency, etc. The business/employer must ensure that the work environment is safe for all team members to stand a chance if an unemployment claim is made. The poor performance of the employee must be clearly specified as the driving factor for termination because this can stand the employer in good stead if an unemployment claim is made by an ex-team member.
Equal Employment Opportunity Commission (EEOC) prohibits discrimination on any grounds. In general, if the termination is not because of discrimination on the basis of age, race, sex, national origin, disability, and so on, or because of the employee’s protected status as a whistleblower, or because they were involved in a complaint filed under any law of the Department of Labor, then the termination is subject only to any private contract between the employer and the employee or a labor contract between the employer and those covered under the labor contract.

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