Small-business familiarity can make firings especially difficult
By Jennie L. Phipps • Bankrate.com

A small, upstate New York wire and cable company had employed an operations manager from day one. The owner and CEO of the company ran the national sales effort and depended on this long-time employee and friend to keep the 24-hour smelter going full tilt.

Things were rosy for many years. Then the plant started having excessive down times, an expensive problem that causes quality as well as delivery issues.

Ultimately, the company owner fired his old friend. Five years later, the wrongful discharge suit is still dragging through the courts, exhausting everyone involved (except maybe the lawyers, who are cleaning up) and leaving a bad taste in the mouths of other employees and customers.

Experts say this is a classic, worst-case scenario, a textbook example of what can go wrong when small-business owners mishandle a separation. Firing someone in a big company is hard enough; in a small one it can be a very personal problem. Handled badly, it can be disastrous.

John A. Challenger, CEO of Challenger, Gray & Christmas, a human resources consulting firm headquartered in Chicago, says, "It's very difficult to get rid of a tried-and-true but no longer effective person because they have so many connections. There is always a sense of betrayal. It's a very delicate situation."

If you're up against this problem, here are some ways to proceed. The advice comes from Challenger and from Paul Salvatore, a partner in the national law firm Proskauer, Rose LLP, which specializes in labor and employment law.

Don't make it a surprise
Talking to co-workers and friends about their performance can be exceedingly difficult. But it's necessary. Salvatore says with wrongful discharge suits the fastest-growing form of litigation, regular and frank discussions about with an employee about shortcomings (and strengths) are vital.

In court, formal evaluations can be the best evidence that the termination was justified. But even if all you do is make notes to the file when you have tough conversations with employees, you'll have evidence in hand if it ever comes to that. A sheath of evidence gathered over a year, or at least several months, is what it often takes to win the case. If you don't have it, it's probably wise to delay termination until you do.

Ease executives out
At the executive level, it's not enough to give them two week's pay and show them the door. The standard package is generous and designed to save face. It generally includes these elements:

• One to four weeks of pay for every year of service, with a minimum of six months.
  
  
• Outplacement support to help the ex-employee find a job. Employed former workers are unlikely to sue. If you really want to help, offer to post-date the separation for a set period. That way, the worker can honestly tell a potential new employer that she is presently employed.
  
  
• Paid health insurance for the duration of the severance.
  
  
• Agreement to not fight any unemployment claim -- if it should come to that.

Put it in writing
Get your lawyer -- or better yet, one schooled in labor and employment law -- to write up a separation agreement. Make him do it in plain English so there's no doubt about what you're offering. Include the financial settlement, the agreement to delay the official termination date, and how you'll handle references. Also seek a release of any claims against your organization and you personally. Other things that you might consider putting in the agreement include a request for confidentiality, a non-compete agreement and an agreement to disagree through arbitration only. Or as Salvatore says, "Lay it out in a way that allows both sides to hold up their heads and separate gracefully."

Do the talking yourself
Not only is turning a firing over to the human resources department the coward's way out, it could backfire. Such a hands-off style could give the soon-to-be ex-employee the idea that she hasn't heard from the real decision maker, meaning an appeal to you is possible. When you do give a worker the bad news, do so at the end of the day so the person can leave unnoticed. Under some circumstances, moving the talk to a quiet corner of a restaurant has some advantages.

Seek consensus
Ask the person you're terminating to sign the separation agreement. If they are in one of the labor-protected classes of employees for reasons of health, sex, age or race, federal law gives them nearly a month to have their own lawyer look the document over, amend or reject it. Be patient and flexible. This won't be settled in a day.

Security is an issue, but be kind
Throwing somebody out the door without giving him a chance to get his personal items creates enormous ill will. If you're concerned about computer security, change pass-codes, but leave terminated workers enough access to get personal files. Making arrangements to have an outplacement counselor or someone neutral from human resources help them pack up, maybe over the weekend, is often a good idea.

Manage rumor central
People will talk -- and spread misinformation. Without going into unnecessary detail, alert other key people that the employee is no longer with the company. Do what you can to reassure them that they aren't next on the list.

Jennie L. Phipps is a contributing editor based in Michigan.

-- Posted: Nov. 19, 2001