How to Avoid Being Sued by an Employee1
By Vincent DiCarlo










Sooner or later, most businesses will be sued by one of their employees. Most of these suits would not be brought without two essential ingredients--a motivated employee and a triable case.

In order to avoid lawsuits, you systematically look at each of the areas that most often cause problems and implement practices that are designed to avoid motivating the employee and to make the case against you untriable by establishing and documenting your defenses.  Problem areas that should be examined include claims for wrongful discharge, unpaid leave or overtime, defamation, and discrimination or sexual harassment. We will use claims for wrongful discharge as an example.

As with all claims, you avoid claims for wrongful discharge by not motivating the employee and by making the case untriable. You avoid motivating the employee by not hiring people that you will be likely to have to fire, by not surprising your employees, and by avoiding procrastination when disciplinary action becomes necessary. There are specific methods of doing each of these things, but because procrastination is the area where many of businesses have a lot of trouble, we will use it as an example.

Someone who has been working for you for a long time is much more likely to sue you for being terminated. Usually, the problem employee realizes that he or she is in disfavor, and procrastination causes a buildup of resentment. Longevity is also, a factor that can be used by a court or a jury as a basis for finding that an implied in fact contract. Moreover, procrastination gives you more time to make a mistake, and it carries with it a risk of enhanced damages for emotional distress.

By far, the best time to terminate is during the initial probationary period right after hiring. Therefore, you should not extend the probationary period without a really good reason and you should not keep a questionable employee past the initial probationary period in the hope that he or she will improve. If, after the initial probationary period, and after a fair warning, the employee fails to bring his or her performance up to a specific standard, end the employment. Do not let a bad situation drag on for months and years while the employee rankles and dreams of sweet revenge.

After doing everything you can to avoid motivating the employee, you strengthen and document your defenses. For wrongful termination, you do this by preserving and documenting the "at will" relationship, by using the probationary period to discharge employees who are not fully satisfactory, by documenting the existence of good cause for any adverse personnel action, by documenting the lack of bad cause, and by getting a release if you can. We will use the preservation of the at will relationship as an example, though you should look at each of the other areas in detail as well.

In California, all employment is presumed to be "at will," unless there is an agreement to the contrary. This means that, in theory, an employer does not need to show that he or she has a good reason to discharge an employee. However, even where employment is at will, certain bad reasons, like age discrimination, will subject you to liability.

The at will presumption may be rebutted by evidence of any agreement, whether express or implied, and whether written or oral. You need to preserve and document the at will relationship so that your reasons for discharging an employee will not be second-guessed by a judge or a jury. You do this by, first, watching what you say and what you write. For example, praising an employee where it is deserved is good management; vague promises of reciprocal loyalty or future rewards are asking for trouble.

You should also carefully review your policy manual and personnel memoranda. Any vague promises or assurances should be eliminated. If the policy manual contains any specific causes for discipline or discharge, there should be a disclaimer in the same section clearly reaffirming that, notwithstanding the causes listed, continued employment is at will and can be terminated with or without cause by either the employer or the employee.

You should also get periodic written acknowledgments of the at will relationship. These acknowledgments should be contained in the job application, the policy manual, the periodic written reviews, and in an acknowledgment that each employee should sign at least annually. This annual signed acknowledgment is one of your most powerful tools. It should be reviewed by your lawyer and should contain a clear acknowledgment and agreement that the employment will continue only so long as both employer and employee wish, that termination may be for any reason or for no reason, and that no contrary promises or statements have been made. The annual acknowledgment should also be used to document your key defenses to claims for discrimination, harassment, and unpaid leave or overtime.

Based on my experience, I believe that if you systematically implement simple and inexpensive procedures in each major problem area similar to the examples given above, you can avoid at least half of all lawsuits that would otherwise be brought against you by your employees. Such preventive measures can be one of the best investments you can make.


Your employee policy manual can either be your best friend or your worst enemy, depending on what's in it. Most businesses have an employee manual, but many of them simply use whatever form they get from a book, a friend, or the internet. They fail to analyze their manual carefully to make sure all the essentials are included and the booby traps are excluded.

If you are sued by an employee or ex-employee, you can be sure that his lawyer will not be so casual about what you have put down in black and white. Now is your chance to make sure that the hostile lawyer won't like what he sees! If you follow a few simple rules below for improving your policy manual now, you may be able to avoid a lawsuit entirely, or at least substantially strengthen your position in case you are sued.

Every employee manual should include a prominent disclaimer saying that it is not and does not constitute a contract of employment. Many a lawsuit is brought by an ex-employee who claims that some provision or other in an employee policy manual constituted a binding commitment that was breached by the company.

Then, go through the manual and systematically strengthen the documentation of your at-will employment relationship. The at-will relationship is your first line of defense in any wrongful termination lawsuit, and you should bolster it wherever and whenever you can.

Start by including a general section affirming the right of both the employer and the employee to terminate the employment at will either with or without notice, and the employer's right to change the conditions of employment at will. Add a statement that no one in your company is authorized to represent anything to the contrary, except in a formal written contract of employment that is signed by a designated officer. Finally, require employees to report any instances of unauthorized promises or representations to the contrary.

Repeat the at-will affirmations in connection with each specific area in which there is a danger of drawing an inference of anything but a pure at-will relationship. For example, if you have grievance procedures, include a statement that those procedures are subordinate to both parties' right to terminate with or without notice and with or without cause. If you have lists of prohibited activities or activities that may lead to specific disciplinary actions, say that those consequences are neither exclusive nor meant to preclude other or more drastic action.

Don't stop yet. If you have probation provisions, say that completing probation does not alter the at-will relationship. If you have lists of factors that may be considered in decisions about promotions, say that the listed factors are given as examples only, are not mandatory or exclusive, and are not meant to constitute a promise of promotion or continued employment. Keep going through the manual until you have identified and neutralized all similar potential problem areas.

Next, start at the beginning and go through the entire manual again looking for and eliminating anything that is superfluous or unnecessary. There is always a chance that even the most seemingly vacuous drivel will come back to bite you, so don't say anything without a good reason. As you go through the manual, look for phrases like "employer shall" and "employer will." Change all the "shalls" and "wills" to "mays." Look for any language that could be tortured and twisted by an crafty plaintiff's lawyer into a promise or commitment and take it out.

Once you have given your manual a thorough going over, there are still a few more necessary tasks to complete. Many businesses with perfectly adequate policy manuals run into a buzz saw because they fail consistently to implement these three simple but essential followups.

First, you should carefully review and update your employee manual at least once a year. Second, you must be have records that will enable you to determine and produce a copy of the exact version of the manual was in effect at any given time. Therefore, you the cover of each manual should include an effective date and you should keep each succeeding version of the manual in a chronological file.

Third, you should distribute the manual to all your employees and get an signed acknowledgment from each of them at least once a year. The acknowledgment should say that the employee has received and read the policy manual effective as of the date on the cover, that the employee understands that it is his responsibility to familiarize himself with the information, procedures, and policies described in that manual, and that the employee agrees to abide by the principles and practices explained in the manual.

The  should go on to say that the employee understands that he should contact certain designated officers of your company if he should have any questions or need clarification as to the content or interpretation of the policy manual. Finally, the acknowledgment should say that the employee understands that the policies and procedures contained in the employee manual are subject to change, and that the manual is neither intended to be, nor does it constitute, a contract of employment.

By the way, the annual written acknowledgment can and should do a lot more than bulletproof your policy manual, and a future column will be devoted entirely to how to make the most of such one. Nothing you do can eliminate all risk of being sued. However, if you carefully follow the steps above, you can at least be confident that you will not ambushed by your own policy manual.


The most useful single document for avoiding a lawsuit by one of your employees is an annual written acknowledgment. Plaintiffs' lawyers hate employee's acknowledgments, and with good reason. A good recent acknowledgment cuts off many of their favorite theories at the knees, and can prevent them from even taking a case, let alone filing a suit.

A good acknowledgment should have a preamble and should cover at least the following areas: receipt of the employee manual, the at-will employment relationship, the lack of any promises of tenure or advancement, the lack of uncompensated overtime, the amount of any accumulated leave, and the lack of any discrimination or harassment.

The preamble should say that the employee need not and should not sign the form unless the statements in it are completely true and accurate. It should instruct the employee to talk to certain specified officials of the company before signing the acknowledgment if any changes or corrections are necessary to make it completely accurate.

After the preamble, the employee acknowledges that he has received the office manual effective as of a certain date, and that he understands that it is his responsibility to familiarize myself with the information, procedures, and policies described in that manual.  The employee agrees to abide by the principles and practices explained in the manual, and to contact certain specified officials of the company if he has any questions about its contents. The employee acknowledges that the policies and procedures contained in the manual are subject to change, and that the manual is not intended to be and does not constitute a contract of employment.

The employee then acknowledges that no promises or assurances of any kind were made to him to accept or to continue his employment, that he knows that no one is authorized to make any such promises, and that any such promises could not reasonably be relied upon.

Next, the acknowledgment says that the employee understands and agrees that his employment is "at will," which means that either the Company or the employee may terminate the employment at any time that either of them desires it, with or without any reason, and that no written or oral promises, assurances, or representations to the contrary, whether express or implied, have been made to him at any time, whether before or during his employment.

Overtime and leave come next. The employee warrants and represents that, since he was first employed by the company, he has not worked any overtime that he has not reported in writing to certain designated officials of the company and that, as of the date of the acknowledgment, he has not worked any overtime, holidays, or other time in addition to normal office hours for which he have not already been properly compensated at the proper overtime rates. He states the number of hours of untaken leave he has accumulated as of the end of the last completed pay period.

Finally, the acknowledgment deals with discrimination and harassment. The employee warrants and represents that, since he or she was first employed by the company, he or she has not been the victim of, or witnessed any evidence or indication of, any form of harassment or discrimination at or by the company based upon race, color, religious creed, sex (including gender harassment, and harassment due to pregnancy, childbirth, or related medical conditions), marital status, age, national origin, physical or mental disability, or ancestry, other than any incident that he or she may already have reported in writing to certain designated officials of the company. As to any incident that the employee may have reported, and of which the employee may have been the victim, the employee acknowledges that he or she has been informed of the outcome of the company's investigation into the matter.

The acknowledgment should be signed by the employee and a supervisor, who will then be able, if necessary, to testify to its due execution, and should be kept in the personnel file for at least four years after the employee leaves the company.

You should have your lawyer prepare or review your form acknowledgment to make sure that it is complete and does not contain anything that can be used against you.

No document, and no other preventive measures, can completely eliminate the risk of getting sued. However, if you take the time to prepare a thorough employee acknowledgment, use it consistently, and keep the executed copies in a safe place, it can be the cheapest and most effective lawsuit repellent that you ever obtain.


 One of the most galling surprises in business occurs when a marginal employee leaves after many years of mediocre performance and then, of the blue, the employer gets slapped with a huge claim for unpaid overtime and leave.  Such parting shots are common and can result in payments of tens of thousands of dollars.

 If you become the victim of such a claim, perhaps the worst part of it is the knowledge that the whole problem might have been avoided if you had followed a simple procedures.  This article will cover overtime, and a future article will discuss leave time.

 Most businesses are subject to both federal and state overtime rules.  You can get informative brochures on both sets of rules by calling California's Department of Industrial Relations.  Most claims result from improperly categorizing an employee as exempt from the overtime rules, failure to track overtime properly, or failure to document overtime or its lack.

 Businesses in California are required to pay time and a half to all nonexempt employees who work either more than 40 hours in one week or more than 8 hours in one day.  This makes flexible responses to changing workloads and flextime arrangements, such as four day weeks, expensive for the employer.  Tracking hours worked and properly adjusting paychecks is also an administrative burden.

 As a result, many employers fall victim to wishful thinking by improperly attempting to categorize some or all of their employees as exempt from the overtime rules.

 The overtime laws exempt executive, administrative, or professional employees, outside salespeople, and certain members of the employer's family.  The terms "executive" and "professional" have been subjected to such abuse these days that it would appear that they could refer to almost anybody.  After all, inside salespeople are routinely called "account executives."  We are sold "executive" pencil sets, "executive" briefcases, and "executive" clothing.

 And isn't everyone who does something for money a "professional" of one kind or another?  The people who clear your sewage lines, keep your books, exterminate your cockroaches, fix your car, clean your teeth, and trim your trees all consider themselves "professionals."

 However, the courts and the government agencies that enforce the overtime rules do no take such a loose view.  If anything, many employees, such as certified paralegals working in a law office, who would probably be called "professionals" in common parlance are not exempt.  Likewise, the government often takes issue with a business's attempts to categorize a salesperson as "outside."

 Another common error is failure to keep careful track of the hours being worked.  Just because you don't ask your employees to work overtime it doesn't mean that you can dispense with monitoring their working hours.  Employees are not permitted to volunteer, and managers must not permit them to work early, late, through lunch, or on weekends without compensation.  Most overtime claims are based on such "unrequested" overtime.

 Finally, you must document overtime or, just as importantly, the lack of overtime.  Timesheets are a good tool for this.  They should be signed by the employee and kept in a file for at least four years.

 The acknowledgment on the timesheet above the employees signature should include a disclaimer of any hours other than the ones shown, not just a statement that the hours shown are accurate.  It should also say that the employee has not worked any overtime, other than what may be shown on the sheet, for which he has not already been paid at applicable overtime rates.  Even for employees who are not supposed to be working overtime, and have regular hours, a time sheet can be helpful in documenting proper payment.

 You should also put provisions in your policy manual clearly saying that no employee is permitted to work overtime, work outside of the office, or work outside of regular hours without advance written approval from specific persons.  The policy manual should also say that no employee is permitted to work overtime without being paid for it a the proper rate.

 If you follow these steps consistently, you will greatly reduce your chances of getting a post-departure surprise from an employee who claims to have spent more hours toiling without compensation than you ever dreamed, thereby piling up a tidy little severance package for himself.


 Most businesses give their full time employees paid vacation time, which usually accrues at a rate of so much vacation leave per week, month, or other period worked.  Failing to handle such vacation time properly can result in the buildup, over a period of years, of substantial liabilities, and in large claims by departing employees for unpaid vacation time.

 The main problems with vacation leave are unenforceable policies that result in invalid forfeitures, failure to track and document usage, and failure consider how vacation policies may apply to top management.

 Because most businesses have learned that vacation time, if untaken, can slowly build to staggering proportions, most of them make some attempt to limit the amount of that obligation in some way, often by limiting the amount of vacation leave that can accrue or be carried forward from year to year.  However, in doing so, many such businesses inadvertently creating unenforceable forfeiture provisions that will not prevent the buildup enormous obligations.

 The important thing to remember is that vacation time, once accrued, cannot be forfeited and cannot be waived.  Once accrued, it must be used or paid.  Therefore, "use it or lose it" provisions will not be enforced.  On the other hand, caps on accruals will.

 What's the difference between an invalid forfeiture and a valid limitation on accruals?  Consider a leave policy that says that "any accrued vacation time in excess of two weeks will be lost if it is not used by the end of each calendar year."  It will be unenforceable because, as written, it calls for the loss of a portion of the vacation time that has already accrued.  Likewise, a leave policy that says "no more than two weeks of vacation leave may be carried from one calendar year to the next" will also be invalid, because what is not carried forward is lost.

 On the other hand, a leave policy that says that "once an employee has accrued a total of two weeks of vacation time no additional time will be earned" can be valid, because it stops leave from accruing, rather than causing it to be lost after it is earned.  Sophistry?  Maybe.  Is it the law?  Yes.

 The second common problem with leave is the failure to track and document its usage.  This happens for several reasons.  First, while tracking accruals is easy, tracking usage is not.  Since leave usually accrues at a regular rate, all you have to do to calculate accruals is to multiply the time on the job by the accrual rate.

 On the other hand, usage is usually irregular.  The disparity in the relative ease of tracking accruals and usage is exacerbated by the fact that, in any dispute, the burden of proving that accrued overtime has been taken is on the employer.

 Moreover, once a dispute arises, I sometimes find that a business has unintentionally generated inaccurate computer-generated records, such as computer-generated pay stubs.  Each pay period, the computer, like the enchanted broom in the "Sorcerer's Apprentice," mindlessly keeps adding leave time at the programmed rate to the running total on the pay stub, and if the usage has not been carefully entered into the computer by hand each time it occurred the resulting erroneous documents can be dangerous weapons in the hands of a hostile lawyer.

 In order to protect yourself from recordkeeping problems, it is a good idea to include the issue of accumulated leave in your annual employee acknowledgment.  The leave and overtime section of the acknowledgment should say how much unpaid leave the employee has accumulated and the language should make it clear that the employee is vouching for the accuracy of the figure.

 Finally, in tracking leave time, many businesses overlook their top management and professional employees.  These businesses mistakenly assume that such persons, who may be exempt from wage and overtime laws, and who may set their own hours and take time off at their own discretion, will not make any claims for accrued leave.

 The fact is that, unless applicable written leave policies or employment agreements explicitly exclude such persons, the presumption is that they accrue leave like everyone else.  It may seem silly to track the leave of a company's founder and CEO, but failing to do so has more than once resulted in a claim for years of accumulated leave at a fancy rate.

 To summarize, you can avoid most claims for unpaid leave by taking the following simple steps:  Make sure your policy manual clearly articulates a valid cap on accruals and not an invalid forfeiture.  Record all usage of vacation time.  Don't forget the managers and professionals.  Get periodic acknowledgments of amount of leave taken and balance left.  And be sure to check those pesky pay stubs!


You, as an owner or manager of a business, will never be able to learn all of the laws and rules relating to workplace discrimination and harassment.  They are numerous, byzantine, sometimes contradictory, unpredictable, and constantly changing.  What you can and should do is take practical steps that have a good chance of keeping you out of trouble.

Among the many protected classes these days are race, color, religion, sex, gender, pregnancy, childbirth, marital status, age, national origin, physical or mental disability, medical condition, ancestry, and, in some places, sexual orientation.

Luckily, preventing harassment and discrimination and avoiding liability for what you can't prevent require roughly the methods.  Here's how to protect your business without becoming obsessed about it.

First, have an anti-discrimination and anti-harassment policy and put it in your written policy manual.  The manual should set clear procedures for reporting problems, with plenty of alternative options, so that there will be ways to get around alleged perpetrators in the chain of command.

Require all employees to report all cases of harassment or discrimination of which they are not themselves the victim.  Encourage victims to do the same.

Document every complaint that you get.  Investigate every complaint thoroughly and involve legal counsel where appropriate.  Involving your lawyer at an early stage where there is an indication of a serious problem can be important if there is a later lawsuit.

If your internal investigation is properly conducted by a lawyer or under his supervision, it may be possible to shield damaging documents that are created as part of your investigation from disclosure in any later lawsuit.  This protection is called the "work-product" doctrine and, while the protection is not absolute, it is well worth preserving.  When your investigation is done, tell the complainant your conclusions and the action, if any, that you took as a result, but do not convey the substance of the statements of any of the other witnesses.

If you are regularly using the all-important employee's annual acknowledgment (and you should!), it should cover the area of harassment and discrimination.  This section of the acknowledgment should list all the forbidden kinds of conduct.  It should then contain a statement by the employee that, since first being employed by the company, he has neither been the victim of, nor witnessed, any incident of such conduct, other than any incident that he may already have reported in writing to specified company officials.

Whenever you must take action adverse to a member of a protected class (or any other employee, for that matter), always document your reasons.  Where possible, involve other members of the protected class in the disciplinary process.  If it becomes necessary to discharge a member of a protected class, it can be harder for the discharged employee to make a case against you if you replace him with another member of the same protected class.

There are also many positive things that managers can do to promote a workplace that is free of discrimination and harassment.  One of the most effective is for you, as a manager, to model the behavior you seek to establish.

Managers should always treat every employee politely and with respect.  They should always strive to see employees as people, not as representatives of a class.  Managers should always avoid crude jokes, and comments or nicknames that may be seen as pejorative.  In fact, managers should always avoid any references at all to age, gender, ethnicity, or membership in any protected class, unless they are clearly necessary and appropriate.

You should never indulge in or tolerate pejorative talk or conduct on the grounds that it is "all in fun," that the butt of the comments was responding in kind, that they "build camaraderie," or the like.  Believe it or not, many people will try to defend their abuse by saying things like "he knows I only say things like that to people I really like."  Such excuses sound really lame in court.

These things may seem obvious, but you would be surprised at what some otherwise intelligent managers will say to a group of employees at, say, the company Christmas party.

Often, a person who has made a thoughtless comment will respond to a tactful conversation with a supervisor.  For example, an employee who habitually refers to another employee as the "old man" might simply be asked whether he has thought about how his conduct might hurt the other employee's feelings, and reminded that, in any event, it is inconsistent with the company's policy of showing respect for coworkers.

A manager or other employee should not be allowed to laugh off unacceptable behavior.  If the conduct is sufficiently egregious, or does not respond to correction, you should clearly explain to the offender that, if he will not change his conduct, you will be forced to discharge him.  Failure to do so could put your entire business needlessly at risk.

The bottom line is that you should not be tempted to become cynical or careless about matters of harassment or discrimination.  Yes, the laws sometimes seem contradictory.  Yes, there is no way to be sure of being completely safe.  However, if you follow the rules above, your chances of falling victim to a lawsuit over these issues can be greatly diminished, and you will have created a healthier, more productive working environment.


When someone stops working for you, either voluntarily or because you fired him, a good written release can be your best protection from being sued. Such a release can prevent many kinds of potentially expensive claims, including those for wrongful discharge, defamation, and discrimination. When you consider that the average California jury award in a successful wrongful discharge case has been reported to be in excess of $1.2 million, the value of trying to get a release from departing employees wherever possible is abundantly clear.

The main mistakes that employers make with releases are to fail to try to get one at all or to use one that won't stand up in court. If you follow the suggestions in this article, you won't make those mistakes.

Of course, there's no way to ensure that you can get a release from every employee who leaves your company. Releases must be voluntary, and some employees are so determined to sue you from the day that they leave that they will refuse to give you a release under any circumstances.

However, in many cases, disgruntled former employees only decide to try to bring a lawsuit after several weeks or months of brooding over their real or imagined grievances. Sometimes, the decision to seek a lawyer to bring suit only arises after the unemployment benefits run out. By seeking a timely release in every case, you can cut off your liability to all but those employees who are committed to a lawsuit from the time that they leave.

Why would a departing employee agree to sign a release? Because the employer offers it as part of a severance agreement that gives the employee severance benefits that he would otherwise not receive. Many employers already give their departing employees severance benefits, such as severance pay, or a period during which the employer continues to pay for health coverage. There is no reason why you should not get a release in exchange for such voluntary severance benefits.

You make the offer of a severance agreement by means of a paragraph added to your standard termination letter. The letter should remind the employee the company has no formal severance package, is not obligated to provide any severance benefit, and is only obligated to pay compensation that has already accrued.

The letter should then say that you are willing to offer the written severance agreement that is enclosed and should briefly summarize the severance benefits that are being offered. The letter should then say that, if the employee wishes to accept the offer, he must sign and return the agreement by a specific date.

In order for the releases in the severance agreement to have the best possible chance to hold up in court, they must be clear, explicit, knowing, and voluntary. A clear and explicit release is one that it is labeled as release and that clearly conveys to the employee, in plain language, that he is giving up the right to sue for claims that he may otherwise have.

You establish that a release was knowing, by including in it, in addition to broad general language releasing all claims of any kind from the beginning of the world to the signing of the release, a description as many of the specific kinds of claims that are being released as possible. It is especially important describe statutory claims, such as claims under federal antidiscrimination laws like the Americans with Disabilities Act or Title VII of the Civil Rights Act, in some detail, since courts have held that, without such descriptions, releases may not be enforceable.

A voluntary release is, of course, one that is entered into without coercion. Therefore, your documentation must make it absolutely clear that, regardless of whether or not the employee signs the severance agreement, he will get any unpaid compensation that may be owed.

But there is more to the idea of what is voluntary than a simple lack of coercion. For example, courts have held that, for a release to be voluntary, must be entered into after an adequate opportunity for consideration, preferably with the benefit of legal counsel. For this reason, you should try to give the employee at least two or three weeks in which to accept the offer. If you can't do that, include a provision that allows the employee to rescind the agreement within a reasonable period of time after it is signed. In addition, the severance agreement should advise the employee to seek the advice of a lawyer before signing it.

Your termination letter and severance agreement will be standard documents that you use routinely. However, it is essential that your forms be prepared or reviewed by your lawyer to ensure that they contain all the necessary provisions and do not inadvertently say something that is going to get you in trouble. Remember, these documents are meant to be examined closely by lawyers who are looking hard for an excuse to sue you!

In the current litigation climate, not to offer some kind of a severance benefit in exchange for a release is foolish, and to offer a voluntary severance benefit without getting a release is downright insane. A written severance agreement, with well drafted releases, should be part of the standard equipment of every business that has one or more employees. Such an agreement, when properly and consistently used, can be worth many times its weight in gold.


Exit interviews are useful, and should be done whenever an employee leaves your company, whether voluntarily or not. They are also dangerous. It is therefore important that the managers who are responsible for conducting your exit interviews have a clear idea of the matters that need to be covered, the things that it is ok to say, and the things that, if said, may get you into a lawsuit.

In this article, I will tell you how to conduct an exit interview that won't get you sued. Because they are the most troublesome, we will focus on exit interviews of employees who you have discharged. It is best to have at least two managers present at such an interview in case there is a dispute about what went on in it.

First, tell the departing employee that the company has decided to terminate his employment due to unsatisfactory performance, tardiness, failure to follow instructions, reduction in force, or other specified reasons that have been preapproved by your lawyer. You should always have, and be able to document, a factually solid, sensible reason for terminating an employee, regardless of whether or not the employment was at will.

Even if you don't consult your lawyer every time that you discharge an employee, you should ask him about any reason that you may have that is not on the list above. You need to be sure that you don't fire someone for a reason that is improper or that can easily be made to look suspect.

Remind the departing employee of your previous discussions, if any, with him concerning the problems for which he is being terminated. Tell him, if applicable, that, as a result of the lack of sufficient improvement in the relevant areas, you cannot continue his employment.

If, as you should, you are offering the employee a severance package that contains releases of liability, tell him that you are willing to offer him a severance agreement that would give him certain benefits. Then give the employee your standard termination letter, the severance agreement, and an extra copy of the usual COBRA notices. The COBRA notice must also be sent by mail within 14 days.

Give the employee the booklet from the California's Employment Development Department concerning unemployment benefits. If you don't have this, you can get it from EDD or your lawyer.

Listen carefully and patiently to what the employee has to say, especially including any complaints he may have. If he expresses disagreement with the reasons for his termination, ask him why he thinks that, and later consider what response may be appropriate, perhaps in consultation with your lawyer. Do not argue with him. Simply say that you are sorry that you do not agree with him and are surprised at any untrue statements that he may make.

Ask the departing employee whether he has any documents or records belonging to the company, including lists of clients, and arrange for their return. Remind the employee that he has a continuing obligation to maintain the confidentiality of the company's business after his departure. Make arrangements for the employee to remove his personal belongings at your mutual convenience.

Ask whether the employee's records relating to compensation are up to date. These might include records relating to sales or leave taken. Tender the employee a check for all accrued compensation, including any accrued salary, leave time, vacation time, commissions, or other amounts that may be due. If there is any disagreement about compensation, tender the amount that you believe you owe, and offer to get back to the employee as to any disputed amount.

There are certain things that, while not necessary, probably won't get you in trouble. For example, It is ok to express your regret that things did not work out well enough for you to continue the employment of departing employee. It is also ok to remind him of any efforts that you made to help him to meet your requirements. You may wish him good luck.

Other things are not ok, and may be expose you to litigation. Do not argue with the employee. It is useless, creates bad feelings, and may cause you to say something that you will heartily regret hearing repeated in court.

Do not tell the departing employee or suggest to him in any way that he is incompetent or dishonest. This is important since such statements may form a basis for tort liability for defamation. Do not suggest that the amount or timing of payment for accrued compensation depends on whether he signs the severance agreement.

Do not promise the employee anything that is not described above, for example, a good recommendation or help in getting another job. Recommendations or references can be a thorny area that involves potential liability to suit, so if someone asks for one you should consult with your lawyer about what your policy should be on the subject.

Do not give a false reason for the termination, or deny the true reasons. People sometimes are tempted to do this out of a misguided desire to avoid hurting the departing employee's feelings. You should resist that temptation.

If anything unanticipated or troublesome comes up, or the employee accuses you or a fellow employee of some kind of improper behavior, such as improper discrimination or harassment, postpone any response until you have had a chance to carefully consider the information, perhaps in consultation with your lawyer. Don't try to improvise a response.

A carefully structured, well thought out exit interview can ensure that you carry out necessary transitional tasks, end the employment relationship without unnecessary hard feelings, and help to keep you out of court. It should be part of every employer's regular practice.

1.   These articles originally appeared as a series in the Sacramento Business Journal.  DISCLAIMER: This document is part of an educational presentation. It is not intended as legal advice and should not be relied upon. It is based upon California law as of the date of its preparation, which may be significantly before the last date on which this page was last updated, is subject to change, and may not be the same as other law.  There is no warranty that any information in this material is correct or accurate. You are advised to consult counsel before adopting any of the ideas or suggestions in this material, or using any of the forms in it, which may or may not be applicable to your specific situation.

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DISCLAIMER: I have entered government service and, as of September 1, 2008, am no longer engaged in the private practice of law.  Therefore, this site is no longer being maintained,  may not be accurate, and should not be relied upon.  It is not now and was not ever intended as legal advice.  It is being provided for historical purposes, and for the benefit of those lawyers who are capable of independently verifying the information and judging the opinions in it, and then reaching their own conclusions.  You are strongly advised to consult qualified legal counsel before adopting any of the ideas or suggestions in this material, which may or may not be applicable in your jurisdiction or to your specific situation, and may no longer be accurate or prudent in any case.  The opinions and statements at this site were solely my own.  They were not and are not those of, nor were they nor are they made on behalf of, any agency of government or anyone else.

Copyright © 1998-2008 Vincent DiCarlo