View All | July 2023 Newsletter Edition


For any size or shape company, letting go or firing an employee is hard enough. However, when that person is an executive, the legal and operational risks can be much greater.

If you rush into or mishandle the firing of an exec, it could severely disrupt the morale and productivity of his or her business unit or department. Worse yet, a lawsuit may soon follow. In the current economic downturn following the COVID-19 pandemic, many workplaces are already in turmoil and the loss may worsen the stress and anxiety that so many of us are still experiencing.

If you’re leaning toward letting go or terminating one of your top management-level employees, here are seven recommendations on how to proceed:

1. Don’t make it a surprise. A business owner may find it exceedingly difficult to discuss subpar performance or simply the need to cut salaries with an executive with whom he or she has worked closely with for a long time. But it’s necessary. Wrongful discharge suits are among the fastest-growing forms of litigation, so being frank about an executive’s shortcomings, or the economic case for letting him or her go, is vital. In court, formal performance reviews can provide strong evidence that the termination was justified.

Thus, be sure to conduct performance evaluations at least annually. In addition, document serious performance-related conversations and add them to the executive’s personnel file. This way, you’ll have evidence in hand if he or she decides to take you to court. Proof of performance difficulties gathered and carefully documented over time is often what it takes to win a case. If you don’t have any evidence, it’s probably wise to delay the termination until you do.

2. Ease them out. At the executive level, two week’s severance pay generally is insufficient. Severance packages are usually generous, designed to save face and include elements such as:

  • One to four weeks pay for every year of service with a minimum of six months.
  • Out-placement support to help the executive find a job. A lawsuit is less likely if he or she remains technically employed. If you really want to help, offer to post-date the separation for a set period. That way, the executive can honestly tell potential new employers that he or 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.

3. Put it in writing. Get your lawyer — one who is experienced in labor and employment law — to draft a separation agreement. Make sure it’s in defensible legal language that clarifies your offer but also offers protection in the event of a lawsuit. Include details of the financial settlement, any agreement to delay the official termination date and the procedures for handling references. In addition, seek a release of any claims against your business 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 resolve conflicts through arbitration (or another agreed-on method). Lay out the terms in a way that allows both sides to hold their heads high and separate gracefully.

4. Do the talking yourself. Turning a termination over to an HR staffer or another executive may backfire if it leads the person to believe they can come to you for an appeal.The business owner should be on hand for the discussion.

5. Seek consensus. Ask the person you’re terminating to sign the separation agreement. If the employee is part of a “protected class” for reasons of health, sex, age, etc. — and many people are these days — federal law gives them nearly a month to have their own lawyer look over the document and amend or reject it. Be patient and flexible. This probably won’t be settled in a day.

6. Apply security measures, but be kind. If the parting is indeed amicable, handle the matter at the end of the day so the exec can leave afterward unnoticed and return at an arranged time to pack up his or her office. Having someone escorted out of the building without giving him or her a chance to collect personal items creates enormous ill will. If you’re concerned about computer security, change the exec’s password(s) but allow temporary, monitored access to save any personal files. Check your server and system records for copied files.

7. Get ahead of the story. You’ll likely need to to manage rumors and misinformation. People will talk. Without going into unnecessary or legally risky details, alert staff that the executive in question is no longer with the company. To avoid a defamation lawsuit, don’t discuss the specifics of the case, but do what you can to reassure other executives and employees that they aren’t next on the list.

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