02 Mar 2017

Termination Best Practices: Reducing Management Liability

March 02, 2017Blog, EPLI

Upper management is often tasked with difficult job of letting employees go. Whether the reason is a lack of performance or aptitude, or your client’s business is facing financial hardship, terminating employees is always a tricky issue to navigate. While most employers include an at-will employment agreement in their hiring contracts, not all liability issues can be foreseen. From claims of discrimination and unfair termination, your clients are exposed to various risks when it comes to employment practices in relation to terminations as well as training practices, as we discussed in our last post. Therefore, in addition to equipping their business with a comprehensive and tailor-made Employment Practices Liability Insurance, please share the following termination best practices with your clients.

First, the employer should prepare its defenses to prevent claims from arising. Following the employer’s existing contract and code of conduct, the employer needs to indicate legitimate and professional reasons that the employee is being terminated. Be sure all opportunity checks and disciplinary actions of the employee have been documented and recorded. If the employee files a claim against the employer, they will have the documentation and proof that they handled the issue appropriately. Next, the employer should refrain from discussing the termination with other employees.

Consistency is another huge factor in reducing liability during termination practices. For example, if other employees had similar small infractions, yet were treated more favorably, this is grounds for an employment practices lawsuit. Inside Counsel states that fundamentally, this analysis requires an employer to have established policies and procedures that reflect current legal requirements, and to have trained its managers and human resources professionals on the application of those policies. When all of management and human resources are consistent, it makes enforcing policies much simpler.

In the event of an investigation, it’s critical for management to understand the potential for whistleblowers, which can expose unprofessional conduct about the employer. It’s also important to note that if the employee served the employer for many years, this also takes precedence in a lawsuit, as well.

Last, the employer can offer a severance package to prevent the former employee from suing. Severance packages include a sum of money in exchange for the employee to forfeit their right to sue. However, as the EEOC carefully scrutinizes these policies, it’s wise for employers to consult with experienced legal counsel if they wish to implement severance packages.

About Euclid Executive Liability Managers

As experts in the executive insurance sector, we provide comprehensive and custom-tailored solutions to protect your client’s entire operation. At Euclid Executive Liability Managers, we offer two EPLI policies. For the insured who is interested in a comprehensive Management Liability Program, we offer Employment Practices Liability coverage as part of our Elements policy. Further, for the insured who wants to purchase a standalone EPLI policy, we offer it through Certain Underwriters of Lloyds of London. For more information about our products, contact us today at (630) 238-1900.