Employee Terminations: Negotiating The Minefield

by John J. Myers, Eckert Seamans Cherin & Mellott, LLC

A joke in a meeting. A passing comment overheard by another employee. A satisfactory employee evaluation. These are all pieces of evidence that can be used in court to prove that an employee was unlawfully discharged.

The vast majority of unlawful discharge cases that former employees win are not based on direct evidence but rather on "indirect" or circumstantial evidence. The angry supervisor who makes a racist remark while firing an employee is an easy case to prove. But most supervisors know not to make such a statement.

Accounting firms must understand that employees do not have to prove actual discrimination to win a discrimination case. Employees only have to prove that the explanation is not believable under the circumstances.

There are six kinds of evidence that often appear (alone or in combination) in every case an employer loses:

  1. Remarks or documents that may indicate bias: Spoken statements like "We need to get some young blood in here."
  2. Inconsistency between the record and the explanation: For example, an employee is discharged for poor performance, but his performance evaluations are satisfactory.
  3. Unequal treatment: For example, if two employees engage in the same misconduct and one is given a warning while the other is fired.
  4. Statistics: If 70 percent of workforce is Caucasian, but nine of 10 employees laid off are minorities.
  5. Unfairness: For example, when the employer doesn't warn the employee that there's a performance problem.
  6. Timing of decision: If an employee is discharged shortly after complaining about sexual harassment.

Employees can establish discrimination or retaliation solely by discrediting the explanation for the termination. Whether or not the supervisor was unlawfully motivated to fire the employee is not at issue.

Intent is irrelevant except to the extent that it influences observable actions or comments. The burden is placed on accounting firms to prove that the motives for the termination did not have the appearance of being illegal.

Reducing the Risk of Liability in Terminations

With this understanding of how cases are won and lost, an accounting firm can improve its chances of winning wrongful termination lawsuits or even avoid them altogether by following these guidelines:

  1. Preserve the at-will relationship of the employment by mentioning the at-will status of employment in all applications, handbooks and offer letters. At-will means that an employer or an employee may terminate the working relationship at any time for any reason, except for discrimination or retaliation.
  2. Review and candidly evaluate the job performance of employees on a regular basis.
  3. Be specific in employee evaluations by citing observable incidents that demonstrate the employee's performance.
  4. Document performance reviews and warnings with written memos and have employees sign to acknowledge receipt.
  5. Don't make promises or assurances you don't intend to keep.
  6. Warn employees and give them a legitimate chance to correct problems, except in case of serious misconduct.
  7. Make sure supervisors know and follow policies and procedures.
  8. Be consistent with your discipline. If you discipline one employee more severely than another for the same offense, be sure that you can give legitimate reasons for the difference, e.g., prior discipline record, seniority.
  9. Avoid inappropriate jokes or comments.
  10. Never make a discharge decision in anger. If necessary, send the employee home while you consider an appropriate response to the employee's behavior.

Checks and Balances

All accounting firms should have procedures for reviewing discharge decisions. The procedures should include the following:

  1. Require approvals of another manager and human resources before terminating any employee.
  2. Develop a written draft explaining the reasons for the termination. Managers and human resources should review the document and the final version should be placed in the personnel file.
  3. Perform "fire drills" in which human resources walk supervisors through a mock termination.
  4. Review records for consistency to ensure that similar actions are disciplined similarly.
  5. Monitor discharges of "protected class" employees to see if a particular supervisor is discharging a disproportionately high percentage of minorities, older employees or women.
  6. Make investigations of "protected activities." Human resources should search to find out if the termination is fueled by a manager's ulterior motives or personal biases.
  7. Confirm that the employee's record is consistent with the termination explanation, and that adequate warnings have been given in cases not involving serious misconduct.
  8. Have two company representatives present at all discharge meetings.
  9. Meet with employees after the termination, when possible, to learn if the employee believes there was an unlawful motive for the termination. Any such suggestion should be investigated immediately. The employee should be told that an investigation will be conducted. Human resources should conduct these meetings with no supervisors present. Document the meeting and, if the employee agrees, get a signature to verify the contents of the interview.

While the sheer volume of laws and court rulings protecting employees against wrongful discharge may give the initial impression of a minefield laid to trap the unwary supervisor, an accounting firm can negotiate this maze of laws successfully by following the rules discussed above.


John J. Myers is chair of the Employment and Labor Law Department at Eckert Seamans Cherin & Mellott, LLC, a national law firm with offices in Pittsburgh, Harrisburg and Philadelphia, Pennsylvania; Morgantown, West Virginia; Haddonfield, New Jersey; Boston and Barnstable, Massachusetts; and Washington, DC. Telephone: 412-566-6000.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Already a member? log in here.

Upcoming CPE Webinars

Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.