Letting an employee go is never easy, but there is a professional and legal way to handle it that can help avoid any unnecessary pitfalls.

Whether due to performance, restructuring, or policy violations, following the correct legal steps can protect your business and ensure fairness. Here’s what every employer should know before terminating an employee.

Employer's rights

In most states, employees are hired on an “at-will” basis, meaning employers have the right to fire an employee at any time for any (or no) reason at all. However, if that individual is employed under contract, their employer must follow the contract’s explicit terms when considering termination.

Some contracts are highly specific, listing the reasons for termination verbatim, while others are broader, citing causes such as poor performance, insubordination, or elimination of the position.

[Read: How to Talk to an Employee About Poor Performance]

Exceptions to at-will terminations

There are three exceptions to terminating an at-will employee:

  • Just cause: Telling your employees they’d only be fired for a “just cause” essentially establishes guidelines for future terminations. This not only implies there is a contract in place, but it also puts you at risk for a lawsuit should you fire someone for a reason that’s not in keeping with your rules.
  • Discrimination: Even though at-will workers can be terminated for any reason, it does not excuse discriminatory actions. It’s federally illegal to fire workers for their age, race, religion, sex, national origin, or disability (so long as it doesn’t interfere with their job performance). Also, check with your state’s regulations to ensure compliance.
  • Public policy: It is considered wrongful termination to fire someone in violation of public policy. If an employee’s actions are protected by a statute or constitutional right, even if you disagree with their activity or it’s at the expense of your company, you cannot terminate the individual on this basis.

Five legal steps to fire an employee

If you’re ready to fire an employee, here are some steps to guide you through the process:

  1. Review your employee handbook and its termination policies. Every employer should have an employee handbook that details disciplinary policies, including potential reasons for termination. All employees should receive a copy during their onboarding period, and you should have a written confirmation of receipt. Before you begin the process of firing an employee, review your handbook to ensure that the policies are, in fact, clearly spelled out, and hold yourself accountable to enforcing all consequences outlined in the handbook.
  2. Document violations. If an employee violates company policy, document it in writing and ensure it is acknowledged by the worker. Create a performance improvement plan and allow the employee to rectify their errors. Store the documentation in their personnel file for future reference so you can support your claims if you terminate the employee.
  3. Investigate the grounds for termination. If you’re ready to fire someone, investigate the situation and collect interviews, documents, and evidence associated with your case. The more evidence you have, the stronger your case is for firing that employee.
  4. Be brief and factual (but don’t sugarcoat it). Once you have everything organized, sit down with the employee and explain carefully why you’re letting them go. Keep the discussion brief and clear. If you sugarcoat your reasoning, you’re potentially misleading the employee, which could come back to haunt you later.
  5. Fulfill all legal requirements. Employers must fulfill certain legal obligations and provide a terminated employee with information about their benefits, including COBRA, their last paycheck, unemployment options, and transportability of other insurance. You might be tempted to deny unemployment benefits, but if you proceed, be prepared to fight claims of discrimination or wrongful termination.

Firing an employee is stressful enough, and the last thing you need is a disgruntled worker taking you to court. It is always recommended to seek legal counsel before making any firing decisions to ensure that you have sufficient cause and documentation for a legally solid termination.

Michelle Yang, Founder and Managing Partner of Lemon Laws by Prestige Legal Solutions, PC, advised employers to consider involving an attorney in the termination process when the risk of legal exposure is high or the situation is complex. For example, she said, legal guidance can be helpful if the employee recently engaged in a protected activity, such as taking medical leave, requesting Family and Medical Leave Act or Americans with Disabilities Act accommodations, and/or complaining of harassment.

“An employment attorney can provide critical support to help ensure that the process is lawful, consistent, and well-documented, reducing the chance of a wrongful termination claim or regulatory violation,” said Yang.

The most common mistake I see employers making that opens them up to liability and lengthy litigation is failing to document an employee’s performance issues and misconduct. In the absence of documentation, it becomes the employer’s word against the employee’s, and in many cases, the lack of evidence significantly weakens the employer’s legal position.

How to prepare the documentation before termination

Before terminating an employee, have thorough and accurate documentation in place to protect your business from potential legal fallout.

“The most common mistake I see employers making that opens them up to liability and lengthy litigation is failing to document an employee’s performance issues and misconduct,” Yang said. “In the absence of documentation, it becomes the employer’s word against the employee’s, and in many cases, the lack of evidence significantly weakens the employer’s legal position.”

Ensure you maintain detailed records of performance reviews, disciplinary actions, written warnings, attendance logs, and any relevant correspondence. Managers and human resources (HR) staff should be trained to record all incidents, even those that seem minor. Over time, these records can establish a clear pattern of behavior that supports the decision to terminate the employee.

Additionally, review local and federal employment laws, and consider consulting a legal professional, especially if you’re unsure whether your documentation meets legal standards.

[Read more: Finding a Small Business Attorney for Your Startup]

How to conduct the termination meeting

Having a clear termination process helps ensure it’s done respectfully and lawfully. Here are some tips to consider:

  • Plan the logistics carefully. Choose a private, neutral location and ensure a member of HR or another witness is present. Schedule the meeting early in the week and earlier in the day to give the employee time to process the news.
  • Be direct and concise. Start the conversation by clearly stating the decision to terminate employment. Avoid small talk or vague explanations, as this can lead to confusion or further distress.
  • Explain the reason and provide documentation. Reference documented performance issues or policy violations that led to the decision. Be factual and avoid emotional language.
  • Outline the next steps. Share details about final pay, benefits, COBRA, return of company property, and any severance, if applicable. Provide a termination letter if required.
  • Maintain professionalism and empathy. Give the employee space to respond, but avoid debating the decision. Remain calm, respectful, and firm to prevent unnecessary escalation.

Remember, conducting the conversation with dignity and structure can help reduce potential backlash.

[Read more: 6 Tips for Firing an Employee With Compassion]

Severance, benefits, and final paycheck checklist

Addressing key post-termination logistics helps ensure a smooth, compliant exit process when terminating an employee. Be prepared to discuss the following items to cover your bases:

  • Severance package: Decide if you’ll provide severance pay and include terms in a written agreement if applicable. This is optional, but it can ease the transition and reduce the risk of a legal response.
  • Final paycheck: Confirm when and how the employee will receive their last paycheck, including unused paid time off, if required by state law. Check deadlines based on your state’s final pay rules.
  • Benefits continuation: Clarify how long health benefits will remain active and provide COBRA information if applicable. Include deadlines for enrolling in continued coverage.
  • Unemployment guidance: Inform the employee of their eligibility to apply for unemployment and offer to provide any relevant documentation.
  • Return of company property: Set a clear deadline for returning laptops, ID badges, or other equipment, and confirm the process in writing.
  • Termination documentation: Provide a written notice of termination outlining the official reason, final compensation details, and any next steps.

Following a structured offboarding checklist helps minimize confusion and protects both parties legally and financially.

Sean Peek contributed to this article.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Published