By Patrick J. McHale
During a recent lecture to his business school students at MIT, legendary business leader Jack Welch was heard to say: “Don’t fall in love with your workers. If you’ve got 16 employees, at least two are turkeys.” Further, on the subject of what a business leader ought to do when faced with one of these turkeys, Welch advised: “Don’t bother trying to improve the performance of underachievers in the bottom 10 percent of the company’s workforce. Tell them they’re not suited to their job and give them a way out.”
This article discusses how a business can get rid of its underachievers without spending the next three years, and hundreds of thousands of dollars in legal costs, in court fighting about whether an employee’s separation was lawful. You see, even in an “employment-at-will” state like Connecticut, employees who are let go can, and frequently do, sue their employers under one or more statutes that protect employees from adverse job action. Just in the area of employment discrimination, federal and state statutes prohibit adverse employment action based upon the employee’s sex, race, color, national origin or ethnicity, religion, disability, age, pregnancy, sexual orientation and marital status. Moreover, both federal and state governments maintain agencies whose sole purpose is to investigate claims of employment discrimination, free of charge to the claimant. For this reason, most workers whose employment is terminated will have an easily accessible place to file a claim alleging that the decision to fire violated one of these statutory prohibitions.
Traditionally, when advising clients on how to deal with their turkeys, employment lawyers recommend that employers should prepare documentation of the employee’s shortcomings, give the employee notice of his/her deficiencies, offer training and provide a reasonable opportunity to improve so that the employer’s real, non-discriminatory reasons for terminating the individual are set forth in advance. Only after every effort has been made to rehabilitate the individual, and after full progressive discipline has been exhausted, should dismissal be considered. Although this advice is legally sound and may even be practical in most circumstances, there are still situations where a business cannot or will not, for a variety of reasons, follow the wise advice of documenting through the problem with progressive discipline.
It is precisely in these circumstances when the business needs a mechanism to, as Welch put it, “give the worker a way out.” That mechanism is commonly referred to as the severance agreement and release.
The severance agreement and release contain two main parts. As the title suggests, it contains a promise of some severance benefits beyond considerations routinely promised by the employer to a departing employee through its personnel policies and practices. It also contains a general release of claims against the employer. Through it, each party receives something that it desires. The employee receives continuing income for some period of time (typically based upon a rate of anywhere from one to four weeks of pay for each year of service, depending upon the employee’s position and the employer’s assessment of the importance of the release), with or without medical insurance benefit costs paid by the employer during the salary continuation period. The employer receives a guarantee that the employee will not sue or bring any other claims, or even talk badly about the business, following separation.
As with any other business document, there is no question that “the devil is in the details,” with each term of the agreement being fully negotiable. Commonly, in order to secure the release, the employer may need to provide a little more than it originally offered in terms of salary continuation benefits, or may need to offer outplacement services as a sweetener to induce an agreement. But, when properly drafted, separation agreements are legal and fully enforceable and provide a business with a graceful way to expedite the otherwise difficult and time-consuming process of terminating the employment of its underachievers.u
Patrick McHale, of Kainen, Escalera & McHale in Hartford, represents public and private employers and nonprofit organizations in all aspects of labor relations and employment law. The firm oversees the Employment Legal Line service, offered through the Connecticut Bankers Association.