Terminating an employee's contract


Terminating an employee's contractWhen someone leaves your employment, for whatever reason, from reclaiming your business' property to ensuring your confidential information is kept secret, you must make sure that everything you do is legal. So, what steps should employers take when terminating someone's employment?

An employer must consider all consequences before terminating someone's employment. The employee's rights to notice, pay, etc, will depend in part on their contract of employment and any associated documents (eg staff handbooks and procedures, pension scheme rules, etc). These should be carefully reviewed to ensure the employee receives what they are entitled to when they leave.

Fair and lawful

If you dismiss someone because of performance issues - capability or conduct - you will also have to review performance and attendance records such as appraisals, sickness and holidays, and any documents relating to disciplinary or grievance issues and sanctions. These must justify the termination as fair and lawful.

If the dismissal is justified, it will still be considered unfair unless you follow fair and reasonable procedures. In most cases, this means the provisions of the Acas Code of Practice on disciplinary procedures. If you unreasonably fail to follow this, the Employment Tribunal can increase any compensatory award it makes against you by up to 25% (or reduce it by up to 25% if an employee fails to follow it).

Beware discrimination. A dismissal is discriminatory if it is related to a protected characteristic your employee has, or is thought to have, such as:

  • gender, marital or civil partner status
  • colour, race, nationality or ethnic origin
  • disability
  • sexual orientation or gender reassignment
  • religious or philosophical beliefs
  • age

Discrimination can be direct, against a particular employee, or indirect because a provision, criterion or practice that you operate discriminates against particular employees who can be defined by one of the protected characteristics (eg their gender) compared to another group.

Carrying out investigations

If investigations are required (because of disciplinary or grievance issues, for example), they should be completed before termination. They must be fair and there should be a full and accurate record of them. Investigations should be lawful, for example, if an employee's emails and internet use are monitored, company policies should permit this, and relevant laws (eg data protection and human rights) observed.

If the employee has access to confidential information or trade secrets, make sure they do not copy it or disclose it to third parties (eg a new employer) without your permission, before termination. If necessary, monitor computer use to ensure such information is not being emailed to, for example, the employee's personal email addresses or downloaded onto a memory stick.

Phone, email or other communication with customers, suppliers or competitors may also be monitored in the period leading up to termination. Social and business networking sites can also be monitored for damaging remarks or information about you or the employee's colleagues.

List the company property held by the employee - laptops, vehicles, phones, documents, etc - and ensure it is all returned or (if that is what you have agreed with the employee) destroyed immediately on termination.

Termination meeting

It is sensible for two managers or other employers to attend the termination meeting - one to speak and the other to act as a witness. The speaker should usually stick to a carefully worded script, and there should be a permanent record - usually written - of what was said.

Prepare a statement for other employees and, if appropriate, the media. If you can, agree it with the departing employee. In any event, ensure it is wholly accurate - and not defamatory or otherwise unlawful. If you can, agree with the employee which aspects (if any) of the termination (reasons, details of any settlement, etc) are to be kept confidential.

If there is to be a settlement with the employee, ensure they sign a compromise agreement, relinquishing their right to make future claims against the business. Take specialist professional advice to ensure the agreement is watertight.

Remind the employee of any non-compete, non-solicitation, non-poaching or confidentiality clauses they are subject to and, if they are a director or senior manager, their general duties of confidentiality. Do this in writing; setting out the consequences of breaching such obligations, so there is a record.

Always consider taking specialist legal advice to ensure risks are identified and minimised.