Substance abuse also is generally a valid reason for terminating an employee. Some companies, especially larger ones, offer treatment as an alternative to termination, but that is not usually an option for a small business. If an employee is under the influence of drugs or alcohol in the workplace, the employer is generally justified in suspending or firing that employee.

The same holds true for physical violence. An employer is not only justified in firing an employee who threatens or commits physical violence, you have a responsibility to make sure that your other employees have a safe environment in which to work.

Those are not the only reasons an employer may be justified in firing an employee. Others include consistent incompetence, flagrant and/or ongoing violation of company standards or policies, and repeated tardiness or unexcused absences from work.

SPECIFIC CONDITIONS

No matter what the circumstances related to a firing situation, you must act carefully and document the supporting reasons for your decision. There are a number of circumstances that call for special diligence, including:

Employees with prior complaints. If a worker has previously complained about working conditions at your company or accused you of harassment or discrimination, firing that employee may open you up to charges of wrongful retaliation.

Terminations or lay-offs involving multiple workers. In cases where you find it necessary to let a number of workers go, be careful to avoid any pattern that could open you up to charges of discrimination later on. In other words, don’t lay off all your women employees over the age of 50 or all your minority workers.

Employees with contracts. If you have to fire a worker with an employment contract, make sure the action is in compliance with any applicable terms in the contract. This is a case where you almost surely want to consult with an attorney. Likewise, if your company has any written policies regarding lay-offs or firings, make sure you follow them to the letter.

Act carefully and document the reasons for your decision to let someone go.

An important step business owners can take to protect themselves against legal actions by fired employees is to be fair and consistent in your dealings with all employees. Policies regarding lost time, lateness, productivity, quality of work, etc. must be applied consistently to all workers in the same manner. If they are not, you undermine your ability to use those factors to defend termination actions later on.

As is the case with any action you take in business, preparation is important when it comes to firing an employee. This is a potentially volatile and emotional situation, but careful planning can help you minimize or avoid misunderstandings, anger, recrimination and the possibility of a lawsuit.

Start by gathering any documents and other material you plan to use to support your decision. These items may include performance appraisals, written and/or documented verbal warnings, salary information, time cards, attendance records and any correspondence that may have taken place between the employee and you or other company managers or officers.

AVOIDING LAWSUITS

Put together a list of all company property the employee might have in his or her possession. This can include keys, corporate credits cards, uniforms, cell phones, computers, tools and equipment, company vehicles, product samples and presentation materials.

Also make a list of any computer passwords, access codes, authorizations and permissions that have been provided to this employee and have them all changed or rescinded immediately.

Ask the employee to review and sign both lists. Have the employee acknowledge that he understands those things are company property and must be returned to the company when he leaves. Have a witness on hand to observer the entire proceeding. If the fired employee decides to sue, the witness can provide corroboration of your version of what took place at the meeting.

It is important for the employer to maintain a positive and professional attitude throughout the proceedings. A tense atmosphere can lead to bitterness on the part of the terminated employee, and a resentful former employee is more likely to take legal action.

Take steps to lessen the likelihood of a fired employee taking legal action against you.

Begin the meeting by thanking the employee for his or her contribution to your company. Be sure to keep this vague. You don’t want to say anything that might undermine your basis for firing this employee.

Don’t play the "blame game" or offer any apologies. Start out by telling the employee that his or her skills and the company’s needs are no longer aligned. Avoid pointing the finger of blame at the employee or the company, and do not apologize for the action you are taking.

Make the situation clear, respond to the employee’s questions, and give him time to pull himself together. The most important thing is to make sure the employee understands he or she is being separated from the company—there can be no confusion or misunderstanding around that fact. Allow the employee to ask questions, but be careful with your answers. Avoid making statements that might be construed as promises or obligations or might otherwise come back to haunt you. Since being fired is a stressful experience for most people, give the employee a few quiet minutes in your office to compose himself before leaving.

Hear the employee out. If the fired employee has something to say, let him speak his mind without interrupting or contradicting him or trying to defend yourself or the company. If you become argumentative, that can increase the employee’s resentment and frustration. Acknowledge what the employee has said to show that you are listening, and thank him for being candid and sharing his insight.

Finish in an upbeat manner. At the end of the meeting, once again thank the employee for his contributions and wish him luck in future endeavors. Stand up to signal that the meeting is over and over a handshake.

After the meeting is concluded, take the opportunity to review the job description of the fired employee and you company’s policy on warnings and termination. Try to find lessons you can use to improve your company’s performance and avoid the likelihood of having to fire another employee in the future. Use the experience to do a better job of hiring new employees and matching their skills to specific job responsibilities.

No matter how carefully you prepare yourself to fire an employee, there is always the possibility that you will end up in a dispute with that employee anyway. In some cases, the best course of action might be simply to do nothing. In other cases, it might make sense to consider a settlement agreement to avoid the cost and distraction of litigation and the potential negative impact it could have on your business reputation.

If you decide to pursue this course of action, you should first secure legal counsel. How the settlement is structured and what it covers will be dependent on a number of factors, including the strength of the employee’s position, your own willingness to compromise and the resources you have available to commit to the settlement.

PROFESSIONAL ADVICE

In return for whatever benefits you provide the employee as part of the settlement, you should expect to get something back. Your goal is to prevent the employee from doing harm to you or your business by attempts to damage your reputation, undermine your competitive position in the marketplace or mount future legal actions against you.

The conditions to which you may want the terminated employee to stipulate will depend on many factors, but some you might want to consider include:

Having the employee sign a release of all claims he or she has against you, the company and all company officers and employees. That release should cover all claims related to the worker’s termination—known and unknown and past, present and future.

The settlement should include a stipulation that the fired employee will not make negative, damaging or disparaging remarks about you, the company or any of its officers or employees now or at any time in the future, publicly or privately.

Settlement agreements should bar ex-employees from disparaging you or your company.

The fired employee should agree not to solicit any of your company’s customers or employees for a set period of time—at least one or two years. That stipulation should apply whether the employee goes to work for another company or starts an independent business.

For most entrepreneurs, firing an employee is not an experience to which they are looking forward, but it is one that most will have to face at some point in their careers. Being well prepared for it can make all the difference in the world.