Before firing an employee, a supervisor should check the employment contract and laws of the jurisdiction to avoid litigation. Laws differ on what a company must do when firing an employee. “At will” employees are not entitled to severance pay, but may receive unemployment insurance benefits. Employment contracts or union contracts may entitle workers to costly termination benefits. Employers must inform employees of their termination and may offer placement services.
When a business experiences, or anticipates, a decline in revenue, it is often faced with the reality that it must cut costs, which, in turn, often leads to employee layoffs. Before a company decides to fire an employee, the supervisor should check the employee’s employment contract, if applicable, as well as the laws of the jurisdiction where the company is located to ensure both are followed to avoid future litigation. Laws differ from one jurisdiction to another as to what a company must legally do when it decides to fire an employee. In addition, the employee’s employment contract or company policy may authorize the employee to lay off continuing benefits or compensation that must be considered before deciding to terminate an employee.
Some jurisdictions legally protect workers more than others. In the United States, employment is generally considered “at will” unless the parties have entered into a written employment agreement. In a “willing” situation, a supervisor can fire an employee for any reason without needing to justify the dismissal. As a rule, an “at will” employee is not entitled to severance pay when he is subject to dismissal. A terminated employee may, however, be eligible to receive unemployment insurance benefits when they were terminated.
For employees who have an employment contract or are part of a union that has a general contract with the employer, the employer must consider all the rules of the contract before making a decision to terminate an employee. For example, many union contracts require an employer to make termination decisions based solely on seniority. While an individual employment contract may not dictate who gets fired first, it can entitle the worker to a variety of costly termination benefits that the employer must consider.
Once the decision to fire an employee has been made, the employer must inform the employee. This is often referred to as “getting a pink slip”. Along with the official notice of termination, an employee may be entitled to receive advice regarding the benefits to which they will receive, as well as any placement services that the company offers to terminated workers. While small companies may simply hand a worker a pink slip, larger companies often offer retraining services, counseling or other programs to help employees adjust to the layoff.
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