Firing Employees FAQ

Can I fire an employee for any reason?

No. Although the law gives employers a great deal of leeway in deciding whether to fire an employee, there are limits. State and federal laws prohibit employers from firing workers for certain reasons -- for example, because of the worker's race or religion, because the worker took family leave, or because the worker complained of illegal company activity.

For a list of reasons for which you can never fire an employee, see Illegal Reasons for Firing Employees.

If the employee has an employment contract or you have made promises to the employee, then you must honor your commitment. Typically, this means you cannot fire the employee without "good cause."

For more on firing an employee with an employment contract, including an explanation of "good cause," see Firing Employees With Employment Contracts.

Do I have to give a fired employee a severance package?

It depends. The law does not require you to give severance packages to employees whom you fire. (There is one exception: a handful of states require employers who are closing a facility or laying off a large number of workers to pay a small amount of severance.)

However, if you ever promised the employee a severance package, you should deliver on that promise. And if you ever signed a contract with an employee in which you agreed to provide a severance package, then you must honor that contract. And finally, if you paid severance in the past to other employees in the same position, you may need to continue that policy.

For more about severance packages, see Should You Offer Severance Pay?

What do I tell prospective employers who call me for a reference for an employee whom I fired?

Sometimes, you might be willing to give a fired employee a positive reference. After all, an employee who wasn't a good fit at your business might do well elsewhere. If you can say positive things about the employee, then say them.

If, however, you are not comfortable giving a positive reference, then you shouldn't. In such a situation, less is better than more. When prospective employers call, tell them that you can only confirm dates of employment and job responsibilities and no more. You must take care not to "trash" the employee to a prospective employer, because this will leave you vulnerable to a defamation suit from the former employee.

For more about giving references, see Giving References for Former Employees.

Can my company be sued for hiring -- or keeping on -- a dangerous employee?

In many states, yes. Failing to take reasonable care in hiring workers can lead to a lawsuit for "negligent hiring." For example, if you hire an employee to make deliveries to customers' homes, and that employee has a serious criminal record that you failed to check, you might be liable to a customer whom the employee robs or assaults.

Failing to fire an employee after you become aware that the employee poses a danger to coworkers, customers, or others can lead to a lawsuit for "negligent retention."

For more on your responsibility for employees' conduct, including tips on avoiding claims of negligent hiring and retention, see Employer Liability for an Employee's Bad Acts.

Can I fire an employee for making a false complaint about our company's billing practices to a government agency?

Under most "whistleblower" laws, it depends on the employee's intent. (A whistleblower is an employee who complains of company misconduct, such as health and safety violations, shareholder fraud, or financial mismanagement.)

As long as the employee has a good faith belief that something illegal is going on, you cannot fire the employee for complaining about it. If, however, the employee knows the complaint is false and makes it simply to stir up trouble, the employee probably is not a protected whistleblower.

For information on whistleblower protections, including the Sarbanes-Oxley Act, see Punishing Whistleblowers Can Lead to Trouble.