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One of the most difficult and intimidating aspects of being a municipal employer is managing employee misconduct or poor performance. City, village, township, and county employers are often tripped up by concepts like “at-will employment,” “just cause,” and “wrongful termination,” and the consequences for getting these disciplinary decisions wrong can be disastrous both financially and operationally. This article will dispel some of the common misconceptions about at-will employment, discipline, and termination and highlight best practices to minimize the risk of liability while maintaining an efficient and effective workforce.

At-Will Employment and the Fundamental Concept

Most discussions of strategies for managing employees start with discussions of “at-will” and “just cause” employment, the primacy of your “right” to manage your staff or the rules that apply to employee rights under state or federal laws. While each of these topics is important to understanding an employer’s rights and obligations in dealing with and managing its employees, the practical reality is that the evolution of state and federal law, decisions by the United States and Michigan Supreme Courts and lower appellate courts, and the sophistication and understanding of employees has created a fundamental set of principles for employers to follow in hiring, managing, and terminating their employees. So, it is important not to be misled (or wrongly emboldened) by catchy employment law concepts like “at-will employment.”

Remember, the concept of at-will employment generally means that either the employee or the employer can terminate the employment relationship at any time and for any reason. The critical caveat is that the reason for termination cannot be an illegal one. Due to expansions in anti-discrimination law and sentiments towards equal employment, that caveat is more and more important as time goes on.

How can that be? All employees fit within a classification of persons protected by a state or federal statute. In Michigan, this includes religion, race, color, national origin, disability, age, sex (including sexual orientation and gender identity), height, weight, familial status, or marital status, veteran status, genetic information, as well as retaliation. Employees may also be covered by a statute or other legal protection because they reported discriminatory conduct, threatened to “blow the whistle,” or were engaged in some sort of collective action, such as union organizing.

That means that it is illegal to take an employment action because of an employee’s protected-class status. Be aware that employees can claim both direct and indirect discrimination or harassment based on these protected classes as well. In other words, even if an employer does not state an illegal reason for its employment decisions, employees can make claims based on patterns of behavior and more subtle connections to protected-class status. For example, if a female employee is terminated for a pattern of tardiness, she may be able to make a plausible claim that it relates to her sex if she can demonstrate that only female employees are ever terminated for tardiness problems.

What then can a well-meaning municipal employer (or official, manager, or administrator) do to limit liability while maintaining an orderly workplace in which to provide service to its citizens? Take employment actions only where the employer can show a “good-faith reason” for the employment action.

State and federal courts have established a process for considering whether an employee has been the subject of unlawful discrimination. Simply stated, in most discrimination cases, the burden of proof changes like this:^[1]

STEP 1 – Employee must show membership in a protected class, qualification for employment, that they were subjected to adverse employment action, and that others outside their protected class were treated more favorably.

• Remember: All employees fit within some protected classification, so parts of this test are very easy to meet.

STEP 2 – Employer must show its actions were reasonable, founded in good faith, and not based on the employee’s protected class

• In other words, the employer shows a good-faith reason for acting.

STEP 3 – Employee must show the good-faith reason(s) is a false reason or an excuse concealing the Employer’s true motive (a pretext)

Whatever the action, whatever the policy, have and be prepared to explain the “good-faith reason” for your actions. If you do, you will not only create an atmosphere that leads to a feeling of fairness and clarity among employees, which can only lead to stronger morale and productivity, but you will also protect your municipality from the myriad of claims that employees can bring.

With this fundamental concept established, how do you know if you have a “good-faith reason” for your policies, actions, or decisions that affect employees? The determination of whether you have a “good-faith reason” is, indeed, a question of fact and there is no hard and fast test that answers every situation. There is, however, a well-established set of principles by which you can evaluate whether the actions you take (or the policies you adopt) would be judged as being in “good faith.” Simply lean into a concept well-known in the arena of labor contracts: just cause.

Don’t tune out if you don’t have unionized employees!

The Fundamental Concept & Employee Discipline

The challenge is to be sure that you have “just cause” to discipline before you act, even if there is no employment agreement or labor contract requiring it. Arbitrators considering whether an employer has “just cause” to discipline or discharge an employee apply a set of principles to evaluate an employer’s actions. Though variations on these principles exist, they all generally rely upon a series of questions that must be asked about the employer’s actions. These tests, if applied, can help you evaluate whether you have a “good-faith reason” for your actions even outside the union or just-cause environment.

Although not technically required for at-will employment decisions, we strongly recommend that any employment decision be analyzed by asking yourself these questions before issuing discipline.

1. Notice – Has the employee been notified of the rules and warned of the consequences of his or her actions?

Notice may come in the form of an actual warning from a supervisor OR in acknowledgment of receiving the employer’s workplace rules and policies. Some rules are so obvious that specific notice may not even be required.

2. Reasonable Set of Rules – Was the rule or order given to the employee a reasonable request?

If a reasonable person could not discern the purpose of the rule, it may not form a strong basis to act.

3. Investigation – Was a thorough investigation completed in an attempt to gather all the facts surrounding the case and was it done prior to issuing the discipline?

The investigation does not need to overturn every single stone and consume weeks of hard work. Do more than enough to reasonably get to the truth of the matter and your investigation will be sufficient.

4. Fair Investigation – Was the investigation fair, timely, and objective?

The investigation may need to include interviews with everyone who has knowledge. Do a fair and impartial job (or assign someone who can do a fair and impartial investigation). Do not just seek out witnesses and evidence that confirm your theory or preferred outcome (avoid confirmation bias).

5. Proof of the Offense – Did the investigation produce substantial evidence to prove guilt in the employee’s actions?

Employees have fewer rights inside the workplace than they would have in civil court, but you must still have real evidence of a rule violation.

6. Equal Treatment – Have the rules or orders been handed out evenly and without discrimination?

If there are discrepancies in how the rule has been applied in the past, you must have a strong justification to distinguish or you open the door to possible problems.

7. Appropriate Discipline – Was the penalty reasonably related to the seriousness of the offense and the past record?

Does the punishment fit the crime?

If the answer to each question is “yes,” then your actions can be fairly said to be in “good faith.” This is not to say that a “no” answer renders the actions “illegal” or indefensible, but just that care should be taken in acting. You may need to reconsider or tone down your initial planned discipline (or response!).

Setting Your Municipality Up for Success

Municipalities have a constant interest in maintaining an efficient operation. Effective management relies heavily on your ability to find capable employees, appropriately correct those capable employees who are straying from the performance standard desired, and move on employees who have demonstrated that they cannot be corrected. Thus, effective management sometimes requires effective discipline.

Being disciplined or terminated is a traumatic experience for employees because it involves criticism and an acknowledgment that an employee has not been performing acceptably, thus affecting that employee’s self-perception. Much too often, however, employees are disciplined or discharged for poor performance, yet their personnel files are full of neutral (or glowing!) evaluations. This creates a conflict between the “paper trail” and reality, or worse—between an employee’s perception and reality. This inevitably leads to difficulty when the municipality is faced with the task of justifying its employment decisions

To that end, your municipality’s disciplinary process should endeavor to achieve several goals.

1. Eliminate disciplinary problems before they require formal discipline as much as possible by making employees aware of what actions are punishable and what the disciplinary procedure is.
2. Put employees on notice that their performance is not meeting municipal standards as soon as you are aware of it. In some cases of misconduct, prior notice may not be possible, but do not let a slow burn of poor performance go unaddressed. Employees should not hear about performance concerns for the first time during disciplinary discussions.
3. Increase employees’ sense of job security by reassuring them that you will not stray from the established procedure.
4. Assure employees that disciplinary procedures will always be carried out uniformly and consistently among all employees and all departments.

Management should be trained to effectively—and consistently—carry out whatever disciplinary procedure you adopt. When a supervisor becomes aware of a policy violation, document the information received concerning the violation, notify management and, if applicable, Human Resources. The designated management representative must then:

• Commence an investigation of the violation;
• Review all the relevant information (including witness accounts, and all documentation); and
• Meet with the employee to discuss their side of the story and weigh that against all the evidence gleaned through the investigation.

If discipline is warranted, meet again with the employee to discuss the appropriate disciplinary measure and the ramifications that measure will have on the employee. Document the disciplinary decision and have the employee sign to indicate their understanding of the purpose and substance of the meeting. Fear not if they refuse to sign the document: make a note of your own about the refusal!

Effective Termination Procedures

Unfortunately, there may come a time when your municipality must terminate someone’s employment for performance problems or misconduct. These decisions cannot be taken lightly, but are appropriate where the employee’s behavior cannot be (or has not been) corrected through lesser discipline or the employee’s continued presence will be intolerable for other employees or municipal operations generally.

On top of the difficulty of the decision to terminate, termination carries more legal risk than any other employment decision. It is critical that termination decisions be carried out promptly and professionally, through reasonable and appropriate procedure. Consider the following tips:

1. The Termination Meeting

• Have another management witness present.
• State the reason(s) for the decision truthfully, without overstating or understating the factors that led to the termination.
• Maintain compliance with any applicable wage payment laws, severance policies, administration of benefits, and insurance law requirements, and explain those to the employee.
• Tell the employee that you will provide a “neutral” reference, unless this is a scenario where a separation agreement is being offered (higher level terminations) and a neutral reference may be a component in the offer made (“consideration”) in exchange for employee releases.

2. Notice

In general, the law does not require you to give a terminated employee written notice of the reason for the discharge, but you should do so anyway to ensure you have documented your good-faith reason and to avoid claims that you made up the reason after the fact. Be aware that you may have a union contract or employment agreement that does require certain written notice as well.

That notice need not be elaborate. Minimally, it should include a brief description of the employee’s conduct which led to the termination, list the rule(s) the employee violated, and state the effective date and time of the termination. Using a simple, basic form that lays out these concepts and provides a line or two for summary descriptive information is usually the best approach. 

3. Wage and Hour Issues

Michigan’s Payment of Wages and Fringe Benefits Act requires an employer to pay all wages due and owing to an employee who has been discharged “as soon as the amount can with due diligence be determined,” and prohibits an employer from making deductions from an employee’s wages without a written consent signed by the employee. Do not forget to include any vacation, sick, PTO, or other payouts required by your policies or a contract (but check to see if a terminated employee is eligible for payouts at all).

Do NOT withhold any pay upon termination for ANY reason, even if, for instance, they still have employer property.

4. Health Care Benefit Continuation

Under the federal Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), many terminated employees of covered employers must be offered health care continuation coverage. COBRA continuation only applies if health insurance is offered in the first place and if the employer has 20 or more full-time equivalent employees for more than half of the calendar year.

5. Employer Property

A termination policy should include a notice to employees that they must return all tools, uniforms, keys, etc. to the employer on their last day of work or reasonably thereafter. If the termination is not amicable and you do not wish for the employee to return to the workplace, you can also arrange for alternative means of returning property. If property is not returned, you may need to send reminder messages or involve law enforcement.

6. Exit Interviews

Exit interviews are entirely optional and are best left to situations where the separation is amicable. This interview may occur after the termination interview or on the employee’s last day after the employee has resigned. Two management representatives should be present during the exit interview. Take thorough notes to enable you to best use the information for continued operational and management improvement, and to protect against future new claims that employee may bring.

7. Pre-Dispute Releases

A pre-dispute release is an agreement between the employer and the terminated employee under which the employee agrees to release all claims he or she might have against the employer in exchange for money and other consideration. The “other consideration” is often outplacement services, a positive (or at least neutral) recommendation, or a continuation of employee benefits the employee is not otherwise entitled to continue.

Conclusion

Discipline and termination are never the goal of good personnel management. But understanding how to legally and effectively navigate discipline and termination are crucial to understanding how to avoid legal pitfalls in managing municipal staff more generally. Having a strong knowledge of these concepts will inspire more confident and more proactive management that may even reduce the need for discipline or termination decisions in the future.

[1] The principles laid out here are very general and there are many, many circumstances or factual situations where the precise legal rule can and will be different. The guidance here should be taken with that caveat.

By: Chad Karsten

This publication is intended for educational purposes only. This communication highlights specific areas of law and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.