Small businesses are faced with lawsuits from employees that have been terminated, just as corporations with hundreds of employees. In 1991, the Americans with Disabilities Act effectively revoked a business owner’s long-preserved prerogative to dismiss employees at will.

No one can prevent all lawsuits from former employees, but you can take steps to minimize your exposure to such lawsuits:

  1. Use an easy-to-understand disclaimer in your job application, specifically stating that the employment position is “at will”. Obtain the applicant’s written permission to request information from former employers.
  2. Spell out the job duties and expectations of the employee.
  3. Create a file documenting events in writing. Encourage other superiors to contribute to the file. Keep your notes clear, factual and formal. Document the rules that are being violated by the employee and have the employee acknowledge receiving the memorandum.
  4. Maintain a personnel file for each employee. Make sure that evaluations are fair and objective and honestly reflect the employee’s behavior and contributions to the organization.
  5. Make references as positive and accurate as possible.
  6. When terminating an employee:
    1. Have a witness with whom the employee does not have a working relationship present to listen;
    2. Give the employee a written termination notice reviewing the disciplinary history and events leading to the termination;
    3. If you’re firing for cause, have the relevant facts at your fingertips and explain how they violated company policy;
    4. Avoid any kind of euphemism such as “layoff”, which could imply that the employee might be welcome back;
    5. Prepare an accurate written account of the interview, give a copy to the employee and have the employee sign it;
    6. Terminate an employee during a work day rather than at the end of the work day. Avoid giving notice before a holiday or after an employee has returned from a business trip;
    7. If you’re firing for cause, make sure that the termination matches past practices for similar conduct;
    8. Avoid any confrontational dialogue. Say only what has to be said and make it as brief as possible; and
    9. Have the termination interview at a neutral location rather than in a supervisor’s office or an executive’s suite.