Avoiding Expensive Legal Costs and Liability When Terminating Hotel Employees
By Lindsay Ayers Partner, Carothers DiSante & Freudenberger LLP | January 26, 2020
Last year, alone, well-known hospitality companies across the country paid multi-millions as a result of wrongful termination claims filed against them. Whether these claims were resolved through settlement or litigating the action through trial, the result was numerous payouts in the millions.
In order to avoid such suits, hotels and restaurants in the hospitality field must ensure they are following the most recent and ever-changing laws in this area, and educating management and subordinate employees on the hotel's policies that comply with these laws. Below are some tips to help guide hotels in taking the proper steps before terminating an employee:
Have a Lawful Reason for Termination
In most states, the general rule is that employment is at-will. The at-will doctrine provides an employer the right to terminate an employee at any time, without cause, reason or advanced notice. Likewise, the employee can leave the company at any time, without reason or advanced notice.
There are, however, exceptions to the at-will doctrine. These include when an employee enters into an agreement with the hotel contracting for a set term of employment. This may be in writing, an oral agreement or some combination of the two. The agreement may also be express (clearly stated via an offer and acceptance) or implied (where there is no written contract, but fairness requires the upholding of certain terms under the law, e.g. terms found in an employee handbook). A collective bargaining agreement would be an example of an express agreement and exception to the at-will doctrine. In these instances, the hotel must adhere to the specific terms of the agreement(s) addressing term(s) of employment and/or termination.
In the absence of an agreement setting the term for employment, while the hotel may have the right to terminate an employee for no given reason, when an employer fails to provide a reason for termination, it can lead the employee to believe that they are being terminated for improper and/or illegal reasons. This can prompt the employee to seek legal advice, which often leads to an employment action being threatened and/or filed against the hotel.
Once attorneys are involved, it is not uncommon that the lawsuit that ends up being filed will not only consist of wrongful termination and related claims (i.e. discrimination, harassment, etc.), but can also include wage and hour claims (i.e. failure to pay overtime, meal and rest break violations, etc.) often in the form of PAGA (Labor Code Private Attorneys General Act) and/or class action suits. As referenced above, these types of actions can cost the hotel from thousands to millions of dollars.
Other exceptions to the at will policy, that amount to illegal reasons for termination, include violations of public policy and breach of the covenant of good faith and fair dealing. Examples of such exceptions might include, termination (i) due to the employee's filing of a workers compensation claim, (ii) of a whistleblower, (iii) in retaliation for the employee reporting harassment or seeking disability accommodation, (iv) in response to the employee seeking a local, state or federal permitted leave of absence (e.g. leave for military duty or jury duty), (v) falsely devising a reason to terminate an employee, (vi) strong-arming employees to resign or retire, and/or (vii) to avoid having to pay the employee an earned bonus or commission.
Termination Should Not Come as a Surprise to the Employee
It is important that the hotel communicate its expectations to all employees. This should be done via the issuance of a hotel employee handbook, including all appropriate and applicable hotel policies, procedures, and/or codes of conduct. For example, the handbook should address policies against harassment, discrimination and retaliation. It should advise what conduct is improper in the workplace. During a new-hire orientation, the hotel should (i) provide all employees (including management) copies of the employee handbook, policies and procedures, (ii) introduce the employees to the policies, and (iii) allow for questions.
All hotel employees should sign an acknowledgement that they received, read and understand all the hotel's policies. All hotel management should receive additional training on how to properly enforce and uphold the hotel's policies, before they be allowed to act in a management role. Accordingly, when these managers are dealing with an employee who is violating hotel policy, or failing on the job in any way, they are equipped to properly address the issue(s) with the employee directly and promptly, documenting as they go. Accordingly, once the hotel deems termination necessary, it should be no surprise to that employee. This will also make it more difficult for the employee to challenge the reasons for termination down the line.
Due to the ever-changing laws in the employment arena, all hotels and companies in the hospitality industry should have their handbooks revised annually (and during the last few months of the year) to ensure that all new required laws for the upcoming year are taken into account and included into the new handbook. Failure to include new legal requirements can automatically place the hotel in violation of the law and open the hotel to class action lawsuits. All that is required to prompt such a claim is for one employee to take that handbook to their attorney seeking advice, which can lead to the filing of such a suit.
Be Consistent and Swift in The Enforcement of Hotel Policies
Consistency in the enforcement of hotel policies will not only avoid claims that the policies are being enforced in a discriminatory manner, but will also send a strong message to employees that the hotel policies are important and must be followed. When employees violate hotel policies, the hotel should immediately address it with the employee.
As keeping track of employees' performance can be challenging due to (i) high turnover rates, (ii) the coming and going of temporary and seasonal workers, and (iii) transfer of management within the establishment, a recommended tool to track employees' performance is the Performance Improvement Plan or "PIP." Upon an employee's continued failed performance, the process allows the hotel to outline expectations for the employee in writing, and a stated timeline for improvement. If after regular meetings to monitor progress, the employee does not improve, they are terminated.
Such a process allows for the employee to be put on notice of their failures, provides them an opportunity to improve, and allows the hotel to document either the improved or continued failed performance. In the end, this provides the hotel the documentation it needs to support the termination and defend any future lawsuit. Even verbal coaching should be documented. This process allows the hotel to maintain track of the employees' progression despite, hotel turnover or transfer of management. Having the employee review and sign all documented write-ups is also recommended, as it, too, will make it more difficult for the employee to later dispute the reasons for their termination.
Do Not Rush to Terminate
Unless the violation of company policy is extreme and/or rises to the level of illegal behavior requiring immediate action, the decision to terminate should not be rushed. For example, the hotel should take the time necessary to assure it has all facts supporting its reason(s) to terminate (i.e. conduct an investigation, if necessary), and have all documents supporting its decisions to terminate (i.e. witness statements, if needed). If time is needed to pull such information together, the hotel may suspend the employee during any such investigation --though it is recommended that legal counsel be consulted in such situations to avoid claims of retaliation.
Another reason not to rush termination is that in some states, i.e. California, the hotel must have the employee's final check ready the same day of termination. Waiting even one day leads to penalties. Also, in some situations, the hotel may wish to provide the employee with a severance and release agreement at the time of termination, which can work to limit future liability for the employer (and should be drafted and/or approved by employment counsel).
Hold a Termination Meeting
When possible, the hotel should meet with the employee in person to advise them of their termination. A second witness should be present, and the witness should not be one of the employee's peers, but instead, a member of Human Resources, the employee's manager or someone else in management (i.e. a director, officer or representative from operations). With two present, one person can advise the employee of their termination, while the other can document all things said and done in the meeting.
Having two witnesses to the final termination can prevent the employee from later fabricating (whether intentionally, or due to a failed memory) events that never occurred, or statements never said at that meeting. It also allows the hotel to have written record of exactly what transpired. Such records will be the first line of defense to any later filed claim of wrongful termination.
At the final termination meeting, the employee should briefly be advised of the reason(s) for the termination (i.e. violation of company policy) and reminded if the hotel has addressed those same issue(s) with the employee previously. The meeting should be held in a private office or space and be no more than 10 to 15 minutes.
Taking these steps and working with your employment counsel on the front end, will work to greatly minimize the risk of a wrongful termination suit, and the extremely costly spend on litigation, attorneys' fees (yours and plaintiff's/claimant's), and/or costs to mediate and/or settle the dispute that follow.
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