Termination: An Ounce of Prevention

03/05/07

You terminated someone for what you thought were good reasons. Now that person is suing you for wrongful discharge. Will your explanation for the termination hold up in court?

As these three case studies show, it pays to take precautions and build a solid case before you terminate. The first two highlight what employers did right. The last is a cautionary tale about employment practices to avoid—advice courtesy of the United States Supreme Court.

Townsend vs. Clairol
The Case. Clairol, Inc., hired Michael Townsend, an African-American male, for a job titled associate cell leader (ACL). The ACL position was partly production, partly management, and included such tasks as planning and purchasing.

Within about three weeks, Clairol decided Townsend was having trouble. The division’s HR director, Carol Kennedy, started getting negative feedback about him, and she observed directly that he was having trouble understanding the managerial nature of his position. His boss, Richard Thompson, also noticed problems and held a meeting in which he informed Townsend that his performance had to improve. He also reviewed Townsend’s role with him and assigned him the task of writing up goals and objectives for himself.

But Townsend’s coworkers continued to complain. Among other things, he slept through training sessions. Despite numerous, lengthy meetings designed to help him improve, Clairol says he never did. He was fired after less than three months on the job.

The Trial. Townsend filed a suit alleging that he was unlawfully discriminated against on the basis of his race. In a bench (i.e. non-jury) trial, the judge ruled in favor of Clairol. “Throughout Townsend’s employment,” the court wrote, “Thompson made a diligent effort to help Townsend develop the skills he needed to succeed in the position of an ACL. Thompson prepared written summaries of his meetings with Townsend. Those summaries, and his testimony at trial as to Townsend’s capabilities, seemed fair and balanced.”

To establish a prima facie case of discrimination—one that looks as if it might have merit—Townsend had to show that his firing gave rise to an inference of discrimination. To rebut this inference, the employer must offer a legitimate, nondiscriminatory reason for its actions.

Clairol did so, according to the judge. “The evidence in this case shows conclusively that Townsend was not qualified for the position . . . Nor is there any credible evidence that he was the victim of racial discrimination.”

The judge was also impressed with Clairol’s efforts to instruct Townsend. “Thompson made a diligent effort to help the plaintiff learn how to perform the functions of an ACL... Thompson addressed [his] concerns at Townsend’s one-month review, and then followed up repeatedly with a series of meetings, reviews, and assignments calculated to help the plaintiff learn the role . . . Only after all these efforts failed, did Thompson recommend that Townsend’s employment be terminated.”

The Takeaway. Says employment law attorney Wendy Smith: “Judges and juries like to see that an employer made legitimate efforts to help an employee improve and that it gave the employee multiple chances to succeed. The other thing to note is the extent to which Clairol employees documented meetings and conversations. When the case came to trial, they were more than ready to refute the plaintiff’s allegations.”

Schermerhorn vs. Mobil Chemical Corp.
The Case. When Ty Schermerhorn was hired to work at Mobil Chemical, one of the hiring managers in the personnel department said something like: “Based on your father’s reputation and his years of service and hard work [at Mobil], if you perform in the same fashion you’ll probably be able to retire from Mobil with many years of service.” Another said to him, “Your job prospects at Mobil are excellent and you can expect a long tenure at Mobil.”

Schermerhorn proved an adequate employee, judging by performance appraisals over the course of nine years. But he had a few altercations with other employees. In one case, Mobil said he directed abusive and obscene language toward his team coordinator, for which he received a written warning.

Later that year, Schermerhorn was involved in another incident in which he allegedly hurled vulgar and obscene language at a woman. Another woman overheard; together they complained. After an investigation and consultations with legal counsel, Mobil terminated his employment.

The Trial. Schermerhorn brought a breach of contract suit against Mobil. He said the termination “was in violation of representations made to him by the company during the hiring process, terms of an employee handbook providing for progressive discipline, and the employer’s routine disciplinary procedures.”

The federal district court hearing the case (under Connecticut law) granted Mobil’s request for summary judgment in its favor because, in the court’s view, no contract existed between Schermerhorn and Mobil. “At the time he was hired,” it said, “plaintiff was not given a contract of employment, he was not told how long he would be employed nor what the procedures would be if he were terminated.”

What about the statements made at the time of his hiring? Said the court, “The remarks that were made to plaintiff by members of the Personnel Department, who had known plaintiff’s father for many years, did not constitute a clear and definite promise that plaintiff could be terminated only for cause or only in a certain manner.”

The court also gave great weight to two disclaimers in the employee handbook. The first said, in part, “Mobil does not intend this handbook, . . . to constitute a contract for employment or a part of any offer of employment.” The other said the company “reserves the right to by-pass all or some steps outlined in the [discipline] procedure below or, at its discretion, issue more less severe [sic] discipline after consideration of the particular incident.”

Most important, the court said, “Numerous Connecticut State court decisions have held that contract claims based upon the terms of an employee handbook must fail if the handbook contained an effective disclaimer.”

The Takeaway. Says Wendy Smith: “This case shows the importance of having a general disclaimer in your handbook, as well as a statement saying you can bypass disciplinary procedures at your discretion. But despite the fact the employer prevailed in this case, I’d still advise against company personnel saying anything about a new hire’s prospective term of employment. And I’d also involve an attorney in any decision you make, because your state laws may be different.”

Reeves vs. Sanderson Plumbing Products
The Case. Roger Reeves, age fifty-seven, was a supervisor for Sanderson Plumbing Products. One of his duties was to record attendance and the hours worked by employees in his department.

When production skidded in the department, the company’s director of manufacturing pointed to frequent absences and short days taken by production workers. Attendance records didn’t show a problem, but an audit purportedly showed errors and misrepresentations by Reeves and two other supervisors. Sanderson fired him and one other supervisor.

The Trial. Reeves filed suit, claiming age discrimination in violation of the ADEA. In the subsequent jury trial, the company claimed Reeves had been fired for his failure to maintain accurate attendance records. Reeves, however, produced evidence that showed he had recorded the attendance and hours of the people he supervised accurately. He also testified that the manufacturing director had said things like he “was so old [he] must have come over on the Mayflower,” and that he “was too damn old to do [his] job.”

The jury returned a verdict in favor of Reeves, and the court awarded him compensatory damages and front pay exceeding $100,000.

Sanderson appealed, and the Fifth Circuit Court of Appeals reversed the decision. It said Reeves hadn’t produced enough evidence to show he’d been fired because of his age.

It was then Reeves’s turn to appeal, and the U.S. Supreme Court agreed to hear the case. It reversed the decision of the appeals court unanimously, sending a major shock through the legal world.

The Opinion. The court said that two things may be “adequate to sustain a finding of liability for intentional discrimination under the ADEA”: First, if the former employee can establish a prima facie case that he was discriminated against, and, second, if he can show that the employer’s reason for the termination is untrue.

An untrue statement may mean, said the court, “that the employer is dissembling to cover up a discriminatory purpose. . . . Moreover, once the employer’s justification has been eliminated, discrimination may well be the most likely alternative explanation, especially since the employer is in the best position to put forth the actual reason for its decision.”

The ruling—which now guides all federal courts—makes it easier for a discrimination case to go to a jury when a plaintiff can cast suspicion on an employer’s reason for a termination. A jury trial is, of course, something to avoid. The results are unpredictable, and it can be very expensive.

The court limited the ruling slightly: “Certainly there will be instances where, although the plaintiff has established a prima facie case and introduced sufficient evidence to reject the employer’s explanation, no rational factfinder could conclude that discrimination had occurred.”

The Takeaway. What does this mean for you? Wendy Smith: “When terminating an employee, give an honest reason and be able to back it up with evidence. That goes double when you’re in court or dealing with the EEOC on a discrimination charge. If you lie or tell a half-truth, and a former employee can cast doubt on your reason, you may find yourself in a difficult position to defend.”