Employee Terminations: Honesty is the Best Policy

Terminating an employee can be one of the most consequential decisions an employer can make. The best way to mitigate risk? Honesty.

While employers generally have wide discretion to terminate at-will employees—this discretion is not without limits. A critical legal risk arises when the real reason for termination is concealed or poorly communicated. This can lead to a finding of “pretext.”

What Is Pretext?

Pretext is a false reason given for an adverse employment action (like termination). While sometimes the fake reason is intended to cover up the real, unlawful reason—such as discrimination based on race, gender, age, disability, or retaliation for protected activity; more often, the fake reason is provided to spare the employee’s feelings, avoid providing negative feedback, or because it seems like the easier approach. Not only is a failure to provide accurate feedback a disservice to employees, it creates significant risk if the termination is challenged.

Under the McDonnell Douglas burden-shifting framework, once a plaintiff establishes a prima facie case of discrimination, the burden shifts to the employer to articulate a legitimate, non-discriminatory reason for the termination (McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973)). If that reason is proven to be false or unworthy of credence, the finder of fact may infer that discrimination was the true motive.

Why Honest Feedback Matters

1. Prevents surprises that invite litigation
   
   Employees who receive little to no feedback about performance issues are more likely to view a termination as unfair or discriminatory. Even modest efforts to document concerns and provide coaching can dramatically reduce the perception of injustice.
2. Builds credibility in litigation
   
   Consistent, contemporaneous documentation—including performance reviews, written warnings, emails to yourself, and meeting notes—strengthens the employer’s credibility in court. If an employer claims “performance” was the issue but has no prior documentation or feedback to support it, it opens the door for a jury to find pretext.
3. Deters juror sympathy and punitive damages
   
   Juries are far less likely to award punitive damages or high emotional distress damages when they see that an employer acted fairly, transparently, and gave the employee an opportunity to improve.

Best Practices to Avoid Pretext Claims

1. Provide clear and honest feedback early and often
   
   Avoid sugarcoating performance issues. Use objective language and provide measurable goals for improvement. Keep a written record.
2. Document the decision-making process
   
   Keep internal notes or memos that detail the reasons for termination, who was involved in the decision, and what alternatives were considered. Courts closely scrutinize whether similarly situated employees were treated differently. The easiest way to do this is to send yourself an email: it is date and time stamped.
3. Be consistent
   
   Avoid giving different explanations to different audiences (e.g., saying “budgetary reasons” to the employee but “performance” to others). Any inconsistency can be fatal to the defense.
4. Follow policies and apply them equally
   
   Deviation from established procedures—like skipping steps in a progressive discipline policy—can be cited as evidence of pretext unless clearly justified. Review your policies to ensure progressive discipline is not mandatory.
5. Train your supervisors
   
   Supervisors should be trained on how to provide effective and lawful feedback. Often times, employees who lack experience or who are not comfortable providing feedback are promoted into supervisory roles. They need to understand that honest feedback is a gift to employees, provides employees with an opportunity to improve, and that failure to provide the same is unfair to the employee and the company. HR should also be on the lookout for potential evaluation inflation.
6. Hold a separation meeting with documentation
   
   At the time of termination, provide a clear, factual explanation that aligns with prior feedback. A signed termination memo or exit interview notes can be helpful if litigation arises later.

Conclusion

While it may not be easy, being honest with employees about performance issues and reasons for termination is not just good practice—it’s an essential legal safeguard. Employers who avoid difficult conversations may find themselves defending against expensive and reputation-damaging lawsuits; the cost of being candid is far lower than the price of being accused of pretext.