Can You Let an Employee Go Without Risking a Lawsuit?

Letting someone go is never easy. But sometimes, it’s necessary.

Business owners often come to me with a tough situation. There’s an employee who isn’t working out, maybe due to poor performance, ongoing conflict, or changing business needs - and they it’s time to make a change.

This difficult decision doesn’t come without challenge. If you don’t handle the exit properly, you could end up facing a constructive dismissal or wrongful termination claim. That’s when things get expensive, fast.

But it is possible to exit an employee the right way - fairly, empathetically and without setting off a legal landmine.

Let’s walk through how to do just that.

Constructive dismissal happens when an employee feels they’ve been forced to resign because their working conditions became unbearable.

Even though they technically quit, the law may treat it as a termination.

This can happen when there are:

• Sudden or unexplained changes to pay, hours, or job responsibilities

• A toxic or hostile work environment

• Lack of response to complaints or concerns

• Subtle (or not-so-subtle) pressure to resign

If they file a claim and you don’t have your ducks in a row, you could be looking at legal fees, back pay, or worse.

You can’t just quietly push someone out the door under the guise of employment at will. There needs to be a legitimate business reason for ending someone’s employment, and you need to be able to prove it.

This is good business practice - and a more human way to make a termination decision.

That means:

• Setting clear expectations: Be upfront about responsibilities and performance standards.

• Giving feedback often: Don’t wait until the annual review to tell someone they are not meeting expectations

• Providing support: Offer training, tools, or feedback that give them a fair shot at improving.

• Documenting everything: Keep a record of meetings, performance conversations, warnings, and follow-ups.

• Following a consistent process: Use your disciplinary or performance improvement procedures, and apply them fairly and consistently.

If you’ve taken these steps and there’s still no improvement, you may be on solid ground to move forward.

Sometimes, a long formal process isn’t the best option for anyone involved. If the relationship is beyond repair, here are a few other paths to consider:

• Mutual agreement: An open, respectful conversation can sometimes lead to a voluntary parting of ways.

• Settlement agreement: You offer a financial package in exchange for a resignation and release of claims.

• Role reassignment: If the employee isn’t thriving in their current role, is there another spot in the company that’s a better fit?

Every situation is different, so this is where personalized HR advice makes all the difference.

Before you take action, get expert HR or legal guidance to make sure you’re on solid ground.

Letting someone go is one of the hardest parts of running a business, but when it’s necessary, it can be done in a way that’s fair to both you and the employee. The key is preparation, documentation, and an empathetically steady hand.

Need help navigating this? That’s what I’m here for. Message me for a free consultation. I’m happy to help.