Startup Accounting
How to Terminate an Employee Legally (Without Getting Sued)
Collated by Harry Prabandham
Curated by Rubric Financial
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Build the Foundation Before You Fire
- At-will employment is the default in 49 states (not Montana). Your offer letters should explicitly state at-will status — but at-will doesn't protect you from discrimination, retaliation, or breach-of-contract claims.
- Document performance issues in writing BEFORE termination: regular 1:1 notes, written warnings, performance improvement plans (PIPs). Without documentation, the employee can claim termination was retaliatory or discriminatory.
- Train managers on consistent feedback. Most wrongful-termination suits start with 'manager X said one thing in writing but fired me for another reason verbally'.
- Set clear handbook policies (probation period, performance standards, termination procedures) and apply them consistently — selective enforcement creates discrimination risk.
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