Employee discipline and termination are probably the most dreaded tasks for entrepreneurs and small business owners. The anxiety and trauma related to a termination can sometimes be just as bad for the boss as it is for the employee. But in our litigious society, business owners need to take extra care when disciplining or firing an employee to be sure they stay on the right side of the law.

Here are some tips on how to discipline or fire employees the right way:

Have clear and reasonable rules. The best way to establish clear rules is to be sure you have an employee handbook that explains the rules and the penalty for breaking them.

Enforce the rules the same way for everyone. Company rules should be impartially and uniformly enforced, no matter who has committed the infraction. Of course, there may be extenuating circumstances that need to be taken into consideration, but if you play favorites in rule enforcement, you create an environment of mistrust and invite litigation.

Don’t waive at-will employment. California is an at-will state. Be sure whatever disciplinary procedures you’ve set up don’t alter this.

Document everything! Record all employment actions in the offending employee’s personnel file. Expectations for corrective behavior should be discussed with the employee and noted in the file. Poor performance should also be documented. Make sure any grounds for termination are very clear; there has been an increase in recent years of terminated employees filing lawsuits against employers and written evidence is the only material used by labor boards and the courts to determine fault.

Conduct performance reviews. Even the smallest companies need to have a performance review policy. These reviews set company expectations for performance and measure how an employee is – or is not – meeting expectation levels. Reviews should be conducted every six months, and the results should be placed in the employee’s personnel file.

We can help you understand the federal and state labor laws that apply to your company. If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT (legal, insurance, financial and tax) Foundation Audit. Mention this article and, availability permitting, we will waive our audit fee.