Should an Employer Provide Reasons for Termination and How Doing So Will Effect Obtaining Unemployment Compensation
I advise that you tell the employee why he or she is being fired. You are not legally obligated to do so. However, Indiana law requires that you provide reasons for termination upon written request of the employee. Further, telling the employee the reasons for termination can prevent lawsuits. Assuming you have a good reason, you are doing the employee a favor by providing an explanation. In some cases, the reason may not be the fault of the employee, and you could provide a positive recommendation to assist the employee in obtaining alternative employment. In other cases it may well be the employee's fault, and the employee will benefit from understanding how to improve and avoid the pitfalls that caused the termination.
Of course I have never heard of an employee who agreed with the reasons provided for termination. I do not recommend that you provide an exit interview, which would simply allow the employee to vent frustrations. Rather, you should politely explain the reasons for termination in general terms, and you should not permit or engage in any argument-once the decision is made, it must be final.
Often employers fear that what they say when terminating an employee could later be used against them. This may be true if the reasons for termination are not legitimate and are merely a "cover-up" for an improper motive such as to discriminate against the employee based upon race, sex, age or disability. The normal honest employer, however, can provide a simple truthful statement without providing specific details.
It is entirely possible that a simple truthful statement of the grounds for termination could be used to support an employee's claim for unemployment compensation. However, employers are often under the mistaken impression that if they have a good reason for termination, the employee cannot collect unemployment compensation. Actually, under Indiana law governing unemployment compensation, the employee will generally receive unemployment benefits unless the employee quit, or the employee engaged in willful misconduct. Willful misconduct means that the employee deliberately (and not merely negligently) violated a work rule of which the employee was aware. The deliberate nature of such misconduct means that even if the employer had a rule on attendance, for example, and the employee knew that he or she was violating it but did not do so deliberately but because of some unavoidable circumstances, then the employee will likely be awarded benefits.
In my experience, employers who oppose granting unemployment compensation when termination was for any performance-related issues will lose. Further, in my experience, the administrative law judges who determine whether unemployment compensation will be awarded in contested cases are pro-employee and most often award benefits.
Therefore, while I advise providing employees with reasons for termination, I also recommend that employers consult legal counsel and "rehearse" the final meeting with the employee. If you wish to avoid payment of unemployment compensation, the explanation of your reasons could make a difference, and I have regularly worked with employers to determine how best to handle such difficult situations.
