Fair Warning: How to Let an Employee Go Properly

What is your game plan if one of your employees starts trouble, say by using a product line you feel is inferior, and you need to reprimand her? Do you know how to do it within the letter of the law? How about if you eventually have to fire her? When it comes to preventing legal problems arising from employee issues, the bureaucratic impulse at America’s nail salons ranges from doing nothing at all to keeping paper trails a mile long. At Nails 2001 in laid-back Southern California, owner Michelle Nguyen says simply, “We have no employee rules because we’re all family!”—words that evoke a less-litigious day and age. At Finger’s Nail Studios in West Dundee, Ill., by contrast, owner Shari Finger has been fortunate enough to avoid employee lawsuits stemming from violations of company rules—but she’s taking care to protect herself with a comprehensive employee handbook, meticulous documentation of employee/employer discussions, and a clear dismissal policy.

What should a salon owner do to protect her business while fulfilling her legal and moral obligations to those who help make her business a success?

Play Fair and Give Warning

Attorney Robert G. Scurrah, whose practice is in Vista, Calif., handles primarily employer defense cases, says that successfully defending yourself from an employee lawsuit requires proving that the employee was aware of and understood all company policies and practices. In practical terms, this means that you cannot reprimand or fire an employee because she did not abide by policies and practices that you never told her about. And the best way to “tell” employees is through an employee manual or handbook.

Job descriptions are an absolutely important part of the whole evaluation/discipline process, according to Finger, and should thus be spelled out in detail in the employee manual. “I make it perfectly clear right up front what is expected of my employees,” she says. She presents new hires with a 12- page handbook and requires them to sign an acknowledgment form indicating they understand and accept what is expected of them. They must also initial each page of the manual — and do so again when any information in the manual changes. Such careful docu­mentation will protect both Finger and her employees should any conflict arise over company policy.

What should a good employee manual contain? Finger says hers spells out everything from how to answer the telephone to the dress code (every worker must “have her hair and makeup done and a smile on her face” and always wear the store’s own polish and a smock). No detail is too small if an infraction of it would warrant a poor evaluation of the employee’s work or a reprimand. Finger’s manual also includes “some really strong statements that certain situations will simply not be tolerated, such as taking client files and removing equipment without permission.” Because the manual makes it clear that such actions will result in immediate dismissal, Finger’s employees have received fair warning of what conduct is and is not acceptable, and Finger has more protection against unfair dismissal lawsuits, although this does not protect her from all employee and labour disputes.

Finger says she learned the hard way about the necessity of having everything — no matter how trivial — down in print for all workers to understand. The manual grew as her business did. Every time a problem needed ironing out, she would add that aspect of the business practice to the manual. One important turning point was when she realized the necessity of spelling out all job duties in a job description section. Back when her salon had little advertising money, “We would go out to pound the pavement and pass out fliers to prospective clients,” she recalls. Some of the employees refused to take part in the distribution work, yet were reaping the benefits of getting new clients. From the friction that situation caused, Finger realized the importance of having written job descriptions that detailed duties such as distributing fliers.

Her companion handbook, the salon’s training manual, must also be read, understood, and signed. “Cutting corners” and not abiding by the salon’s standard procedures merit a reminder of the contents of the manual. Repeated, flagrant disregard for salon practices merits dismissal.

Nails Now!, a four-salon chain based in Dallas, operates on the same “fair warning” principle. The company has both independent contractors (its nail technicians) and regular employees (its bookkeepers, administrative staff, etc.), and all of the regular employees receive a manual with “guidelines on almost everything you could think of,” says CEO Ira Bloom. Policies and practices applicable to the regular employees (independent contractors are not legally required to follow them) in Bloom’s manual range from handling problem clients and procedures for opening and closing the stores to what radio stations maybe played in the work areas. All employees must sign an acknowledgment form after reading the manual.

Small businesses are known for creating the type of camaraderie that Nguyen’s salon enjoys, and many salon owners may not be comfortable either compiling the employee handbook or asking employees to sign acknowledgments. Yet when everything is spelled out and agreed to, both employees and employer are protected and the possibility of an unpleasant situation can be avoided.

When in Doubt, Document

Once your employees understand what you expect of them, what do you do when they violate the rules?

Attorney Scurrah says that a successful defense requires that the employer have well-written documentation describing both the rule and the infraction of that rule. To protect yourself and your employees, then, you should have a set evaluation/discipline process (which should be written out and put in the employee manual) that you document every step of the way.

At Finger’s Nail Salon, repeated violations of salon practices — cases of frequent tardiness, for example — go through a “progressive dismissal” process: first, a verbal warning, then, a written warning and announcement that the next time will be die last.

Finger explains: “I sit down and think about the problem and put it all on paper. Then I go over it with the employee, writing down her answers to each of my points. And then I summarize our conclusions — how we will solve the problem — and we both sign the paper.” It is important to note that even so-called verbal warnings should be documented and signed. Finger says because she is very easy-going and always tries to give people a break, she will sometimes go through this “verbal” process half a dozen times before moving on to the next, more serious written step. When the employee has pushed the situation to the point of a written warning, Finger then hands her a written statement of the problem.

The managers at Nails Now! handle discipline problems in much the same manner, although being a larger company there are several differences. Problem employees are given a number of chances to redeem themselves if they’ve violated a policy — “Basically, it’s three strikes and you’re out,” says Bloom — but the company requires two managers to be present when any disciplinary action is taken as an additional precaution should any legal dispute arise over the meeting between the worker being reprimanded and the manager doing the reprimanding.

Bloom says, “When you don’t have things in writing, the person can come back and say, “You never told me that’ or. ‘That’s not what I understood.’“ Since that is as true for the employer as for the employee, keeping everything on the record protects everyone.

At My Nails of Westerville in Westerville, Ohio, owner Sue Roberts says that employees don’t always know what they are doing wrong until you tell them, hence the need for giving people a second chance when they slip up. Roberts, who, with her husband Joe, has owned the 21-year-old establishment since 1993, explains: “The employee has to know what she is doing wrong so she won’t repeat it. They don’t know unless we tell them. If that employee ‘chooses’ to repeat a situation that she knows is not acceptable, she made the decision to be reprimanded or fired. It’s her fault — not ours.”

Handling Independent Contractors

In the salon industry, many nail technicians are booth renters or independent contractors, not employees, and so not subject to the same procedures for discipline or termination as employees are. How do salon owners handle them when disciplinary problems arise?

Bloom says that while using independent contractors is much simpler and less costly in terms of dealing with taxes, it is very difficult to handle discipline problems with them because they are not under any legal obligation to comply with employee rules. While you can outline dress and grooming requirements for regular employees, for example, independent contractors cannot be required to follow them. When you have a problem with a booth renter, you cancel her contract. “Your only option is to cancel the contract,” Bloom says.

Nails Now! requires all independent contractors to sign a contract outlining the terms of the lease arrangement with Nails Now! and the guidelines the IRS requires them to abide by. The contract may be broken by either party with a seven-day notice.

As with regular employees, independent contractors at Nails Now! will be immediately fired — that is, have the contract immediately revoked — for such serious problems as drug use. For less-serious problems, the only way Bloom’s managers can use progressive discipline and reprimand an independent contractor is to remind that person that the company can cancel the contract at any time. If a nail technician repeatedly comes to work inappropriately dressed for example, you can talk to her about it, says Bloom. “You can tell her that she doesn’t fit in with the image of the salon, or with the clientele, and that if she doesn’t change the way she dresses you’ll have to cancel the contract.”

Such warnings are put in writing by the manager, signed by the independent contractor, and filed at the salon. Thorough documentation of all disciplinary action is just as important with independent contractors as it is with employees.

Ted Walsh, owner and manager of The Hairstyling & Nail Company in with rent paid weekly. Walsh includes in Vista, Calif, has seven independent con- his lease the “rules of the house,” which tractors. Their leases are open-ended, address personal demeanor, appearance, and professionalism. By signing the lease, his renters have indicated that they have read, understood, and agreed to the conditions imposed by the salon. Changes in lease payments are discussed and agreed to by signed addenda to the lease.

Walsh notes that other common-sense and common-courtesy house rules are not included in the lease but are discussed with everyone and agreed to by all. Infractions of such rules incur a $1 fine, which goes into a pot and, when large enough, is used to treat everyone to pizza. Violations of rules actually in the lease (such as “no smoking in the building”) incur a $5 fine. Once he instituted the fines, Walsh says that the few problems he was having with workers disappeared. In his 10 years in business, Walsh says he has only had to terminate one person, and that was because of drug use.

No salon owner wants to turn her shop into a daily tangle of red tape. But as these salon owners have demonstrated, a few minutes of clear communication with your employees is in everyone’s best interest and can result in many years of successful and harmonious business.

Disciplinary Action

“Never speak in anger” should be one of /our guiding principles when handling problem employees. Not only will a cool temper allow you to fulfill your legal obligations — taking the time to put your explanation of the employee’s infraction of the rules in writing for example — it will also give you time to reflect on your moral obligations in such a situation In all but the most serious instances you have a moral obligation to give your employee a second chance Everyone makes mistakes, after all But you also have a moral obligation to yourself and to your other em­ployees, and reminding yourself of this is one of the best ways to “psych” yourself up for the meeting.

Management consultant 8arbara Lydick of B&A Associates recommends that you “remind yourself that it’s your business and that you need to protect it the best you can, Say to yourself,’ I built this business and now my employees are depending on me to be a leader”‘

Lydick points out that once you have placed this unpleasant task in the broader context of your own livelihood and that of your other employees the seriousness of the situation will become apparent to you Once you realize that an employee’s error or infraction is not part of an isolated problem you can ignore but something which, if not corrected or checked, can damage the business you have worked so hard to build — you will find it much easier to face that employee and hold a firm line when speaking with her.

Once you have prepared yourself mentally, the easiest and most effective way of handling the actual meeting, according to Lydick, is to follow the advice of Ken Blanchard in The One-Minute Manager You should “look your employee straight in the eye and state exactly what the problem is —kindly but firmly. Tell the employee precisely what she did wrong. Then tell her why it has made you frustrated or angry.”

That’s the hard part of your meeting, and fortunately it should take no longer than one minute, according to Lydick. She recommends that you then add that you are surprised the employee made such a mistake because you have so much respect for her. Such words, she says, “reinforce the dignity that all leaders must show for their people”

Lydick continues, “If firing is the only course left, this too should be done with firmness and kindness and respect for that employee’s dignity”. By treating the employee with the respect that you would wish to be treated with in such a situation and leaving things on as positive a note as possible, you can lessen the chances that the fired worker will be eager to get back at you and your business by seeking to take you to court.

From Discipline to Dismissal: Protecting Yourself and Your Employees

Have every employee sign an “employment-at- will” statement if allowed in your state. The phrase “employment at wilt” means that both employer and employee are entering into the employment arrangement of their own free will and that either may terminate the arrangement at any time for any legal reason (i.e., the employer may not fire the employee for being of a certain race, an act which would constitute illegal discrimination and leave the employer open to a wrongful termination lawsuit). Samples of employment at will statements may be found in The Employer’s Legal Handbook or any of the many other legal reference guides for business owners available in any local library or bookstore.

Maintain an up-to-date employee handbook. Every expectation you have of your employees should be spelled out in plain English in an employee handbook Presumably, most of the policies and procedures you might put in a manual won’t be a big surprise to your employees if they have worked in your salon for some time. Still, do not assume anything because you are legally required to make sure that all company policies are understood by all employees and that the policies are applied across the board. Any changes in policy or practice should be immediately updated in the handbook.

Be careful of speaking about an employee you fired. An employer opens herself up to a defamation of character lawsuit by speaking out negatively about a former employee — even in an informal situation, such as when someone asks in a social setting “What is So-and-so doing these days?” and the employer proceeds to gripe about what a poor worker So-and-so was.

Find out what employment laws are specific to your state. In Texas, for example, independent contractors must be licensed as such, and business owners must keep this information on file. And while illegal discrimination is covered by federal labor laws, many of the other laws concerning wrongful discharge are determined by individual states The Employer’s Legal Handbook lists the addresses and telephone numbers for all 50 state labor departments and offers advice on finding a lawyer to provide additional assistance when you need to let someone go.