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Four Risks Small Businesses Face When Firing Employees

By Sherri Bennett, SPHR & SHRM-CP on Aug 02, 2019
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Four Risks Small Businesses Face When Firing Employees

When you’re a small business owner, having to fire an employee sometimes comes with the territory. The process is never without some anxiety. Adding to the unpleasantness are the inherent risks all employers assume when they decide terminating an employee is necessary. Mishandling the offboarding process can expose your company to litigation, security threats, retaliation and lowered morale among your remaining workers.


Terminated employees who claim they were wrongfully let go or discriminated against may sue for damages. In both cases, the burden of proof would be on your shoulders to show a just or legitimate cause for termination. The only acceptable legal proof point is to keep accurate employee records that document performance concerns, disciplinary actions and other issues as they occur.

To disprove wrongful termination, you must offer documentation that shows why you let the employee go. So, for example, if you fire someone because of excessive absences, you should be able to provide documents that show:

  • the employee was aware of the company’s related policies;
  • his or her attendance record;
  • disciplinary actions taken and written warnings given to the employee; and
  • any other proof that the employee violated your company’s employment guidelines.

Recordkeeping is equally important in defending against discrimination claims. Because federal law prohibits firing an employee based on discriminatory factors such as race, age, sex or disability, you also should document discrimination-related performance issues and how they were handled before resorting to termination.

Written proof illustrating that you made the employee aware of underperformance or misconduct, provided opportunities for improvement and followed disciplinary actions outlined in company policies will help prove there was a legitimate cause for termination.

wrongful termination

Information Security

Before firing an employee, take appropriate measures to minimize security risks that arise when employees have access to company resources. Plan how you will retrieve company property, prevent physical access to your worksite, disable passwords and otherwise ensure that departing employees cannot steal trade secrets, cell phones, computers, files and other items that belong to your company.

To discourage employees who work with confidential information from using it against you after they leave the company, ask them to sign nondisclosures and confidentiality agreements during the onboarding process.

RELATED: Terminating an Employee Without Warning; When to Skip Progressive Discipline >>


Handling terminations with civility and professionalism can help ensure an amicable parting and lower the odds a fired employee will retaliate against the company. When recently terminated employees feel unfairly treated and exceptionally angry about losing their jobs, they are more likely to strike back in the form of negative comments – both spoken and posted online – sabotage or even violence that results in injury to themselves or their former coworkers.

You can minimize the risk of retaliation by not blindsiding employees with unexpected termination, promptly paying any remaining benefits such as earned vacation time and treating them with dignity throughout the offboarding process.

Disgruntled employees can often be perpetrators of workplace shootings.


How you handle – or mishandle – terminations can negatively affect the morale of employees who remain on your staff. If these workers perceive that you are being unfair or unprofessional, it will be more difficult for them to fully support the company’s mission.

The firing of a colleague also may cause remaining employees to question their own job security. To mitigate the ill effects of terminations on employee morale and productivity:

  • clearly communicate job expectations;
  • ensure your employees aren’t overburdened by too many responsibilities previously covered by a terminated coworker; and
  • maintain a respectful relationship with departing employees.

Before firing an employee, understand federal, state, and local employment laws, exercise due diligence, protect company resources and maintain professionalism to minimize the effect on remaining employees and reduce the risk of legal action.

Turn to Axcet HR Solutions for assistance with all end-of-employment lifecycle duties.

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