The Challenge of Firing Toxic Talent: A Guide to Eliminating High-performing but Difficult Employees

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Businesses want employees that excel in their positions. But all employees come with personalities, and sometimes those with the right skill sets can be toxic. In these circumstances, HR faces a unique challenge: justifying the termination of a “great” employee, sometimes in court. But by establishing values and cultural fitness as critical performance metrics, HR can lawfully remove workers that may appear to help—but who also greatly harm the organization.

Joel J. Greenwald, Esq., Managing Partner of Greenwald Doherty LLP, visited TemPositions’ HR Roundtable Series on Thursday, April 3, 2014 to discuss the challenge of eliminating toxic workers that are high-performing. Terminating these employees is often a very good idea, he explained, but it can be trickier than it seems from a legal perspective.

Over the past 25 years of his practice representing businesses, Greenwald has become “increasingly passionate” on the topic of corporate values and culture, particularly in terms of how they affect HR and employment decisions. Today, he sees looming legal risks for companies that fire workers for any reason that isn’t formalized within company practices.

It’s wrong to conclude that nothing can be done about a toxic worker. But addressing this challenge means embracing it—with updates to policies and practices that begin with HR.

The Risks of Firing High-Performing Workers

For every company that hesitates to remove a problematic top performer, there’s another that takes action and terminates. After all, what could be wiser than removing a person who is impossible to work with? Toxic employees are terrible for morale, and they often hamper the productivity of those around them.

But while co-workers may breathe easier, there can be serious legal risks involved for the employer, Greenwald explained. It’s the company formal practices—not just the employee’s behaviors—that usually determine whether or not a termination is found to be lawful.

“Too often, we hire for skills but fire for behavior,” he noted. And that can lead to exposure.

Greenwald offered two examples of toxic workers and the trouble they caused. In each case, the employer took a different risk—and paid a different price.

First, Greenwald described sales team leader, “Henry.” Henry was a top earner and never failed to meet his targets. But he never shared credit for his success with his teammates, and they never felt he appreciated or even recognized their support. In addition, Henry did not communicate well with the corporate marketing department. He preferred to be in control of his own sales materials, even though marketing could have helped him be even more successful.

Leadership at the company considered terminating Henry, Greenwald explained. But they hesitated. Henry was bringing in extraordinary profits. Thinking that salespeople are relatively easy to replace, they took no action regarding their problematic team leader. The result? Henry’s long-suffering subordinates acted on their own. Having lost faith in leadership, Henry’s salespeople left en masse, and the company had to replace the entire group.

Greenwald’s second example was a programmer named “Eduardo” who worked for a hip, fast-paced technology start-up. As a programmer, Eduardo was a star, with all the skills an employer could ask for. He worked at an astonishing speed. He understood the company’s target customer base. Thanks to his expertise, the company’s flagship product was a runaway success.

Unfortunately, Eduardo exhibited extreme “negative energy.” He seemed angry. He voiced grievances loudly and often, and he was openly pessimistic about the company’s future. Even when dealing with leadership at the highest levels, Eduardo’s demeanor was unpleasant.

Eduardo’s company did not hesitate to terminate. But while this decision was wise, the rationale offered at his exit interview was not. HR didn’t (and likely couldn’t) point to specific company policies that Eduardo had violated, or any performance expectations that he had not met. Instead, they told him he simply “wasn’t a good fit.”

Eduardo was shocked. He believed his performance had been stellar by all standard business measures, and he found his firing inexplicable. He concluded the decision was an act of discrimination based on his Latino heritage. He soon filed a wrongful termination suit.

“Whether you take no action, or the wrong action, there can be consequences,” Greenwald warned. When the company fails to act, the employee base can feel abandoned. But a bungled termination can prove equally disastrous. Without some kind of formalized standard for acceptable behavior, the company may find themselves in a weak position.

The moral, he went on, is not to wait until a toxic employee comes on the scene to establish standards for how employees may treat one another, but to formalize these standards as performance metrics.

Individuals are guided in their behavior by cultural values. The key to weeding out the difficult and unwelcome may be establishing a positive—and formal—culture of collaboration.

The Culture Factor

When most people think about corporate culture, Greenwald explained, they tend to think of innovative companies like Google or Netflix. These brands create fun zones in the workplace, and are often cited for the most unusual or creative of their practices. Their approaches won’t make sense for every business. But based on the employee engagement levels they enjoy, they demonstrate what positive culture can achieve—and prevent.

What most casual observers don’t realize is how powerfully corporate culture can protect a company from employment litigation. Employers with positive cultures are likely sued less frequently. Employees are more content in their positions and may stay on staff longer. Even those who leave are more likely to stay in friendly contact with their former co-workers.

Online shoe retailer Zappos believes that creating a great workplace is the first step to becoming a great brand. It seeks to increase employee happiness. In Zappos’ experience, a happy work environment inspires everyone to do their best, ultimately benefiting customers. The company credits their growth to a policy of putting their employees, not their customers, first.

“Zappos is evangelical about their employees and the way they treat them,” Greenwald said. “They’re evangelical about the values they care about—and those values are published and posted everywhere.” And such values can become a tool for HR.

After all, to lawfully terminate a toxic worker, the company needs a reason that falls formally within the scope of how they do business. But traditional performance review processes often focus on volume of work performed. A typical job description focuses on skills and tasks/ responsibilities. Leadership and employees alike can be tempted to treat short-term financial gains as ultimate performance metrics. But toxic workers can also lead to terrible losses.

When properly defined and communicated, values—and the culture they support—may serve as the foundation of important new performance measures. Workers can be gauged on people skills in addition to job-related skill sets. Relationships can matter, officially. And in that context, toxic behavior can become a much clearer violation of company policy.

What Greenwald finds particularly exciting about companies like Zappos, he stressed, is that it uses its culture to defend its business. Zappos values are featured so prominently in company branding and expressed with such clarity and pride, prospective employees know about them before they come in for so much as an initial interview. The company is therefore more likely to attract the types of workers it wants—individuals who share its aspirational ethics.

A strong culture is also useful for managing existing workers, he went on. When employees know how much company values mean to the organization, they aren’t surprised when they’re held accountable for upholding them. When leadership visibly lives by those values, workers may more readily accept their own performance being measured (at least in part) against them.

And when an employee is terminated from a company with a strong culture, where behavioral expectations are clear, they’re more likely to accept lack of cultural fitness as a valid reason. Greenwald reminded attendees of Eduardo, the brilliant but bad-tempered programmer. Because his company didn’t have a strong and well-documented culture, the explanation that Eduardo was fired for being a bad “fit” didn’t make sense. It could have—if his company had clear values and the behavioral expectations to match.

A positive culture won’t be established or enshrined in policy overnight. But building one pays off in countless ways—including helping HR address the challenge of toxic workers.

Jumpstarting a Culture

Launching a culture takes planning and a commitment to follow-through. Greenwald learned this himself, it turns out, as he recently completed a culture-building initiative at his own law firm. He wanted to help his own managers and employees reap the benefits of a positive work environment—and formalize the high standards for interpersonal interaction that establish toxic behavior as unacceptable.

Greenwald took personal ownership of establishing values and culture at his firm. He communicated clearly that he’d embraced the project, and he took on all related responsibilities, without lessening his daily workload. This helped to communicate, from the beginning, that the firm’s leadership treated the matter of culture seriously.

While already familiar with many aspects of corporate culture, Greenwald began by immersing himself even more deeply in the topic. He reviewed in-depth case studies, exploring what facets of other companies’ cultures might benefit his firm. He attended professional conferences, where he met and exchanged ideas with thought leaders on corporate culture-building.

Next, he began brainstorming possible corporate values. He made lists of personal attributes and ways of work that he felt were vital to success, and he asked a select internal leadership team to do the same. Then, methodically, he began making selections and drafting a Values Statement.

Greenwald surveyed his leadership team on several work-in-progress drafts of this document. Only when he had their confidence and support did he disseminate an advanced draft of the Values Statement to his greater employee base for their review and suggestions.

While gathering input in incremental steps slows the process, workers appreciate being consulted, he noted. Employees always feel more invested in initiatives they help create. And just as importantly, they have vital insights to contribute. Workers spend their days in the trenches, managing the challenges of day-to-day operations. They know “what works.”

Greenwald’s employees impressed him with their suggestions. For example, many workers cited “Respect” as critical to keeping the firm’s environment positive. In the fast-paced practice of law, he acknowledged, it’s easy for communication to become short, elevating tensions. His employees reminded him that by keeping all contact respectful, even if it needed to be quick, they could positively impact each other’s experience—and streamline productivity.

As a final step—following the guidance of the thought leaders and successful brands whose examples he hoped to follow—Greenwald incorporated business goals into his firm’s Values Statement. After all, cultures are useful for far more than warding off toxic personalities.

How to include business goals will vary organization by organization, he explained. The key is to identify behaviors that both benefit the workplace (as determined in partnership with employees) and clients/customers (as determined by leadership). If the company’s survival rests on keeping in timely communication with customers, the company may establish “Responsiveness” as a value. If the organization’s projects require team members from many disciplines to work together seamlessly, “Collaboration” might be established as an expectation.

Once Greenwald completed this process, he presented the firm’s final Values Statement to his employee base. And one last time, he welcomed their input. He asked his staff to evaluate how well they thought the firm was performing against its new stated values overall, and how well each employee felt they were performing against them personally. Based on the results, everyone set benchmarks for improvement in the coming year—a plan for continual progress.

These new values were then documented and enshrined in the employee handbook—and beyond. They’re posted in the workplace. They’re discussed in the interviewing and hiring processes, and thoroughly explained during on-boarding. They’re cited in review processes. And yes, they’ve become a partial foundation for termination.

Deciding When/How to Fire for Culture

Even at companies with strong cultures, HR will eventually face the familiar challenge of a toxic star. The decision to terminate will remain difficult, because there are always some metrics against which these workers excel. But a documented culture can help determine HR’s choice.

Greenwald offered guidance influenced by his readings of corporate guru Jack Welch, who has written extensively on HR and its contribution to any organization’s success. In matters of talent retention, Welch encourages businesses to view cultural fitness as a very high priority.

Employees who exemplify the company’s culture, serving as role models for others, can be worth the effort to remediate when their performance suffers. Their overall, positive impact on the business deserves consideration. But those who are toxic and threaten the integrity of company culture, Greenwald notes, can be identified as the danger they are. Even if their skills are top-notch, their failure to meet stated behavioral expectations shouldn’t be tolerated.

The C-suite may continue to feel squeamish about termination. But HR must take charge, helping them understand the serious, often long-lasting damage that toxic workers do. HR may also need to explain, step by step, how firing the worker must be handled to ensure it is lawful.

To prepare for a tricky termination, it’s helpful to take a look at typical termination lawsuits, Greenwald noted. Analyzing the common weaknesses that lead to these suits can help employers avoid making critical mistakes.

Anatomy of a Termination Lawsuit

Today, termination lawsuits are being filed in ever-growing numbers, Greenwald explained. The reason? Worker anxiety. Terminated employees know they face a tough job market, and they fear long-term unemployment. So more of them are both threatening to sue (usually to negotiate a better severance package) and suing outright to ensure their own economic survival.

It remains true that employees who are surprised and/or angered by their termination are most inclined to file a suit. Employees who don’t understand how they failed to meet expectations often feel cheated and look for the “real reason” they were let go. Since they no longer trust their former employer, they may suspect wrongdoing.

Termination lawsuits can perplex employers, because under the employment-at-will doctrine, employees can be terminated at any time and for any reason. Greenwald offered the example of a company that terminated a worker for driving an unattractive car. Because drivers of unattractive cars are not a protected class, the firing was bizarre—but completely lawful.

(There are rare exceptions to employment-at-will rules. For example, companies must meet a “just cause” standard for firing union members. And under special circumstances, high-ranking executives may enjoy special contractual privileges that alter the at-will relationship.)

Because the employment-at-will doctrine is so helpful to employers, Greenwald recommends safeguarding it whenever possible. Employee handbooks, contracts and even general correspondence regarding employment can be used to reaffirm an employee’s at-will status.

Understanding the Employer’s Burden
To help attendees understand their company’s obligations in court, Greenwald shared a graphic illustrating the McDonnell Douglas Burden Shifting Method of Proof. Depending on the specifics of a case, the burden to put forth evidence to prove or disprove allegations may shift back and forth between the plaintiff and defendant.

If a terminated employee claims discrimination, the burden of proof is on the employee, Greenwald explained. They must ultimately provide evidence to the court to substantiate their discrimination claim, and this is often difficult to do. The McDonnell Douglas method allows discrimination to be inferred if a plaintiff shows, among other things, that they were a member of a protected class and suffered an adverse action, such as termination.

A burden then shifts to the organization to establish that the company had a legitimate business reason to terminate the employee. For example, the business could show that the employee’s failure to meet critical business-related standards led to the firing. Increasingly, Greenwald stressed, cultural considerations have come into play. If a company can demonstrate that its culture is tied to its business success, and the employee did not adhere to the company’s core values, it may help create a strong defense.

The final potential shift within the McDonnell Douglas framework is triggered if the employee claims the company’s “business reason” is nothing but a pretext. At that point, a burden returns to the employee to demonstrate the pretext and offer proof that the real reason for the termination was unlawful.

Protected Classes & Discrimination
Many lawsuits allege discrimination based on membership in a protected category. There are numerous intersecting statutes that prohibit companies from making employment decisions based on race, gender, religion, etc.—including Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the New York State Human Rights Law and the New York City Human Rights Law. Even local counties have begun creating their own protected classes.

In response, HR must remain aggressively up to date on local statutes, Greenwald counseled. Courts look to punish “patterns and practices of discrimination,” so companies should adhere to clear, lawful policies, applied consistently across their workforces.

Disciplinary Policies & Practices
Within employee handbooks and other HR materials, the company can describe both workplace expectations and the general process for discipline. It’s difficult for a terminated worker to be angered or surprised by the action when they’ve been part of a process, or been advised when sudden terminations may occur.

A standard disciplinary process can be progressive, Greenwald explained. Employees who fail to meet expectations within reasonable limits can first receive a verbal warning, then a written warning, then an unpaid suspension, then be terminated. However, the company should always ensure all actions “up to and including termination” remain available. (The courts generally support gross misconduct or incompetence as grounds for immediate firing.)

Again, clear performance expectations are essential for disciplinary processes to be viewed as legitimate and non-discriminatory. Greenwald reminded attendees to “fold culture into performance appraisals,” and to also offer feedback more frequently. HR, in partnership with managers, can communicate with employees throughout the year to let them know when their performance is sub-par—including when they’re exhibiting toxic behavior.

By communicating expectations more consistently and openly, employers can avoid what Greenwald called “ugly timelines.” At their annual review, a toxic high performer may receive a glowing report for their success against sales goals. But if, months later, their belligerence leads to termination and then a suit, the court will review all performance-related communications. The company’s motives become suspect when the last item on file is a highly favorable performance evaluation.

Within an ugly timeline, the former employee (and their attorney) will look for discriminatory rationales behind the termination. If the employee had recently become pregnant, had disclosed their religious faith in the workplace, or otherwise established their membership in a protected category, the company’s claim to have a legitimate business reason for the termination is weakened.

Sometimes, smarter employees become aware their position is at risk and act preemptively to avoid being terminated. If they know HR has only positive paperwork on file, they may suddenly allege harassment, or initiate some other internal HR process that complicates or at least postpones their firing.

The Importance of Documentation
Courts are guided by a fundamental sense of fairness, Greenwald noted. So the company can guard against ugly timelines by ensuring employment paperwork tells the full story of the termination. Employers strengthen their position significantly by not only following lawful, consistently-applied processes, but documenting them properly.

The courts respond more favorably to employers who’ve made an effort to communicate sincerely with a worker before firing them. Barring gross misconduct or incompetence, they look for evidence that the company gave the employee adequate warnings and a chance to improve their performance. Finally, they look for clear business reasons for the termination.

Documentation is especially important when business reasons are culture and value-related, Greenwald stressed. Top-notch performers, toxic or not, often look like great assets on paper if only the most traditional metrics apply. But if behavioral expectations have been set as part of a greater cultural initiative—and failure to meet those expectations is documented within an employee’s disciplinary process—juries are more likely to see the fairness behind the firing.

“You want the court to conclude, ‘this culture stuff really matters to them,’” Greenwald explained. “They want to see that you hire for it, onboard with it, manage to it, performance-appraise against it, and fire over it. It’s important that they see your culture as central to the way you do business.”

Of course, the benefits of good documentation begin long before any suit. Some employees don’t take verbal warnings seriously. Others experience so much stress during any disciplinary conversation that may do not remember what HR had to say. Following up on conversations with written memos can therefore serve an important, dual purpose: clarifying and reaffirming the company’s message to the employee, and formalizing the disciplinary timeline.

Just beware of “documentation pitfalls,” Greenwald noted. While some employers document too little, it’s also possible to document too much. He urges HR to watch for patterns in their paperwork. For example, if the company happens to write up performance issues regarding multiple pregnant women or older workers, all within a limited timeframe, those documentation practices themselves may appear discriminatory.

The Termination Process
The specific circumstances of an employee’s exit can influence whether or not a termination lawsuit follows. Being fired can be traumatic. So when letting even the most toxic personality go, remember that “compassion goes a long way,” Greenwald said. Making the termination as painless as possible will be easier on the worker and may also reduce the company’s legal risk.

Greenwald recommends terminating employees early in the week or mid-week, rather than at the end of the day on a Friday. In his experience, when workers have a few days of quiet at home before the weekend (when friends and family become available for in-depth, perhaps heated discussions about what occurred), they tend to respond more calmly and practically.

Keep the exit interview mercifully short, he urged. The conversation should take no longer than 15-20 minutes, and only a portion of that time should be spent on the reason for the termination. If the employee has been part of a progressive disciplinary process, they should be aware of their failure to meet expectations (including cultural ones). And if they indulged in gross misconduct or incompetence, there’s no reason to spend time discussing excuses. A clear, brief agenda can help keep the exchange focused.

The company should conduct the exit interview in a neutral setting, such as a conference room (not the employee’s workspace or their manager’s office). The conversation should be led by a manager/executive or HR, not any party whose presence may provoke the employee. It’s often helpful to bring a third party to witness the conversation.

Spend as much of the exit interview as possible explaining the ways the company will help the employee move forward. Discuss all post-separation benefits, like extension of health insurance coverage or severance pay. Offer to guide the employee through the process of signing up for COBRA benefits. Any supportive gesture can soften the blow or help calm frustrations.

When it comes to severance, be as non-discriminatory in those policies and practices as you are with discipline and termination decisions, Greenwald explained. Varying severance is common, but it does come with risk. The best way to mitigate that risk is to ensure, again, that HR avoids troubling patterns. (If men tend to receive higher severance than women, the practice may come under scrutiny.) It’s helpful to establish a range within which the company has discretion.

Some terminated employees pressure the company for severance when it is not typically offered, or demand larger packages—threatening to sue if their demands are not met. These negotiations are uncomfortable, Greenwald noted, but the company should consider the risk involved with the termination and act accordingly. In many cases, the employee will settle for an amount that is far smaller than the company would have to pay to see a baseless claim dismissed by a judge.

Regardless of severance package size or the circumstances surrounding it, be sure they include confidentiality, non-disparagement and other agreements with employees. These ensure, for example, that if the worker disparages the company after their termination, they will forfeit their severance.

Clear Expectations, Lawful Terminations

In the end, employers want to avoid the difficult choice (and sometimes risk-laden road) of terminating toxic high performers—and the threat of ending up in court. They want rank-and-file employees to treat each other respectfully. They want leadership to stay focused on business goals and ensure their workplace is a safe and positive place for their people.

Formalizing a positive culture can help, Greenwald stressed in closing. Toxic employees are less likely to be perceived as “great” in these environments. The first signs of negativity can be addressed by HR as a violation. Company leadership can more clearly perceive a toxic personality as a threat to their business plans. And subordinates can know they have the support of both HR and the C-suite to report behavior that undermines the company’s success.

When a company embraces values—and gains a reputation for honoring them—toxic personalities can’t possibly be a “good fit.” Even if one slips into the company through the cracks, they may well choose to leave on their own, before anyone has to fire them.

Anne DeAcetis is a freelance writer based in New York. Reach her at anne.deacetis@gmail.com.

The HR Roundtable is a breakfast forum for human resources professionals in New York City sponsored by The TemPositions Group of Companies. TemPositions, one of the largest staffing companies in the New York tri-state area with operations in California, has been helping businesses with their short- and long-term staffing needs since 1962. Visit them online at www.tempositions.com or email them at info@tempositions.com.

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