I formerly employed an assistant who held a Masters Degree in Human Resources. On occasion she’d say “I love working here. I’ll never quit.”
Of course, as a good employer I felt an urge to reply with equal commitment, but I couldn’t. I’d say “You realize that you can say that every day for the next 1,000 days, and then just never show up to work again. There is no penalty. But if even once I reply ‘And I’ll never fire you,’ I’ve offered a verbal contract and can be sued if I change my mind.”
We’d both laugh, because we knew it was true. The continuing employment relationship is completely stacked in the workers’ favor. Any verbal or written promise of continuing employment creates an obligation on the part of the employer. The company must document any change in those conditions.
Under the Worker Adjustment and Retraining (WARN) act an employer of more than 100 people must give at least 60 days notice of a layoff. I’ve known several companies of that size who experienced a sudden downturn in business. Faced with a choice between compliance and having the company go under, they took their chances with ignoring the law.
Yet your most critical employee, your second in command, top salesperson, or an engineer in the middle of a large and complicated project, can just call one day and say they’ve gone to work for a competitor. The law says they have that right unless contractually prohibited.
The verbal or written promise is one reason why many small companies avoid employment agreements. That’s like entering into any other long-term business agreement on a handshake. It may feel like an expression of trust, but a contract makes sure that both parties understand what is expected.
The employee should commit to following company policies, appropriate use of social media (you can’t dictate that in your handbook, but they can agree to it in exchange for employment), to hold proprietary company information confidential, give appropriate notice of voluntary termination, and non-solicitation of other employees after they leave.
Appropriate notice can be spelled out as different lengths of time for different levels of responsibility.
In return the employer promises to follow written policies for discipline and performance review, and give appropriate notice of termination except for cause, with pay in lieu of notice if such arises.
Let’s face it, most employers who avoid employment agreements do so because they don’t want to hold up their end. Their handbook is either nonexistent or a dusty tome that people sign off without reading. They conduct employee evaluations rarely or not at all. They don’t want to be obligated to pay anything at termination merely because they’ve failed to sufficiently document the reasons.
Our economy is based on over 70% services. In a service business, employees are almost invariably the number one expense. You can either look around at your staff every day and know that they may all be gone tomorrow, or you can treat their employment for what it is, a critical component of your business.
By the way, the assistant eventually left (everyone does), but she did so with appropriate notice, and we are still friends.
If you enjoy Awake at 2 o’clock, please share it with another business owner.
The article has a lot of prudent advice. However, if you added up the total number of times employees have lost jobs without fair notice or reason, and the number of times employers have had employees leave without fair notice or reason, it is not clear that employers would end up with the short end of that stick. The truth is that without mutual respect either party may treat the other poorly. It is because of mutual respect that you and your past employee parted on good terms. When employment is mutually beneficial and mutually satisfying, it will end appropriately even when the termination is inconvenient for one or the other.
Agreed David, and I hope that came across. I have always felt lucky that the people who work for me choose to do so, and try to be worthy of their loyalty.
It is always important to outline in advance how a business relationship will end; Rather it is an employee, vendor or partner.
Shouldn’t it be a two-way street?
The laws today that protect employees in these situations are fair. Companies need to understand that employee loyalty (or lack of) is a product of their own making. When an employee puts their notice in, they’ve been ready to leave for awhile. You protect your investment in employees by making sure the investment continues to work for both parties. When it no longer does, you’re welcome to part ways if it’s for the right reasons.
What if you have a holding company and employees work for separate incorporated companies under the umbrella and each individual company has less than 100 employees each?
Good question. I would guess that it is covered under ERISA (common benefits, common ownership) but I’m not sure. That’s a labor lawyer question.