Managing Employee Terminations: Safeguarding Your Firm Against the Hidden Costs

As painful as it may be the need to let a nonperforming employee go is part of running a business. But the economic turmoil of the past two years has added another dimension to the issue of employee terminations. Businesses of every kind have been forced to reduce overhead with personnel reductions included in the cost-cutting strategies of many. And law firms have been no exception. According to statistics on the online legal tabloid Law Schucks between January 12008 and early September 2009 more then 13700 people had been laid off by major law firms.

On a positive note there are clear signs that the economy is improving. However some layoffs may continue for a while and too there’s the always-ongoing issue of people who do not live up to performance expectations and need to be let go regardless of a firm’s financial health. In both instances the result can be disgruntled former employees and professionals who may pose serious risks to your firm.

The potential for a wrongful termination suit may be the most obvious risk. But fraud could be more damaging both from a financial perspective and (perhaps more important) the specter of compromised client data. There is the potential for harming a law firm’s reputation along with its financial stability should a data breach occur. Do not let this happen to your firm because you fail to take the necessary precautions.

Whether an individual has been with a firm for a couple of decades or just a couple of months it is imperative to have a thorough exit policy that reduces exposure to risk and minimizes the potential damage that can be done. Many businesses establish policies and procedures after the pain of a breach or wrongful termination lawsuit. But obviously the wisest course is to take preemptive steps to reduce risks before terminating employees. Here is advice on establishing the proper procedures starting today.

Make Sure All Your Managers Are on the Same Page
Arrange a roundtable discussion to ensure that all the necessary personnel from various departments, such as human resources information technology and practice group chairs understand their roles in the termination process so you can coordinate more effectively. If everyone knows what they are supposed to do you will increase the chances of handling a termination without any incident.

Everyone involved in the termination process should be aware of the organization’s responsibility to preserve critical documents and electronically stored information and keep client data uncompromised. Beware the risk that IT staff as part of the redistribution of terminated employees electronic devices will inadvertently reformat or destroy hard drives wipe PDAs or delete employees files and e-mail accounts that are subject to a legal hold or could be used as evidence to counter a suit.

Should any such data be damaged or deleted (either inadvertently by staff or intentionally by a disgruntled person) coordinate with both managers and IT staff to ensure the data is recovered and secured. Failure to preserve data that is subject to a litigation hold or is client information can result in penalties which may include evidentiary sanctions adverse rulings negative perceptions about the firm fines and additional costs.

Evaluate All Contracts Laws and Current Litigation
Look over the contracts of targeted personnel to see if there are any significant provisions or if the termination would violate any laws. Evaluate whether the individual may possess confidential data or information subject to legal holds. Compare the names of departing employees with employees subject to investigations depositions and active litigation. If someone is flagged advise IT staff and others so the necessary precautions are taken.

Be sure to consider the nature of the termination and whether or not further measures are necessary. For example if someone is voluntarily taking an early retirement option they likely won’t be as hostile as someone who has been there for many years and has to be let go.

Follow Every Policy and Procedure Thoroughly
An effective termination process will provide certain explicit guidelines that must be followed to a tee. At the same time different employees positions and departments pose different risks so be sure to tailor appropriate parts of your procedures to each situation. Overall pay close attention to the big-picture things like confidential data and potential lawsuits. Whether you are terminating a high-level professional or a lower-level staff member your policy should be designed to prevent and detect any incidents or any intention to harm the organization.

Disable All Access Points
In tandem with the final exit meeting with terminated employees remove their access to computers and other firm property. Develop a checklist so that this can be done efficiently. For example during the meeting collect keys building-access cards and security codes. Disable their passwords remote access and e-mail accounts and anything else that could pose a threat. Create a mirror image of their hard drive before they can alter it so that you may have an accurate idea of what data they may have. If they anticipate that they may be let go they may have already made copies of keys or taken other measures. Therefore it is essential to get this process right.

In the actual meeting you’ll want to collect any other physical items or electronic devices that are the property of the firm. This includes firm credit cards and cell phones personal digital assistants laptops thumb drives discs documents manuals and the like. When a severance package is offered make sure that they understand they will be unable to file a suit if it is accepted.

Following the meeting the best practice is to monitor them as they collect their things. It is important to uphold this policy for everyone no matter how awkward so that everyone is treated equally and fairly.

Inform Others That the Person No Longer Works There
Anyone who works with the departing employee including relevant vendors should be told that the individual is no longer with your firm. Do this promptly to ensure disgruntled ex-employees are unable to access the organization. If a lawyer has been working closely with a client be sure to inform the client promptly as well so that you can prevent miscommunications. Update internal employee lists Web sites phone directories and all other places that convey association with the firm.

While a formalized plan that spans across the whole firm is required taking specific measures on a case-by-case basis will be helpful as well. Terminating people is never an easy process but following these steps can help make it go as smoothly as possible.

Jorge Rey, CISA, CISM, is a Cybersecurity & Compliance Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.