Termination Laws in Colorado – An Overview
Central to the relationship between employees and employers is the understanding that employment may end for any number of reasons, some of which are within the control of the employer, and others that are not. Regardless of this freedom to terminate, however, every employer should understand the legal concepts that apply to the termination of employees, such as termination based on performance, absences, or time with a company.
Colorado law recognizes that in most circumstances, employee-employer relationships can be terminated by either party without the need for either side to provide a rationale. However, while these "at will" relationships can be established either verbally or through written policies and documents, there are three specific circumstances that prevent employers from using these "at will" relationships to dismiss employees:
• Termination of an employee for any reason that violates established state public policy , which generally prohibits an employer from using their business solely to advance personal wealth; federal and state laws provide several examples of specific public policies. For example, it would violate public policy to terminate an employee for reporting health or safety violations, for refusing to accept unsafe products for delivery, for taking child medical leave, for refusing to commit illegal acts to please an employer, and for refusing to make contributions to political parties.
• Discrimination – an employer is prohibited from terminating employees based on race, religion, gender, pregnancy, age, nationality or sexual orientation, or on related reasons such as the need to treat an existing disability.
• Termination of an employee who has filed a complaint under the Family and Medical Leave Act (FMLA)(although in some cases employers might be able to present evidence that a termination was based on lack of qualified personnel).
Termination Exceptions to At-Will Rule
Under Colorado law, absent an employment contract with terms to the contrary, employment is presumed to be "at will." At-will means that an employer can terminate an employee for any reason, legal or otherwise, without having to give prior notice to the employee.
Notwithstanding the presumption of at-will employment, there are exceptions. First, a general exception to the at-will presumption is where an employee has an express contract of employment for a defined period of time. Termination in violation of that agreement may give rise to breach of contract damages. Second, another exception occurs in cases in which the employer has promulgated an employee manual or policy that creates an implied promise of employment. In such a case, the employer will be required to abide by the procedures outlined in its employee manual or policy. Third, even in the absence of express or implied contract terms to the contrary, there are four circumstances in which an employee can maintain a wrongful discharge suit against his or her employer for firing him or her despite being employed "at will:" (1) discharge contrary to public policy; (2) discharge in violation of an express employment contract; (3) discharge in violation of a statute providing employee protection; and (4) wrongful discharge in violation of the implied covenant of good faith and fair dealing.
Final Paycheck Rules in Colorado
The final paycheck laws in Colorado require employers to tender all wages due to the terminated employee at the time of his or her termination. If an employee provides notice of an intention to terminate and the employer and employee have agreed on a date after which the employee will not perform work and the planned separation occurs, this is not the same as a unilateral termination by the employee and the general rule for final pay applicable to a termination without notice will not apply. Therefore, the final paycheck for the employee who has given notice must be paid on the date set for the employee’s last day of work. If the employment relationship continues for a period of time after the employee has provided notice of an impending separation, the employer and employee may agree on whether the employee will be paid on the next regularly-scheduled payroll date, or at the end of the pay period in which the employee’s last day of work falls. In the absence of such an agreement, the final check must be tendered at the time of the employee’s termination.
The penalty for failing to pay wages owed to an employee upon his or her termination is one day’s wages for each day the payment is late, not to become due until the employee has filed a complaint with the Division of Labor Standards and Statistics.
Severance Payments and Continuing Benefits Upon Termination
Severance and benefits considerations are often in the forefront of employer discussions about terminations in Colorado. In contrast to some other states, severance pay is not a mandated requirement in Colorado. It is either intended to be paid voluntarily by an employer, or the employer is required to pay it pursuant to a contract, policy or practice. For example, if an employment contract sets forth that an employee is entitled to a certain amount of severance, the employer is legally obligated to pay the employee the amount of the severance upon termination. However, if an employer chooses to pay severance in Colorado, it is important that the employer then actually makes the payment.
If an employer does not have a policy or employment contract mandating severance in Colorado, and does not pay severance in an individual situation, the employer will not be liable to the employee unless the employer has established a pattern or practice of paying severance to terminated employees over a period of time. This practice could create an implied contract to pay such severance. A recent case may shed light on these issues.
The Colorado Court of Appeals recently found that a practice of paying severance to employees every year when they are laid off may establish a contractual obligation to pay severance to an employee discharged from employment even when no contract is in effect. In Bright v. Nu-Way Labs, Inc., the court of appeals ruled that the employee stated a claim for breach of contract against her employer when she was discharged but not offered severance after the company had historically paid severance every year.
Severance is not required under Colorado law. Some employers choose to provide it even when not required to do so in order to "do the right thing." In the same spirit, a Colorado employer must be careful if it has chosen to provide severance and has established a pattern of paying employees who are discharged, out of courtesy, to depart with a severance package. If outplaced employees are given more than a standard severance package, such as assistance in helping them locate other employment, an employer can do so without creating an implied contract so long as the assistances are offered "routinely" and not "every time."
Basis For (and Against) Wrongful Termination Claims
While the vast majority of employees in Colorado are employed at will, meaning that they can be terminated with cause, without cause, or for any reason that is legal, there are exceptions to the at will employment doctrine. Generally, if a terminated employee claims wrongful termination, it means that the employee claims that the firing was based on an unlawful employment action. Even after the at will employment doctrine is explained to them, some employees still believe that because they were let go, that the employer must have done something illegal or improper. The reality is that a wrongful termination claim in Colorado may exist only in a few scenarios.
Disability Discrimination Claims
Similarly, an employee or former employee may bring a disability discrimination claim by alleging that the employer terminated him or her due to the individual being disabled . Unless exempted by the American with Disabilities Act, employers are required to provide reasonable accommodations to accommodate an otherwise qualified disabled individual, unless doing so would create an undue hardship on the employer.
Retaliatory Discharge Claims
A Colorado plaintiff may also bring a retaliatory discharge claim against his employer if he or she can prove that the termination occurred as a result of the employee’s exercising a right protected by law. Colorado law protects employees from being terminated for reporting or complaining of: Retaliatory discharge claims are one exception to the doctrine of employment at will in Colorado and as a result these claims will be subject to far less legal scrutiny than a disability discrimination claim. In Colorado, employees cannot bring wrongful termination claims after the termination of employment, unless those claims fall into one of the above three categories. Otherwise, there is no cognizable claim for wrongful termination by an employer under Colorado law.
Steps Employers Should Take Before a Termination
It is best practice for Colorado employers to assess whether there is cause to terminate an employee and a reasonable basis to support that decision. Before taking the termination action, employers should conduct diligence to investigate the circumstances of the termination, including speaking with the employee about his or her performance and any issues that may affect the termination decision. Employers should also weigh the risk of litigation against the benefit of terminating the employee. We recommend that employers take the following steps prior to termination: In summary, if a Colorado employer has a just cause documented and an otherwise defensible termination, the employer can make a termination decision notwithstanding an adverse effect on morale. However, if there is no definitive reason or record evidencing just cause for the termination, the employer could face an adverse impact lawsuit.
Documentation & Written Record-Keeping
Whether for performance-based reasons or in the context of a lay-off, when terminating an employee, it is important to maintain contemporaneous notes justifying the decision to terminate. These notes should also reflect any specific instructions you gave the employee as part of their termination, as well as your expectations in the following days/weeks regarding how the employee would utilize time left due to the termination, such as by removing personal belongings or transferring work to other employees. Any written, signed, termination materials received from the employee should also be kept.
It is also important to have employees in Colorado sign a general release of any wage claims at the time of their termination. This release of wage claims should be kept on file, along with the termination notes, to facilitate enforcement of these releases, if necessary.
Ten Tips for Conducting a Termination Meeting
In the context of separation, there is little more stressful and uncertain than the termination meeting itself. A best practice, however, is to "leave HR out of it," if possible. Sometimes this is unavoidable. For example, if the meeting includes outplacement or unemployment benefits, or requires paperwork that only a human resource representative can complete, it is usually helpful to have HR directly in the room. However, in the absence of such circumstances, leaving HR out of it generally: (1) alleviates some of the anxiety of the moment for the employee; (2) allows the manager to focus on the "what" and "why" at the termination meeting; and (3) allows the HR professional to counsel the manager in the immediate aftermath of the meeting, whether it be to approach the employee gently with an offer of assistance or to follow up promptly with the remaining team members to commiserate and plan.
Also , set the room for a successful termination meeting. The classic "pizza box" boardroom style table, with the manager at one end, the terminated employee at the other, and the human resources representative next to the manager, communicates to the terminated employee that he or she is severed from the company, without recourse or empathy. Instead, put yourself on the same side of the table as the terminated employee. Have a few chairs open at the table, inviting the terminated employee to take a seat. This will immediately demonstrate that you are partners in confronting the reality of the meeting, and soften the disruption to the employee. When the manager and employee sit on the same side of the table, there is no "us against them" feel to the meeting, and the conversation flows more smoothly.