Can I Fire an Employee From My Startup for Going Off Meds?

Imagine this: you start up a small business, let's say a bakery. You hire a great candidate to oversee the finances for your Manhattan confectionary. A few months later, her performance slips. She explains to you in a surprising moment of candor that she has ADHD and depression, and tried going off her meds. She promises she won't do it again. Her performance improves... until it doesn't. What do you do? Would your tiny operation be jeopardized if you fired her for not doing her job?

Most states in the US, including New York, recognize "at-will employment" as the default employment relationship. What is at-will employment? It is an employment relationship that allows for the termination of the employment relationship at any time for almost any reason, as long as a law or contract allows for the termination. So, in theory, it should be no problem to fire an employee, right?

The thing is, there are laws and there are practicalities. Your startup likely can ill-afford to face a lawsuit. And, even with the default rule of "at-will employment," there are quite a few loopholes you should be aware of. Courts can find legal agreements in oral hiring (though, in New York, at-will is usually preserved in an oral agreement), employee manuals, and hiring letters. So you should not be the one drafting your offer letters and employment agreements/handbooks, unless you are an attorney. Also, the courts have consistently found that discrimination and end-runs around the written statutes may undercut the "at-will" rule. Hence, the problem with just unceremoniusly firing an employee with a medical condition. That employee may claim that he or she was discriminated against because of his or her condition rather than poor performance.

Medical conditions come in all forms, including those that are not readily visible; mental health matters may be classified as a disability. The American Disabilities Act of 1990 and its 2008 Amendments recognize a disability as:

• a physical or mental impairment that substantially limits one or more major life activities of such individual;
• a record of such an impairment; or
• being regarded as having such an impairment.

At the very least, if you are aware that your employee has a medical condition (and sometimes, even when you're not!), you will likely not be able to get a discrimination lawsuit easily dismissed. The longer a lawsuit progresses, the more it costs you. Even if your legal fees are covered by insurance (which you have hopefully purchased), your insurance premium will likely increase as a result of the lawsuit.

In fact, the best way to avoid litigation is to plan for termination of employee relationships long before you begin hiring. You should consult with a knowledgable attorney about the pitfalls of hiring and firing. A good lawyer will tell you to:

1. Draw up an employment policy manual that is vetted or drafted by a lawyer. Keep the language simple. Be consistent in following the policies within the manual.
2. Document performance regularly in a consistent manner. Establish specific expectations for the duties of each employee. Make a paper trail. Keep in contact with your lawyer before and after each documentation.
3. Recognize the concept of "consideration." Consideration is quid pro quo--for example, when your employee signs an acknowledgment of reading, understanding, and agreeing to follow the manual, the signature is consideration for employment.
4. Discipline promptly. Use incident/discipline reports that are acknowledged by the employee. Be clear and specific, without using harsh wording that may expose you to a claim of retaliation. Even if an employee is rude or inappropriate, do your best to be dispassionate (this is often a traumatic time for an employee). Give the employee an opportunity to respond in writing to your incident/discipline report.
5. Educate yourself about state and federal laws. For instance, protected classes of employees (such as those who are of a certain age, race, ethnic group, religion, genetics, or disability) in individual states may be more "protected" than they are federally. Individual states and even cities, such as New York City, have civil rights and human rights laws. Your lawyer should be able to guide you about what you should and should not say when seeking employees, interviewing, interacting in the workplace, promulgating disciplinary procedures, or terminating the employment relationship.
6. Have a full plan that outlines how to terminate an employee, including a template or sample "script" for an exit interview, separation and release of claims agreements drafted by an attorney, and written policies for managers, directors, and C-Suite in handling terminated employees and their colleagues.

We do live in a litigious society. But it would be foolish to cast all of the blame on those who bring lawsuits. Just because you have a small business doesn't mean you can "wing it" when you become an employer. You show your employees the utmost respect when you commit yourself to a relationship that consists of clear communication, natural policy and behavior adaptations based on changes in the law and the workplace, and mutually acknowledged expectations. And remember, there is something special about an employer who shows respect towards an employee.

Related: Before You Hire an Independent Contractor for your Startup Small Business...