Addressing Employee Discipline

General Principles

Discipline of employees often gives rise to employment litigation. The following general guidelines for managing employees with disciplinary problems may help employers avoid litigation. Employers must have clear disciplinary standards and evidence that employees were given notice of the standards. In implementation, the standards must be applied uniformly. Additionally, the organization should retain the right to determine the amount and/or type of discipline that will be imposed in each individual situation. Employers must create a discipline policy that will not limit their right to enforce appropriate disciplinary measures.

A disciplinary procedure should follow these four rules:

• The employee must know the nature of the problem.
• The employee must know what to do to fix the problem.
• The employee must have a reasonable period of time in which to fix the problem.
• The employee must understand the consequences of inaction.

Progressive Discipline

Companies should consider using a progressive discipline system. The progressive discipline system generally begins with the recruitment process and continues through orientation, training, performance evaluations, and daily supervision.

A progressive discipline system consists of the following:

• Verbal warning.
• Written warning.
• Suspension.
• Termination.

Elements of Due Process

In most cases, private sector employers do not have a legally mandated due process obligation in the employment relationship, although this obligation may be imposed by state law or by an employer’s policy or practice. However, it is often in the employer’s best interest to attempt to rehabilitate problematic employees. Progressive discipline is a form of due process, and its use demonstrates the affirmative steps taken by an employer to correct an employee’s behavioral and performance-based problems. For example:

• Knowledge. For an employer’s discipline program to be effective, employees must know the employer’s expectations and the consequences should an employee fail to meet those expectations.
• Consistency. Discipline should be applied consistently and an employer’s responses to rule violations should be predictable. Violations must not be corrected on an ad hoc basis, because the employer will be perceived as arbitrary, unreasonable, and discriminatory.
• Appropriateness. The discipline chosen for a particular problem must be appropriate. Occasional poor performance, tardiness, and absenteeism are certainly actionable, but probably not cause for termination. An employee’s performance record and previous disciplinary record should be taken into account.
• Opportunity. An employer must allow an employee to respond to allegations of misconduct before administering discipline. In a system structured for rehabilitation, failure to allow an employee a chance to offer a defense or alternate position will likely create employee relations problems and may be a catalyst for litigation.
• Reasonableness. To be effective, progressive discipline must allow employees a reasonable period of time to improve their performance.

Investigating Employees and Liability

When employers investigate employee misconduct in the workplace, they are often caught in a “catch-22.” For example, on one hand, employers must conduct inquiries into employee performance and allegations of rules violations or misconduct because the Supreme Court has held that failure to promptly and thoroughly investigate reported employee misconduct may disqualify an employer from an “affirmative defense” against liability for workplace discrimination and subject the employer to punitive damages. (See Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (1998) and Faragher v. City of Boca Raton, 524 U.S. 775 and 789 (1998).)

On the other hand, investigating employee misconduct creates the possibility of exposure to legal liability. For example, employers conducting workplace investigations often are subject to requirements of the Fair Credit Reporting Act (FCRA), which since 1999 had been interpreted to govern such an investigatory process if third parties were used. (See Federal Trade Commission Staff Opinion Letter Vail, April 5, 1999 at www.ftc.gov/policy/advisory-opinions/advisory-opinion-vail-04-05-99)

Under that interpretation, the Federal Trade Commission (FTC) required employers using third-party investigators to notify employees suspected of misconduct before conducting an investigation, to obtain the employee’s prior consent before commencing the investigation, and to fully disclose investigative reports before taking any adverse action against an employee. Such stringent requirements made workplace investigations extremely difficult while increasing the risk of liability, especially the vulnerability to claims of retaliation actions.

As one can see, applying the requirements of the FCRA to an investigation of a typical case leads to an absurd result. If an impartial third party is used to conduct an investigation, the employer would have to comply with the act’s requirements as follows:

• Have the alleged harasser’s written consent before the third party could begin the investigation.
• Provide the alleged harasser with a copy of the resulting investigative report before taking any adverse action.
• Disclose to the alleged harasser the name of the alleged victim, the investigator’s identity, and the names of all persons interviewed during the investigation.

With the cloak of anonymity absent, victims and witnesses were less likely to provide the most accurate accounts of incidents, and employers were left in uncertainty.

With the enactment of the Fair and Accurate Credit Transactions Act (FACT Act), on March 31, 2004, employers have enjoyed relief from the FCRA’s stringent investigation requirements. Although the FACT Act reincorporates the majority of the FCRA’s provisions, it lessens the investigative burdens on employers by countering the 1999 FTC opinion letter. Specifically, the FACT Act eliminates the need for prior consent before third parties conduct workplace investigations and removes the pre-adverse action disclosure to the employee being investigated for the alleged misconduct if communication of the third-party investigator’s report is limited to the employer or an agent of the employer. As a practical matter, the report should not be disclosed to the complaining party; doing so may bring it within the scope of an investigative “consumer report” otherwise triggering the disclosure requirements.

In the event adverse action is taken against the employee based on the results of the third-party investigation, the FACT Act still requires the employer to provide the employee a summary of the third-party investigative report. Employers using third parties to conduct internal investigations must therefore remember to provide this summary whenever an adverse action is taken, even if a mere written warning results. The summary, however, does not need to identify the individuals interviewed or identify other sources of information. If employers follow the FACT Act’s requirements regarding third-party investigations, they will eliminate the “catch-22” created by the FCRA under the FTC’s interpretation.

Creating and Implementing a Disciplinary System

An effective disciplinary policy consists of several interrelated components, such as the following:

• Establishing a fair system of work rules and expected standards of behavior and performance.
• Ensuring the consistent application of discipline.
• Requiring detailed documentation.

Consistency and documentation are the foundation of an effective disciplinary policy. Regardless of the quality of an organization’s policies, without consistent application the policies will lead to disputes in labor and management relations. A disciplinary policy must provide for adequate documentation. For example, in any type of legal action, an employer that is forced to defend its disciplinary decisions may use the documentation as proof of its fair, consistent, and nondiscriminatory discipline system. Importantly, each component of the disciplinary system must be designed with the individual organization’s needs and capabilities in mind.

Establishing the Rules

A disciplinary system must notify employees of what actions or inactions will constitute grounds for discipline. Although disciplinary policies are varied due to the many differences among employers and their operations, a few general rules may be gleaned from these divergent approaches.

Drafting of an effective disciplinary policy requires the knowledge of business operations. Disciplinary rules should not be adopted from another employer because a borrowed policy will not reflect the needs of all employers, but rather the employer for which the policy was designed. Additionally, an adopted policy may cause unnecessary problems and require constant amendment. A disciplinary policy should be suited to a specific operation. For example, employers should seek input from each level of supervisory personnel, and then draft a policy that addresses the particular concerns.

Employers with nonunion workforces should exercise caution to ensure their disciplinary policy does not contain language that may be construed as a promise altering the employment-at-will relationship. Qualifying language that is prominently displayed in the disciplinary policy may reduce the risk of inadvertently altering the at-will relationship.

For example, a disciplinary policy may incorporate the following qualifying language:

• All employment is employment-at-will. Nothing contained in this disciplinary policy is intended to create a contract of employment or change the at-will nature of this employment.
• Nothing in this disciplinary policy restricts the employer from terminating employees for reasons unrelated to discipline, providing the reason is not contrary to law.
• The following list of offenses is not all-inclusive. This list is only intended to provide an example of offenses warranting discipline or discharge. The employer fully reserves the right to discipline employees for misconduct that is not specifically referenced in this list, up to and including discharge.

Establishing Effective Policies

Disciplinary procedures may be established through an employee handbook or personnel policy. The following issues should be evaluated in considering whether to implement an employee handbook or personnel policy:

• Employers should retain discretion to address each situation on a case-by-case basis.
• Handbooks should have a disclaimer stating that the handbook is not an employment contract. The disclaimer should be prominently displayed on the first page of the handbook.
• At least once a year employers should review all written policies to ensure they are current and comply with all applicable laws.
• Employees should be required to sign an acknowledgement form stating that they have received a copy of the handbook. The form should contain a disclaimer stating that the employee recognizes that the handbook is not an employment contract and that employment is at-will. These forms should be maintained in the employee’s personnel file.

An annual evaluation process should be established. The advantages of a well-developed evaluation process are as follows:

• Both the employee and supervisor are aware of performance deficiencies.
• A specific record of performance is created that documents the issues of a problem employee and others with whom the problem employee’s performance could be compared.
• Management is forced to establish legitimate performance goals.

The elements of an effective evaluation process include the following:

• Written evaluations, based on documented criteria, which are distributed to all managers.
• Regularly scheduled evaluations.
• Honest and candid appraisals of performance.
• Multiple levels of management review the evaluation.
• Communication of the evaluation to the employee.
• An opportunity for the employee to raise any objections to or comments on the evaluation.

Enforcing the Rules

Once the rules are determined, a process must be established for initiating disciplinary action whenever there is a rule violation.

For example, the process may include the following three steps:

• Investigation.
• Decision, explanation, and imposition of discipline.
• Appeal process.

Investigation

Once an employer becomes aware that a possible infraction of the rules has occurred, an appropriate management official should immediately conduct a preliminary investigation. An appropriate official may be a supervisor, a human resources department professional, or someone in authority who is completely removed from the incident. The only essential requirement is that the person conducting the investigation must be capable of objectively evaluating the facts and the persons involved. A related consideration is whether the person conducting the investigation will be perceived by the employees involved as someone who is fair and objective. If employees do not have confidence in the objectivity of the person conducting the investigation, the result of the investigation will not provide the finality necessary for the resolution of the problem.

The official investigating an incident should determine the following:

• Whether misconduct occurred.
• Which employees were involved in the misconduct.
• Who witnessed the misconduct.
• What was the specific misconduct.
• The consequences of the misconduct, such as the following:
  • Whether anyone was injured.
  • Whether production was hindered.

Immediately after the event, an interview should be conducted with the employee suspected of the misconduct. The employee’s supervisor or another appropriate representative of management should conduct the interview in private, away from other employees. If the misconduct is serious, the interviewer should consider having another management representative present should a witness be needed to verify what occurred during the interview.

The employee should have the opportunity to explain what happened and why it happened. The employee should be encouraged to identify any other employees who may have knowledge of the incident. At the conclusion of the interview, the employee should be told that they will be contacted upon completion of the investigation. If serious misconduct is involved, the employer may suspend the employee — with or without pay — during the course of the investigation. The interviewer must keep detailed and accurate notes of the interview.

Interviews should be conducted with all witnesses as soon as possible after the incident. Interviews with witnesses should be conducted separately and detailed notes should be taken. If the misconduct involved is serious, the interviewer should get signed statements from each witness. In some cases, such as those involving alleged harassment, it may be preferable to interview other witnesses identified by a complainant before conducting an interview with the suspected perpetrator.

Decision, Explanation, and Imposition of Discipline

The personnel department or management staff should review the information obtained from the investigation. At least one person in the decision-making process should be familiar with past disciplinary actions taken relevant to the group of employees involved. The personnel file of the employee should be reviewed to identify circumstances that would either increase or reduce the discipline imposed.

An employee’s supervisor must complete a written disciplinary form upon the decision that an employee should be disciplined for misconduct. The employee’s name, job classification, department, and supervisor should be identified on the form. In describing the nature of the misconduct, the following information should be provided:

• The date and time of the offense.
• A brief description of the events surrounding the incident.
• All of the rules or policies violated by the misconduct.
• The effective date and nature of the discipline to be administered. If the discipline is a final warning, it should be clearly stated that future offenses will result in discharge.

Employers may develop a standardized Disciplinary Action Form. In addition to the Disciplinary Action Form, in cases of serious misconduct a complete factual account of the incident should be maintained in the employee’s personnel file. Importantly, because fair employment practice agency charges and complaints constitute only allegations, they should be maintained separately from personnel files.

When the offense and corresponding disciplinary action are clearly explained the employee should be allowed to review the Disciplinary Action Form. The employee must understand exactly what action the organization will take if another violation of company rules occurs. The employee should also be asked to sign the Disciplinary Action Form, which demonstrates the employee’s notice of and understanding of the situation. If the employee refuses to sign, an attempt should be made to have the employee sign a notation on the document stating, “Employee refused to sign.” If the employee still refuses, the supervisor should indicate on the document that the employee refused to sign, and, if possible, have a management witness verify this fact.

At all meetings it is essential that detailed notes are made and witnesses are present. The management official must retain composure at all times and the employer should not argue with the employee but should be willing to listen to the employee.

Appeal Process

Another part of the disciplinary procedure is the appeal process, particularly in instances of serious misconduct. The appeal should be made to a high-level management official who was not involved in the original disciplinary process. The appeal process may be initiated verbally; however, the issues and outcome of the appeal should be reduced to writing. The person considering the appeal should review the detailed notes of the investigation and compare the disciplinary action with discipline imposed in previous cases. The reviewing official must make certain that the discipline is fair and consistent with past practice. The appeal process should be timely, requiring no longer than a week to complete. Alternative dispute resolution (ADR), such as peer review, mediation, or arbitration may also be used in these circumstances.

Note: Under some union contracts, an employee’s time to grieve discipline resulting from misconduct may be expressly limited. If the employee or union does not exercise this right to appeal in a timely manner, the matter may be deemed settled.

Documentation

The best-designed disciplinary policy may be rendered useless by the failure to maintain adequate documentation. Upholding any disciplinary action will require the employer to show the action is consistent with the employer’s normal disciplinary policy. Without proper documentation, an employer will have difficulty ensuring consistent disciplinary actions and assuring a third party of that consistency.

If possible, a separate file should be maintained for each company rule or policy. Any time an employee is disciplined for violating a company rule or policy, a copy of the Disciplinary Action Form should be placed in the corresponding “offense file.” For example, all discipline imposed on employees for insubordination would be in one file for easy reference and comparison. If more than one company rule or policy is violated by an employee’s misconduct, one copy of the Disciplinary Action Form should be placed in each corresponding offense file.

Employers should also keep a record of policy or rule violations where no disciplinary action is taken. For example, an employee breaks a company rule, but the investigation reveals reason to support a reduced discipline. In such circumstances, a memorandum should be placed in the offense file indicating that a violation of the rule or policy was excused for a particular reason. This filing system should not replace the organization’s personnel filing system; it is an additional system designed to help supervisors administer consistent discipline.

Warnings

The typical progressive discipline formula begins with a verbal warning and progresses to a written and then a final written warning before termination. Usually the impetus that moves the process from one stage to the next is a repeated violation of the same rule or type of rule (for example, repeated tardiness or unexcused absences). Disciplinary actions include the following verbal and written warnings, suspension, and discharge.

Verbal Warnings

When giving a verbal warning, the employer should speak privately with the employee. Verbal warnings are proper for infractions of a relatively minor degree. The supervisor should inform the employee at all times that the employee is receiving a verbal warning and that the employee is being given an opportunity to correct the behavior.

It is important the employee be notified of the following:

• The number of days the warning will continue.
• That failure to correct the behavior will result in more severe disciplinary measures.

A written record of the verbal warning should be completed and placed in the employee’s personnel file.

Written Warnings

If the employee continues to disregard the verbal warning or if the infraction is severe, the supervisor should issue a written warning. The supervisor should give a detailed description of the infraction in the warning and sign the written notice of infraction. An employer should take the following steps when issuing a written warning:

• Discuss the warning with the employee.
• Confirm that the employee understands the reasons for the disciplinary action.
• Inform the employee of the number of days the warning will operate.
• Provide the employee with a copy of the warning at the time of the discussion.
• Obtain the employee’s signature, with the current date, on the warning copy acknowledging the employee’s receipt.
• Place the original warning in the employee’s personnel file.

Example:

Date: _________________

Employee Name: _____________________________

Any further violations (more absences, tardiness).

Within the next ___________ (days, months).

Will result in ____________________ (next step in disciplinary process).

Employee Signature: _______________________

Supervisor Signature: _____________________

Suspension

Suspension is the most severe form of discipline — short of termination — given by a supervisor. Supervisors should reserve suspension for severe infractions of a rule, standards, or for excessive violations. Usually, the employee has already received a written warning and has made little or no effort to improve performance or behavior. Suspension should be utilized only after a thorough evaluation by the supervisor.

Employers should follow these steps when imposing a suspension:

• Present all the facts that initiated the reason for the disciplinary suspension and the duration of the suspension.
• Inform the employee of the reasons for the disciplinary action and give the employee an opportunity to respond before the suspension is imposed.
• The original notice of suspension should be placed in the employee’s personnel file.

After the employee returns from a period of disciplinary suspension, the supervisor should make certain that the employee may return to the workplace without injury to the employee’s dignity or self-worth.

Note: Many employers believe employee suspensions only increase absenteeism and therefore use final written warnings rather than suspensions.

Discharge

If the employee fails to improve after the supervisor has issued a suspension, the last option available to the employer is termination. When the supervisor is unsure whether termination is proper, the “last chance” letter should be considered. This last chance letter alerts the employee that they should be terminated; however, the employer is willing to offer the employee one more chance to rectify the actions that may lead to termination. However, any future form of misconduct will result in an immediate discharge.

Summary Discharge

Progressive discipline is an employee benefit. However, employers are not required to offer progressive discipline to someone whose actions are illegal or intolerable in the workplace. If an employee engages in illegal activity or other egregious conduct (such as gross insubordination, gross negligence, or drug use on company premises), employers may be justified in the prompt termination of the individual.

Note: Immediate discharge actions should be avoided in most cases in order to allow adequate time for appropriate review of these serious decisions. Alternatively, an employer may suspend an employee “pending further review and final decision regarding discharge”

Employers need to remember that discipline must be administered consistently. Where appropriate, the application of discipline should logically and sequentially follow upon previous disciplinary actions documented in the employee’s file.

Rehabilitation

The purpose of progressive discipline systems is to rehabilitate, and employers must try to assist employees in solving their problems.

Employers should document their efforts by performing the following procedures when disciplinary action occurs:

• Clearly state in writing the nature of the problem and how the employee’s performance or conduct damaged the organization.
• Provide a clear and unequivocal warning that the employee’s failure to improve will result in discipline, up to and including termination.
• Prove through progressive disciplinary actions that the employee’s poor performance continued despite repeated warnings.
• Demonstrate that discipline was dispensed in a fair and consistent manner, so as to notify any future employee that termination under similar circumstances may be reasonably expected.

Protected-Class Employees

Employers must be especially careful about documentation when dealing with protected-class persons. Special attention should be paid to the following when dealing with protected-class employees:

• Uniformity.
• Absence of evidence of discriminatory intent.
• Use of “last chance” technique (see Warnings: Discharge section).

Absenteeism

Absenteeism tends to be a prevalent disciplinary problem. Absenteeism results in inefficiency and decreased productivity as employers reassign workers and rearrange schedules to substitute for absent employees.

Employers pay a heavy price when employees consistently fail to report to work.

Establish an Attendance Policy

The first step in combating absenteeism is to establish an attendance policy that encourages and rewards attendance while discouraging absenteeism. A formalized plan provides an objective goal for the employee and a framework for uniform implementation that ensures equal and just treatment for all employees.

Incentive Plans

Reward and Penalty Type Plan

A comprehensive attendance policy should have elements of both reward and penalty. For example, an employee may receive a reward for exemplary attendance. Many employers offer additional time off for employees who do not use sick days; for instance, for every six-month period during which an employee has not used a sick day, the employee earns a personal day.

There is no requirement that the incentive take the form of extra days. Some employers offer cash incentives, awards, prizes, or dinners to employees who achieve exemplary attendance. An effective incentive program offers a reward worth achieving within a reasonable time frame. Quarterly incentives are often more effective than yearly incentives, which may often seem unreachable to an employee. However, the Occupational Safety and Health Administration (OSHA) has criticized incentive plans that discourage employees from fully reporting occupational injuries and illnesses, such as those which offer rewards based on having the fewest lost work time accidents.

The penalty component of the attendance plan may be as varied as the reward portion. Such a policy may take the form of a traditional plan distinguishing between excused and unexcused absences or it may be a no-fault plan. Both types contain progressively severe penalties for increased absenteeism. Traditional plans usually share several features. Importantly, plans provide absent employees with an option, distinguishing between excused and unexcused absences. In addition, such plans typically allow employers to take special circumstances into account and provide for progressive discipline. The result is a plan in which supervisory personnel exercise significant discretion.

No-Fault Plan

No-fault plans diminish supervisory discretion by eliminating the excused and unexcused distinction while informing employees that a certain number of absences will result in a definite disciplinary action. Typically, such a plan also seeks to foster consistent attendance by maintaining a rolling tally where points drop off with the passage of time, or by returning the absenteeism tally to a zero after a certain period of perfect attendance. However, despite having a no-fault policy, some arbitrators still require an employer to take into account all relevant factors in determining whether to discharge an employee. Furthermore, in large organizations, prompt enforcement of such plans may prove difficult, since there often will be a day between the time the employee incurs a triggering absence and the time the human resources officials calculate the running total and direct disciplinary action. This could give rise to the appearance of inconsistent treatment.

Family and Medical Leave Act In developing a no-fault plan, the employer must assess any Family and Medical Leave Act (FMLA) absences and not count them against the employee. Additionally, government investigators looking into allegations of unlawful retaliation for the exercise of protected rights under various labor and employment laws may view with skepticism an employer’s reliance on a lock-stop policy to explain a suspect termination, especially where it is not enforced with a high degree of consistency.

In particular, employers should be mindful of the requirements of the FMLA, the Americans with Disabilities Act (ADA), and similar state and local laws in applying any policies or practices discussed in this chapter.

Chronic Absenteeism

Physician Certificates

An important component of any successful attendance policy provides for verification and reintegration of absent employees returning to work. Employees absent for more than a few days due to a medical issue should be required to provide medical verification of their condition. The number of days used to trigger this requirement should range between three to five workdays. Accordingly, an employee who calls in sick for more than five days should be required to provide a physician’s note verifying the existence of an injury or illness and, if applicable, releasing the employee to return safely to the workforce.

A physician verification policy protects the following:

• The employee who may try to return to work too soon after a serious illness.
• Other employees who may be subjected to an infectious illness.
• The employer against employees using sick leave for unauthorized purposes.

A policy may also be developed that requires a physician’s note if a sick day is taken in conjunction with other forms of leave or in conjunction with weekends. A proficient policy will allow the employer to request a physician’s note whenever the employee is suspected of abusing sick leave.

Return-to-Work Physicals

A comprehensive attendance policy should also allow the employer to require an employee returning to work after a long illness or injury to undergo a physical examination.

The purpose of the physical examination is to ensure that the employee is fit to return to the workplace. This examination must be limited to verifying that the employee is able to meet the legitimate physical requirements for the employment position (subject to any appropriate accommodation).

Absenteeism Without Violation of Policy

Regardless of the type of attendance plan used, an organization may still be concerned about the following:

• A chronically absent employee.
• An employee who does not technically violate the basic attendance policy.
• An employee who negatively affects productivity.

Regular attendance is a basic requirement and an employer cannot maintain efficiency and productivity without consistent attendance from employees. Arbitrators recognize the rights of employers to ensure that their operations do not experience productivity declines and inefficiency resulting from chronic absenteeism, even if the absenteeism results from illness or other legitimate reasons.

In cases of chronic absenteeism, the employee may be disciplined and discharged, although the employee has not directly violated the absenteeism policy. The key in such cases is to first determine what constitutes excessive chronic absenteeism, and then to develop a method for disciplining such an employee that meets a just-cause standard.

Calculating Absenteeism

Often a statistical approach is used to determine what constitutes excessive absenteeism. For example, to obtain a simple percentage the number of days missed are divided into the number of days scheduled. This percent may then be compared to the absentee rates throughout the employer’s facility.

Employers should also consider the gross number of absences and the frequency of absence. For example, an employee who is out for a single 36-day period for surgery or other medical problem may cause less disruption than an employee who randomly misses work an average of three times per month, although both employees have a yearly absenteeism rate of 13.8 percent.

With proper employee-provided notice, employers may prepare for a single 36-day absence and arrange for a suitable, temporary replacement. However, employers will have more difficultly in the efficient replacement of an employee who is randomly absent due to the unpredictable nature of the absence.

Discipline

Employers should construct a system for disciplining the chronically absent employee that takes into account the following factors:

• Has the employee been notified of attendance requirements?
• How frequently has the employee been absent?
• Of what duration were the absences and over what period of time?
• What are the reasons for the absences or tardiness?
• Did the employee provide timely notice and required documentation?
• Has progressive discipline or other corrective action been taken?
• How does the employee’s record compare to other employees’ records?
• Have employees in similar situations been treated the same way?

Note: Particular attention must be paid to special leaves of absence. Leaves of absence protected by the FMLA may not be counted against an employee’s attendance record. In addition, the Equal Employment Opportunity Commission (EEOC) has taken the position that an extension of leave beyond that authorized by company policy may constitute a reasonable accommodation under the ADA.