Someone recently asked me, are you within your rights to terminate an employee if their behavior is reflecting negatively upon your company? For example, what if an employee is found to be a cross dresser in his private life? What if you find that a married employee is having an affair? What if one of your salespeople moonlight in a strip club? Are there legal ramifications to terminating employees for the way they conduct their private lives?
Key question number one: Can an employer fire an employee for questionable behavior outside of the office?
Unless you have a union or employee contract which states otherwise, in most cases you can terminate an employee for behavior you find unacceptable off the job. Employee conduct outside the workplace that is not in violation of a criminal statute but may otherwise be construed as improper or inappropriate can be grounds for termination if the business is in an employment-at-will state or bound by a morality clause in the employment contract. In an employment-at-will state — which includes most states in the U.S. — an employer does not need a reason to fire the employee and is free to do so at any time with or without good reason. In this type of employment arrangement, engaging in what you would consider immoral or unethical conduct outside the workplace could be grounds for termination if the employer sees it that way. A morality clause is a provision in an employment contract that requires the employee to refrain from sexual impropriety, drug use or other such conduct that could reflect negatively upon the employer. I am Founder and CEO of Corban OneSource and have a clause in my agreement with our Board of Directors that says I can be fired for such behavior. This may sound odd to some given I am the one that required it be put in the agreement but I believe that “accountability” is a good thing and one’s title is completely irrelevant.
Now, you must proceed with caution as an employer cannot terminate employment for discriminatory purposes. As we all know, federal law prohibits discrimination based upon race, color, religion, national origin, age, sex, familial status, disability, veteran status or genetic information.
Key question number two: Can you fire an employee for behavior off the job without risking a legal action — such as a wrongful discharge lawsuit — by the employee?
There are a number of possible risks if an employer terminates an employee for behavior away from work. Some examples:
- In a termination caused by the employer’s personal judgment that an employee’s behavior is “immoral,” if the employer publicizes the reason for the termination, the employer could face a defamation lawsuit by an angry employee.
- If an employee is terminated for involvement in religious-related activity outside work (such as attending a rally for a religious-based issue related to a minority culture) the employer could face a religious discrimination or minority discrimination charge.
- If an employer terminates a female employee because her romantic affair outside work is causing “scandal,” but does not terminate a male employee who is involved in a similar affair, the employer could face a sex discrimination charge.
Key question number three: Can you fire an employee for behavior off the job and still deny the employee unemployment benefits? The answer to this question is almost always “No.”
A rather typical case involved a motel employer with a rule stating employees must “maintain high integrity and morals, both on and off the job.” The motel fired an employee who had an on-going affair — off duty — with an individual who was a frequent patron of the employer’s motel.
The unemployment ruling, in favor of the employee, concluded even if the employee’s conduct violated the employer’s “high integrity and morals” rule, that ” the violation was not ‘in connection’ with the claimant’s employment.”
To deny unemployment benefits to an ex-employee, in a case like this, you would have to show the employee’s private behavior off the job seriously damaged your reputation. Or, the employee’s private behavior off the job severely interfered with his or her ability to represent you on the job.
Such a case might involve a company executive or a company salesperson. If the private behavior of an employee in such a position interfered with the employee’s ability to successfully represent the employer, in his or her role as an executive or a salesperson, you could argue the “cause” for termination was job-related.
While it is understandable that you may be outraged about your employee’s behavior, (even the CEO’s) I would ask that you don’t act without extreme caution. Most situations can be worked out in a win-win manner given the opportunity to think clearly and seek wise counsel. Talk to your personal as well as professional adviser to get some clarity on what actions are open to you and the best route for you to take.
Some excerpts taken from Biz Actions