Business Law

How to Discipline Employees in a Small Business

By Sachi Barreiro, Attorney, University of San Francisco School of Law
Avoid discrimination lawsuits by following these tips for disciplining employees.

As a small business owner, you have to make several business decisions every day. Sometimes, these decisions involve how to handle an employee's poor performance, work-related misconduct, or violation of company policy. Although they’re not the most enjoyable tasks, disciplining employees and consistently enforcing company policies are vital to keeping your business running smoothly and efficiently.

However, disciplining employees can also be risky if you don't do it right. In particular, if you discipline employees differently for the same offense, your company could end up facing claims of employment discrimination.

Avoiding Discrimination Claims

Under federal law, it’s illegal to discriminate against employees based on certain protected characteristics—such as race, gender, pregnancy, religion, national origin, disability, and age. Many states have their own laws that outlaw discrimination on additional grounds, such as sexual orientation or gender identity.

Federal antidiscrimination laws typically apply only to employers with 15 or more employees (or 20 or more employees for age discrimination). So if your business is very small, these laws may not apply to your employees. But this doesn’t necessarily give you a free license to discriminate—your state, county, or city might have a law or ordinance that applies even to the smallest employers. And, even if none of these laws apply, it will be hard to attract good employees once word gets out that employment decisions are based on immutable characteristics rather than merit. (To learn more, read our article on antidiscrimination law basics for employers.)

Because most employers don’t intentionally discriminate, the bigger concern is inadvertently discriminating against employees, or even just giving off the appearance of discrimination. This often happens when employers impose discipline inconsistently. For example, suppose you give warnings to three male employees for coming in to work late. Then, because you’re fed up with tardiness, you decide to fire the next employee who comes in late. If that employee is a female, she could claim that you engaged in gender discrimination because you disciplined her more harshly than the male employees for the same offense.

Generally, an employee must file a complaint with the Equal Employment Opportunity Commission (EEOC)—or a similar state agency—before filing a discrimination lawsuit in court. If an employee files a complaint against your company, you should consult with an employment lawyer on how best to proceed.

Tips for Enforcing Your Discipline Policy

The following guidelines will help you avoid discrimination and other types of claims by employees:

  • Create a clear discipline policy. Your company should have a written disciplinary policy—either as part of an employee handbook or as a stand-alone written policy. The policy should clearly state that the company will discipline employees for performance, misconduct, and violation of company rules. You may want to include the types of discipline that may be imposed—for example, a verbal warning, a written warning, suspension, and termination—as well as examples of disciplinable offenses. However, you should explain that employment with the company is at will, that the company may discipline for other offenses, and that employees can be terminated without receiving prior discipline. If you need help creating a policy, contact an employment lawyer.
  • Communicate the policy to employees. You should distribute your discipline policy (and other company policies), explain it and answer questions, and ask employees to acknowledge receipt in writing.
  • Consistently enforce the policy. Consistency in disciplining employees is critical. But, consistency doesn't necessarily mean that you have to apply the exact same discipline and follow the exact same procedures in every situation. Instead, look at the big picture to make sure that similarly situated employees receive similar discipline for similar offenses.
  • Document disciplinary actions.

    That way, you can show that an employee was really fired for poor performance or misconduct, rather than discriminatory reasons.

  • Have a process for internal complaints. Your company should provide employees with a process for making complaints within the company, which can be as simple as having employees come to you with their concerns. If employees are concerned about unfair treatment, you can remedy the situation before they file a lawsuit or agency complaint.

Don't Retaliate

The same laws that prohibit discrimination also prohibit retaliation against employees who file a discrimination claim or otherwise exercise their rights. Retaliation can take a number of forms, including demoting an employee, refusing to promote an employee, or giving the employee unjustified negative performance reviews. Even small things—such as changing an employee’s shifts—can be considered retaliation, if the employee finds those shifts less desirable. (To learn more, see our article on how to prevent workplace retaliation claims.)

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