The First Time You Have to Let Someone Go

The first person we terminated was a contractor who was not delivering. The relationship had been unclear from the start: we had a signed agreement, the agreement had scope language, and the contractor's interpretation of the scope differed from ours in ways that had been building for two months. When we finally had the conversation, we thought the hardest part was the conversation itself.

The hardest part was what came after it.

Why this is different from what you expect

Terminating a working relationship is not the same as ending a relationship with a vendor you stop using. An employment or contractor termination has legal requirements attached, and those requirements exist at both the federal level and the state level, and they differ by relationship type, and most new business owners do not know what they are until they need them.

For a contractor, the requirements are mostly contractual. What does the agreement say about termination? Is notice required? What happens to work product that was in progress? Who owns deliverables that were partially completed? If the agreement does not answer these questions, you are in the territory of what the law says by default, which may not be what you assumed.

For an employee, the requirements are more specific and more consequential. At-will employment means you can terminate without cause in most states, but at-will does not mean without process. Final pay timing is governed by state law, not by your preference. In some states, final pay is due on the last day of employment. In others, it is due by the next regular pay date. Getting this wrong creates a wage claim. A wage claim from a terminated employee is not how you want to spend the weeks after a difficult conversation.

What we did the first time

We had an attorney review our contractor agreement before we terminated. Not because we expected a dispute, but because we did not know what our obligations under the agreement actually were. Two hours of attorney time, paid at hourly rate, told us what the agreement required for termination notice, confirmed that the deliverables language was on our side, and flagged one clause about dispute resolution that we had not noticed. It also told us what to say and, more usefully, what not to say in the termination conversation.

The "what not to say" part was the thing we had not thought about. A termination conversation that includes reasons, especially reasons that could be interpreted as discriminatory or retaliatory, creates exposure that a clean, process-based termination does not. This does not mean being dishonest. It means being precise and limited in what you communicate in the moment. Nobody explains this before your first termination. We are telling you now, so you have time to talk to an attorney before you need to, rather than while you need to.

The specific things that went wrong anyway

Despite the preparation, two things happened that we had not anticipated.

The contractor submitted an invoice for work in progress after the termination conversation. The agreement was ambiguous on whether work initiated before the termination date was billable if it was not yet delivered. We paid a portion of it based on documented hours, not the full invoice, and documented why. That documentation mattered later when the contractor sent a follow-up email disputing the amount.

The second thing: we had not recovered access to a shared tool the contractor had been using on their own account with access to our data. We caught this in the day after the termination and revoked it, but we caught it because we were looking, not because we had a process. That is the version where it goes fine. We now have a checklist.

Before the next time

For an employee termination specifically, the things to have in place before you need them: documentation of performance issues that led to the decision, a clear record of any policies that were violated, confirmation of your state's final pay requirements, and a process for revoking access to systems and data immediately following the conversation.

The documentation is not about being adversarial. It is about being able to show, if asked, that the decision was made for a legitimate reason and was handled properly. The access revocation is not about distrust. It is about not having to make a judgment call about a former employee's system access at a stressful moment.

The conversation itself is not the part you should spend most of your preparation on. The preparation that matters is the part that happens before you sit down, and the process that runs in the hours after you stand back up.