Employee separations—whether voluntary or involuntary—present significant legal risk. Termination decisions are frequently challenged through discrimination claims, wrongful termination lawsuits, and unemployment disputes. Proper handling of separations protects organizations while treating departing employees fairly.
Understanding legal requirements helps HR professionals make defensible decisions and execute separations in ways that minimize exposure.
At-Will Employment and Its Limits
Most U.S. employment is at-will, meaning either party can end the relationship at any time for any lawful reason. However, at-will doesn't mean employers can terminate for any reason. Terminations based on protected characteristics, retaliation for protected activity, or violations of public policy remain unlawful.
Some employees aren't at-will: those with employment contracts specifying termination procedures, union members covered by collective bargaining agreements, and public employees with civil service protections. Know which employees have enhanced protections.
Even at-will employees may have implied contract claims if handbooks or manager statements created expectations of job security or required termination procedures.
Documenting Performance Issues
Documentation is essential defense against wrongful termination claims. When an employee claims discrimination, the employer must show a legitimate, non-discriminatory reason for termination—and that reason must be documented.
Document performance problems as they occur, not when you've decided to terminate. A thick file created immediately before termination looks like justification manufactured after the decision, not contemporaneous record of actual problems.
Be specific in documentation. "Poor attitude" isn't helpful; "On March 15, employee raised voice at customer and refused to apologize despite supervisor direction" is specific and defensible.
Avoiding Discrimination Claims
Before terminating, review whether the employee is in a protected class and whether similarly situated employees outside that class have been treated differently. If you're firing a 60-year-old for attendance while excusing similar absences by a 25-year-old, expect an age discrimination claim.
Timing matters. Terminating someone shortly after they complained about harassment, requested accommodation, or took FMLA leave invites retaliation claims. Even if legitimate reasons exist, proximity creates inference of retaliation.
Consider who's being selected for layoffs. If a reduction disproportionately affects a protected group, you need legitimate business justification for the pattern.
Final Pay Requirements
State laws govern when final pay must be provided. Some states require immediate payment upon termination; others allow until the next regular payday. California requires immediate payment to terminated employees—penalties for delay can exceed the wages owed.
Final pay typically must include all earned wages, accrued vacation (in states requiring payout), and any other compensation due. Deductions from final pay have strict limitations.
Commissions, bonuses, and incentive pay may be subject to specific rules or agreement terms about when they're "earned" and payable upon termination.
WARN Act Compliance
The Worker Adjustment and Retraining Notification (WARN) Act requires 60 days' notice before plant closings or mass layoffs affecting 100 or more employees. Many states have "mini-WARN" laws with lower thresholds and longer notice periods.
WARN violations result in back pay liability for the notice period not provided. Certain exceptions exist for unforeseen business circumstances, but they're narrowly interpreted.
Severance Agreements
Severance pay isn't legally required in most circumstances, but employers often provide it in exchange for release of claims. Severance agreements typically include confidentiality provisions, non-disparagement clauses, and waivers of discrimination and other claims.
For employees 40 and older, the Older Workers Benefit Protection Act (OWBPA) requires specific language, 21 days to consider the agreement, and 7 days to revoke. Non-compliant releases don't validly waive ADEA claims.
For group terminations of older workers, additional OWBPA requirements apply, including disclosure of eligibility factors and ages of those selected and not selected for termination.
Exit Interviews and Transitions
Exit interviews provide valuable information about why employees leave and potential problems in the organization. However, information disclosed in exit interviews can become evidence in later litigation.
Handle property return, access termination, and knowledge transfer professionally. Escorting terminated employees out like criminals creates hostility and damages morale among remaining employees. Treat departing employees with dignity whenever circumstances allow.
Respond promptly and accurately to unemployment claims. Contesting claims without valid basis can constitute retaliation and creates unnecessary conflict.
Getting Legal Help
High-risk terminations—employees in protected classes, recent complaints or protected activity, long tenure, or potential whistleblower situations—warrant legal review before action. Employment attorneys help evaluate risk, ensure documentation supports the decision, and structure separations to minimize exposure. The cost of pre-termination legal consultation is far less than defending wrongful termination litigation or paying settlements. When in doubt, get advice before acting.