Overview: Employee terminations are restricted for certain reasons or without proper procedures. While Title VII of the federal Civil Rights Act prohibits termination which discriminates against protected classes of workers, state law can be more expansive in creating classes of workers who are eligible for such protections, shielding employees who are not covered by federal law. Similarly, some states have broader restrictions against retaliatory terminations for certain types of protected activities, like filing workers' compensation claims and for blowing the whistle on unlawful or wasteful practices in the workplace.
Federal and state law also requires employers to utilize notification procedures when they plan to lay off large numbers of employees or close an entire facility. The federal WARN Act sets the minimum standard for covered employers, but some states impose even stricter requirements on employers based on the number of employees they plan to discharge.
Employees leave a company for other reasons as well, through retirement and resignations, some of which can be viewed as forced resignations or constructive discharges. Exit interviews and managing the exit process should be handled consistently and in compliance with federal and state law.
Trends: Employers are increasingly gravitating toward severance packages for employees terminated involuntarily in exchange for waivers or releases of claims against the employer. With these systems in place, employers can preemptively eliminate post-termination threats by providing outgoing employees with something of value. Employers must be prudent, however, in ensuring that such termination agreements are enforceable by crafting agreements in easily digestible language, providing valuable consideration in exchange for waivers and fully documenting the exchange.
Author: Michael Jacobson, JD, Legal Editor
Updated to include a provision regarding disqualification from unemployment benefits for misconduct, effective August 24, 2018.
Updated to include forthcoming continuation coverage law applicable to small employers.
Updated to include forthcoming state WARN act.
Updated to include amendments clarifying employment relationships in franchise business models, effective July 1, 2018.
Updated to reflect an amendment regarding termination for gross misconduct, effective July 1, 2018.
Updated to include information on Digital Realty Trust, Inc. v. Somers, a Supreme Court case that addresses whistleblower protections.
Updated to reflect the reduced supplemental withholding rates under the tax reform law enacted on December 22, 2017, effective January 1, 2018.
Guidance for HR on understanding and complying with federal and state law regarding legal and fair employee terminations.