Employee separations are a common aspect of doing business. When facing an employee separation, employers may find themselves asking, in the words of Boyz II Men, “How do I say goodbye to what we had?” Whether the separation is a voluntary resignation or an involuntary termination, employee separations create logistical considerations and legal obligations for the employer under local, state, and, sometimes, federal law.
Being prepared for an employee separation can ensure compliance with applicable laws and make the process a little easier. Below is a list of considerations that employers should keep in mind when offboarding an employee.
Voluntary Resignation, Termination for Cause, or Termination without Cause?
One important question to ask when beginning the separation process is, “Is this a voluntary resignation, termination for cause, or termination without cause?” The answer to this question can trigger different obligations under an employer’s policies and applicable law. Knowing your state’s requirements at or before the time of separation is crucial to ensuring compliance with applicable law.
Existing Agreements and Policies
Similarly, at the beginning of the separation process, the employer should confirm whether it has any agreements in place with the employee, such as a restrictive covenants agreement or other employment agreement. Some employment agreements contain provisions concerning the ability to terminate the employment relationship—in the event the employee is not an at-will employee—or about the employee’s entitlement to certain compensation at separation of employment. Such agreements may also impose post-employment obligations on the employee, such as non-solicitation or confidentiality obligations, about which the employer will want to remind the employee.
Likewise, if the employer has any policies applicable to employee separations, the employer should be sure to comply with its own policies (as long as those policies comply with applicable law).
Timing of the Final Paycheck
Many states have laws that dictate the timing of when an employee must receive his or her final paycheck, and these laws can vary widely from state to state.
For example, South Carolina law states that an employer “shall pay all wages due to the employee within forty-eight hours of the time of separation or the next regular payday which may not exceed thirty days.” S.C. Code Ann. § 41-10-50. Conversely, in California, an employee must be paid his or her final paycheck immediately upon termination or resignation, if proper notice is given. If the employee resigns without providing notice, the final paycheck must be paid within 72 hours of the employee’s last day of work. Cal. Labor Code § 201.
Content of the Final Paycheck
Employers commonly have questions about whether an employee’s unused but accrued PTO, vacation time, or sick leave is paid out to the employee at separation. Many states, such as South Carolina, North Carolina, Arkansas, and Delaware, among others, have laws stating that the employer’s policy or contract with the employee governs whether earned, unused PTO, vacation time, or sick leave are considered wages that are paid at separation. Other states, such as California and Colorado, require an employee to receive payment for earned, unused vacation time at separation of employment.
Access to Internal Systems
Employers should be sure to have a clear plan in place to terminate a separated employee’s access to the employer’s internal systems as soon as the separation goes into effect, including email accounts, company intranet sites, subscription services, file share sites, and any other systems or databases to which the employee had access.
Such a plan often requires clear communication between human resources employees and the employer’s IT department. The prompt termination of an employee’s access to the employer’s internal systems ensures the security of the employer’s confidential information, which can include things like patient information, customer information, and proprietary trade secret information.
Return of Equipment
It is also important for an employer to determine whether a separating employee needs to return any equipment such as laptops, cell phones, keys, and access cards. Employers should clearly communicate to the separating employee when and where such equipment should be returned. If the employee was a keyholder, the employer may consider changing the locks to which the employee had a key. If the employee had an individualized alarm code for a particular location, the employer may consider disabling that alarm code.
Severance Considerations
In certain circumstances, such as involuntary termination, employers may consider offering the employee a severance package in exchange for a release of claims. The employer should consider whether the employee is entitled to receive severance under the terms of an existing agreement with the employee or an applicable policy. If the employee is offered severance, the employer should be aware of any applicable requirements under laws like the Older Workers Benefit Protection Act of 1990.
Notice Forms and Unemployment Eligibility
Some states require particular notice forms to be provided to an employee at separation, including notices related to the employee’s eligibility to receive unemployment benefits. For example, the Georgia Department of Labor requires employers to provide a form Separation Notice to each worker leaving employment, regardless of the reason for the separation. Employers should be aware of any similar requirements in states where their employees are located.
Termination of Employer-Provided Benefits
If the separating employee is enrolled in any benefit plans provided by the employer, such as health insurance, retirement plans, or life insurance, be sure to notify the administrator of the plan about the employee’s separation. The employee will likely be entitled to certain notices regarding these benefits, such as a notice from the health plan administrator about coverage continuation rights under laws like the Consolidated Omnibus Budget Reconciliation Act (COBRA).
Who Else is Being Terminated?
If multiple employees are being terminated at the same time, such as during a reduction in force, the employer should determine in advance whether any obligations are triggered under the Older Workers Benefit Protection Act of 1990, the Worker Adjustment and Retraining Notification (WARN) Act, or a state law version of the WARN Act, all of which could affect the timing and structure of the terminations.
Conclusion
This guide is a general list of topics an employer should consider in connection with an employee’s separation and is not meant to be exhaustive. When in doubt, employers should consult outside counsel with questions concerning employee separations and compliance with applicable laws.
