The Ultimate Termination Process Checklist
Losing an employee, whether due to firing, layoffs, or quitting, is never an ideal situation. Things can get messy and complicated, and, during the tumult, important security measures can be forgotten. To avoid potentially dangerous situations, we’ve compiled the ultimate employee termination checklist.
- Before You Let Them Go
Before you fire an employee, there are a few do’s and don’ts to keep in mind.
- Don’t fire someone on the spot. This sets you up for lawsuits and other headaches.
- Do make sure you have a valid, nondiscriminatory business reason for taking action and that you have enough documentation to prove it. Keep track of the employee’s unsatisfactory behaviors during the normal course of business. Keep the documents on file. They should include any documentation of violations of rules or poor performance reviews.
- Do make sure you have clearly outlined your company’s conduct and performance expectations in the employee handbook, so everyone has fair warning about what is expected of them.
- Don’t discriminate. Rules should be enforced fairly and applied equally to all employees.
- Consider a Release
To negate the risk of being sued after letting someone go, consider negotiating a release agreement with him or her. Releases require the employee to give up his or her right to sue you and are most often used when the documentation needed to fire someone is lacking. They can also be used to offer early retirement or when you are seeking to end an employment contract early by buying someone out.
To be effective, the release must be:
- In writing
- Signed by the employee who is waiving the right to sue
- A knowing and voluntary waiver
- Supported by adequate consideration (you must give them something of value in return that they wouldn’t receive without signing)
The release should specifically refer to employment laws involved in the waiver of rights. The goal here is to be sure that the employee can't claim he or she didn't know what the document said.
- Look Up Severance Agreement Requirements
Severance pay is often granted to employees upon termination and is usually based on length of employment. There is no requirement in the Fair Labor Standards Act (FLSA) for severance pay; it is an agreement between an employer and an employee.
As there is no FLSA requirement to provide employees with severance, it’s important to know your company policy and have things in place before letting an employee go. Severance packages may include health insurance, continued payments for a designated period of time, and the services of an outplacement program.
Employees may have a right to a severance package for the following reasons:
- The terms of a written contract provide for severance pay
- Severance pay is included as an employee right in the employee handbook
- The company has a history of offering severance pay to other employees in the same position
- An oral promise to offer severance pay was made
- Health Coverage Extension
Terminated employees have the right to health insurance coverage after they’ve been let go, due to the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986.
The law gives workers who lose their health benefits the right to choose to continue group health benefits provided by the plan under certain circumstances, which include:
COBRA generally requires that group health plans sponsored by employers with 20 or more employees offer employees and their families the opportunity for a temporary extension of health coverage. It generally covers group health plans and applies to plans in the private sector and those sponsored by state and local governments.
- Voluntary or involuntary termination of employment for reasons other than gross misconduct
- Reduced hours of work
- The employee becomes entitled to Medicare
- Divorce or legal separation of covered employee
- Death of the covered employee
- Loss of status as a dependent child under plan rules
It is the responsibility of the former employee to pay the full cost of coverage.
Familiarize yourself on the COBRA notification requirements established by the U.S. Department of Labor to make sure you have all your bases covered.
- The Termination Letter
A termination letter should be clear and concise and include all relevant information about the arrangement. Keep in mind that it, like every other step of the termination process, should be in line with the employee’s contract and fulfill any obligations they may have under said agreement.
A termination letter should be written formally, should thank the employee for their service, and, if applicable, should mention any specific event or positive accomplishment about how the employee benefitted the company. The reasons for termination should be expressed very carefully and clearly; this letter will remain in the employee’s record.
The letter should contain:
- The name of the person being terminated, the name of the company, and the date when the termination becomes effective
- The reason for termination
- If the employee has been warned verbally or in writing before the decision to terminate him or her, this should be mentioned. This includes any performance reviews that alerted the employee of issues
- A list of items the employee is required to return
- Mention of any accrued vacation time that requires payment, or other pay needs, along with a date the payment will be made
- If health benefits have been provided, it should be mentioned how this will be handled (see #4)
Before writing the termination letter, be sure to gather the employee’s contract, any non-disclosure agreements they signed at the start of employment, an independent contractor agreement (if applicable), and the employee handbook.
Make sure all legal matters are covered by consulting with a lawyer.
Consider looking at a few termination letter samples to get an idea of how you want to write yours.
- Retrieve Company Property
- Cell phone
- Card key/other keys
- Company car
- Parking pass
- Credit cards
- Laptop/desktop computer
- Printer, copier, scanner, fax machine
- Marketing materials
- Company contact list (employees as well as clients)
- Employee handbook
- Identification badges
- Any other company equipment (camera, uniform, etc.)
This is important because by not collecting items like parking passes, credit cards, marketing materials, and contact information, the former employee will have inappropriate access to company information and property which he/she could abuse.
- Revoke Access Information
- Disable email account
- Remove employee’s name from:
- Email group lists
- Distribution lists
- Internal/office phone list
- Building directory
- Close computer access
- Disable access to company intranet
- Disable access to company social media accounts (Twitter, Facebook, Instagram, Tumblr, etc.)
- Change or transfer phone extension
- Change voicemail
- Deactivate long-distance access code
- Lock access to system and backup data prior to the notification meeting
- Remove access to external company databases and/or remote access software
- Review and change all passwords prior to or during the notification meeting
- Transfer/cancel employee’s email account
- Set automatic email notification to alert senders that employee is no longer employed
In today’s digital world, it’s easy to overlook some of the many accounts and sites that need to be addressed with this step. But it’s a very important step, as giving recently terminated employees access to, say, the company’s Twitter feed can be detrimental.
For example, in early 2014, HMV, a British entertainment retailer, laid off 190 employees. The company pulled a group of more than 60 into the HR office and gave them the bad news. One of the soon-to-be unemployed was an HMV community manager and still had access to the corporate Twitter account. She started live tweeting about the layoffs. In 20 minutes, she sent out numerous tweets to the company’s then-61,500 followers about the “mass execution,” as she called it.
This is not the message you want to send to the public, customers, employees, or competitors. Take the necessary steps to block this kind of access before beginning the termination process to avoid embarrassment and potential lawsuits.
- Determine Amount Owed to be Paid
Calculate what wages are owed; consult with a lawyer or your state’s department of labor, as laws vary by state
- Consider any past correspondence, verbal or written, as well as what is stated in the offer letter/employment agreement and the company handbook, regarding severance compensation
- Determine when wages must be paid following termination—again, laws vary by state (i.e. next scheduled payday vs. day of)
- Determine if deductions are necessary for unpaid loans, lost/stolen company property, etc., and whether those deductions are allowed by law
- Discontinue automatic payroll deposits
Not paying the accurate amount could end in a lawsuit. Also, keep in mind it is illegal to withhold an employee paycheck as collateral while waiting for company property to be returned, according to the Fair Labor Standard Act’s (FLSA). The FLSA notes that employers are not required by federal law to give former employees their final paycheck immediately. Some states, however, may require immediate payment.
- Vacation Consideration
- Calculate how much vacation the employee has earned and how much has been used
- Determine if your policy is to pay employees for accrued but unused vacation—consult the handbook as well as state law
Most states have laws entitling terminated employees to get paid for their unused accrued vacation time. Be sure to review your company’s policy as well as state law with regard to this matter.
Also, companies cannot deduct vacation pay without the employee's consent or withhold vacation pay as a disciplinary matter. Some states will prosecute employers for doing such; employees can sue in civil court even if their state lacks specific laws regarding final wages.
To protect your business, employees, and reputation, it’s important to take the time to put in place specific, all-encompassing termination requirements as part of your performance management plan. Following these steps will help ensure a smooth transition between employees and help you avoid unnecessary lawsuits.