The decision to terminate an employee isn’t something that most HR managers take lightly. An employee termination letter can make the process straightforward and informative for everyone involved. A letter gives the opportunity to explain legal and ethical reasons for ending your working relationship with an employee.
Here’s what HR managers should consider when drafting a termination letter and how Mosey can help you stay compliant with your state’s employee termination requirements.
What Is an Employee Termination Letter?
An employee termination letter is a formal communication from an employer to an employee detailing the end of their employment relationship.
It serves as official documentation of the termination and typically includes details such as the termination date, reasons for termination, and any next steps the employee needs to take (such as returning company property, continuation of benefits, and when to expect their final paycheck).
The letter should be written in a clear and concise manner, maintaining a professional tone. A termination letter isn’t a way to reprimand or scold an employee — it’s a very brief summary of objective facts that lead to a termination decision.
A termination letter is intended to be actionable. You should include your termination policy (and the next steps in your termination process) within the employee handbook and reiterate those steps towards the end of your termination letter.
Why Can Employers Terminate an Employee?
Employers have the legal right to terminate employees under certain conditions. Common reasons for termination include:
Poor Performance
Poor performance is when an employee consistently fails to meet job expectations despite adequate training, support, and interventions when necessary.
Misconduct
Serious violations of company policies or codes of conduct, such as theft, harassment, or committing crimes in the workplace.
Redundancy
When a position is no longer necessary due to organizational changes (like downsizing or right-sizing), technological advancements, or financial constraints.
Breach of Contract
Violations of employment agreements or contracts, such as non-performance of duties or confidentiality breaches. Employees who violate a non-disclosure or non-compete agreement can be terminated for doing so.
Employers need to document instances of poor performance or misconduct to support their decision to terminate an employee and to ensure compliance with legal requirements.
How Does the Law Affect an Employer’s Ability To Terminate an Employee?
Employment laws govern the process of employee termination to protect both employers and employees from unfair practices.
Key legal considerations include:
At-Will Employment
In every state except Montana, employment is at-will, which means employers can terminate employees for any reason that is not illegal. Under state and federal employment laws, it’s legal to fire an employee for any reason that wouldn’t be considered discriminatory or retaliatory.
Anti-Discrimination Laws
Employers cannot terminate employees based on protected characteristics such as race, gender, gender identity, sexual orientation, religion, national origin, disability, maternity status, or age.
Contractual Obligations
If an employment contract exists, termination must comply with the terms outlined in the contract. Most employment contracts hold both sides accountable if they fail to meet their contractual obligations.
If you end a contract early, you still need to hold up your end of the deal. This might mean giving a long notice period or paying out a severance package. If you don’t follow through, your terminated contract employee may be able to take you to court.
Notice Period Laws
Some jurisdictions require employers to provide advance notice of termination or payment in lieu of notice, depending on the length of employment and local labor laws. You may be expected to have an employee’s final paycheck ready at the moment they’re terminated. Double-check final paycheck laws to ensure compliance.
Remaining mindful of federal, state, and local employment laws can help you prevent a lawsuit or a hefty fine for the wrongful termination of an employee.
How to Stay Compliant with Termination Law
If an employee has a reason to suspect they were unlawfully terminated, they can file a formal complaint. If the complaint appears to have merit, your hiring and termination processes may be investigated. Making a few considerations regarding the optics of an employee’s termination can help to avoid legal trouble.
Intervene and Document Before You Terminate
Firing an employee without intervening first can be the right call if the employee commits a serious infraction, like theft or intentionally destroying company property. Minor policy violations or performance issues can be addressed before you decide to terminate an employee.
Schedule a meeting with the employee in question and discuss your concerns. Create a performance plan that requires regular check-ins. If the situation resolves itself in a timely and satisfactory manner, there may be no reason to terminate an employee.
If it doesn’t, your documents from meetings, check-ins, and performance reports can clearly show why the employee was terminated and that your reason for termination was legal.
Be Mindful of Your Timing
If an employee recently has become pregnant or disabled, or if you have a reason to believe that an employee will become pregnant or disabled in the near future, choosing to terminate them at an inopportune time may give the impression that your termination decision was discriminatory.
The optics of when you choose to let someone go may seem suspicious, even if you have a perfectly valid reason for deciding to fire them. Waiting for the right time to end your relationship with an employee can prevent speculation that your decision may have been unlawful or unethical.
When Should an Employer Send an Employee Termination Letter?
An employee termination letter should be delivered in person whenever possible or sent via certified mail with a return receipt to act as proof of delivery.
The letter should be issued immediately after the decision to terminate an employee has been made. If your state mandates that you meet other requirements when you decide to terminate an employee, ensure you’ve met all requirements before sending a termination letter to avoid compliance issues.
Timely communication helps maintain transparency and respect for the employee while minimizing disruption in the workplace. Your terminated employee will likely need to find a new job, and communicating quickly can help them move on.
Employee Termination Letter Example
Many HR departments use a template for termination letters. Templates make it easy to include all important information, simplifying the process of sending an effective termination letter.
[Date]
[Employee’s Name]
[Employee’s Address]
Dear [Employee’s Name],
I regret to inform you that your employment with [Company Name] will be terminated effective [Termination Date]. This decision has been made after careful consideration of [reasons for termination, such as poor performance or restructuring].
As per company policy, you are entitled to [details regarding final paycheck, benefits, returning company property, etc.]. Please arrange to return [list specific items] to [contact person] by [date]. You can refer to the termination policy listed within your employee handbook for more detailed information.
If you have any questions or require further information, please do not hesitate to contact [HR manager’s name] at [HR manager’s phone number/email].
We wish you the best in your future endeavors.
Sincerely,
[Your Name]
[Your Position]
[Company Name]
Employee Termination Letter FAQs
You may still have a few questions about writing an employee termination letter. Here are some things that HR managers often ponder when creating a termination letter template.
Q: Is it necessary to provide a reason for termination in the termination letter?
A: Explanations are reasons often aren’t required by law, but it may be wise to do so. Providing a brief explanation for an employee’s termination may protect you from misunderstandings that can cause an employee to file a wrongful termination claim.
Q: Do I need to have a termination meeting with an employee?
A: A termination meeting or an exit interview isn’t always necessary, but many HR teams find that a meeting provides the best space for communication.
A termination meeting should be conducted in a private setting and include a discussion of the reasons for termination, final paycheck details, benefits continuation or termination, and information on returning company property.
Q: How can my company minimize legal risks when terminating an employee?
A: Document performance or misconduct issues thoroughly, comply with company policies and employment contracts, and speak to your lawyer if you’re unsure about the legality of the termination.
Q: Can terminated employees claim unemployment benefits?
A: Eligibility for unemployment benefits varies by state and individual circumstances. Employees terminated for reasons other than misconduct may be eligible for benefits, i.e. employees who were laid off.
Staying Compliant With Mosey
Termination law compliance is more than just following federal guidelines — state and local laws will shape your termination policy. Mosey’s compliance automation platform can help you keep track of state and local employment laws that will impact the way you hire or terminate your employees.
We’ll help you monitor compliance throughout the process. Schedule a demo with Mosey to learn how we can simplify compliance.
