What Is Termination of Employment? FAQs

Kaitlin Edwards | Jan 25, 2024

What Is Termination of Employment? FAQs

One of the most important parts of operating a business is familiarizing yourself with the proper hiring procedure. It can be equally as important to understand how to properly utilize termination of employment if, for whatever reason, you wish to discontinue your working relationship with that employee. Employees also need to understand how termination of employment works in order to ensure that their workplace rights aren’t being violated.

What Is Termination of Employment?

Termination is also referred to as being fired, laid off, or let go. It’s the point at which an employer-employee relationship ceases to be. There are several different circumstances under which termination may occur, and each of them has different implications. Most types of termination consider one party to be at fault, and the at-fault party can potentially face consequences if their actions cause harm.

How Are Voluntary and Involuntary Termination Different?

Voluntary termination is the formal term for leaving a job. If you quit your job or accept a new job offer, you’re voluntarily terminating your employment. Unless there is an employment contract that specifies the duration of your employment or your new position violates a non-compete agreement, voluntary termination is perfectly acceptable.

Involuntary termination occurs when an employee is fired or subject to a layoff. Involuntary termination sometimes implies some sort of wrongdoing, either on the part of the employer or the employee, unless the termination was part of a justifiable at-will employment decision.

What Are the Different Types of Termination?

There are several different types of termination, each with their own implications. Some terminations are a standard part of doing business, even if they may have unfortunate consequences. Other types of termination, such as wrongful termination, can create legal consequences for employers in the event that an affected employee decides to take their case to court.

Restructuring Layoffs

When a company undergoes downsizing (or “right-sizing”), the overall number of available positions often decreases. Roles are eliminated or combined with other roles. Some departments may be merged or eliminated altogether. Offices or physical store locations may be closed. The need for staff is reduced, and some of them are let go.

Restructuring layoffs occur when someone loses their job as a direct result of this process. It doesn’t mean that the employee committed any wrongdoing or deserved to be fired. Employers sometimes offer severance pay and often write letters of recommendation for satisfactory employees who were unable to obtain a new role within the company during the restructuring process.

Performance Terminations

A performance termination occurs when an employee fails to meet company standards, breaks the law, or fails to meet a company’s standards. For example, poor performance may come in the form of consistently showing up late to work or routinely making crucial errors. Violating company policies, habitual insubordination, or theft of company property would be examples of an employee’s actions directly leading to their justifiable termination.

Wrongful Termination

Wrongful termination occurs when an employer is found to have fired an employee for a reason that is against the law. Federal laws prevent employees from being terminated based on their status as a protected class, like their race or gender. There are also protections in place to prevent retaliatory firing for an employee refusing to participate in illegal activity or for reporting their employer’s engagement in illegal activity.

Wrongful termination can also be the result of technicalities. If your employer fires an employee without abiding by their own written termination policies agreed to at the time of hiring, the determination may be deemed wrongful.

“There is a potential for a lawsuit against an employer if the evidence supports that an employee was wrongfully terminated. These types of lawsuits are often expensive and not in the best interest of the company,” highlights Taylor Fike, Partner at Fike Advisors and Expert Contributor for Mosey.

At-Will Termination

Almost all states are at-will termination states, with 49 states (all except for Montana) giving employers the right to fire their employees at any time for any legal reason. At-will termination doesn’t have to have a clear cause or reason as long as discrimination or harassment doesn’t play a role in an employer’s decision to fire an employee.

There are no legal aspects of termination of employment as long as an employee isn’t fired for an illegal reason. Illegal reasons for firing an employee include:

  • If an employee’s status as a class protected against discrimination (race, sex, disability, etc) directly resulted in their termination, it would be a violation of Equal Employment Opportunity
  • Refusing to work unpaid overtime or work for free from home
  • Reasonably refusing to do something dangerous (i.e., repairing electrical work if they have no such expertise)
  • Being sexually harassed, reporting sexual harassment, or refusing unwanted advances
  • Refusing to lie to authorities or the court on behalf of an employer
  • Reporting a safety hazard or dangerous condition in the workplace
  • Whistleblowing activity
  • Seeking to make a workers’ compensation claim or another similar claim, they may be entitled to

If employers are found to have terminated an employee based on an illegal rationale, the terminated employee has the right to pursue legal action. If the employee and their legal counsel are able to successfully prove wrongful termination in court, the employee may be awarded damages.

What Should You Know About Unemployment Benefits?

Employees who haven’t been wrongfully terminated and employees who have been laid off by their employer have the legal right to seek unemployment benefits, sometimes called reemployment assistance benefits.

Benefits may also be awarded to employees who have experienced voluntary termination (quitting their jobs) if they have a good cause for doing so. Employees are required to document evidence of attempts to rectify the situation with their employer before leaving their jobs.

Employees who quit for the following reasons may be able to obtain unemployment benefits under the law:

  • They weren’t able to obtain maternity leave
  • Hostile working conditions (i.e. an employer attempting to motivate an employee to quit)
  • Temporary health problem or illness (and not being granted necessary sick leave)
  • Left unemployed after an offer for a new job fell through
  • Workplace harassment

Benefits are intended to be used short-term and will be granted to terminated job seekers who are able to prove they are making a consistent and meaningful effort to find work. Benefits cease when they secure new employment.

Employers are required by law to pay a portion of each eligible former employee’s unemployment benefits until they are no longer eligible to receive benefits. Employers may also be required to contribute to COBRA health care coverage for certain employees who would lose their health insurance as part of the termination process.

What Should Employees Know About Their Rights After Termination?

If you are an employee who has recently been wrongfully terminated, you are well within your rights to pursue legal action against your employer. Evidence is the most important aspect of a successful wrongful termination case.

Your legal counsel will be able to advise you of the type of evidence necessary to reach a conclusion in court. You may be required to provide things like emails and text messages exchanged between yourself and your superiors that demonstrate evidence of wrongful termination.

You may be eligible to receive unemployment benefits in many situations. Most people who are terminated in at-will employment states can receive assistance. Your employer cannot attempt to push you to quit (like by making the work environment hostile or significantly reducing your work hours) in order to avoid responsibility for their percentage of your unemployment benefits.

Unfortunately, employees who are fired without cause and are unimpacted by wrongful termination protections don’t have any sense of recourse. Your employer is allowed to fire you simply because they don’t feel as though you’re a good fit for the position or because they’ve found another candidate they like better. Asking your employer for a binding employment contract that specifies a minimum duration at the time of hiring can help to avoid unexpected termination.

Stay Compliant With Mosey

Employee termination can be a tricky issue. It’s a wise idea for employers to be forthcoming about their employment policies and create an employee handbook that clearly outlines expectations, employee rights, and rules. Written policies help to protect both sides of an employment relationship by reducing the possibility of unwanted surprises for either side.

Most importantly, businesses have a responsibility to maintain compliance with employment laws. It can be a lot to navigate, especially for small businesses that don’t have a formal human resources department. Mosey’s compliance automations can make it easier for businesses to assure compliance with state, federal, and local employment laws. Schedule a demo with Mosey to learn how we may be able to help you keep your business running smoothly.

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