Whether it’s because of poor performance, misconduct or downsizing, there may come a time when you have to fire an employee. However, terminating an employee is a sticky situation that can have serious legal consequences if you don’t navigate it properly. To maintain legal compliance, learn how to properly communicate an employee termination and what to include in a formal termination-of-employment letter.
When you fire or lay off an employee, you should provide them with an official termination letter. A termination-of-employment letter, also known as a notice of termination or a pink slip, is a formal document that informs the employee about the end of their employment. It includes details regarding the reason for their termination, how to collect their final compensation and any next steps they must take (e.g., return property, sign up for COBRA health insurance).
>> Learn More: 6 Signs It’s Time to Terminate an Employee
In most instances, the federal government does not require companies to provide termination letters, though there are some exceptions (e.g., labor unions, certain businesses governed by the WARN Act). Some state laws and business policies outlined in your employee handbook may also require you to provide a termination letter.
“If the employee has a special arrangement with the employer, whereby the employee can only be terminated for cause – which is sometimes the case with executives – the reasons for terminating the employee should be expressly set out in a letter or other written documentation to the employee,” Dani Fontanesi, founder and managing partner of Fontanesi Law, told us.
Regardless of legal obligation, providing a termination letter is best practice for any business. It is also a good idea to maintain internal documentation for future reference. Document the termination in writing and keep it in the employee’s personnel file.
“Documenting the termination, including the reasons for termination, helps protect the employer in the event that the employee files a complaint with a government agency, like the Employment Development Department in California or the U.S. Department of Labor, or files a lawsuit,” Fontanesi said.
Even though you can’t prevent an employee from filing a complaint or a wrongful termination lawsuit, maintaining proper documentation can help protect your business and limit your exposure if you end up having to defend your decision to let the employee go.
Fontanesi, along with Shannon Almes, a partner at Feldman & Feldman, created the following employee termination letter templates for your reference. Keep in mind that you will need to customize each template to suit your specific employee termination.
To: [Employee Name]
RE: Termination of Employment
Dear [Employee Name],
As discussed in our meeting today, due to [insert reasons for termination, if appropriate; otherwise, omit], I regret to inform you that your employment will be terminated effective [date].
Your final paycheck, in the amount of [$XX], will be paid to you by [date], which will include all accrued but unused vacation and paid time off (if applicable) [amend based on state laws and company policies]. You will also be receiving a COBRA election notice with your separation paperwork.
Please ensure you return all company property to [employer contact], including [identification cards or badges, access codes or devices, keys, laptops, mobile phones, credit cards, electronically stored documents or files, and physical files] and any other company property and information in your possession.
[If the employee has any continuing obligations following termination, like a noncompete agreement or confidentiality obligations, insert language referencing those obligations, and remind the employee that he or she must comply with those obligations following his or her termination.]
Please keep us updated on any changes to your address or phone number. If you have any questions, please feel free to contact me [or insert alternate contact] at [the contact information below]. We wish you the best in your future endeavors.
[Acknowledgment page follows]
[You can also include the following optional acknowledgment.]
Please acknowledge your receipt of this letter below.
[Name of employee]
Dear [Employee Name],
This letter is to inform you that your employment with [Company] is terminated as of today, [date].
You were informed on [date] of [the company’s] investigation of allegations that you were [reason for termination]. After investigation, it has been determined that your behavior violated [Section XX] of the employee handbook, a copy of which you signed on [date]. You were provided with written warnings on [date] that such behavior was inappropriate and attended additional training on [date].
Please return your [company-issued laptop, building access card and office keys] to [employer contact] by [date and time].
Your final paycheck will include salary through [date] and compensation for all unused personal time and will be paid to you on [date], your regular payday. You will receive information by mail regarding your benefits.
Please keep in mind that you signed a nondisclosure and confidentiality agreement on [date].
If you have any questions, please contact [employer contact].
You can access various termination-letter templates online for free, but keep in mind that you will likely need to customize them to fit your specific situation. Here are some additional options to get you started:
You are always best served by having an attorney review your employee termination letter before you deliver it to the employee.
Effective communication can play a key role in maintaining legal compliance during an employee termination. Here are some ways you can effectively communicate an employee termination.
The best way to communicate an employee termination is both orally and in writing. This allows you to definitively explain the situation and document the occurrence. A termination of employment letter is one of the best ways to communicate the event in writing.
The best way to speak to an employee about their termination is in a private setting, away from other employees. In addition to the employee, have at least two other people in the room during the termination, such as an HR representative and the employee’s manager.
“From a legal perspective, having more than one person in the room when the decision is communicated to the employee provides the employer with a witness to the discussion, which can help mitigate a ‘he said, she said,’ scenario if the employee later claims that he or she was terminated unlawfully,” Fontanesi said.
When terminating the employee, use clear, definitive wording. Do not use emotional language, as that can potentially escalate the situation. Do not use ambiguous language that would lead the employee to believe they are being furloughed or laid off with the potential for rehire (unless, of course, that is the case).
Articulate the reason for termination as concisely as possible, and avoid unnecessary language that prolongs the conversation. The decision for termination is not a debate.
Employers should be sure to provide all required state and federal legal notices during the termination. For instance, Fontanesi previously said that California employers must provide the terminated employee with a copy of the “For Your Benefit: California’s Programs for the Unemployed” pamphlet, and employers with 20 or more employees must complete and provide the employee with the appropriate COBRA forms.
In addition to telling the employee what is legally necessary, it can also be beneficial to communicate other essential details on things like final compensation, unemployment benefits, returning company property, project transitions and severance pay.
“Depending on the situation, an employer may want to consider offering a severance payment in exchange for the employee releasing any claims against the employer and covenanting not to sue,” Fontanesi said. “This is typically documented in a severance and release agreement.”
You can also offer support and resources to the departing employee, especially if the termination is due to reasons beyond their control (e.g., downsizing). Providing resources such as outplacement services, career counseling or assistance with job searches can reflect your company’s commitment to the well-being of your employees.
The specifics of your employee termination letter will vary depending on your circumstances. However, there are a few basics that every termination letter should convey, including:
Almes said it is important to be straightforward and concise when providing an explanation in the termination letter.
“Include only the reasons that led to the termination decision, presented in a factual manner, rather than attempt to create a laundry list of all the transgressions of the employee during their employment,” Almes said. “It is important to consult legal advice when preparing to terminate an employee, but especially when there are other factors, such as age, religion, race, gender or leave requests that could lead to the inference of other motives for the termination.”
According to career advice website Indeed, employers should create a letter addressed to the organization to notify staff of an employee leaving the organization. The letter should be professional and state the date that the employee is leaving and any next steps in the process. Since the employee was terminated, in most cases, you shouldn’t provide details on the reasons behind the firing. The most important part of the notification letter is to state a transition plan. Giving the details about the termination will only result in office gossip.
Send the letter by email. If the terminated employee is an integral part of the organization, give notice to the other employees within a couple of hours. If not, the notification can wait until the next business day.
If employees ask the reason for the termination, you can state that it goes against company policy to provide personal details.
There are likely hundreds of reasons to terminate an employee. However, according to The Hartford, termination causes can usually fall into one of six categories:
Any of the preceding reasons have an impact on the integrity of your business. The first three reasons can hurt profits and reduce efficiency. The latter three reasons could pose a risk to the health and safety of your employees. No matter what your reason for termination, always first confirm that the firing isn’t a violation of workplace protection laws from the Equal Employment Opportunity Commission.
Because most of the United States has at-will employment, there is no federal law that imposes a minimum notice period for termination of employment. This means that either party (the employer or employee) can terminate the employment relationship without notice.
There are a few exceptions, such as certain state and local laws that restrict at-will employment and have their own termination guidelines.
Other exceptions include employment contracts, collective bargaining agreements and mass workforce reductions. For example, under the WARN Act, employers are required to give employees 60 days’ notice in advance of covered mass layoffs or plant closings.
Source interviews were conducted for a previous version of this article.