End an employee's tenure at your business: Termination Letter

A Termination Letter can be interpreted as a legal document by a court of law should your company be sued over the termination. For this reason, it should not conflict with any Employment Contract or other contracts you signed with the employee. The contents should be limited to the contractual responsibilities of the terminated employee, the reason for the termination, and instructions for receiving termination benefits. 

Each state has separate termination requirements, and it is your responsibility to ensure the Termination Letter complies with your state's laws. Be sure to consult an attorney if you have any questions or concerns about terminating an employee or making a Termination Letter that complies with federal, state, and local laws.

Appeals Process

If your company has a process to appeal terminations, you may include those details in the Termination Letter. Include the process for appeal and a person the terminated employee may contact for further information.

If your company does not have a process for appeal, it is not necessary to include this information.

California Unemployment Benefits

In California, an employer must provide the California Employment Development Department (EDD) Pamphlet DE 2320 regarding unemployment benefits upon termination.

Reasons for Termination

The listed reason(s) for termination can be challenged in a court of law should the employee choose to do so. If you have proof of poor performance, you should keep the proof in your employee records. Any complaints about tardiness or absence should be well documented if they are listed in the Termination Letter.

If you choose "Other" and enter your own reason, you may want to only list specific reasons if you have proof or other supporting documentation to back up those reasons. Try not to include emotion in listing your reason for termination. Ask an Attorney to review your reasons if you are not sure they can be legally supported.

Separation Benefits

Some states require separation compensation even for poor performance or breach of contract. You may want to review your state's requirements when writing a Termination Letter so you’ll know whether or not you should include separation benefits. Consult an attorney if you have any questions about your state’s requirements or concerns about meeting the separation compensation laws in your state. 

It is important to disclose the effect of termination on long-term benefits like health insurance and retirement plans. It is best to include someone to contact if the terminated employee has questions regarding benefits.

Signing and Delivering

Once you’ve completed your Termination Letter, review the final version to make sure it reflects and follows your company's policies exactly. Should the employee sue for wrongful termination (a lawsuit where the employee claims their termination was not lawful), the Termination Letter may be used as evidence against you.

It is best to deliver the Termination Letter in person or by certified mail restricted delivery. This way, the employee cannot argue that they did not receive a Termination Letter. You may want to document your delivery of the letter and any final payments to the employee, especially if you are unable to deliver them in person.

Letting go of an employee can be a positive change or, especially in the case of a forced layoff, it can be very difficult. But being a professional means putting the notice of employment termination in writing. Let the employee know why the decision is being made and what both of your responsibilities are.

Here's what you may want to include in your Termination Letter:

Basic information: Note who is being terminated, the name of the company, and the name of the person who is handling the cessation of work. You'll also want to include the date, both of the letter of separation and the date the termination becomes effective, if those dates are different.

Reason for employee termination: As noted above, sometimes a termination is out of your control. You may be an HR manager who has been forced to lay off an otherwise productive employee because the business is going through a rough patch. On the other hand, you might be firing an employee for verbal abuse, excessive tardiness, or poor performance. With a Termination Letter, your employee will get a better understanding of why they're being let go.

Lead up: If you are terminating an employee for reasons under their control, make sure to note whether they were warned, how many times, and whether those warnings were verbal, written, or both.

Company property: Whether it's a laptop you provided, a company car, or just a key card, chances are your employee has something that belongs to the company. Of course, in some cases of employee termination, certain property is given as a perk of employment. Make sure you note if you'll be asking for property back.

Vacation time and final paycheck: If your employee has accrued vacation time, chances are you're required to pay them for what they've accrued. But laws vary and, if you're dealing with a contractor or part-time employee, you may not have to pay out for vacation or sick leave.

What you will have to do to pay your employee what they're owed: Include what date they'll be paid through and how they'll receive their last paycheck: in person, by mail, or direct deposit. It's often smart to pay your employee then so that when the Termination Letter is signed, employment is officially over.

Health insurance, 401K, and other benefits: If you've provided benefits like health insurance or retirement savings, you may want to make sure your employee knows how this will be handled, and that it is outlined in the Termination Letter. Provide them with information about continuing their health insurance and when it runs out. Let them know where their savings are. Your work relationship may be over, but your employee still has a future. Giving them this information up front will make their transition much easier.