termination of employment in The United States: laws & severance policies

Legal Grounds for Termination of Employment in the United States

When it comes to terminating employment in the United States, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

In the United States, the employment relationship is predominantly governed by the "at-will" employment doctrine. This means that, in most states, either the employer or the employee can terminate the employment relationship at any time, for any reason, or for no reason at all, provided the reason is not illegal.

Valid reasons for termination include:

   
• Poor Performance: Consistently failing to meet job expectations or performance standards.
   
• Misconduct: Violation of company policies, such as theft, harassment, or insubordination.
   
• Redundancy: Elimination of a position due to organizational restructuring or economic downturns.
   
• Attendance Issues: Chronic absenteeism or tardiness without valid reasons.
   
• Insubordination: Refusal to follow lawful and reasonable instructions from supervisors.

Employment Laws and Severance Policies in the United States

Notice Period in the United States

Under the at-will employment doctrine, employers are generally not required to provide advance notice of termination. Nevertheless, it is customary that they provide a two-week notice before termination.

However, the Worker Adjustment and Retraining Notification (WARN) Act mandates that employers with 100 or more employees provide a 60-day notice in cases of mass layoffs or plant closures affecting a significant number of employees.

Exceptions to notice requirements may include terminations due to gross misconduct, where immediate dismissal is justified.

Severance Pay in the United States

There is no federal law mandating severance pay for terminated employees. Severance agreements are typically outlined in employment contracts or company policies. Employers may offer severance packages based on factors such as length of service, position held, and company discretion. In cases of mass layoffs, some states have specific laws that may require severance pay or additional notice.

Probation Period in the United States

The U.S. lacks a mandated minimum probation period, but employers can set a period between 60 to 90 days.

Formal probation periods are uncommon due to at-will employment, allowing employers to terminate without cause, notice, or severance at any time.

Process for Ending Employment in the United States

   
• Review of Employment Agreement: Ensure compliance with any contractual obligations.
   
• Documentation: Maintain records of performance issues or policy violations.
   
• Notice of Termination: Provide written notice outlining the reason for termination.
   
• Final Pay: Settle all outstanding wages, including accrued vacation or benefits.
   
• Exit Interview: Conduct an interview to address any concerns and retrieve company property.

Employee Rights During Termination in the United States

Unfair Dismissal Protections

While at-will employment allows termination without cause, federal and state laws protect employees from dismissals based on discriminatory reasons, such as race, gender, age, religion, disability, or retaliation for whistleblowing. Terminations violating these protections are considered wrongful and can lead to legal consequences for employers.

Grievance Procedures

Grievance procedures provide a structured process for employees to raise concerns about workplace issues, including disputes over termination. These procedures are essential for resolving conflicts internally and may be outlined in company policies or collective bargaining agreements.

Final Pay and Benefits

Employers are obligated to provide terminated employees with their final paycheck, including any unpaid wages, bonuses, and accrued but unused vacation time. The timeline for delivering final pay varies by state law; some require immediate payment upon termination, while others allow a specific period after the termination date.

Termination expenses may encompass compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), which is a federal law enabling employees to maintain health insurance coverage during unemployment.

What Termination Documentation Is Required by Law?

Upon termination, employers are generally required to provide:

   
• Termination Letter: A written notice specifying the termination date and reason.
   
• Final Pay Statement: An itemized statement of the final wages and any deductions.
   
• Benefits Information: Details on the status of health insurance, retirement plans, and information on continuing coverage options under COBRA.

Specific requirements and timelines for providing these documents can vary by state law and company policy.

How to Stay Compliant as An Employer in the United States

Expanding your workforce across international borders is an exciting step, but it can be a logistical nightmare to hire and pay employees in different countries. And if you need to terminate employment, it’s critical to adhere to local compliance laws. That’s the advantage of using a trusted Employer of Record like Playroll. They can:‍

• ‍Handle international compliance: Different countries each have their own federal and local laws governing employee rights. An EOR helps ensure that you are compliant with the unique set of laws for any country in which your company operates. 
• ‍Run payroll for your global team: An EOR will act as your payroll provider, paying your employees on your behalf in the local currency. The company will also have in-depth knowledge of local tax codes, regulatory practices, and everything else that goes into managing global payroll.
• ‍Scale your team anywhere: Legally hire and swiftly onboard new hires in 180+ regions without the need for entity set-up by leveraging Playroll's infrastructure, so you can freely explore new markets and focus on growth.