Following an employee’s policy violations, misconduct or substandard performance, you may conclude it’s time to terminate the employment relationship. Several employers prefer or are required by state law to send a termination letter. How that letter is worded might save you a legal headache.
“When involuntarily separating an employee, a termination letter is often appropriate. Some states do not require such a letter, but more information, if properly crafted, often diffuses a former employee’s drive toward litigation or suggestion of wrongful termination,” said Merrick Dresnin, an HR consultant with MD-HR Consulting Services in Washington, D.C.
Eighteen states require employers to provide a written termination letter or specific forms at the end of a worker’s employment, according to Experian Employer Services, a Costa Mesa, Calif.-based HR consulting firm.
Employees who have a contract or a collective bargaining agreement typically also need written communication of their employment termination (refer to the agreement).
“I recommend employers use termination letters in instances where the employment at issue is governed by an employment agreement that has termination procedures,” said Sara Jodka, an attorney with Dickinson Wright in Columbus, Ohio. “In those cases, a formal, written notice of termination may be required. If the employment agreement requires a cause for the termination to be identified, I recommend structuring the language of the termination notice along the specific cause provisions in the employment agreement itself or referring to the specific section of the employment agreement.”
Employers should take time to draft the letters carefully and get legal guidance where applicable.
What to Include
Termination letters should be professional, clear, precise and accurate.
The letter should include “the reason for the separation, request for any company items/equipment to be returned, reference to COBRA rights, indication to arrange any further visits to the business through human resources. Different states have different content requirements,” Dresnin said. In some cases, the letter might need to name the company policy the worker violated or the dates of any verbal or written warnings given.
In addition, the letter should include “the last date of employment, date of the last paycheck, the vacation/PTO [paid time off] payout, if applicable, the last date of the different benefits, how to access pay stubs and the process for accessing the 401(k),” said Kimberly Prescott, president of Prescott HR in Columbia, Md. The letter also could contain a reminder about any confidentiality agreements or non-compete agreements the employee has previously signed. Try to confirm their personal e-mail address and home address.
The termination letter can be delivered as a printed copy or by e-mail if in person is not an option. “Any separation needs to be treated with the utmost formality, and a printed page, to me, reflects the fact that the company takes this decision very seriously,” Dresnin said.
What to Exclude
Employers don’t want a termination letter to provide fuel for a future lawsuit alleging discrimination or retaliation. Companies should avoid including harsh language, jokes, emotional statements or too much detail in the termination letter. The tone should be respectful and direct.
“Stick to the facts,” Dresnin said. “A termination letter should provide a straightforward reason for separation, required information helpful to the former employee, a signature of the HR professional and little more. This letter should not have any emotions, opinions or apologies.”
However, Prescott disagreed on one point: “I strongly advise against putting a termination reason or any details leading to the termination. If the information is needed for an unemployment claim, the state will request that information directly.”
A case in Illinois illustrates a time when providing details backfired on the employer. Two employees sued a medical practice for unpaid overtime wages and retaliation. Their termination letters cited unprofessional behavior, rudeness and complaints from patients. The employees filed a motion to compel the medical practice to reveal the patients’ names and contact information. As a health care provider, the employer argued that patients’ privacy rights outweighed the employees’ interest in including that information in the legal proceedings. In 2014, the U.S. District Court for the Northern District of Illinois granted the employees’ request to discover the patients’ names and contact information.
Most workers are considered at-will employees, meaning their employer can legally dismiss them at any time for any reason or no reason at all, as long as it doesn’t constitute discrimination or retaliation. Employment is presumed to be at will in all states except Montana. Montana is considered at will employment only during the 6 month probationary period.
To avoid discrimination lawsuits, the termination letter shouldn’t make reference to legally protected characteristics like sex, gender, race, color, religion, national origin, disability, pregnancy and age. Nor should termination reference anything ADA (Americans with Disabilities Act) or other HIPAA protected situations.
As an example of how wrong and employer can get it: In 2020, the U.S. Equal Employment Opportunity Commission (EEOC) sued a car dealership in California because it fired a title clerk who was undergoing testing for cancer. The clerk had informed her supervisor about her hospitalization, cancer screening and plan to return to work within a few days. Soon after sharing that information, she received a termination letter that stated her termination was not performance related and advised her to “focus on her health.” The EEOC argued the letter was proof that the business discriminated against her because of a disability protected under the Americans with Disabilities Act. The case was settled on Jan. 19, 2022.