What Must Be Legally Included in Employee Termination Letters?

Most employees are considered at-will employees. You can dismiss them any time for any or no reason, provided the termination does not constitute discrimination, retaliation or a breach of contract. This means you won’t always need to provide employee termination letters. However, these notices can protect you against wrongful termination lawsuits and offer guidance for your former employees regarding their next steps.

Some states require termination reasons for former employees to qualify for unemployment benefits. You can indicate these reasons within the termination letter, also known as a separation notice. At the federal level, you must provide a notice if you lay off a certain number of employees. Learning the requirements and best practices can protect your company from legal repercussions.

Contact Us

In This Article

• Separation Notice Requirements
• What Should a Letter of Termination Include?
• Best Practices for Employee Termination Letters

Separation Notice Requirements

Some employment and collective bargaining agreements have termination clauses that require employee termination letters. Other agreements also require a cause for termination. Some states require specific notice deadlines, while others offer a form of their own. Specific legal requirements depend on your company size, the number of employees to terminate and your company location.

Federal Requirements

You’re not required to provide employee termination letters at the federal level for individual terminations or for terminating workers with cause. However, mass layoffs and plant closings can trigger the Worker Adjustment and Retraining Notification (WARN) Act. The act requires a termination notice at least 60 calendar days before the event. Temporary layoffs and plant closings are also covered. 

Employers who must comply include those who:

• Have at least 100 full-time workers and are laying off at least 50 people on one worksite.
• Are private and quasi-public organizations with at least 100 workers who work a combined 4,000 hours per week and are laying off at least 50 people on one worksite.
• Are closing a facility temporarily or permanently, which affects at least 50 employees.
• Are laying off at least 500 full-time workers at a single worksite within a 30-day period.
• Are laying off 50-499 full-time workers, which constitutes 33% of the total active workforce at a single site.
• Are temporarily laying off workers for less than six months, but decide to extend the layoff for over six months, and who also meet other criteria.
• Are reducing work hours for at least 50 workers by 50% or more per month in a six-month period.

State-Specific Requirements

All states except Montana presume employment is at-will. This means you technically don’t need a reason to dismiss employees and can do so at any time. Understandably, states don’t often require employee termination letters. However, these letters can help you comply with other state requirements regarding unemployment insurance.

States typically ask for termination reasons. Having these reasons laid out makes compliance easier. The termination letter may also include information on how to apply for unemployment benefits. Specific requirements and forms vary.

For instance, Alabama does not require termination letters. However, you must provide your former employee with the state’s unemployment compensation notice at the time of the separation. The state may also reach out to you if a former employee applies for unemployment benefits.

California provides a notice sample, stating the termination reason and effective date. You’re required to provide this notice immediately and keep a copy in your records. Meanwhile, Delaware also does not require termination letters. However, you must notify the Division of Unemployment Insurance of the termination reason within seven calendar days from the date the division sends you a notice. The division will reach out if your former employee files a claim for unemployment benefits.

Note that Montana does not consider workers who completed the probationary period to have at-will employment. You cannot dismiss employees without cause. If you don’t have a probationary period, the state considers a probationary period of 12 months. You can also extend your probationary period, but the total period must not exceed 18 months. 

What Should a Letter of Termination Include?

Employee termination letters typically include the necessary information that will help former employees understand the reasons for their termination. You may need to structure the letter based on the employee agreement provisions, if any. If you don’t have these provisions, and if the state does not specify the requirements, these termination details should suffice:

• Basic information: The letter should contain the employee’s full name and position, the employer and company’s name, the date the letter was written, and the effective termination date. States may require notice periods, so ensure that the termination date is accurate.
• Reason for termination: Be straightforward with the termination reason. People can appreciate direct and honest communication. You can also reference performance reviews, violated policies and previous warnings. You may outline the sequence of events for clarity. 
• Final compensation: Indicate final compensation details, such as the covered payments, payment date and method. Explain the cessation of benefits and what happens to certain benefits, such as health insurance and paid time off. The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires employers with at least 20 employees to offer continued health benefit coverage for a limited period after termination. “Use it or lose it” policies for benefits may also be illegal in some states.
• Return of company property: You may have provided company equipment, such as a laptop, keys or ID. Detail the instructions on how and when your former employee should return this equipment.
• Confidentiality agreements: Your contract may indicate confidentiality or noncompete agreements. You can remind former employees of these legal duties.
• Closing details: Indicate who your former employee can contact, usually someone from human resources. Terminated employees may have further questions regarding their benefits and final pay. You may also ask them to sign the termination letter as an acknowledgement. If a printed copy is not possible, you may deliver the letter through email.

Some states let employees inspect and receive a copy of their files to learn about their job performance. States may also allow employees to add their own files if they disagree with the information you have on your records. Keep this in mind when providing your termination reason. 

States may also have final payment deadlines, which you should consider in your compensation details. In California, you must pay all wages due immediately once you terminate your employee. Noncompliance can lead to penalties or legal claims. 

Best Practices for Employee Termination Letters

Keeping your employee termination letters professional, clear and accurate can protect you from legal issues. Consider these best practices:

• Keep the tone respectful and direct: Free the letter from emotional, apologetic and opinionated language. Keep it neutral, as the goal is to write clearly instead of providing comfort. Avoid mentions of legally protected characteristics, such as sex, gender, race and religion. Mentioning these characteristics can lead to discrimination lawsuits.
• Remain factual: You may discuss work performance, but ensure these evaluations are truthful. While clarity matters, consider indicating information only if it’s relevant and helpful to the former employee. 
• Consult with HR and legal professionals: Ask legal and HR professionals to review your letter for compliance. They can also inform you of potential lawsuit triggers.
• Review potential contractual violations: Watch out for union agreement violations or violations of implied contracts. For instance, does the employee have reasonable expectations for continued employment? Did you promise any promotion or continuously provide positive performance evaluations?
• Address severance package expectations: If the termination is due to layoffs, company restructuring or role eliminations, you may need to provide a severance package. A severance package is a set of compensation and benefits you provide to former employees for terminations due to no fault of their own. 

Provide Accurate Separation Forms Through Poster Compliance Center

Providing accurate termination letters requires due diligence. Even without high turnovers, preparing these notices can take up time and resources. To ensure your team focuses on growth-related and innovative tasks, consider leaving your separation forms to Poster Compliance Center. You can purchase state-specific letters that address the unique requirements. 

Since 1991, Poster Compliance Center has been helping small, medium-sized and large organizations remain compliant with federal, state and local labor law poster requirements. We understand that mandatory laws can get complex, and they can get in the way of you running your business. To reduce this friction, you can rely on our expert team for compliant forms and posters. Keep your offboarding process smooth and efficient by purchasing separation forms today.