Q: What Are the Laws on Firing an Employee?

You’re considering firing an employee? Well that’s no fun, and probably a little scary, too. To stay compliant, the next step is to know your requirements on firing employees so you can breath easy and avoid a lawsuit down the road.

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These are the five main laws and requirements you need to double (and triple!) check before firing an employee:

  1. Wrongful termination: Make sure you’re not firing someone for an illegal reason.
  2. At-will employment: Check if your state has any exceptions to at-will employment laws.
  3. Last paycheck: Make sure you give their last paycheck when and how your state mandates.
  4. COBRA Insurance: Provide your employee with COBRA insurance information.
  5. Unemployment Insurance: Offer unemployment insurance to employees who qualify.

Still confused? Below is an overview of each specific requirement and how it affects you.

1. Wrongful termination: Common illegal reasons for firing an employee

Some of the main illegal reasons for terminating an employee include:

  • Discrimination: You cannot fire an employee because of their race, gender, national origin, religion, age (if they’re over 40), disability, among other protected traits. (Click here for a full list.) Some states have additional protected classes, so check on your local laws by visiting your state DOL website or asking a local HR expert.
  • Retaliation: You can’t terminate an employee for lodging an internal or legal complaint against their employer. An employee who has shed light on an illegal activity is known as a whistleblower, and they have legal rights protecting them from termination.
  • Protected leave: It’s also illegal to terminate employees who are on protected leave, including jury duty, military leave, or maternity leave.

A quick note: The above are common scenarios that are protected by multiple many different laws, including labor laws, employment laws, anti-discrimination laws, and at-will employment exceptions. What’s important is that you check with a local expert to ensure you’re firing someone for a good reason and one that can’t be construed as an illegal one.

2. Common exceptions to at-will employment

Unless you live in Montana, your state assumes that employment arrangements are at-will. At-will employment means that you can terminate an employee at any time without a reason. It also means that an employee can leave the company at any time as well without a reason, too.

However, some states have exceptions that override an at-will employment agreement. The three common exceptions to at-will employment include:

  • Public Policy: Employees cannot be fired for doing something that is to the public’s good, like refusing an employer’s request to commit perjury, reporting fraudulent behavior, or performing activities for public good like jury duty.
  • Implied Contract: If proven, implied contracts can override at-will employment agreements, like an oral promise or language in an employee handbook.
  • Implied Covenant of Good Faith and Fair Dealing: This means that you can’t terminate an employee for bad intentions, like firing a salesman just before a large commission.

So, if you don’t have a sound reason for firing an employee, check your state for what exceptions to at-will employment laws are in place. You can learn more about at-will employment here.

3. Last paycheck requirements:

Check with your state on this one. Most states have very specific requirements for when and how terminated employees need to be given their final paycheck.

Federal law also has specific requirements, though most states have stricter timelines, thereby overriding Federal mandates.

For example, in California an employer must give an employee their final paycheck immediately if they were fired or laid off, and within 72 hours if the employee quit. Whereas in Texas, a terminated employee must get the final check within six days if they’re fired or laid off, and the next scheduled payday if they quit.

4. COBRA Insurance requirements:

In many states, like California, you’re required to give a terminated employee information on how to enroll in COBRA. COBRA insurance is a federal program that allows terminated employees to temporarily extend the health insurance provided by their previous employer. Employers with more than 20 employees are actually required to offer COBRA as part of their health insurance plan. All terminated employees, whether they are fired ,laid off, or quit, are eligible for COBRA.

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5. Unemployment insurance requirements:

Fired employees, like those who quit voluntarily, are generally not entitled to unemployment insurance. Employees who were laid off due to no fault of their own are certainly eligible, however, and employers are required to accept that laid off employee’s claim. If a fired employee tries to claim unemployment insurance, you can contest it. Read more on how unemployment insurance works here.

Last, can I fire someone without a reason?

Yes, you can. Due to at-will employment laws, you can fire an employee at any time without a reason or explanation. However, it’s best to have a well-documented reason, even if you choose not to disclose it to the employee. If a fired employee sues you for wrongful termination, having a good reason—and being able to prove it—is your best course to avoid liability.

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