Employment separation can be tricky, whether the employee is leaving voluntarily and on good terms—or under less ideal circumstances. No matter what, it can be a difficult situation to manage, and the last thing employers want at a time like this is to sort through varying state and federal laws to make sure they are protecting themselves and their soon-to-be former employee by checking off every requirement. SixFifty created the 50-State Separation Kit to help organizations navigate employee separation requirements. Let’s take a look at what we’re dealing with.
Final paycheck requirements
Perhaps the most obvious requirement of an employer during the employment separation process is to make sure the employee is paid their final earned wages in a timely manner. That seems simple enough, right? Not exactly. States have varying requirements on when the final paycheck is due, whether the final paycheck must include unused leave, how and where the payment must be issued, and the penalty for failing to do these things.
- California employees must be paid immediately following termination, but resigning employees may be paid within 72 hours of resignation. However, if the employee provides at least 72 hours’ notice of their resignation, they must be paid at separation.
- Employees who provide 72 hours’ notice of resignation may receive their wages by mail, if they so request.
- Employers who fail to pay wages may be required to pay both the unpaid amount plus an additional 30 days’ wages at the employee’s regular pay rate.
- Colorado employees who resign must receive their final paycheck by the next regular payday.
- Employees must be paid at the work site, the employer’s local office, or the employee’s last-known mailing address.
- Employers who fail to pay wages may be required to pay both the unpaid amount and either an additional ten days’ wages or 125% of unpaid wages up to $7,500 plus 50% of unpaid wages that exceeds $7,500—whichever is greater.
Every state has its own requirements on final paychecks and penalties for failing to keep them, so it’s important for employers to pay close attention to employment laws in every state where their employees work.
Separation notice requirements
Most states require employers to give specific notice to employees upon separation, and—you guessed it—those state-specific requirements can vary greatly. Providing employees with notice of their impending separation allows them to prepare for the transition and make necessary arrangements for things like unemployment and health insurance. Employers should research state notice requirements and make sure they are providing all required notices upon separation.
Employers of South Carolina employees, take note. All employees in South Carolina who separate from employment must be provided a Notice of the Availability of Unemployment Insurance Benefits upon separation. South Carolina also requires all employers who offer group health insurance to “clearly and meaningfully advise” separated employees of their right to continue coverage under South Carolina’s state-level COBRA law as well as “the amount of premium required” and “the employee’s responsibility to pay the premium each month before the date that the policy month begins” at the time of separation.
Employees in our nation’s capital are entitled to a slightly different notice. Washington, D.C. requires employers who provide a group health insurance plan and have fewer than 20 employees to notify separated employees only of their right to continue coverage under D.C.’s state-level COBRA law. But that must be provided within 15 days of separation.
Legal frameworks or labor laws often outline the minimum notice period that employers must adhere to, and it is essential for employers to comply with these regulations to ensure fair treatment of their employees.
Severance agreement requirements
A severance agreement, also known as a separation agreement or termination agreement, is a legally binding contract between an employer and an employee that outlines the terms and conditions of the employee’s departure from the organization. It typically covers matters such as severance pay, continuation of benefits, non-disclosure and non-compete agreements, and any other terms negotiated between the parties. These agreements aim to provide clarity and protection for both the employer and the employee during the separation process, ensuring a smooth transition while addressing legal and financial considerations.
Employers of North Dakota employees executing claims releases with their employees must explicitly list the claims the employee is releasing under federal and state law. In North Dakota, the state law claims that may be released are those under the North Dakota Human Rights Act, North Dakota Equal Pay Act, North Dakota’s minimum wage and overtime laws, and North Dakota’s leave laws.
As you might expect, California employers have a list of requirements about four times longer than that of North Dakota. In California, the state law claims that may be released include:
- wrongful termination in violation of public policy (Tameny claims);
- breach of contract;
- breach of the implied covenant of good faith and fair dealing;
- privacy violations;
- intentional infliction of emotional distress; and
- discrimination and harassment claims under California’s Fair Employment and Housing Act.
And this is just a small portion of California’s severance agreement requirements (note that employees can’t waive unknown claims unless the employer explicitly explains their statutory protections).
It’s important to ensure that claims releases are sufficiently specific. Because severance agreement provisions differ depending on the state where the employee works, it’s important for employers to know their state requirements to make sure their severance agreements are enforceable for their specific employees. And what laws apply to your remote employees? But that’s a discussion for another time.
Federal separation requirements
In addition to the varying compliance requirements of all 50 states and Washington, DC, employers have numerous and complex separation obligations under federal law.
Employers should ensure that COBRA notice is provided if applicable. The US Department of Labor (DOL) requires employers that provide a group health insurance plan and have 20 or more employees to offer continuation of medical coverage to separated employees who have lost coverage as a result of certain qualifying events.
Employers should provide Worker Adjustment Retraining Notification (WARN), if applicable. The WARN Act ensures that notice is provided to certain categories of employees in the event of mass plant closings or layoffs.
Comply with federal laws in severance agreements
When drafting a severance agreement, employers should consider the Older Workers Benefits Protection Act (OWBPA) in age discrimination claims waivers. Also, the NLRB’s recent decision and subsequent guidance from its General Counsel restrict the use of non-disparagement and confidentiality provisions in severance agreements.
SixFifty makes it easy
SixFifty’s 50-State Separation Kit will help you understand the legal implications that arise when your employment relationship with an employee ends, whether that is because you terminate their employment or because they choose to leave your organization. These legal requirements vary depending on the state where the employee is located. This new tool will help organizations smoothly navigate the separation process.
For more information, book a demo today!