Illinois employee separation laws can vary significantly from other states’ processes. If you’re not familiar with these specific employee termination laws, it could put your organization at risk. This employee separation checklist and guide offers a helpful overview of Illinois final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.

Illinois Employee Separation Checklist

  1. Provide final paycheck
  2. Issue separation notice
  3. Execute severance agreement
  4. Report termination
  5. Withdraw registration to do business

1. Final Paycheck Requirements in Illinois

Illinois law sets clear final paycheck guidelines for employers. Terminated or resigning employees must receive their final paycheck no later than the next scheduled payday. Commissions due at the time of contract termination must be paid within 13 days. Those that are due after separation must be paid within 13 days of that due date.

Final compensation must include wages, commissions, and earned bonuses, along with payment for any accrued and unused vacation time. Specifically, Chicago employees who have used less than 40 hours of leave in the previous 12 months must be compensated for the difference. Note that this rule only applies to employees in Chicago, not in the whole state.

Final wages should be provided at the usual place of payment, or mailed upon written request. Employers who fail to comply may face significant penalties, including administrative fees, fines, and additional payments to the employee.

2. Firing Employees in Illinois

If you’re firing employees in Illinois, it’s important to understand the documentation requirements. Illinois is an at-will employment state, which allows employers and employees to terminate the relationship at any time.

However, Illinois requires employers to issue any employee, who separates from employment for seven or more days, Form CLI111L – What Every Worker Should Know About Unemployment Insurance. This notice should be given on the employee’s last day of work. If this isn’t possible, it must be mailed to their last known address within five days.

Illinois also requires all employers that provide a group health insurance plan to notify separated employees of their right to continue coverage under Illinois’ state-level COBRA law within 10 days of separation.

3. Severance Agreements in Illinois

Illinois severance agreements can include non-compete provisions—however, these clauses are unenforceable against employees who were terminated without cause. When drafting a claims release within a severance agreement, employers should explicitly list all federal and state claims the employee is releasing. 

Note that non-disparagement clauses in severance agreements cannot restrict employees from discussing or disclosing facts related to sexual harassment or assault disputes, especially where the conduct may have violated federal, tribal, or state law.

In Illinois, the relevant claims release laws include:

The Illinois Workplace Transparency Act also requires employers to provide all employees with 21 days to consider signing a severance agreement, and a seven-day period to revoke their signature after signing. Be sure that the release of claims in a severance agreement only waives claims that have arisen before the effective date, not those that might arise later.

Under the Illinois WARN Act, employers with 75 or more employees are required to provide a minimum of 60 days’ notice before a plant closing, mass layoff, or relocation that affects a significant number of employees. Specifically, notice is required for a plant closing that impacts 50 or more employees, a mass layoff affecting 25 or more employees (comprising at least 33 percent of the workforce), or 250 employees, regardless of percentage. This also includes any relocation that results in an employment loss.

The Illinois WARN Act generally aligns with the federal WARN Act. However, there are specific circumstances under Illinois law where the notice period can be shortened or waived. If these exceptions apply, notice must be given as soon as practicable. Notice must be provided to affected employees, their representatives, and several government entities.

Finally, employers should review relevant federal laws, including the recent NLRB decisions that restrict the use of non-disparagement and confidentiality provisions in severance agreements.

4. Reporting Employee Termination in Illinois

For employees with an Income Withholding for Support Order (“IWO”), report the employee’s termination to the child support agency, court, or attorney that issued the IWO as soon as possible. Register for online reporting with the Federal Office of Child Support Enforcement here to expedite the process.

Employers may opt to report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Fax or mail it to the child support agency that issued it. Have the following information ready:

  • Employee Name
  • Employee Case Identifier
  • Last Known Home Address
  • New Employer Address (if known)
  • Date of Employee Separation

5. Withdraw Registration to do Business in Illinois

If separating from your last Illinois employee ends your business in the state, organizations may apply to formally withdraw from doing business in Illinois. The form an organization needs to submit to the Secretary of State varies, depending on the type of business structure.

For-Profit Corporations must file this Application for Withdrawal and Final Report, and Non-Profit Corporations must file this Application for Withdrawal and Final Report. Limited Liability Companies (LLCs) are required to file this Application for Withdrawal.

Stay Compliant with Illinois Employee Separation Requirements

Understanding the requirements for an Illinois Employee Separation Agreement helps ensure that organizations fulfill their employer obligations, honor employee rights, and mitigate risks.

Looking for instant access to a reliable database of federal, state, and local laws? Check out SixFifty’s employment law platform. With SixFifty, you can research state-specific laws, and generate multi-state handbooks, policies, addenda, agreements, and more in a matter of minutes. 

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Looking for employee separation laws for a different state? Our interactive map makes it easy to find all employee termination requirements by state.

Ryan Parker, Esq.

By Ryan Parker, Esq.

Ryan is the Chief Legal Product Officer at Sixfifty and works with teams of attorneys and technologists to help make the law more accessible for businesses and individuals.