The Pennsylvania employee separation process varies from other states’ rules. Employers need to understand the nuances of employee termination laws and employer obligations to mitigate legal liability.
This helpful employee separation checklist and guide is intended to brief Pennsylvania employers on the state’s final paycheck requirements, separation notices, severance agreements, reporting employee termination, and withdrawing registration to do business in the state.
Pennsylvania Employee Separation Checklist
- Provide final paycheck
- Issue separation notice
- Execute severance agreement
- Report termination
- Withdraw registration to do business
1. Final Paycheck Requirements in Pennsylvania
Pennsylvania state law provides that all employees who separate from their employer must receive their final paycheck on the next scheduled payday, whether they were terminated or resigned. This final payment must include all earned wages or compensation. However, employers are not obligated to pay out unused vacation time unless specified by an employee contract or company policy.
The final paycheck can be delivered through the usual pay channels, or by mail, upon request. Employers who fail to pay wages on time may face penalties. These include 25 percent of the unpaid wages or $500, whichever is greater. Employers could also face criminal penalties for each offense, including fines of up to $300, imprisonment for up to 90 days, or both.
2. Firing Employees in Pennsylvania
Firing at-will employees in Pennsylvania is subject to a two-prong notice requirement. All separated employees in Pennsylvania—whether they were terminated or resigned—must be notified of the availability of unemployment compensation. Employers must provide a completed Form UC-1609 – Employer Information.
The state also requires employers who provide a group health insurance plan, and have fewer than 20 employees, to notify separated employees of their right to continue coverage under Pennsylvania’s state-level COBRA law. This notice must be provided within 30 days of separation. Employers are welcome to use the state’s model notice in complying with this requirement.
3. Severance Agreements in Pennsylvania
If you plan to ask an employee to sign a severance agreement, there are three things to note:
First, the severance agreement must explicitly list the claims the employee is releasing under federal and state law. In Pennsylvania, the state law claims that may be released are those under the Pennsylvania Human Relations Act, Pennsylvania’s Equal Pay Law, Pennsylvania’s Wage Payment and Collection Law, Pennsylvania’s Personnel File Inspection Act, Pennsylvania’s minimum wage and overtime laws, and Pennsylvania’s leave laws.
Second, the release should only waive claims that arose prior to the effective date of the agreement.
Finally, be mindful of the applicable federal laws and guidelines before executing your agreement. For example, the NLRB’s 2023 McLaren decision restricts the use of non-disparagement and confidentiality provisions in severance agreements.
4. Reporting Employee Termination in Pennsylvania
When separating from an employee with an Income Withholding for Support Order (“IWO”), promptly report the employee’s termination to the child support agency, court, or attorney that issued the IWO. You may register for online reporting with the Federal Office of Child Support Enforcement here.
You also may report an employee’s termination by completing the Notification of Employment Termination or Income Status section of the IWO. Then fax or mail it to the child support agency that issued it. You will need the following information:
- 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 Pennsylvania
When separating from your last Pennsylvania employee ends your business transactions in the state, your organization may wish to formally withdraw its state business registration. In Pennsylvania, all For-Profit Corporations, Non-Profit Corporations, and Limited Liability Companies (LLCs) must file this Statement of Withdrawal with the Pennsylvania Secretary of State. The statement should be filed along with tax clearance certificates from the Pennsylvania Departments of Revenue and Labor. Learn how to get the necessary tax certificates here.
Stay Compliant with Pennsylvania Employee Separation Requirements
Understanding Pennsylvania Employee Separation Agreement laws helps employers ensure regulatory compliance by recognizing employee rights.
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