Termination Best Practices

Even though the economy is improving, we are still seeing some layoffs as small companies merge or are sold to larger ones.  And, of course, there continue to be the standard involuntary terminations based on performance or misconduct. Whether you are letting an employee go due to a layoff or an involuntary termination, it’s important to take note of requirements and best practices to avoid any legal issues.

Final paycheck. If you fire an employee, or sever their employment as the result of a layoff, you need to give them their final paycheck immediately upon termination.  And remember, in California, an employer can only make deductions from an employee’s final paycheck that are

• required under federal or California law, such as income taxes and social security tax
• authorized by the employee, such as premiums for a health or pension plan, or
• authorized by the terms of a collective bargaining agreement.

No other deductions are allowed. You may not deduct from an employee’s final check any amount still owed on a debt, even though the indebtedness is contained in a written agreement to pay the full amount of the debt on demand, at termination or otherwise.

Likewise, if you advanced an employee vacation and they are terminated before the advanced vacation is earned back, you cannot deduct the amount from the employee’s final paycheck. Be sure to cover the following items in your termination process.

Benefits – related notices to provide (if applicable):

• COBRA benefits coverage information should be sent to the departing employee’s home address
• COBRA Notice to Plan Administrator of Cal-COBRA Notice to Carrier
• HIPPA Notice
• Health Insurance Premium (HIPP) Notices (California only)
• Stock Option Closing Statement
• 401(k) plan information should be sent to the departing employee’s home address

Other Items/Forms to provide:

• Copy of the Non-Disclosure/Confidentiality Agreement or Policy (Best Practice)
• Notice to Employee as to Change in Relationship (California only)
• EDD Form 2320 For Your Benefit

Examples of property to be collected:

• Building and desk keys
• ID/security badge
• Laptop, software, hardware, etc.
• Cell phones
• Company tools and equipment
• User ID/passwords (voicemail, computer)
• Files and other miscellaneous company-owned items

Also, remove the terminating employee’s access to email, the network, the company intranet and any other programs or proprietary information meant solely for the use of employees. Ask the employee to provide their most recent address and contact information (phone, email) for W-2s and any other follow up communications. Remind them to contact you in the event they move prior to year end.

Remember, if you are unsure as to whether to terminate an employee, it is highly recommended you seek the advice of legal counsel.