8 myths about employee terminations … busted

Today we'll talk with our guest Meryl Gutterman about myths surrounding employee termination. Meryl is senior counsel with ADP's HCM group. Hello there, Meryl. As always, it's great to have you back on our show.

So, for example, there are laws that prohibit employers from terminating individuals for exercising their rights under the law, such as taking job protected leave, and employers can't terminate an employee because of a protected characteristic, such as age or race or religion, disability, gender, national origin, or military status, for example.

So if an employer were to terminate an employee for engaging in protected activity or because of a protected characteristic, for instance, then they may be subject to a claim or a lawsuit regardless of the employee's at will status. And there are other ways other exceptions to at will employment as well That can be created by a contract or a statute or the courts or public policy so you have to pay attention to those as well.

The law also has rules for notifying a discharged employee of any written internal procedures for the employee to file an appeal with the employer about a discharge. And the state also defines good cause as reasonable job related grounds for an employee's dismissal based on the employee's failure to adequately perform their job duties or the employee's disruption of the employer's operation.

Or the employee's material or repeated violation of an express provision of the employer's written policies or another legitimate business reason that the employer determines while they're using reasonable business judgment.

The next myth I would like to ask you to address is the one that talks about final pay isn't due until the next regular payday, regardless of the state or the situation.

Involuntary termination, uh, for example, in Texas, for involuntary terminations, final pay is due within six days of the date of termination. And when an employee quits or resigns, they must be paid in full, no later than the next regularly scheduled payday after the effective date of the resignation or the retirement.

And keep in mind, too, that some states have separate final pay deadlines and other rules that apply to commissions and bonuses and other special situations that you have to also pay attention to.

Uh, for our third myth, Meryl, let's discuss the misunderstandings that a departing employee's final pay should always be mailed to them.

When the employee resigns or retires, California requires that the employee receive their final pay at the office of the employer in the county they had been working. And if the employee gives at least 72 hours notice of their intention to quit, final pay must be paid at the time of quitting. But, if a California employee quits or retires without providing that 72 hours notice, then they can receive payment by mail if they request it and they designate a mailing address.

And the date of the mailing is what constitutes the date of payment for purposes of that requirement to provide payment within 72 hours of their separation notice. And then also in California for both voluntary and involuntary terminations, an employee who is authorized final pay by direct deposit may receive final wages in this manner as well, provided that all the other final pay requirements are also met.

employees employment ends is ensuring the company equipment is returned. This has resulted in the myth that employers can simply withhold the employee's final pay in those kinds of situations. What's the truth?

So if you have a non exempt employee and that's an employee who's entitled to minimum wage in overtime, the Fair Labor Standards Act, or we know as the FLSA. It does permit deductions for unreturned equipment, as long as the deductions don't reduce the employee's pay below the minimum wage, and they don't cut into any overtime pay.

But there are some states that prohibit this practice, or have other requirements, so employers need to check their state law, and they really also should be consulting with counsel before they're making any decisions. This type of deduction or any type of deduction, um, deductions for unreturned equipment are never permitted for employees classified as exempt from overtime. And keep in mind too that under the FLSA employers have to get an employee's consent before they make a deduction.

So the agreement needs to specify the items for which deductions will be made. And that could be for company uniforms or equipment. Or even employee theft and the agreement also needs to specify how the amount of the deduction will be determined. So, again, it's best practice to obtain the employee's authorization in writing and to consult with legal counsel before you're making a deduction.

always disqualified from them. So to receive benefits, employees who resign have to show that they quit for good cause. And this is typically attributable to the employer. So while good cause varies by state, employees who quit as a result of retaliation or maybe to care for a sick family member or perhaps due to a significant reduction in hours or pay, they may be eligible for unemployment benefits and eligibility rules vary greatly.

So here too is another area where employers need to check their state law for details.

Okay, Meryl. So the next myth I'd like to address is the one that once an employee leaves. The employer no longer needs to keep their records. Is that true?

And then also under certain federal non discrimination laws, employers have to hold on to personnel records for at least one year from the date of an involuntary termination. And if an employee files a discrimination claim, then they then employers have to hold on to those records until the claim is resolved. So employers need to make sure they're checking federal, state, and local laws, uh, just to make sure they're on top of all of the specific record keeping requirements.

Or the third way is employers can exclude unused vacation from final pay unless they have a policy that says otherwise. So here employers need to check their state law to see which of these options applies to their business. And then as far as sick leave laws. Most don't require employers to pay employees for accrued unused sick leave at the time of separation.

However, there's always a caveat, if the employer chooses to bundle all of their leaves, so if they were to include sick leave into a single pay time off policy or PTO policy, then The state could apply the same rules as it does for accrued unused vacation and PTO. And in that instance, that could require payout upon separation.

interviews are a waste of time?

So as a best practice, we recommend that you try to conduct exit interviews with employees who resign or retire, and when doing so, it's helpful to use the same core set of questions so you can identify trends and then go ahead and develop plans for improvement.

So the first point I wanted to reiterate was, at will employment generally means the employer or employee, who has a May end the employment relationship for any reason, but the employer's reason for termination must still be a lawful one. The second point I wanted to reiterate was that under federal law, final pay is generally due by the next regular payday, but many states require final pay sooner, so we need to look into that.

The third one is many states have specific rules about the location and method for final pay. So simply mailing final pay to the employee may be incorrect in some situations. Another point that you raised was that some federal, state, and local record keeping rules require employers to retain certain records well beyond the employee's length of employment.

And another and final point I wanted to reiterate for our listeners was that whether an employee's final paycheck must include pay for unused vacation time depends on the state and the company policy. So did I cover those accurately?