Write a Termination Letter

Making the decision to terminate an employee is difficult. However, if you determine that an employee is not a good fit for your business or realize that you need to downsize, then you should write a letter to formally inform the employee of his or her termination. Drafting an effective letter requires that you identify the reason for the termination, support that decision with documentation, and then draft a termination letter that comports with the law.

Steps

Preparing to Write the Letter

1. Identify the employment relationship. Most employees in the United States are considered “at will.” This means that they may be discharged for any reason at all. Apart from state and federal laws that protect against retaliation or discrimination (on race, gender, sexual orientation, age, religion, etc.), an “at will” employee has no legal protection against termination.
   • To understand federal anti-discrimination law, you can read the summaries provided by the federal Equal Employment Opportunity Commission.
   • Your state or municipality may also have anti-discrimination laws. You should try to find them by searching online or by meeting with a lawyer.
2. Review the contract. One important exception to the “at will” doctrine is an employee who works under a contract. Contracts often include provisions stating that an employee can be terminated for “good cause” or “just cause.” A list of examples or circumstances considered may also be included. You should review the contract to see for what circumstances termination is allowed.
   • Your employee may also be covered by a collective bargaining agreement. If so, locate a copy of the agreement and review the termination provisions. Typically, a collective bargaining agreement lays out a multi-step process you must follow when terminating employment.
   • Sometimes, an employee can claim that an “implied contract” has been created during the work relationship. If one exists, then you may be able to terminate employment only for “good cause.” A court will look at a variety of factors to determine if an implied contract exists:
     • duration of employment
     • job promotions
     • employee handbooks, letters, policy manuals, or other documents which contain language creating a promise of continued employment
     • an employer’s assurances of continued employment
     • industry practices
3. Gather evidence of the grounds for termination. Even if you have an “at will” employee, you will still want to make sure that you have a paper trail supporting your decision to terminate in case the employee claims illegal discrimination.
   • Look at your past feedback. See if you have mentioned in previous performance reviews the problem that is the reason of termination. If you have given nothing but glowing reviews, and the reason for the termination isn’t a need to downsize, then you might want to hold off on terminating them until you can give more signals that performance is subpar.
   • Do your own investigation into the employee’s performance. If you have a supervisor pushing to have the employee fired, you shouldn’t just take his or her word for it. Look at the employee’s file and note any commendations, reprimands, and performance reviews or comments.
   • Identify your valid reason for the firing. You should be able to put down in words why you are firing the employee. If you just “feel” that the employee is a bad “fit,” then try to come up with specific examples of how the employee doesn’t fit and why you think the employee is harming the company. By being able to articulate grounds for dismissal, you can insulate yourself from a wrongful termination claim.
4. Seek the advice of a lawyer. State law provides many requirements that you must abide when terminating an employee. Some states, for example, have implied a covenant of good faith and fair dealing into every contract. To make sure that you are following all applicable laws, you may want to seek out the advice of a qualified employment attorney.
   • To satisfy the covenant of good faith and fair dealing, parties must refrain from doing anything that makes it impossible for the other party to fulfill its duties. Furthermore, each party must do everything reasonable to fulfill its own obligations. The concept is sufficiently elastic that you should get a legal opinion that you are complying with it.
   • To find a qualified attorney, visit your state’s bar association, which should run a referral program.
   • Once you find an attorney, check their qualifications by visiting their website. Look for an attorney who has experience advising clients on employment matters.
   • Some states also award certification in employment law. This certification is not made available to all lawyers. Instead, a lawyer must have devoted a significant percentage of his or her practice to employment law, have taken special continuing legal education courses, and have received recommendations from peers or judges. Often, the lawyer must also pass an exam.

Drafting the Termination Letter

1. Use company letterhead. Space down two lines and insert the date. Then space down two lines and add the words “Personal and Confidential” beneath the date in bold letters. Space down and enter the employee’s address, aligned on the left.
   • If your business address is not part of the letterhead, then insert your address at the top of the page, two lines above the date. Line it up flush with the left hand margin, as you did the employee’s address.
2. Explain the change in the employment relationship. You should begin the letter by explicitly stating whether the employee is being terminated or laid off from the position. You should also state the date in which the termination or layoff is effective.
   • Sample language could be: “I regret to inform you that your employment with [insert company name] is terminated effective as of [insert date].” Or “I regret to inform you that you will be laid off effective as of….”
3. Include the reasons for the change. In the second paragraph, you should explain the reason for the change. For example, if the company is struggling financially, you might want to lay off the employee to save money. Alternately, if the employee is a poor performer, you would want to note that as well.
   • You might want to state, “Unfortunately, your performance has been unsatisfactory.”
   • If the lay-off is for economic reasons, you can state, “The current economic environment has forced us to make difficult downsizing decisions.”
4. Address unsatisfactory performance with specifics. You can go into additional detail about how the employee’s performance has been unsatisfactory. State specifics, such as the date of performance reviews and what deficiencies were noted. You can also attach copies of anything that supports you, such as prior performance reviews, written reprimands, or customer complaints.
   • If the employee is being terminated for inadequate performance, you could write: “Your employment is terminated due to repeated failure to perform the duties of your job. When you were hired, you were provided a description of your Job Duties. Since then, you have been provided with periodic feedback and training. However, there have been continued deficiencies in your performance and a failure to follow directives. This has been discussed with you numerous times: on [insert dates]. No improvement has resulted on your part.”
   • If the employee is being fired for poor attendance, you could write: “Your employment is terminated due to your repeated tardiness and absences. This was discussed with you repeatedly on [insert dates]. On those dates, I again reminded you of our policies regarding attendance.”
   • If the employee is being laid off for economic reasons, feel free to state that you are thankful for the good work the employee performed.
5. Include information on the final paycheck. If you are offering the employee severance, then you should also state the details here.
   • For example, if the employee has a final paycheck coming, write: “Your final check will include payment for any accrued, unused hours of vacation leave up to the maximum of [state maximum].” Then provide contact information if the employee needs to talk over compensation.
   • You may wish to provide severance, either because it is contractually required or because you are willing to provide it in exchange for a release from liability. If you wish to provide severance in exchange for a release, you should contact your attorney. Releases must be drafted carefully, and you will want an attorney to help you describe the severance and any obligations on behalf of the employee in order to qualify.
6. Ask for the return of company property. If necessary, you should also explain when and how the employee can return company property—office keys, laptops, phones, pagers, etc. You may want to ask the employee to contact you to set up a time to return all company property.
   • For example, you could write, “You may contact me at [insert phone number] to arrange a time to return your [list equipment] and collect any personal items left in your workspace.”
7. Remind the employee of nondisclosure or non-competition agreements. As a condition of employment, the employee may have signed a nondisclosure (NDA) or non-competition agreement. Review the employment contract.
   • If the employee agreed to either, you should copy and paste in the terms of the NDA or the non-competition agreement. Preface this information by stating, “Per the employment contract signed [insert date], you agreed to the following:”
8. Offer to provide recommendations. If you are parting on good terms, then you may want to conclude the letter by offering to provide a positive recommendation for the employee. You can also offer to provide job placement assistance, if you want.
   • Type: “Thank you for your hard work. I am happy to provide a positive reference for future jobs. Have prospective employers contact me at [include contact information]. I am also willing to provide a written reference if that is preferred.”
   • Alternately, you may want to simply state that if contacted about a reference you will only provide dates of employment and job title.
9. Add a space to sign. You will sign the letter, but ideally you will get the employee to sign a copy as well. Accordingly, you should insert a line for your signature. Also include a line for the employee to acknowledge that he or she received the letter.
   • Above the employee’s signature line, you could write: “By my signature below, I acknowledge that I received a copy of this notice. My signature does not necessarily indicate agreement with the contents.”
10. Include necessary attachments. State or federal law often dictates that supplemental information be provided with the letter, often in the form of hand-outs. For example, some states, like California, require employers to provide a pamphlet, “For Your Benefit,” to all discharged or laid-off employees.
    • Some states require that an employer provide a notice immediately as to a change in employment status. This notice is quite short and not equivalent to a full termination letter. A sample notice from California is here.
    • Provide information about COBRA rights. Additionally, you must provide discharged employees with notification of all continuation, disability extension, and conversion coverage options under any employer-sponsored coverage for which they might be eligible.
    • Include anything else recommended by your lawyer in order to comply with state or federal law.
    • Finally, include anything referred to in the letter itself, such as copies of performance reviews or written reprimands.

Tips

• For more information on how to part amicably with an employee, see wikiHow’s How to Prevent Wrongful Termination Lawsuits.
• Press for the employee to sign a release. A release will relieve you of liability for a future lawsuit. You should probably try to get a release if the employee is a racial minority, female, or over the age of 40. Ask your lawyer to draft it.

Quick Summary

Template:Summary:Write-a-Termination-Letter

See also

• Sue the Government for Discrimination
• Claim Age Discrimination for Apprenticeship Programs
• Help Avoid Employee Lawsuits
• Verify Rehab Treatment for an Employee
• Handle Disciplinary Actions
• Claim Weight Discrimination
• Know if You Should Sign a Covenant Not to Sue
• Defend Yourself in a Wrongful Termination Lawsuit
• File Charges With EEOC
• Defend Yourself in an Asbestos Exposure Lawsuit

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What links here

• Terminate an Employee in California