Employee Rights After Termination: An Overview
Employees terminated by an employer have certain rights. An employee has the right to receive a final paycheck, have the option of continuing health insurance coverage, and may be eligible for severance pay or unemployment compensation benefits.
At Will EmploymentIn most cases, employment is “at will.” At-will employment refers to the rights of an employer in the private industry to terminate an employee at any time and for any reason, as long as it is not illegal or contrary to an agreement. Job termination, however, may be unlawful for a number of possible reasons.
For example, if an implied contract governs the terms of the employment relationship. When determining implied agreements, courts consider whether the employer promised continued employment, whether the employer failed to abide by its employment practices regarding termination, and the length of employment. The termination may also be unlawful if firing the employee violates public policy. It is against public policy, for instance, for an employer to fire an employee for having jury duty, serving in the military, or complaining about or refusing to engage in illegal conduct. Employers also cannot terminate employees in such a way that violates laws prohibiting discrimination. The federal and state laws prohibit discrimination against employees and job applicants based on race, color, age, national origin, disability, and religion. Lastly, it is unlawful to terminate an employee in retaliation for a specific act protected by law. An employer cannot fire an employee for reporting certain unlawful activities. For example, an employer may not terminate an employee for reporting sexual harassment, discrimination, or a violation of the Occupational Safety and Health Act (OSHA).
Receiving Your Final PaycheckMany states have laws that dictate when the employer must give an employee their final paycheck. In general, the employee’s rights to receive a final paycheck depend on whether the employee quit or whether the employer fired the employee. In Connecticut, for instance, the employer must issue a final paycheck by the next business day after firing the employee and by the next payday if the employee quit. Other states have stricter laws; for example, in California, the law requires the employer to pay the employee immediately if the employee was fired or if the employee quit after giving at least 72 hours notice. If the employee failed to give notice, the employer has 72 hours to issue a final paycheck. These laws may be inapplicable if a contractual agreement between an employer and an employee states otherwise.
Receiving Severance PayA severance agreement is a contractual agreement between an employer and an employee. The agreement typically entails the following terms: the employer will provide the terminated employee with a severance package in exchange for the employee’s promise not to sue the employer. In addition to a lump sum payment, a severance package may include health insurance, continuing payments for a number of years, and the services of an outplacement program.
The Fair Labor Standards Act (FLSA) does not require employers to offer severance packages to terminated employees. Consequently, whether an employer offers severance often depends on the agreement between the employer and the employee. An employee may have rights to a severance package if the terms of a written contract provide for severance pay, an employee handbook documents the employer's policy on severance pay, the employer has a history of offering severance pay to other employees in the same position, or the employer made a verbal promise to offer severance pay.
Although not required by law, many companies do offer severance pay. In general, the amount the former employee receives depends on the length of employment and the reason for the termination. For example, some companies may offer two weeks pay for each year employed.
Maintaining Health CoverageTerminated employees have the right to health insurance coverage after separation from their employer. The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, grants terminated employees and their families the right to continued healthcare coverage for a limited period. Under the law, an employer with 20 or more employees must offer the option of continued participation in the employer’s health insurance plan.
It is the responsibility of the former employee to pay the full cost of coverage. In general, the employee will pay up to 102 percent of the plan’s cost. However, a worker that was terminated involuntarily between September 1, 2008 and December 31, 2009 may qualify for a 65 percent subsidy for the cost of the health premiums.
Receiving Unemployment CompensationA terminated employee may be able to replace some lost income by receiving unemployment compensation. If qualified, the unemployed worker may receive compensation while searching for employment. Generally, unemployment compensation is less than the employee’s regular pay since the calculation is based on a percentage of the employee’s pay during a certain time. An unemployed worker can receive benefits for 26 weeks, and if qualified, the worker may receive up to an additional 20 weeks of unemployment benefits.