Termination, while often unpleasant, is simply a necessary part of the employment relationship. Once an employment relationship no longer effectively serves the needs and interests of both the employer and employee, then it may simply be time for that relationship to end.

Fortunately for employers and employees alike, employment is generally considered at will, which means that either the employee or the employer may terminate an employment relationship at any time and for any reason—any legal reason, that is. Employment at will can end because “it’s just not working out” or even for no reason at all.

Of course, as with nearly all legal principles, there are limits to the employment-at-will principle. For example, if an employment relationship is established and protected by contract, such as a collective bargaining agreement in a unionized workplace, this agreement limits the parties’ rights to unilaterally terminate employment. Contracts change the nature of the employment relationship such that it is no longer considered to be at will.

Additionally, note that termination can be for any legal reason. Numerous state and federal laws, several discussed below, supersede and limit an employer’s otherwise absolute right to terminate employment—for example, when the reason for termination is based on a protected class, status, or activity.

Finally, note that public employers and employers in the state of Montana generally do not have the at-will principle at hand, so these employers may have to follow specified discharge procedures.

In addition to the laws governing why termination may occur, employers may also be required to abide by specific practices regarding how termination can occur. Employees may be entitled to receive notice, continuation of health benefits, and timely payout of earned compensation.

While employment at will is the law in most states, there are a number of exceptions to this general rule that have been created both by statute and by the courts. Several key exceptions are discussed in detail in the segments below.

Through these exceptions, and contrary to an almost common belief, employers cannot necessarily terminate employees for any reason.

Federal antidiscrimination laws protect employees from losing their jobs based on their race, color, national origin, sex, religion, disability, pregnancy, age, or genetic information. Employees can sue their former employers under a variety of antidiscrimination laws, including Title VII of the Civil Rights Act of 1964 (42 USC Sec. 2000e et seq.), the Americans with Disabilities Act (ADA) (42 USC Sec. 12101 et seq.), the Pregnancy Discrimination Act (PDA), the Equal Pay Act(29 USC Sec. 206d), the Age Discrimination in Employment Act (ADEA) (29 USC Sec. 621 et seq.), and the Genetic Information Nondiscrimination Act (GINA) (42 USC Sec. 2000ff).

In addition, most states have enacted their own laws prohibiting discrimination in employment, some of which include additional protected classes such as sexual orientation, marital status, and military membership.

An employer may not terminate or otherwise discriminate against an employee in retaliation for engaging in an otherwise protected activity—for instance, making a discrimination complaint or participating in the investigation of a discrimination complaint.

An employer may be found liable for retaliatory discharge if the employee can prove that:

Statutes addressing retaliation. The principal federal civil rights law, Title VII, prohibits employers from retaliating against employees who oppose any unlawful employment practice or who make a charge, testify, assist, or participate in any investigation, proceeding, or hearing under the law.

Illegal retaliation includes termination, as well as other employment actions such as suspension, demotion, altered work schedules or assignments, and negative performance evaluations.

Similar antiretaliation protections are also extended to employees under the ADEA, the ADA, the Equal Pay Act, and the Family and Medical Leave Act.

Section 1981 (Civil Rights Act of 1866). Even though the statute is silent on the issue of retaliation, the U.S. Supreme Court has held that 42 USC Sec. 1981, a federal civil rights statute, also encompasses retaliation claims (CBOCS West, Inc. v. Humphries, 553 U.S. 442 (2008)).

Section 1981 is a post-Civil-War-era statute that gives "all persons ... the same right ... to make and enforce contracts ... as is enjoyed by white citizens."

In this case, the employee claimed that his employer violated Section 1981 when it discharged him because of his race and because he had complained to managers that a coworker had also been discharged for race-based reasons.

What is retaliation? The U.S. Supreme Court has ruled that retaliation includes any action taken by an employer—whether job-related or not—that is "materially adverse" and could dissuade a reasonable employee or job applicant from exercising protected rights (Burlington Northern and Santa Fe Ry. Co. v. White, 548 U.S. 53 (2006)).

Under the Court's decision, retaliatory actions are not limited to actions that are employment-related (i.e., that affect the terms and conditions of employment or that occur in the workplace) but include any action by an employer that has a materially adverse effect and could reasonably deter a person from engaging in activity protected by Title VII.

Who is protected from retaliation? Title VII prohibits two types of retaliation: (1) the "opposition" clause protects employees from retaliation when they oppose any practice that is unlawful under Title VII; and (2) the "participation" clause protects employees from retaliation when they make a charge, testify, assist, or participate in an investigation, proceeding, or hearing brought under Title VII.

The U.S. Supreme Court has held that the opposition clause protects an employee from retaliation when he or she answers questions during an employer's internal investigation of another employee's improper conduct. The employee participating in the internal investigation is deemed to have opposed unlawful conduct even if he or she did not initiate the discrimination complaint (Crawford v. Metro. Gov't of Nashville and Davidson County, 129 S.Ct. 846 (2009)).

The U.S. Supreme Court has also ruled that an "aggrieved person" under Title VII is anyone with an interest intended to be protected under the statute, including employees who have a relationship with another employee who has brought a Title VII discrimination charge against the employer (Thompson v. N. Am. Stainless, LP, 131 S.Ct. 863 (U.S. 2011)).

In this case, the plaintiff and his fiancée worked for the same employer. Shortly after the employer learned that his fiancée had filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC), the employer fired the plaintiff. The plaintiff brought a lawsuit under Title VII claiming unlawful retaliation, but the 6th Circuit Court of Appeals ruled that the plaintiff could not pursue his claim because he had not engaged in protected activity himself.

The Supreme Court reversed and ruled that the firing could constitute unlawful retaliation against the fiancée and that the plaintiff, by virtue of his relationship with her, was an aggrieved person under Title VII who fell within the zone of interests protected under the law. The Court concluded that the plaintiff was entitled to bring his lawsuit claiming unlawful retaliation against him by the employer. The Court declined to specify a "fixed class of relationships" that would qualify an individual for third-party protection, other than to state that firing a close family member would almost always meet the standard and inflicting a milder reprisal on a mere acquaintance probably would not.

Retaliation against former employees. The U.S. Supreme Court has ruled that an employer may be held liable for retaliation under Title VII if an unfounded and negative employment reference is given for a former employee. In Robinson v. Shell Oil Co., 519 U.S. 337 (1997)), the Court allowed a worker to sue a former employer for providing an unfavorable job recommendation to another employer in retaliation for the worker's filing a discrimination complaint.

Accordingly, the term “employer,” within the context of Title VII, may encompass former employers.

Document, document, document—retaliation risk management. In the years since the Supreme Court’s decisions in Crawford and Thompson, claims alleging retaliatory behavior have steadily increased. Nearly half of the charges filed with the EEOC, the federal agency responsible for enforcing laws prohibiting employment discrimination, are claims alleging unlawful retaliation.

Enforcement trends like this reinforce the importance that employers carefully document legitimate, nondiscriminatory reasons for disciplining employees and, when necessary, terminating the employment relationship. The best protection against a claim of retaliation is a written disciplinary record demonstrating that there was a legitimate and nondiscriminatory reason supporting the action. An employer should be able to show that clear, understandable work rules and disciplinary policies were communicated to the employee and that the company personnel policies were applied consistently in the case at hand.

While the previously discussed principle of at-will employment doesn’t require employers to have, or state, a reason for discipline or termination, understand that often “the best defense is a good offense.” Being able to proactively demonstrate a fair and legitimate reason for an employment action can save time, resources, and frustration otherwise spent defending legal claims that a termination for “no reason” was unlawful.

Employers should also be especially aware that retaliation claims may—and often do—survive even when the underlying discrimination claim is dismissed. In other words, employers that may have initially done nothing wrong can still find themselves paying out hefty fines and settlements if the employee is later retaliated against for exercising, or attempting to exercise, an employment right such as filing a complaint.

Discharging an employee who has engaged in a protected activity (taking protected leave, filing a claim or complaint) is a matter that should be approached with extreme caution. Nonetheless, the mere fact that a worker has filed a complaint should not alone prevent an employer from terminating an otherwise undesirable employment relationship. As long as the termination is warranted, is not based on a pretext, and is consistent with past practice, the employer is theoretically secure from liability.

More information on retaliation is available.

Several federal laws also specifically protect employees from retaliation for engaging in whistleblowing activity. The following list details a few key examples; however, as a general best practice, employers should not retaliate against employees for any activity that could be seen as whistleblowing.

Affordable Care Act (ACA). The ACA prohibits employers from terminating or otherwise discriminating against an employee who:

Additional information is available. Please see the national Health Care Insurance section.

Consumer Product Safety Improvement Act of 2008 (CPSIA). The CPSIA provides employees of manufacturers, private labelers, distributors, and retailers of defective consumer products with whistleblower protection (15 USC Sec. 2087).

Under the CPSIA, employers may not discriminate against or discharge employees who:

The Department of Labor (DOL) is authorized to investigate employee complaints under the CPSIA. If a violation is found, the DOL may, among other things, order the employer to reinstate the employee and award compensatory damages.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank created several whistleblower protections, while also expanding those in existing law and providing significant financial incentives for employees to disclose to government officials what they believe may be illegal conduct by their employers.

Fair Labor Standards Act (FLSA). Federal wage and hour law (FLSA) prohibits employers from, among other things, discharging an employee "because such employee has filed any complaint” alleging a violation of the FLSA (29 USC Sec. 215(a)(3).

This includes claims for minimum wage, overtime, misidentifying employees as exempt or nonexempt, and unpaid wages of any kind (29 USC Sec. 201).

The U.S. Supreme Court has held that this provision protects oral as well as written complaints of an FLSA violation (Kasten v. Saint-Gobain Performance Plastics Corp., 131 S.Ct. 1325 (U.S. 2011)). This means that an employer may be liable for retaliation if it discharges an employee because he or she complained about an FLSA violation, even if the employee does not make a formal, written complaint.

The Supreme Court did not resolve the issue of whether an oral internal complaint is sufficient under the FLSA's antiretaliation provision or if the complaint must be made to a government agency. However, most lower courts have ruled that internal complaints are also protected; therefore, employers should proceed cautiously before terminating an employee who has made any complaint of wage and hour violations.

Occupational Safety and Health Act (OSH Act). Under the OSH Act, employers may not retaliate against employees based on the filing of a complaint concerning work safety (29 USC Sec. 651 et seq.).

Public employees, protected speech, and testimony in court. In the context of public employment, issues can arise when an employee's individual First Amendment right to engage in protected speech (including whistleblower activity) is balanced with a government employer's interest in managing, controlling, and issuing discipline related to statements made by a public employee that could be seen as representing, disparaging, or otherwise compromising the employer.

Citizens do not automatically surrender First Amendment rights by accepting public employment. However, the Supreme Court has held that when public employees make statements pursuant to their official duties, these individuals are no longer speaking as citizens for First Amendment purposes but are operating in the employment context. Therefore, when disciplining a public employee for speech, it is critical to determine whether the speech was "employee speech" or "citizen speech," the latter of which is protected by the First Amendment (Garcetti v. Ceballos, 547 U.S. 410 (2006)).

This distinction can be fact-specific depending on the speech and the employee's duties. For example, in one decision the Supreme Court unanimously held that a public employee who provided subpoenaed testimony in court was afforded First Amendment protection—even though the testimony was related to the employee's official duties—because providing testimony was not part of the employee's ordinary job responsibility. The Court held that the employee's act of testifying in Court was outside the scope of his employment and was entitled to First Amendment protection as a matter of public concern (Lane v. Franks, 573 U.S. ___ (2014)).

Sarbanes-Oxley Act of 2002 (SOX). SOX prohibits retaliation against employees of publicly traded companies who report acts of mail, wire, bank, or securities fraud; fraud against shareholders; or violations of any rule or regulation of the U.S. Securities and Exchange Commission (SEC) to their supervisors or other appropriate officials within their companies or federal officials with the authority to remedy the wrongdoing.

The law also prohibits retaliation against employees who assist in any investigation of such violations or participate in any proceeding related to an alleged violation of these laws (18 USC Sec. 1514A).

Though an employment contract is generally understood to be a written agreement entered into by the employer and the employee, an unwitting employer may ultimately find itself bound to a promise made by a personnel manager during an interview, in the course of the worker's employment, or in a memo posted on a bulletin board. A promise, or “contract,” may also be implied in an employee handbook. Most often, the promise boils down to this: no discharge except for good cause.

Although the enforcement of such promises varies considerably from state to state, employers should be extremely careful about the promises and representations that are made to employees before and during employment. Employers should train their managers not to make any statements or promises regarding terms or conditions of employment to job applicants or employees. Some careless promises can place an employer in an unexpected and undesirable contractual relationship and effectively remove any right it may have had to terminate an employee without cause.

Disciplinary policies. Many companies have specific disciplinary procedures set forth in a policy manual or employee handbook. If the employer has failed to follow such established procedures or the policies limit the employer's discretion to terminate its employees, the employee may have a state law cause of action for breach of implied employment contract or wrongful discharge.

Although the federal National Labor Relations Act (NLRA) is most often associated with unions and union organizing efforts, its protections—particularly those granted in Section 7 of the act—extend to nonunion workforces, as well. Section 7 gives employees numerous rights, including the right to engage in “concerted activities” for the purpose of collective bargaining or other mutual aid or protection.

Section 8 of the NLRA then makes it an unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of these rights. Thus, employers are forbidden from discharging employees who engage in “concerted activity” to bargain with the employer; challenge employer policies or practices; or advocate for better pay, benefits, or working conditions—regardless of whether the employees are unionized.

"Concerted activity” can be defined quite broadly and may include just about any lawful act undertaken by two or more employees—again, regardless of whether the employer has a unionized workforce or not. Please see the national Unions section.

The Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) (38 USC Sec. 4301 et seq.) provides protection for employees who are returning home from active military service and protects them from discharge without just cause.

Cat's paw liability. The U.S. Supreme Court has ruled that an employer may be held liable under USERRA for an adverse employment action taken by an unbiased Human Resources (HR) manager when the action is based on the recommendation of a supervisor who had discriminatory intent (Staub v. Proctor Hosp.,131 S.Ct. 1186 (U.S. 2011)).

In this case, the vice president of HR fired an employee following a report by the employee's supervisor that the employee had violated the terms of a disciplinary warning and a review of the disciplinary documents in the employee's personnel file. However, the disciplinary documents were put in the file by the employee's supervisors, both of whom were hostile to the employee's military obligations that were protected under USERRA.

The vice president of HR did not investigate the supervisor's report nor investigate whether the disciplinary documents were based on legitimate, nondiscriminatory factors. The fired employee subsequently brought suit under USERRA. Even though the vice president of HR had no discriminatory motive, the Court ruled that the employer could be liable.

Under the standards established by the Court, an employer may be liable if all the following are established:

Caution: This case illustrates the importance of having a process in place to effectively review disciplinary actions. Additionally, although this case was brought under USERRA, the Court noted that USERRA's language regarding a "motivating factor" is very similar to Title VII. Thus, "cat's paw liability" maybe applied by courts in cases brought under Title VII.

Federal law makes it illegal to discharge an employee for performing jury service in any U.S. court (28 USC Sec. 1875).

In addition to federal law, most states have enacted a number of laws that affect an employer's ability to terminate its employees.

If an employee is being terminated as part of a layoff, reduction in force, or plant closing, under the federal Worker Adjustment and Retraining Notification Act (WARN Act) (29 USC Sec. 2101 et seq.), an employer must give 60 days' notice of any plant closing and/or mass layoff. The law applies to employers that employ 100 or more full-time workers and employers that employ 100 or more workers that work at least a combined total of 4,000 hours per week (excluding overtime hours).

At least 60 days before a closing or layoff, an employer must provide written notice to (1) the union representing the affected employees or to the employees themselves if there is no union, (2) the state dislocated-worker unit, and (3) the chief elected official of the local government unit in which the closing or layoff is to occur.

Some states have additional “mini-WARN” laws that cover smaller employers. Please see the Layoff section.

Recall that the employment-at-will doctrine applies to both employers and employees. This means that employees may also voluntarily terminate their employment at any time, for any reason, with or without notice.

Employee notice requirements. Of course, some advance notice of a resignation gives the company time to find a replacement, provides the company with time to discuss a counteroffer with the employee, gives the employer time to process the necessary paperwork for separation, and allows coworkers to make an easier transition.

For this reason, some employers encourage employees to provide notice via their internal policies—for example, by making receipt of certain benefits or payments, such as vacation or severance pay, contingent on providing and working the duration of a minimum notice period.

If benefit payout, such as that of accrued vacation or other paid time off, will be made contingent on provision of reasonable notice, consult applicable state law to determine whether this practice is permissible, then set forth the terms clearly in a formal written policy. Even in states where the practice is permitted, employers’ attempts to withhold or require forfeit of expected or promised benefits such as accrued vacation will rarely pass muster in court if the employer’s notice expectations have not been clearly communicated in writing.

An exit interview should be conducted with every employee who leaves the company voluntarily. Because many employees feel more comfortable providing honest feedback once the employment relationship has ended, exit interviews may yield important new information and insight on an employee’s overall employment experience and overview of the company.

The best practice for exit interviews is to have the interview in person immediately before the employee’s final departure date. Of course, this may not always be logistically possible, so consider alternatives such as e-mail, phone, or direct mail interviews, online surveys, and/or using third-party off-boarding services.

Sample questions. The content of an exit interview will certainly vary from employer to employer; however, the following questions provide a standard template:

Keep questions open-ended. Try to incorporate as many open-ended questions as possible during an exit interview. “Yes or no” questions undermine the value of the exit interview, as they fail to elicit personal experiences, anecdotes, and valuable insight.

Handling troubling information. If an employee shares particularly troubling information during an exit interview, such as an allegation of sexual harassment, the shared information, as well as the employee, should be handled with extreme care.

Gather as much detailed information as possible from the employee and document the facts thoroughly. Convey a sincere appreciation for the information given and assure the employee that the allegation(s) will be investigated and resolved immediately.

Terminating an employee is one of the most difficult and important steps an employer or supervisor can take. It should not be taken lightly, because its repercussions go beyond the employee and the employer. Coworkers can be unnerved by the firing of another employee, even if they felt the person was a poor worker, exhibited a poor attitude, or simply wasn’t a good fit. A firing may engender feelings of uncertainty and vulnerability in others. Also, a firing may result in a wrongful discharge claim, which, even if not legitimate, is costly, unsettling, and a distraction to the workplace.

Despite the freedom, discussed above, afforded by the at-will employment doctrine, for many employers it will be preferable to err on the side of caution, terminating employees only for substantial business reasons such as demonstrating a continued inability to meet performance standards, consistently violating company policy, exhibiting violent behavior against another in the workplace, or engaging in criminal activity, such as embezzlement.

The actual termination is never a pleasant experience. Therefore, every termination meeting should be planned carefully and executed quickly and competently. To achieve this, an employer may want to incorporate the following practices as part of its overall termination policy:

Making a clean break. When terminating an employee, the employment relationship should end at the conclusion of the termination meeting.

Absent an intervening contract, there is no legal requirement for an employer to provide an employee with a notice period following the termination; in fact, it is not recommended. If the employer has promised a notice period, the employer may be bound to it, but most employers offer pay covering the period and dismiss the employee from further work.

There is little to gain by allowing an otherwise deficient employee to continue working for an extended period after the termination meeting. In almost every case, the employee's emotional connection to the employer is effectively severed, and the more important issues of employee morale, productivity, and risk to company property should take precedence.

If you believe the former employee might damage company property or cause some other disruption in the workplace, have someone escort the former employee to his or her desk to pack up and then escort him or her out. But do this only under extraordinary circumstances.

Employers may ask an employee who is resigning, being terminated, or laid off to release potential legal claims the employee may have against the employer (e.g., for alleged employment discrimination) in exchange for additional compensation. Some state and federal laws prohibit the release of claims under those acts—for example, the FLSA, NLRA, and USERRA prohibit employees from waiving certain rights under those laws. For this reason, any general waiver of claims must be written carefully.

If the employee is aged 40 or over, the Older Workers Benefit Protection Act (OWBPA) (29 USC Sec. 621 et seq.) contains specific requirements for such a waiver and release of claims that must be followed to ensure that the release is enforceable.

If the format is not followed, the employee may ignore the release and sue the employer.

Regardless of the age of the employee signing the release, the employer should consult with an attorney when drafting the legally binding document in order to guarantee that all legal requirements are fulfilled.

No federal law requires that an employer pay severance pay upon terminating an employee. However, severance benefits are often offered in conjunction with waivers and releases of claims. Additionally, some employers opt to provide severance benefits to ease the transition for discharged employees, particularly those with lengthy tenure with the organization.

Additional information and guidance on severance plans and packages are available. Please see the national Severance Pay section.

There are no federal laws regulating the payment of final wages, although many states have such laws.

For administrative simplicity, when termination is involuntary (firing or immediate layoff), many employers provide the final paycheck immediately upon discharge. For voluntary separations (resignations) or nonimmediate layoff, the final paycheck might be provided within the standard pay cycle.

In choosing the appropriate final pay practice for your organization, ensure that it complies with applicable state laws on final paycheck timing—otherwise, penalty wages could be assessed.

Questions regarding vacation pay, severance pay, or debts or obligations owed to the company should be addressed well in advance of the termination date. Postponing any of these actions until after the employee departs can lead to serious misunderstandings and possible legal problems.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) and many state laws require that employees be offered the option to continue group health insurance coverage after the employment relationship has ended.

Employers should assign responsibility for seeing that discharged employees return any company property, such as uniforms, keys, or credit cards, before departure.

In the case of employees with access to trade secret information, software, or product development plans (e.g., computer programmers), and particularly in the case of telecommuting arrangements, it may be necessary to take additional measures to protect company property (e.g., terminating the employment relationship immediately upon receipt of a resignation letter and escorting the employee from the premises, making arrangements to retrieve company computers, software, etc., from the employee's home office).

A common concern raised by employers during the termination process is whether, and to what extent, employees can be charged for outstanding debts owed to the employer—for example, negative balances in a paid time off bank, damaged or unreturned company property, losses due to fraud or theft, previously authorized loans or paycheck advances, and clawbacks of bonuses or incentives the employee failed to earn.

Whether these amounts can be recovered via a deduction from pay or whether they will require separate reimbursement (and, perhaps, legal action) depends on several factors, including the amount owed, the reason owed, whether the employee authorized the deduction in writing, and the jurisdiction.

The best practice is for employers to refrain from advancing funds that would be sizable enough to warrant seeking a deduction from final pay; however, to the extent that hindsight is often 20/20, limited deductions approved in writing by the employee may be permissible.

Form W-2 may generally be issued at any time after termination, no later than January 31 of the following year.

However, if an employee requests issuance of Form W-2 (either verbally or in writing) and there is no prospect that the employee will be rehired by the company, the W-2 must be issued within 30 days of the request or within 30 days of the last payment of wages, whichever is later.

While an employer may be subject to liability for giving a deliberately inaccurate or misleading job reference, an increasing number of states have enacted job reference immunity laws that exempt employers from liability when accurate job reference information is given.

All documentation associated with a termination should be filed in the employee's personnel file. If departmental personnel files are also maintained, they should be kept in a confidential and secure place.

Some states have laws that specifically govern the maintenance and retention of all employee personnel files.