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Potential Issues That May Arise from Termination of Employment

Note: Employers should consult with an employment attorney and/or state agency to determine the specific laws that apply to them.

Discrimination Claims

Federal laws prohibit discrimination on the basis on race, color, sex, age, national origin, disability, military service and genetic information. Most states have laws that are the same as the federal laws, and some state and local governments have added other protected classes, such as marital status, sexual orientation, criminal history, and even off-duty unlawful behavior.

Retaliation Claims

Retaliation is when employees are adversely affected in any area of their employment, including discipline and discharge, when they report violations of various employment laws. As with discrimination claims, some states extend these laws beyond even the federal statutes. Examples of retaliation are being terminated for filing a sexual harassment claim, or a claim that overtime was not paid, or a dangerous working condition.

WARN Act Notice

The Federal WARN Act requires employers with 100 or more employees to provide at least 60 calendar days’ notice to employees affected by certain mass layoffs and plant closings.

Exceptions to “At Will” Employment

In the United States, most employees are “at will,” meaning that there is no written contract and the employee and the employer may both end the employment relationship at any time. However, there are exceptions to this rule, some of them complex, and some may require the services of an experienced labor attorney.

Reference Policy

There have been cases of former employees suing and winning defamation claims against former employers for bad references. As a result, some employers will only confirm the dates of employment and position held. Every employer should create a policy regarding giving references. It is possible to be honest and objective, as references are a valuable source of information when considering whether to hire a candidate for a job with your company.

Layoffs / Reductions in Force

RIF are usually an economic decision, to reduce costs on a large scale. Other options include reducing existing salaries, benefits, or hours worked. In all cases, discrimination laws apply, so RIF decisions must avoid intentional discrimination, and also “adverse impact” on one or more protected classes of employees. For example, an employer may be discriminating if only workers over the age of 40 are laid off.

COBRA Benefits Continuation

Companies of 20 or more employees (less in some states) that offer group health coverage to their employees must offer benefit continuation following the end of the employment relationship or loss of coverage.

HIPAA Certificate of Creditable Coverage

Group health plans must issue this Certificate verifying the insured’s period of coverage when certain qualifying events take place, such as termination of coverage or eligibility for COBRA.


Employers sometimes will pay cash to an employee who has been terminated. Often severance is given in consideration for a “release of claims” by the employee. There is no federal law mandating this, but severance may be included in an employment contract, defined in an Employee Handbook or policy, be in a Collective Bargaining Agreement, or agreed to in a RIF.

Retirement Plans

When an employee in a defined benefit plan, such as a pension, retires, they may be eligible to receive payments. Employees in a defined contribution plan, such as a 401(k) Plan, may rollover their funds to another qualified plan.
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