Letter Of Termination

What Is a Letter of Termination?

A letter of termination is a formal notice used to inform an employee they will be dismissed from their current employment.

A clear termination letter can help ensure the departing employee follows internal offboarding HR policies to protect the organization and encourage an amicable transition.

This document can be referred to as a:

• Letter of termination
• Termination letter
• Termination of employment letter
• Notice of termination
• Letter of dismissal
• Termination notice
• Separation notice

You may have also heard of a “pink slip”. This name is less common today but refers to a termination letter, which was delivered on the pink layer of a triplicate form.

Is a Letter of Termination of Employment Required?

According to the Fair Labor Standards Act (FLSA), employers aren't required to provide a letter of termination. The exceptions are when employees are part of a union, a collective bargaining agreement, certain mass layoffs, or corporate closures.

Other employees to consider are at-will employees, meaning that either the employee or the employer can choose to end employment at any time, without cause. It’s important to check any legislation around at-will employment in your state before dismissing employees to stay on the right side of the law.

In some states, such as Georgia, employees must sign a separation notice in addition to a letter of termination. Connecticut goes a step further, requiring an entire unemployment separation package.

How Does the Type of Dismissal Change the Letter of Termination?

A termination letter should reflect the circumstances of the dismissal. Employers generally have three situations where they may need to terminate employees:

• With cause.  Typically required if an employee’s performance or behavior isn’t meeting expectations in the employee handbook or violates the employer’s code of conduct.
• Without cause. The employer dismisses employees due to larger market factors, such as a lack of revenue leading to downsizing and redundancy.
• End of contract.  An employer that hires a short-term employee can issue a letter of termination if they decide not to renew the employment contract beyond the initial term.

Why Should an Employer Write a Letter of Termination?

Termination letters serve two main purposes: they help employers keep records of termination decisions and provide employees the clarity they need to start the transition to the next stage of their careers.

Saying goodbye on good terms and ensuring amicable relationships with departing employees can also help the employer protect its reputation. Keep in mind that potential candidates check employer review sites for ex-employees’ opinions, so it’s a good idea to look after your team members as they offboard.

In the event of a legal challenge, having a separation letter with all the details of the termination can help the employer document the reason for the dismissal and prove they gave the former employee appropriate notification.

Are Termination Letters Different for At-Will Employment?

In the US, most employment is at-will. This means employees have the right to leave their jobs at any time, for any reason. Employers can also end employment without establishing just cause if no employee protection laws are violated or a contract states otherwise.

In these scenarios, employers can leave out circumstances surrounding the termination and simply inform the employee about their dismissal. However, the employer must still outline the employee’s rights and benefits in the termination letter.

Common protected categories include laws enforced by the Equal Employment Opportunity Commission (EEOC). The agency prohibits discrimination based on an employee’s race, color, national origin, disability, age, gender, or genetic information.

What Should a Letter of Termination Include?

A termination letter should at the least include the following:

• Employee’s name and position
• Managers’ names and position
• The termination date
• Reason(s) for termination
• An explanation of next steps for compensation and benefits
• A list of company property employees need to return
• Notification of agreements employees signed, such as non-disclosure agreements
• HR contact information for further questions.

If the employee has company property, such as a laptop or phone, be sure to list those items and provide return instructions. A thorough termination letter should also include:

• When the employee can expect their final paycheck and how it'll be delivered
• What's included in their severance package
• Details on the cessation of benefits, retirement fund transfers, etc.
• Next steps for maintaining health coverage or seeking unemployment benefits.

Finally, your letter of dismissal should let the employee know who to contact if they need to follow up or ask questions after their last day with the company.

How Long Should I Keep a Termination Letter on File?

Employers should retain copies of termination letters for a period specified, as stated by your state. If no minimum timeframe is required in your area, a termination letter can be considered part of an employee’s personnel file document, so plan to keep the letter for at least two years.

Can I Send a Letter of Termination by Email?

Ideally, termination letters should be hand-delivered to employees on their final day of employment or at the time of notification (if they're allowed to work the pay period).

However, mailing a termination letter is acceptable in instances of job abandonment or when individuals are banned from a workplace due to safety concerns. When using this approach, companies should deliver the letter via certified mail to demonstrate good faith efforts to meet statutory notification requirements.