September 17, 2024 • 13 mins
The end of the employer-employee relationship is an inevitable part of running a business and requires special care. To help you manage your next employee separation, we address some common misconceptions about the termination process, and help you know the facts. Listen in as we cover:
- [0:43] At-will employment
- [3:11] Final pay timing
- [4:26] Method of final pay
- [5:56] Return of company equipment
- [7:59] Entitlement to unemployment benefits
- [8:37] Recordkeeping post-employment
- [9:40] Pay for unused vacation & sick leave
- [11:18] Exit interviews
This content is based on generally accepted HR practices, is advisory in nature, and does not constitute legal advice or other professional services. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content. Employers are encouraged to consult with legal counsel for advice regarding their organization's compliance with applicable laws. This content is current as of the published date.
Copyright © 2024 ADP, Inc. All Rights Reserved. The ADP logo, ADP, RUN Powered by ADP, and HR{preneur} are registered trademarks of ADP, Inc. and its affiliates. All other marks are the property of their respective owners.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jim (00:00):
The end of the employer employee relationship is an inevitable part
of running a business and requiresspecial care. In this podcast.
we'll cover some common misconceptionsabout the termination process
and help, you know, the facts.
Welcome to HRpreneur.
I'm Jim Duffy.
From main street to your street.
The HRpreneur podcast is centeredaround helping small businesses
(00:20):
like yours gain the knowledge youneed from HR, payroll, and hiring to
time, taxes, benefits, and insurance.
Today we'll talk with our guestMeryl Gutterman about myths
surrounding employee termination.
Meryl is senior counselwith ADP's HCM group.
Hello there, Meryl.
As always, it's great tohave you back on our show.
Meryl (00:39):
Hi, Jim.
Thanks for having me.
It's great to be here with you as well.
Jim (00:43):
So let's address the first myth we'd like to bust.
And that is at will employment meansyou can fire an employee for any reason.
Meryl (00:52):
This is a great myth to attack first.
The truth is while at will employmentbasically means that the employer.
or the employee may end the employmentrelationship for any reason, the
reason must still be a lawful one.
So, for example, there are laws thatprohibit employers from terminating
individuals for exercising theirrights under the law, such as taking
(01:15):
job protected leave, and employerscan't terminate an employee because
of a protected characteristic,such as age or race or religion,
disability, gender, national origin,or military status, for example.
So if an employer were to terminatean employee for engaging in
protected activity or because ofa protected characteristic, for
(01:38):
instance, then they may be subjectto a claim or a lawsuit regardless
of the employee's at will status.
And there are other ways other exceptionsto at will employment as well That can
be created by a contract or a statuteor the courts or public policy so you
have to pay attention to those as well.
Jim (01:58):
Okay, meryl So I understand Montana is the only state that
doesn't recognize at will employment.
Could you please explainhow Montana's law differs?
Meryl (02:07):
Sure.
So in Montana, employers must havegood cause to discharge an employee
after the employee completesan initial probationary period.
If an employer doesn't establisha specific probationary period,
the probationary period is assumedto be 12 months from the date of
hire, which the employer can thenextend for up to 6 more months.
(02:28):
The law also has rules for notifyinga discharged employee of any
written internal procedures forthe employee to file an appeal with
the employer about a discharge.
And the state also defines good causeas reasonable job related grounds for
an employee's dismissal based on theemployee's failure to adequately perform
their job duties or the employee'sdisruption of the employer's operation.
(02:53):
Or the employee's material or repeatedviolation of an express provision of
the employer's written policies oranother legitimate business reason that
the employer determines while they'reusing reasonable business judgment.
Jim (03:09):
Thank you, Meryl.
Very helpful.
The next myth I would like to askyou to address is the one that talks
about final pay isn't due untilthe next regular payday, regardless
of the state or the situation.
Meryl (03:22):
Yes, this is a myth, so let's debunk this one as well.
Uh, the truth is that under federallaw, final pay is typically due by the
next regular payday, but there are manystates that require final pay sooner.
In some cases, the timeframe differsdepending on whether the employee
initiates the separation, and that'salso known as a voluntary termination,
(03:44):
or if the employer initiates theseparation, and that would be
known as an interim termination.
Involuntary termination, uh, forexample, in Texas, for involuntary
terminations, final pay is due withinsix days of the date of termination.
And when an employee quits or resigns,they must be paid in full, no later
than the next regularly scheduledpayday after the effective date of
(04:08):
the resignation or the retirement.
And keep in mind, too, that some stateshave separate final pay deadlines and
other rules that apply to commissionsand bonuses and other special situations
that you have to also pay attention to.
Jim (04:24):
Great points to remember.
Uh, for our third myth, Meryl,let's discuss the misunderstandings
that a departing employee's finalpay should always be mailed to them.
Meryl (04:34):
Good idea.
Let's tackle this one as well.
So, in reality, many stateshave rules about the location
and the method for final pay.
So, listeners need to firstmake sure they're checking
their state law for details.
So, for example, in California, whenthere's an involuntary termination,
the employee must receive their finalpay at their place of discharge.
(04:56):
When the employee resigns orretires, California requires that
the employee receive their finalpay at the office of the employer
in the county they had been working.
And if the employee gives atleast 72 hours notice of their
intention to quit, final pay mustbe paid at the time of quitting.
But, if a California employee quitsor retires without providing that 72
(05:20):
hours notice, then they can receivepayment by mail if they request it
and they designate a mailing address.
And the date of the mailing is whatconstitutes the date of payment
for purposes of that requirementto provide payment within 72
hours of their separation notice.
And then also in Californiafor both voluntary
and involuntary terminations, an employeewho is authorized final pay by direct
(05:46):
deposit may receive final wages in thismanner as well, provided that all the
other final pay requirements are also met.
Jim (05:55):
So moving on here, one of the challenges that employers face when
employees employment ends is ensuringthe company equipment is returned.
This has resulted in the myththat employers can simply
withhold the employee's finalpay in those kinds of situations.
What's the truth?
Meryl (06:12):
Right.
Uh, well, that's not the truth.
The truth is that regardless of whetherthe employee has failed to return
company property, the employer must meetfederal and state final pay deadlines.
So while withholding an employee'sfinal paycheck is not allowed, there are
some limited cases in which deductionsmay be permitted under federal law.
So if you have a non exempt employeeand that's an employee who's entitled to
(06:36):
minimum wage in overtime, the Fair LaborStandards Act, or we know as the FLSA.
It does permit deductions forunreturned equipment, as long as the
deductions don't reduce the employee'spay below the minimum wage, and they
don't cut into any overtime pay.
But there are some states thatprohibit this practice, or have other
(06:57):
requirements, so employers need tocheck their state law, and they really
also should be consulting with counselbefore they're making any decisions.
This type of deduction or anytype of deduction, um, deductions
for unreturned equipment arenever permitted for employees
classified as exempt from overtime.
And keep in mind too that under theFLSA employers have to get an employee's
(07:20):
consent before they make a deduction.
So the agreement needs to specify theitems for which deductions will be made.
And that could be for companyuniforms or equipment.
Or even employee theft and the agreementalso needs to specify how the amount
of the deduction will be determined.
So, again, it's best practice to obtainthe employee's authorization in writing
(07:43):
and to consult with legal counselbefore you're making a deduction.
Jim (07:48):
Thank you for clarifying that, Meryl.
Another common myth is thatemployees who quit are never
entitled to unemployment benefits.
Meryl (07:55):
Right.
This is a pretty common myth.
In reality, the fact is thatan employee who quits is not
always disqualified from them.
So to receive benefits, employeeswho resign have to show that
they quit for good cause.
And this is typicallyattributable to the employer.
So while good cause varies by state,employees who quit as a result of
(08:16):
retaliation or maybe to care fora sick family member or perhaps
due to a significant reduction inhours or pay, they may be eligible
for unemployment benefits andeligibility rules vary greatly.
So here too is another areawhere employers need to check
their state law for details.
Jim (08:36):
Great point.
Okay, Meryl.
So the next myth I'd like to address isthe one that once an employee leaves.
The employer no longerneeds to keep their records.
Is that true?
Meryl (08:46):
Right.
That is a myth worth addressingbecause no, that's not true.
Uh, the truth is that there aresome federal state and local record
keeping rules that require employersto hold on to records well beyond
the employee's length of employment.
So for example, an employer has tokeep an I 9 form for at least three
years from the employee's date of hire.
(09:08):
Or for one year followingtermination, whichever is later.
And then also under certain federalnon discrimination laws, employers
have to hold on to personnel recordsfor at least one year from the
date of an involuntary termination.
And if an employee files adiscrimination claim, then they then
employers have to hold on to thoserecords until the claim is resolved.
(09:29):
So employers need to make surethey're checking federal, state,
and local laws, uh, just to makesure they're on top of all of the
specific record keeping requirements.
Jim (09:40):
Great.
Uh, the next one here, Meryl,is, could you also please address
the myth that employees are neverentitled to pay for unused vacation
time when they leave the company?
And if I can add, does thisalso apply to paid sick leave?
Meryl (09:54):
Sure.
Uh, so let's tackle bothparts of that question.
States generally handle unused vacationand pay time off in one of three ways.
So, the first way is employers haveto pay employees for unused vacation
time at the time of separation.
The second way is employers can excludeunused vacation time from final pay.
(10:17):
If the employer has a writtenpolicy that explicitly states that
employees will not be paid foraccrued unused time upon separation.
Or the third way is employers can excludeunused vacation from final pay unless
they have a policy that says otherwise.
So here employers need to checktheir state law to see which of these
(10:40):
options applies to their business.
And then as far as sick leave laws.
Most don't require employers topay employees for accrued unused sick
leave at the time of separation.
However, there's always a caveat, ifthe employer chooses to bundle all of
their leaves, so if they were to includesick leave into a single pay time off
(11:02):
policy or PTO policy, then The statecould apply the same rules as it does
for accrued unused vacation and PTO.
And in that instance, that couldrequire payout upon separation.
Jim (11:16):
Excellent, Meryl.
Thank you.
And for our final myth today, canyou please bust the myth that exit
interviews are a waste of time?
Meryl (11:25):
Sure.
I'd be happy to bust that myth.
Um, it's a common myth and really exitinterviews are not a waste of time.
Um, as we all know, turnover can becostly and exit interviews are a great
way to find out why employees are leaving.
So you can, if possible, make changesto help prevent other employees
from departing for similar reasons.
(11:47):
So as a best practice, werecommend that you try to conduct exit
interviews with employees who resign orretire, and when doing so, it's helpful
to use the same core set of questionsso you can identify trends and then go
ahead and develop plans for improvement.
Jim (12:04):
Excellent, Meryl.
Thank you very much.
Again, another fascinatingconversation with you.
This brings us to the end of this episode.
Again, we enjoyed thediscussion here on HRpreneur.
And as I've been trying to do recently,Meryl, as I take some notes while we're
chatting here, and I'd like to justrecap, but please do keep me honest.
So the first point I wanted to reiteratewas, at will employment generally means
(12:27):
the employer or employee, who has a Mayend the employment relationship for any
reason, but the employer's reason fortermination must still be a lawful one.
The second point I wanted to reiteratewas that under federal law, final pay
is generally due by the next regularpayday, but many states require final
pay sooner, so we need to look into that.
(12:49):
The third one is many stateshave specific rules about the
location and method for final pay.
So simply mailing finalpay to the employee may be
incorrect in some situations.
Another point that you raised was thatsome federal, state, and local record
keeping rules require employers toretain certain records well beyond
the employee's length of employment.
(13:11):
And another and final point I wantedto reiterate for our listeners was
that whether an employee's finalpaycheck must include pay for
unused vacation time depends onthe state and the company policy.
So did I cover those accurately?
Meryl (13:25):
Great.
You captured those all really well.
Jim.
Jim (13:29):
Great.
Thank you, Meryl, for that.
Presented by ADP, HRpreneur focuseson the entrepreneurs and business
drivers who are shaping the growthof their companies and positively
impacting the lives of their employees.
With each episode, webring the experts to you.
We answer your questions and helpyou think beyond today so you can
discover more success tomorrow.
(13:49):
Thanks also to our listeners forjoining us for today's episode.
Be well, and we hopeyou'll join us again soon.
The end of the employer employee relationship is an inevitable part
of running a business and requiresspecial care. In this podcast.
we'll cover some common misconceptionsabout the termination process
and help, you know, the facts.
Welcome to HRpreneur.
I'm Jim Duffy.
From main street to your street.
The HRpreneur podcast is centeredaround helping small businesses
(00:20):
like yours gain the knowledge youneed from HR, payroll, and hiring to
time, taxes, benefits, and insurance.
Today we'll talk with our guestMeryl Gutterman about myths
surrounding employee termination.
Meryl is senior counselwith ADP's HCM group.
Hello there, Meryl.
As always, it's great tohave you back on our show.
Meryl (00:39):
Hi, Jim.
Thanks for having me.
It's great to be here with you as well.
Jim (00:43):
So let's address the first myth we'd like to bust.
And that is at will employment meansyou can fire an employee for any reason.
Meryl (00:52):
This is a great myth to attack first.
The truth is while at will employmentbasically means that the employer.
or the employee may end the employmentrelationship for any reason, the
reason must still be a lawful one.
So, for example, there are laws thatprohibit employers from terminating
individuals for exercising theirrights under the law, such as taking
(01:15):
job protected leave, and employerscan't terminate an employee because
of a protected characteristic,such as age or race or religion,
disability, gender, national origin,or military status, for example.
So if an employer were to terminatean employee for engaging in
protected activity or because ofa protected characteristic, for
(01:38):
instance, then they may be subjectto a claim or a lawsuit regardless
of the employee's at will status.
And there are other ways other exceptionsto at will employment as well That can
be created by a contract or a statuteor the courts or public policy so you
have to pay attention to those as well.
Jim (01:58):
Okay, meryl So I understand Montana is the only state that
doesn't recognize at will employment.
Could you please explainhow Montana's law differs?
Meryl (02:07):
Sure.
So in Montana, employers must havegood cause to discharge an employee
after the employee completesan initial probationary period.
If an employer doesn't establisha specific probationary period,
the probationary period is assumedto be 12 months from the date of
hire, which the employer can thenextend for up to 6 more months.
(02:28):
The law also has rules for notifyinga discharged employee of any
written internal procedures forthe employee to file an appeal with
the employer about a discharge.
And the state also defines good causeas reasonable job related grounds for
an employee's dismissal based on theemployee's failure to adequately perform
their job duties or the employee'sdisruption of the employer's operation.
(02:53):
Or the employee's material or repeatedviolation of an express provision of
the employer's written policies oranother legitimate business reason that
the employer determines while they'reusing reasonable business judgment.
Jim (03:09):
Thank you, Meryl.
Very helpful.
The next myth I would like to askyou to address is the one that talks
about final pay isn't due untilthe next regular payday, regardless
of the state or the situation.
Meryl (03:22):
Yes, this is a myth, so let's debunk this one as well.
Uh, the truth is that under federallaw, final pay is typically due by the
next regular payday, but there are manystates that require final pay sooner.
In some cases, the timeframe differsdepending on whether the employee
initiates the separation, and that'salso known as a voluntary termination,
(03:44):
or if the employer initiates theseparation, and that would be
known as an interim termination.
Involuntary termination, uh, forexample, in Texas, for involuntary
terminations, final pay is due withinsix days of the date of termination.
And when an employee quits or resigns,they must be paid in full, no later
than the next regularly scheduledpayday after the effective date of
(04:08):
the resignation or the retirement.
And keep in mind, too, that some stateshave separate final pay deadlines and
other rules that apply to commissionsand bonuses and other special situations
that you have to also pay attention to.
Jim (04:24):
Great points to remember.
Uh, for our third myth, Meryl,let's discuss the misunderstandings
that a departing employee's finalpay should always be mailed to them.
Meryl (04:34):
Good idea.
Let's tackle this one as well.
So, in reality, many stateshave rules about the location
and the method for final pay.
So, listeners need to firstmake sure they're checking
their state law for details.
So, for example, in California, whenthere's an involuntary termination,
the employee must receive their finalpay at their place of discharge.
(04:56):
When the employee resigns orretires, California requires that
the employee receive their finalpay at the office of the employer
in the county they had been working.
And if the employee gives atleast 72 hours notice of their
intention to quit, final pay mustbe paid at the time of quitting.
But, if a California employee quitsor retires without providing that 72
(05:20):
hours notice, then they can receivepayment by mail if they request it
and they designate a mailing address.
And the date of the mailing is whatconstitutes the date of payment
for purposes of that requirementto provide payment within 72
hours of their separation notice.
And then also in Californiafor both voluntary
and involuntary terminations, an employeewho is authorized final pay by direct
(05:46):
deposit may receive final wages in thismanner as well, provided that all the
other final pay requirements are also met.
Jim (05:55):
So moving on here, one of the challenges that employers face when
employees employment ends is ensuringthe company equipment is returned.
This has resulted in the myththat employers can simply
withhold the employee's finalpay in those kinds of situations.
What's the truth?
Meryl (06:12):
Right.
Uh, well, that's not the truth.
The truth is that regardless of whetherthe employee has failed to return
company property, the employer must meetfederal and state final pay deadlines.
So while withholding an employee'sfinal paycheck is not allowed, there are
some limited cases in which deductionsmay be permitted under federal law.
So if you have a non exempt employeeand that's an employee who's entitled to
(06:36):
minimum wage in overtime, the Fair LaborStandards Act, or we know as the FLSA.
It does permit deductions forunreturned equipment, as long as the
deductions don't reduce the employee'spay below the minimum wage, and they
don't cut into any overtime pay.
But there are some states thatprohibit this practice, or have other
(06:57):
requirements, so employers need tocheck their state law, and they really
also should be consulting with counselbefore they're making any decisions.
This type of deduction or anytype of deduction, um, deductions
for unreturned equipment arenever permitted for employees
classified as exempt from overtime.
And keep in mind too that under theFLSA employers have to get an employee's
(07:20):
consent before they make a deduction.
So the agreement needs to specify theitems for which deductions will be made.
And that could be for companyuniforms or equipment.
Or even employee theft and the agreementalso needs to specify how the amount
of the deduction will be determined.
So, again, it's best practice to obtainthe employee's authorization in writing
(07:43):
and to consult with legal counselbefore you're making a deduction.
Jim (07:48):
Thank you for clarifying that, Meryl.
Another common myth is thatemployees who quit are never
entitled to unemployment benefits.
Meryl (07:55):
Right.
This is a pretty common myth.
In reality, the fact is thatan employee who quits is not
always disqualified from them.
So to receive benefits, employeeswho resign have to show that
they quit for good cause.
And this is typicallyattributable to the employer.
So while good cause varies by state,employees who quit as a result of
(08:16):
retaliation or maybe to care fora sick family member or perhaps
due to a significant reduction inhours or pay, they may be eligible
for unemployment benefits andeligibility rules vary greatly.
So here too is another areawhere employers need to check
their state law for details.
Jim (08:36):
Great point.
Okay, Meryl.
So the next myth I'd like to address isthe one that once an employee leaves.
The employer no longerneeds to keep their records.
Is that true?
Meryl (08:46):
Right.
That is a myth worth addressingbecause no, that's not true.
Uh, the truth is that there aresome federal state and local record
keeping rules that require employersto hold on to records well beyond
the employee's length of employment.
So for example, an employer has tokeep an I 9 form for at least three
years from the employee's date of hire.
(09:08):
Or for one year followingtermination, whichever is later.
And then also under certain federalnon discrimination laws, employers
have to hold on to personnel recordsfor at least one year from the
date of an involuntary termination.
And if an employee files adiscrimination claim, then they then
employers have to hold on to thoserecords until the claim is resolved.
(09:29):
So employers need to make surethey're checking federal, state,
and local laws, uh, just to makesure they're on top of all of the
specific record keeping requirements.
Jim (09:40):
Great.
Uh, the next one here, Meryl,is, could you also please address
the myth that employees are neverentitled to pay for unused vacation
time when they leave the company?
And if I can add, does thisalso apply to paid sick leave?
Meryl (09:54):
Sure.
Uh, so let's tackle bothparts of that question.
States generally handle unused vacationand pay time off in one of three ways.
So, the first way is employers haveto pay employees for unused vacation
time at the time of separation.
The second way is employers can excludeunused vacation time from final pay.
(10:17):
If the employer has a writtenpolicy that explicitly states that
employees will not be paid foraccrued unused time upon separation.
Or the third way is employers can excludeunused vacation from final pay unless
they have a policy that says otherwise.
So here employers need to checktheir state law to see which of these
(10:40):
options applies to their business.
And then as far as sick leave laws.
Most don't require employers topay employees for accrued unused sick
leave at the time of separation.
However, there's always a caveat, ifthe employer chooses to bundle all of
their leaves, so if they were to includesick leave into a single pay time off
(11:02):
policy or PTO policy, then The statecould apply the same rules as it does
for accrued unused vacation and PTO.
And in that instance, that couldrequire payout upon separation.
Jim (11:16):
Excellent, Meryl.
Thank you.
And for our final myth today, canyou please bust the myth that exit
interviews are a waste of time?
Meryl (11:25):
Sure.
I'd be happy to bust that myth.
Um, it's a common myth and really exitinterviews are not a waste of time.
Um, as we all know, turnover can becostly and exit interviews are a great
way to find out why employees are leaving.
So you can, if possible, make changesto help prevent other employees
from departing for similar reasons.
(11:47):
So as a best practice, werecommend that you try to conduct exit
interviews with employees who resign orretire, and when doing so, it's helpful
to use the same core set of questionsso you can identify trends and then go
ahead and develop plans for improvement.
Jim (12:04):
Excellent, Meryl.
Thank you very much.
Again, another fascinatingconversation with you.
This brings us to the end of this episode.
Again, we enjoyed thediscussion here on HRpreneur.
And as I've been trying to do recently,Meryl, as I take some notes while we're
chatting here, and I'd like to justrecap, but please do keep me honest.
So the first point I wanted to reiteratewas, at will employment generally means
(12:27):
the employer or employee, who has a Mayend the employment relationship for any
reason, but the employer's reason fortermination must still be a lawful one.
The second point I wanted to reiteratewas that under federal law, final pay
is generally due by the next regularpayday, but many states require final
pay sooner, so we need to look into that.
(12:49):
The third one is many stateshave specific rules about the
location and method for final pay.
So simply mailing finalpay to the employee may be
incorrect in some situations.
Another point that you raised was thatsome federal, state, and local record
keeping rules require employers toretain certain records well beyond
the employee's length of employment.
(13:11):
And another and final point I wantedto reiterate for our listeners was
that whether an employee's finalpaycheck must include pay for
unused vacation time depends onthe state and the company policy.
So did I cover those accurately?
Meryl (13:25):
Great.
You captured those all really well.
Jim.
Jim (13:29):
Great.
Thank you, Meryl, for that.
Presented by ADP, HRpreneur focuseson the entrepreneurs and business
drivers who are shaping the growthof their companies and positively
impacting the lives of their employees.
With each episode, webring the experts to you.
We answer your questions and helpyou think beyond today so you can
discover more success tomorrow.
(13:49):
Thanks also to our listeners forjoining us for today's episode.
Be well, and we hopeyou'll join us again soon.
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