Most employers are faced with the prospect of separating an employee at one time or another. While this is not a task employers typically look forward to, the process will go smoother when employers are prepared beforehand with the paperwork and notices required under state and federal law.
Requirements Under California Law
- Notice to Employee as to Change in Relationship. When an employee is terminated or laid off, employers are required to provide a Notice to Employee as to Change in Relationship or prepare their own document that includes the same information. This notice is not required when an employee voluntarily resigns or changes jobs within the company. (See California Unemployment Insurance Code 1089).
- Final paycheck. When an employee is terminated, the employer is required to pay all wages owed at the time of termination. If an employee resigns and provides less than 72 hours’ notice, the employer has up to 72 hours (or 3 days) from the time the employee resigns to pay the final wages. When employers fail to timely provide the final paycheck, they may be hit with “waiting time” penalties, which are the employee’s usual wages for each day (up to thirty days) after the final paycheck should have been provided. (See California Labor Code § 203). Make sure final wages include accrued vacation pay, earned bonuses, and earned commissions.
- Notification of Coverage Options. All employers, whether public or private, must “provide to employees, upon termination, notification of all continuation, disability extension and conversion coverage options under any employer-sponsored coverage for which the employee may remain eligible after employment terminates.” (See California Labor Code § 2808(b)).
- Pamphlet on California’s Programs for the Unemployed. Employers must provide departing employees with a copy of the following pamphlet containing information about unemployment benefits no later than the date of separation: For Your Benefit: California’s Programs for the Unemployed. (For additional information, please visit the following page on the California Employment Development Department’s website).
- Notice of Cal-COBRA Continuation Rights. Employers must notify departing employees who have healthcare coverage through their employer of their Cal-COBRA continuation rights. Cal-COBRA must be offered to both terminated employees of small employers (2-19 employees) and large employers (20 or more employees).
- HIPP Notice. Employers with 20 or more employees must provide a copy of the following form to eligible employees covered under the program: The Health Insurance Premium Payment (HIPP) Notice to Terminating Employees (DHCS 9061). (For additional information, please visit the following page of the Department of Health Care Services’ website).
- WARN Notice (State). The California WARN Act applies to businesses that have employed 75 or more full and part-time employees within the preceding twelve months (counting employees who have been employed for at least six of the preceding twelve months). Employers in California must deliver notices to affected employees, email the WARN notice to email@example.com, and give notice to other specified state agencies and officials. (See here for further instructions).
Requirements Under Federal Law
- COBRA Election Notice. For employers with 20 or more employees, the day before a termination, a Consolidated Omnibus Budget Reconciliation Act (COBRA) election notice needs to be provided to employees who are participating in the employer’s group health plan and to any of the terminating employee’s dependents on the plan. A model election notice can be found here.
- WARN Notice (Federal). The Worker Adjustment and Retraining Notification (WARN) Act applies to employers that have over 100 full-time employees or 100 full-time and part-time employees working a total of 4,000 hours a week. The purpose of the WARN Act is to give employees advance notice of an upcoming layoff so that the employees may prepare to obtain alternate employment. If a covered employer is planning a mass layoff or plant closure, the WARN Act requires the employer to give affected employees at least 60-days advance written notice. An employer may use any reasonable method of delivery designed to ensure receipt of the written notice at least 60 days before separation. However, preprinted notices included in each employee’s paycheck or pay envelope and verbal notices do not meet WARN Act requirements.
- Notice of Retirement Benefits. For employers that have retirement benefit plans for their employees, the IRS requires such employers to provide a notice to former employees that advises of rights to retirement benefits within 90–180 days after the employment relationship ends. The notice must explain a participant’s right to defer receiving his or her account balance and the consequences of taking money out of a retirement plan immediately rather than later. The documents provided to participants who are no longer working should contain enough information for the participant to understand their benefits and how to obtain them.
Employers should also consider the following best practices for departing employees:
- If an employee has access to company credit or debit cards, make sure to cancel or close those accounts when the employee is separated.
- Make sure the employee turns in keys, keycards, employee IDs, etc.
- Change company passwords and passcodes if necessary.
- Restrict a former employee’s access to company email accounts, including from mobile devices.
- Take measures to ensure the employee cannot remove confidential company information, whether stored in physical or electronic format.
- Consider completing an exit interview.
If you need assistance complying with state or federal requirements for a departing employee, please contact an experienced employment attorney.