The Importance of Timely Terminations

So often, our blogs focus on strategies for sourcing, hiring, and compliance issues surrounding workforce management. However, there are essential considerations to make when terminating an employee, either by choice or by HR. 

Let’s examine some compliance issues companies must respect—specifically, the timeliness of administering termination pay, unemployment compensation, healthcare, and other benefit extensions.

Pay Requirements After Terminating an Employee

Laws regarding terminating an employee vary widely from state to state, each dictating their own requirements around issuing an employee’s last paycheck. 

One of the more common requirements governs when the employer must deliver a terminated employee’s final paycheck. Alabama, Florida, Georgia, Mississippi, and Ohio are the only states without specific laws dictating how quickly an employer must pay employees their final wages upon termination.

California, where employment laws are stricter, enforces a penalty on employers who do not promptly deliver an employee’s final pay. In The Golden State, employers must pay employees on their last day if they gave prior notice of their intent to quit, or within 72 hours if they did not provide a notice. 

The penalty calculation multiples the employee’s daily wage by the number of days they did not receive pay, up to a maximum of 30 days. This does not mean that wages continue for 30 days, but that the employee may be entitled to up to 30 actual days’ worth of wages if they do not receive pay.

Unemployment Compensation

Several factors will determine how an unemployment insurance (UI) claim will impact an employer, all of which are important to understand. Every UI claim can potentially affect an employer’s bottom line—an important detail to remember for any company interested in controlling labor costs.

When employers do not report terminations promptly, employees can file for unemployment. There is a tiny window (usually about 7–10 days) for the terminating company to respond. If, somehow, they do not know the employee has been terminated and fail to respond to the notice, the employee may be deemed eligible to receive unemployment when, in fact, the cause of their termination could make them ineligible for benefits. 

If a company does not respond on time, reports incorrect data, or keeps outdated records, the state may flag it for audit.

Health Benefits

An individual covered under a group health plan the day before a qualifying event occurs would be qualified as a beneficiary. A qualifying event is a specific event that results in losing plan group coverage. There are several types of qualifying events for employees, their spouses, and dependent children:

• For an employee, a qualifying event may include voluntary or involuntary termination of employment for any reason other than “gross misconduct” and reduction in employment hours, which would result in the loss of coverage.
• For a covered employee’s spouse, qualifying events include the death of the employee, termination of the employee, reduction in the employee’s employment hours, divorce, legal separation, or if an employee becomes eligible to receive Medicare benefits.
• Qualifying events for an employee’s dependent children include those listed above for spouses—plus an instance wherein the child loses eligibility due to reaching the maximum dependent or student age or graduation from college.

Group health plans must give each employee (and each spouse of an employee who becomes covered under the plan) a general notice describing COBRA rights within 90 days of the date the covered employee or spouse first receives coverage. 

However, if the employee receives it later, the plan’s date becomes subject to the continuation coverage requirements or moves to the date the administrator must give an election notice to the employee or their spouse (or dependent).

The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives notice that a qualifying event has occurred. Failure to comply with these requirements increases the risk of fines and penalties via litigation.

Need More Advice on Employee Management?

If your workforce management program does not maintain a standard, written set of policies governing terminations, turn to experts in workforce management like nextSource to help develop and implement such plans before issues arise.