Termination of Employment

Termination of employment is the formal end of the relationship between an employee and an employer. It can be initiated by either party and may occur for many reasons—downsizing, performance issues, misconduct, retirement, or mutual agreement. Employees temporarily away from work (illness, leave, furlough) remain employed unless they receive a formal notice of termination.

Key takeaways

• Termination can be voluntary, involuntary, or mutual.
• Severance is typically discretionary and not required by federal law.
• Workers unemployed through no fault of their own may qualify for state unemployment insurance.
• Final paycheck, accrued vacation payout, and other rules vary by state.

Types of termination

Voluntary termination

Voluntary termination occurs when an employee chooses to leave:
* Resignation to take another job, retire, start a business, or take a break.
* Constructive dismissal (constructive discharge): the employee is effectively forced to leave because working conditions were made intolerable—examples include unreasonable relocation, significant increase in hours, severe pay reduction, harassment, or an ultimatum to “quit or be fired.” If unlawful conduct by the employer can be proven, the employee may be entitled to compensation.

Employees who resign often provide advance notice (commonly two weeks) to allow for transition.

Involuntary termination

Involuntary termination is initiated by the employer and includes:
* Layoffs/downsizing: usually not the employee’s fault; may be temporary or permanent due to restructuring, cost cutting, or reduced need for certain skills.
* Dismissal (firing): typically for performance problems, misconduct, or violation of company policy.

Many jurisdictions recognize at‑will employment, allowing employers to dismiss employees without prior notice or stated cause, but there are important limits: employers cannot lawfully terminate employees for discriminatory reasons (race, religion, sex, age, disability, etc.) or in retaliation for exercising legal rights (refusing unsafe work, taking protected leave, reporting violations, whistleblowing). Such illegal dismissals may constitute wrongful termination and can lead to reinstatement and/or damages.

Mutual termination

Mutual termination occurs when employer and employee agree to end the employment relationship. It can reduce emotional strain and often includes negotiated terms (e.g., transition arrangements, severance).

Termination for cause and related processes

A termination‑for‑cause clause or policy usually requires documented performance issues and may include an improvement plan (often 60–90 days). If performance does not improve, the employer may terminate employment “for cause.” Dismissals may be issued with or without prejudice:
* With prejudice — dismissal due to misconduct or poor performance; reemployment unlikely.
* Without prejudice — dismissal for non‑performance reasons; rehire remains possible.

Compensation and benefits at termination

Severance pay

Severance packages are typically discretionary unless specified in an employment contract or company policy. There is no federal requirement that employers provide severance.

Final paycheck and accrued benefits

State laws vary on timing and components of the final paycheck. Some states require immediate payment and payout of accrued vacation or paid time off; others do not. Check your state’s regulations.

Unemployment insurance

Workers unemployed through no fault of their own may be eligible for state unemployment benefits. Eligibility, benefit amounts, and application procedures vary by state.

COBRA and health coverage

Under federal COBRA rules, eligible employees may continue group health plan coverage (typically up to 18 months) but are generally responsible for the full premium. State continuation rules may also apply.

Employee rights and responses

If you believe a termination was unlawful (discrimination, retaliation, wrongful termination), consult an employment attorney promptly. After termination, consider:
* Filing for unemployment benefits if eligible.
* Reviewing any severance or separation agreement carefully (consider legal review before signing).
* Verifying final paycheck details and accrued paid time off.
* Assessing continuation of health coverage under COBRA or state laws.

Best practices for employers handling termination

• Document performance issues and prior corrective actions.
• Hold a brief, direct termination meeting—be compassionate and respectful.
• Prepare logistics in advance (final pay, return of company property, access removal).
• Follow company policies and applicable laws to reduce legal risk.

FAQs

What’s the difference between being terminated and being fired?
* They are generally the same—both refer to the end of employment initiated by the employer.

What are the main types of termination?
* Voluntary, involuntary, and mutual.

How should an employer conduct a termination?
* Keep documentation, be direct and compassionate, complete necessary administrative steps, and remove access promptly to protect both parties.

Bottom line

Termination of employment covers a range of situations—from voluntary resignation to involuntary dismissal. Protections exist against unlawful termination, and certain benefits (unemployment, health continuation) may be available depending on the circumstances and state rules. If you face or must execute a termination, understand applicable laws, document actions, and consider legal advice when rights or entitlements are in question.