Termination Letter

What Is a Termination Letter?

A termination letter is a letter from an employer to an employee containing pertinent details surrounding their dismissal. It's typically used as a formal notice to the employee and an official record of the fact that they've been let go from the company. This document is also referred to as a:

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

The term “pink slip,” although less common today, may reference a termination letter delivered on the pink layer of a triplicate form.

Why Do Employers Use Termination Letters?

A detailed termination letter can prevent situations where a former employee might claim they were dismissed without cause or knowledge. If it includes reasons for the employee’s dismissal, it can be used as evidence that the employee was terminated on legitimate grounds.

However, a termination letter shouldn't be the sole defense against a wrongful termination lawsuit—in most cases, it's necessary to provide additional records supporting employment-related decisions.

Are Companies Required to Use Termination Letters?

There's no federal legal requirement to create or deliver a termination letter in advance under the Fair Labor Standards Act (FLSA), but several states enforce separation notice regulations, including:

• Arizona
• California
• Colorado
• Connecticut
• Illinois
• Iowa
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nevada
• New Jersey
• New York
• Pennsylvania
• Rhode Island
• South Carolina
• Tennessee

Many of these states also mandate that employers provide information about the individual’s rights. 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.

What Should an Employee Termination Letter Include?

For recordkeeping reasons, a termination letter should at the least include the following:

• Employee’s name and position
• Managers' names and positions
• HR administrator in charge of the termination
• Date of the employee’s last day
• Current date

If the employee is in possession of company property, 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

A termination letter often contains a summary of the facts or events that led to the decision to let the employee go, including any warnings or disciplinary action taken before the final decision. In the case of an at-will termination, a termination letter might, instead of a reason for termination, include an explanation of the at-will employment relationship.

States that require a termination of employment letter often mandate that employers issue an accompanying pamphlet that outlines the terminated individual’s unemployment rights and benefits. For businesses that operate in these states, it’s important to mention the pamphlet in the termination letter as secondary proof that all state legal requirements were met.

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.

Are Termination Letters Different for At-Will Employment?

Most states and Washington, D.C., recognize employment as 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 as long as no laws are violated. 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, as well as the offboarding process. The primary difference between termination letters for at-will employment and traditional dismissal letters is the timeline leading up to termination.

With that being said, businesses can voluntarily include a list of offenses or circumstances relevant to the termination. This is purely at the company’s discretion but is often considered best practice.

How to Write a Termination Letter

Before initiating the termination process, make sure you have all the documentation necessary to support your decision. This should include a list of inciting incidents in chronological order, as well as a list of witnesses or reporting parties.

Here are the key steps to follow when it comes to writing a termination letter:

Step 1: Clearly Identify the Employee

Use the employee’s name, and if applicable, their organization identification number in the header. This makes it clear to whom the termination letter is addressed.

Step 2: Choose an Appropriate Salutation

Keep the tone and language professional. Using a salutation like “Dear” is perfectly acceptable.

Step 3: Compose the Body of the Letter

The body of a termination letter should be well-organized and concise. Open with the purpose of the letter and inform the employee that they're being terminated. Then, transition into a timeline of events that prompted the termination, such as absenteeism.

Next, remind them to return any company-issued property in their possession and outline their rights and responsibilities.

Step 4: Include a Signature Line

End the letter with “Respectfully” or similar and include the name and title of the human resources director or business owner.

Step 5: Make a Copy for Your Employee to Sign

Bring two copies of the employee termination letter to the meeting, and include other parties to safeguard HR staff against any claims of mistreatment or harassment. Ask the terminated employee to sign your copy of the letter and provide them with a copy, as well.

How Are Termination Letters Delivered to Employees?

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 finish out the pay period).

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

How Long Should I Keep a Termination Letter?

Employers should retain termination letters for a period specified by state law. If no minimum timeframe is required in your area, plan on keeping the letter for at least two years.