Employee Termination

Our recommended employee termination procedure

When the time comes to terminate an employee, you must have a solid employee termination agreement prepared ahead of time. If you fail to do so, you might find yourself entrenched in a legal battle that could be costly and time-consuming. You might even find yourself battling legal charges if the employee feels that your termination was discriminatory or that your termination did not have a solid basis.

What is an employee termination agreement?

An employee termination agreement is a legal contract that you, the employer, must sign with the terminated employee. This agreement is legally binding for both parties.

What should you include in an employee termination agreement?

The exact information included in your employee termination agreement depends on you, the employee, and the specific firing situation. For example, you may be terminating the person’s employment but plan to hire the person on as a consultant for your business. In this case, employee termination agreement should explain this.

Regardless, your employee termination agreement will include the rights and responsibilities of both the employee and the company. This might include whether the terminated employee will receive any benefits. It also might stipulate the employee cannot use the information he or she has picked up about your business to help your competition. Most importantly, your employee termination agreement should specify the employee cannot hold your company liable for any debt or to bring a lawsuit against your company.

Who should sign the employee termination agreement?

Obviously, the employee should sign the employee termination agreement. You should also have at least two more people sign the agreement as witnesses and as representatives of your company. If you are the Human Resources Manager of a company, you will sign the employee termination agreement. The owner of the company or the employee’s boss should sign it as well.

If you are a small business owner, you will sign the agreement. If you do not have any other employees, you might want to take the agreement to a notary for witnessing.

What format should I use with my employee termination agreement?

Using the proper wording and formatting is important when creating an employee termination agreement. Failing to use certain words or using a word in the wrong place can change the meaning of the document. This can leave you vulnerable for a lawsuit. Ideally, you should contact an attorney to help you create the agreement. Alternatively, buy a book that provides specific samples of an agreement and information about how to alter the samples properly to fit your specific needs.

What you must know before terminating any employee