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Notice of Termination

A notification made by an employer and sent to an employee informing the latter that they will no longer work for the organization

What is a Notice of Termination?

A notice of termination is a notification made by an employer and sent to an employee informing the latter that they will no longer work for the organization starting from a specified date in the future. It is an official document from an employer that informs an employee that they are being laid off or fired from their current position in the organization.

 

Notice of Termination

 

The reasons for termination can range from gross misconduct, downsizing, layoffs, poor performance, and corporate closures – among others. Most countries require employers to provide advance notification of an impending layoff or company closure to give the employees enough time to prepare for the termination.

 

Summary

  • A notice of termination is an official document made by an employer that is used to notify an employee that their employment contract has been terminated.
  • A notice of termination may be provided to an employee for various reasons, such as poor work performance, layoffs, and unethical behavior.
  • Under the Fair Labor Standards Act (FLSA), employers in the United States are not required to provide a written notice of termination when ending the employment contract of an employee.

 

How Does a Notice of Termination Work?

Under the Fair Labor Standards Act (FLSA), employers in the United States are not required by law to provide written notice of termination to an employee. However, if an employee belongs to a worker’s union, is part of a collective bargaining agreement, or is serving under a contract, the employer is obligated to provide written notice of termination. Such employees should also be given advance notification of termination before the actual notice of termination is given to them.

Most US workers are hired “at-will,” and the employer is not legally bound to provide a notice of termination when ending the services of an employee. The employer can terminate the employee for any reason, as long as the reason is not illegal – such as termination based on gender, religion, or racial discrimination. In addition, the employee can leave the job at any time during their tenure of employment.

Other countries adhere to different regulations regarding the notice of termination and when it should be given to an employee. In Canada, employers are required to provide employees with written notice of termination if the employee has worked continuously for at least three months. The employee should also be granted termination pay alongside the notice of termination. The notice period varies with the length of service of an employee.

 

Termination-Related Notifications from Employers

Although the federal government does not require employers to provide any sort of written termination notice detailing the reason for termination, there are certain termination-related notifications that employers are required to provide. The notifications include the Consolidated Omnibus Benefits Reconciliation Act and the Worker Adjustment and Retraining Notification Act – abbreviated as COBRA and WARN, respectively.

COBRA is a federal law that provides continuing group health insurance benefits for employees and their families who lose their health benefits due to unemployment or other qualifying events, such as death, divorce, career transition, etc. COBRA allows such employees to continue the health benefits provided by their group health plan for a limited period at the group rates while looking for a new position.

The employee must pay the full cost of insurance and an administrative premium. The COBRA coverage lasts for a maximum of 18 months but can be extended up to 36 months in special circumstances.

On the other hand, the WARN Act is a federal law that requires employers to provide at least a 60-day notice before a planned mass layoff or closure. WARN applies to employers who plan to lay off more than 50 employees since it can negatively impact the economic conditions of the employees, their families, and the community that they are part of.

The notice is provided to the employees, their representative union/collective bargaining unit, or the state dislocated worker unit.

 

Forms of Involuntary Termination

The following are the main forms of involuntary termination:

 

1. Layoffs

When a company is undergoing financial challenges, it may decide to lay off some of its employees as a way of reducing their operating costs. Layoffs may also occur as part of a company’s strategy to restructure its human resources by letting go of non-essential employees whose services will not be required in the new structure.

 

2. Getting fired

An employee may be fired from an organization for violating the company’s policies, poor work performance, or unethical behavior that does not fit the company’s culture. Employees hired “at-will” may be dismissed from employment without the employer providing notice of termination.

 

3. Termination for cause

An employee may be dismissed from employment for a specific cause. Usually, before an employee is terminated, he or she is put on an improvement schedule that may last for 60 to 90 days, during which the employee is required to show improvement in their work ethics or overall performance.

If the employee shows improvements during the probation period, he or she may be retained in the company. However, if the employee does not show improvements during the allowed period, they are dismissed for a cause.

 

Related Readings

CFI is the official provider of the Certified Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.

In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

  • Attrition
  • Being Laid Off vs. Getting Fired
  • Cyclical Unemployment
  • Remuneration

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