Your Compliance Edge

Termination Steps

Termination of employment, whether voluntary or involuntary, can be one of the most stressful events an employer faces. Depending on the reason for the termination, employees may have different rights, and employers may have different responsibilities. The Steps to Success interactive guides featured in this section are designed to give employers a clear picture of the key action steps involved in both involuntary and voluntary terminations, from developing an effective termination policy to satisfying post-termination obligations. To get started, click on the appropriate link in the left-hand navigation.

The following overview highlights some common reasons for termination of employment, as well as key differences between voluntary and involuntary terminations which may impact an employer's responsibilities before, during, and after the termination. 

Reasons for Involuntary Termination

  • Layoff/Reduction-in-force
  • More cost-effective alternatives
  • Close of business
  • Firing for:
    • Poor performance
    • Tardiness/absenteeism
    • Failure to abide by company policy
    • Insubordination
    • Misconduct, such as harassment, employee theft or violence
  • Death of employee

 Reasons for Voluntary Termination (Employee Resignation)

  • Move to another job
  • Going back to school or switching to another career
  • Personal or family needs (beyond family/medical leave entitlements)
  • Retirement
  • Quitting as a result of: 
    • Workplace conflict
    • Low morale
    • Dissatisfaction with position and/or future with company  
    • Constructive discharge*

Key Differences between Involuntary and Voluntary Termination

The reason that an employee leaves your company may affect your responsibilities and the employee’s post-termination rights.  For example:

  • When an employee retires, the retirement plan that you sponsor may need to prepare for making distributions to the employee.
  • If the employee dies, your life insurance plan may need to distribute proceeds to the employee’s surviving spouse or dependents.  
  • If an employee is terminated reasons deemed to be “gross misconduct,” he or she may not be eligible for unemployment insurance benefits, severance, or continuation of health coverage through COBRA or state law. 
  • Whether or not an employee’s termination is voluntary or involuntary, he or she may still be eligible for COBRA continuation of health coverage, or state continuing coverage. 
  • If an employee is terminated in connection with a mass layoff or plant closing, you may be required to provide all such affected employees  advance notice (60 calendar days) under the WARN Act. 

*Constructive discharge

Even when an employee “quits” or resigns, sometimes in the eyes of the law, a resignation may be viewed as an involuntary termination.  These situations are referred to as “constructive discharges.”  This type of discharge occurs when an employer imposes intolerable working conditions in violation of the law, such as those related to discrimination or sexual harassment, that compel a reasonable employee to quit.  This conclusion may be reached regardless of the employer’s intention to force the employee to resign.

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