What is a 'Notice of Termination'

A notice of termination refers to how an employer notifies an employee as to the end of their employment contract. More broadly, it may also refer to the formal notification of the end of a contract between two or more parties. While a notice of termination usually is provided to an employee for reasons unrelated to his or her job performance — for example, because business conditions necessitate layoffs or downsizing — it may also be given to an employee for poor job performance or misconduct. Another term for notice of termination document is "pink slip" or "termination letter."

Breaking Down 'Notice of Termination'

In the United States, employers are not required to give notice to a worker prior to their termination as per the Fair Labor Standards Act (FLSA). All American workers are considered "at-will," which means that an employer can terminate employees for any reason, without establishing just cause, as long as the reason is not illegal (such as gender, religious or racial discrimination). The reasoning is that an employee also has the right to leave a job for any reason at any time. In certain cases, however, employers are required to give workers advance notice of mass layoffs or a plant closure, especially if they are a member of a union.

In some countries, an individual who has been employed for a certain period of time must be provided with a notice of termination. For example, in Canada workers who have been employed with a company continuously for three or more months must be given a written notice of termination by their employer, along with termination pay or a combination of both. How long a notice period is depends on length of service. A notice of termination is not due to an employee who is guilty of disobedience, willful misconduct or neglect of duty, however.

In the U.S., the only notifications legally required to be included in a notice of termination are related to the Consolidated Omnibus Benefits Reconciliation Act (COBRA) and the Worker Adjustment and Retraining Notification Act (WARN). A reason for termination need not be stated, though it tends to be a best practice if an employee has been fired for cause.

Notice of Termination: Contracts

When a party to a contract wants to notify another party (or parties) of their intent to end their relationship, as well as disclose a date for contract expiration, they will send a notice of termination. Simply put, it is a formal declaration of to another party that you plan to end a contact. It acts as a public record of such an action and can help resolve disputes should they arise later. Such a notice will contain the terms that permit termination of an agreement. A notice of termination (also called a "notice of cancellation of contract" or "contract termination letter") serves as a courtesy to other parties and can help preserve relationships.

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