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.

RELATED TERMS
  1. Termination of Employment

    Termination of employment refers to the end of an employee’s ...
  2. Voluntary Plan Termination

    The discontinuance of a defined benefit plan by an employer. ...
  3. Voluntary Termination

    Voluntary termination may refer to a variety of actions, most ...
  4. Terminal Year

    The year in which an individual dies, in the context of estate ...
  5. Termination Clause

    A section of a swap contract that describes what will happen ...
  6. Zero Layoff Policy

    A type of company policy that dictates that no employees would ...
Related Articles
  1. Small Business

    How To Handle A Wrongful Termination

    From the moment you lose your job to finding your next one, how do you handle being wrongfully terminated?
  2. Investing

    Why Do Some Failed Mergers Result in Break-Up Fees?

    When mergers go bad, there's often a break-up fee involved of as high as 3-5% of the value of the proposed merger.
  3. Tech

    Bloomberg Adds Litecoin, Ethereum and Ripple To Its Terminal

    Financial data provider Bloomberg added price quotes for Litecoin, Ethereum and Ripple to its terminals.
  4. Managing Wealth

    The Difference Between Being Fired And Resigning

    Here's a rundown of how the two scenarios differ and what you need to know about each.
  5. Small Business

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  6. Investing

    What Happens to Your 401(k) After You Leave a Job?

    Wondering why your 401(k) plan is unavailable after your employment termination? Here are some scenarios to consider.
  7. Retirement

    Is Your 401(k) Administrator Competent?

    The more that employees know about their employee 401(k) plans, the better. But what doesn't your administrator know?
  8. Personal Finance

    What's Your Employee Value?

    Have you ever wondered how much you're worth to your boss? Here's a method for calculating that value.
  9. Managing Wealth

    The layoff payoff: A severance package

    If you must leave your job, go out fighting for the best benefits you can get.
  10. Personal Finance

    The Purpose Of a FMLA Form

    Parsing the different types of paperwork that accompany a leave of absence under the Family Medical Leave Act.
RELATED FAQS
  1. What can cause the terminal growth rate to be negative?

    Learn about the assumptions built into terminal valuations and in what circumstances the applied terminal growth rate might ... Read Answer >>
  2. When evaluating terminal value, should I use the perpetuity growth model or the exit ...

    Examine the important calculation of a terminal value in discounted cash flow analysis, and learn which method of calculating ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center