What Is Termination of Employment?

The term termination of employment refers to the end of an employee’s work with a company. An employee may be terminated from a job of their own free will or following a decision made by the employer. Employers who execute a termination of employment may do so for a number of reasons, including downsizing, poor job performance, or redundancies.

An employee who is not actively working because of an illness, leave of absence, or furlough is still considered employed if the relationship with the employer has not been terminated formally with a notice of termination.

Key Takeaways

  • Termination of employment refers to the end of an employee’s work with a company.
  • Termination may be voluntary, as when a worker leaves of their own accord.
  • Involuntary termination occurs when a company downsizes, makes layoffs, or fires an employee.
  • Severance packages are discretionary, which means a company does not need to offer them to employees when their employment is terminated.
  • A worker who is unemployed through no fault of their own may be eligible to receive unemployment benefits.

How Voluntary Termination Works

An employee may voluntarily terminate their employment with a company at any time. An individual usually does so when they find a better job with another company, retire from the labor force, resign to start their own business, or when they want to take a break from working.

Voluntary termination may also be a result of constructive dismissal, which is also called constructive discharge or constructive dismissal. This means that the employee leaves the company because they had no other choice. They could have been working under significant duress and difficult working conditions, which could include a low salary, harassment, a new work location that is farther than the employee can reasonably commute, increased work hours, among other reasons.

The forced discharge of an employee, whereby they are given an ultimatum to quit or be fired, also falls under constructive dismissal. If the employee can prove that the employer’s actions were unlawful during their tenure, they may be entitled to some form of compensation or benefits.

An employee who voluntarily leaves an employer may be required to hand in their resignation, which is an advanced notice, either verbally or in writing. Most industries usually require a two-week notice of an employee's termination. In some cases, the employee gives notice at the time that they terminate, or they give no notice at all, such as when an employee abandons the job or fails to return to work.

If your employment changes due to a change in hours, lay off, or termination, you may qualify for COBRA health insurance coverage under your existing group health plan for 18 months. If you choose to continue under the same plan, you are responsible for the full premium each month.

How Involuntary Termination Works

Involuntary termination of employment occurs when an employer lays off, dismisses, or fires an employee.

Layoffs and Downsizing

In a layoff, employees are usually let go through no fault of their own, unlike workers who are fired. Companies often decide to lay off workers or downsize their organizations to lower their operating costs, restructure their organizations, or because they no longer need an employee’s skill set. Layoffs may require employers to suspend certain roles temporarily, as was the case during the COVID-19 pandemic, or they may be permanent as a result of restructuring decisions.

Getting Fired

An employee is usually fired from a job as a result of unsatisfactory work performance, bad behavior, or a poor attitude that does not fit with the corporation’s culture. They may also be let go because of unethical conduct that violates the company’s policies.

According to at-will employment laws recognized in some states, a company may dismiss without warning any employee who is performing poorly or violating some form of the company’s rules. In fact, the company does not need to give a reason for the employee's termination.

Illegal Dismissals

Although employment-at-will contracts do not require an employer to warn or give a reason for a dismissal, an employer cannot fire a worker for certain reasons, including:

  • Refusing to work more than the hours specified in the contract
  • Taking a leave of absence
  • Reporting an incident or a person to the Human Resources (HR) department
  • Whistleblows to industry regulators

Individuals cannot be fired for these reasons. An employer who discharges an employee for exercising their legal rights does so unlawfully and may be liable for wrongful termination in the courts.

Other illegal dismissals occur when an employer lets an employee go for discriminatory reasons such as religion, race, age, gender, disability, sexual preference, or nationality. An employer who is found guilty of wrongful termination may be required to compensate the wronged employee and/or reinstate them into the company.

Termination for Cause

Other than at-will conditions of employment, an employer may fire an employee for a specific cause. A termination-for-cause clause requires the employer to put the employee on an improvement schedule of 60 or 90 days, during which the employee is expected to improve their work ethic. If the employee does not improve by the end of the probationary period, they could be terminated for cause and dismissed with prejudice.

In some cases, an employer may dismiss an employee without prejudice. This indicates that the employee was let go for reasons other than incompetence, insubordination, or misconduct in the workplace. In such situations, the employee may be rehired for a similar job in the future.

Termination Compensation

Some employers may provide employees with a notice of termination and/or termination pay, which is often called severance pay. This is common for employees who have worked with a company for more than three months and are involuntarily terminated. A company that offers severance does so following an agreement made privately with the employee or because severance is specified in its employee handbook. Keep in mind, though severance packages aren't a requirement under the Fair Labor Standards Act (FLSA).

Employers are not required by federal law to give the terminated employee a final paycheck immediately. However, state laws differ and may mandate that the employer must not only immediately provide the affected employee with a final paycheck, but also include accrued and unused vacation days.

Anyone who is unemployed through no fault of their own may be eligible to receive unemployment benefits. Each state administers an unemployment insurance (UI) program to offer temporary financial assistance to people who are unemployed and looking for a job. The U.S. Department of Labor (DOL) provides detailed information about unemployment insurance benefits.

The last day with your employer is commonly referred to as your end, separation, or termination date.

Is Getting Terminated the Same as Getting Fired?

You are terminated from your employment if you are fired. The reason for your termination depends and your employer should let you know why they let you go. You may be fired for misconduct, poor performance, or because you're not a good fit for the position or company.

What Are the Main Reasons For Getting Fired?

Employers may fire their employees for misconduct, poor job performance, violating company policy(s), theft, damage to company property or the use of company materials for personal matters, insubordination, too many sick days without justification, or consistent lateness.

Some employers may build moral clauses into their employment contracts, which hold employees to a certain standard in and outside the workplace. As such, social media activity that goes against these standards may be reason enough to fire an employee.

What Is Wrongful Termination?

Wrongful termination occurs when an employee is let go for reasons prohibited by employment law, such as discrimination, whistleblowing, or retaliation.

Employers who fire individuals for not complying with certain requests, such as doing dangerous or illegal work, are also guilty of wrongful termination. Companies that change working conditions without notice, ultimately forcing an employee to leave or be fired, are also said to be in violation of employment laws.

Individuals who are wrongfully terminated may pursue legal action against their former employers.

How Do You Fight Termination of Employment?

You may not be able to fight termination of employment if you were let go for a legitimate reason, such as restructuring or theft of company property. But if you believe you were terminated without just cause, there are some steps you can take.

Make sure you understand why you're being terminated. If you can, appeal the decision with your employer or the company's human resources department. Request copies of documents, including your employment contract, any communications between you and your employer regarding your performance, as well as your employment file. If you have a union, contact your representative. You can also consult an employment lawyer to take your case to court if you have a case.

The Bottom Line

There are many reasons why employees and employers end their relationship. Some employees may decide to leave their jobs voluntarily while others may be let go because of misconduct, poor performance, or another reason.

You have certain rights if you were terminated. For instance, you have the right to rescind your resignation if you choose to leave voluntarily. And you have the right to file an unemployment insurance claim if you lost your job through no fault of your own. You may have legal recourse if you believe that your employer retaliated against you and let you go illegally, whether that's because you took a leave of absence or because they discriminated against you. Be sure to check with an employment lawyer if any of these apply.